Wiki Selling TSLA Options - Be the House

[elasalle]

I used to have 700 shares of Tesla pre-split. That's 3,500 post split. I sold covered calls to make extra income, and buy extra shares... Eventually I couldn't roll my covered calls far enough out into the future to cover them all, and lost shares. I never lost money. I've made $250,000 on an initial $60,000 investment. Yep, I've been the house, making that consistent income...

What did I lose? Let's see.. 3,500 * $1,088 = $3,808,00 - $250,000 = $3,558,000 in potential gains lost.

I played it safe, I played the house as it were, and as a result I missed out on $3.5 MILLION!

I'm back on dice.com and linkedin looking for jobs in the IT field where I was working previously. I seriously messed up, I could have a larger home that fits all my things and a Plaid Model S to boot, doing a bunch of nothing but fun, and instead I'm job hunting with a big gap in my employment that it seems is holding me back from being employed...

Too smart for my own good, and I should have just HODL? I'll go crawl back into my hole, and try not to vomit when I think about what I could have had.

I sold CC's consistently against almost all my shares since pre-split. (Once we hit Cathy's bear case price of $600 pre-split, I started selling CC's heavily, starting at $900 pre-split). Played mainly with longer term leaps. Each time I sold CC's, I used the proceeds to buy more Calls at lower strikes and for longer periods. (Sell short term, buy long term)
Have been hit a few times like 2019 etc where I have had to nuke my account, sell calls, shares etc to try and balance best I could.

I ended up ahead so far. If all my shares get called at 2500(post split), I will not have any regrets will end up a happy man. I need to keep trying to survive and make sure my shares stay intact beyond 2500 though & I am hoping to be in the game till then. cheers!!

(+ one thing I never played with was margin)

 

[PastorDave]

At ATH, shouldn't strategy be more of selling BCS rather that selling BPS?
At some point SP will drop. Clearing 1100, 1200 etc will need multiple attempts. cheers!!

ATH is price discovery. We don't know how high it could go, and we can't trust call walls or put walls as much. Selling BCS either far out in time (3 weeks?) and/or money (1300s?) then manage it if we breakout is what I'd do. It will probably find a ceiling next week or the week after and then we can all get back to business as usual with a newly defined channel and trading range, but I think the risk of it going to 1200 next week is very real if we break 1100 on Monday.

 

[Chenkers]

Need some "not advice"....

Trying to decide what to do about another potential mistake I made this week. I was pretty shaken by my losses Monday and Tuesday, and I wanted to repair the damage as quickly as possible. My TSLA shares were all fine, but the cash in my account was wiped out. I was convinced that the SP had gone too high, so I sold 2024 CC against all my shares for 1500 and 2000 strikes with the idea of buying them back after a 25% gain. However, the continued SP climb has increased the value of those calls even more and they are underwater. If the stock pulls back to the upper 900s I will be able to buy them back. Do I

1) Buy them back now for a loss, because the SP is never coming back down....
2) Resign myself to the fact that my shares will get called away in 2024 (unless they are not so ITM by then that I can roll somehow) and just use the money for the next two years to sell BPS (hopefully without big mistakes) and make money to decrease the loss in value of my account if the SP goes to 3000 by 2024.
3) Be patient and see if the SP pulls back in the next month and I can buy them back with minimal loss, accepting #2 if I can't.

What would you guys do?

If it was me I'd also be going with 3. I would be looking for opportunities to trim them back over time. Using income from BPS from the sale is a good way to do that. IV has also lifted recently and if it falls back to previous lower levels then you may get some relief.

However I would be prepared to buy them back if they are looking like going well ITM. I had several Jan'23 700/900 Bull Call Spreads open for a while. I got into margin issues a couple of months back and IB liquidated the 700C+, leaving the 900C-. At first I was OK leaving them as they created a lot of extra margin in the account to sell options with. But as soon as they went ITM and with this recent run up their value has rapidly risen from around $185 just over a week ago (all extrinsic) to now $336 (intrinsic + extrinsic). So now I have to deal with unwinding these positions and the cash/margin hit that will result.

 

[⚡️ELECTROMAN⚡️]

Note to future self - stay 15% from SP, especially when the stock is making moves like it was end of last week.

For what time period? A week out?

 

[FS_FRA]

That seems highly unlikely. But if it starts getting close to the strike price, can I buy to close? Will it just cost me significantly more than the premium I just received? Or is there a better strategy to minimize losses?

Figure it out here: Covered Call Calculator

 

[buttershrimp]

I used to have 700 shares of Tesla pre-split. That's 3,500 post split. I sold covered calls to make extra income, and buy extra shares... Eventually I couldn't roll my covered calls far enough out into the future to cover them all, and lost shares. I never lost money. I've made $250,000 on an initial $60,000 investment. Yep, I've been the house, making that consistent income...

What did I lose? Let's see.. 3,500 * $1,088 = $3,808,00 - $250,000 = $3,558,000 in potential gains lost.

I played it safe, I played the house as it were, and as a result I missed out on $3.5 MILLION!

I'm back on dice.com and linkedin looking for jobs in the IT field where I was working previously. I seriously messed up, I could have a larger home that fits all my things and a Plaid Model S to boot, doing a bunch of nothing but fun, and instead I'm job hunting with a big gap in my employment that it seems is holding me back from being employed...

Too smart for my own good, and I should have just HODL? I'll go crawl back into my hole, and try not to vomit when I think about what I could have had.

Did you calculate what you would have had if you sold ATM puts each week until you got your shares back? Opportunity cost is a real thing.

I would be a trillionaire if I would have bought TSLA stock instead of a $167,000 P100D 5 years ago; but the joy I’ve experienced from that vehicle was way better than being like Sawyer Merritt and watching a stock from the side lines and hoarding shares while not owning the car. (No offense to sawyer, he loves that stuff) but there is more to life than being mega rich and having lots of stock.

Options and investing is time consuming and very hard, with the steepest and most punishing of learning curves. Especially if you learn by doing. Sounds like you have a successful skills and education where you actually do something with your life! Rejoice!

How many of us are truly happier or healthier since option trading? Depends when you ask me I suppose. Things that make you go hmmmmm.

 

[BornToFly]

I'd pick 3 and think of it as a hedge against the market crashing (which it probably will before 2024, right?). Also, you can always roll those out and up once we get closer to 2024. If one bad trade wiped out of my cash, I'd say that I'm not leaving enough cushion in my account for repair and rebuild. I'm typically only trading with 25%-30% of my total account value and plenty of cash in reserve. Then again, I'm trading with riskier positions that don't hurt very badly if they go against me.

The cash was about 10% of my account value. Cash/margin used 30% of account value.

 

[juanmedina]

Closed my BCS 1150/2000, I can breath now. I still have my 1090cc's but I am not worry about since they are in IRA's.

 

[DurandalAI]

Did you calculate what you would have had if you sold ATM puts each week until you got your shares back? Opportunity cost is a real thing.

I would be a trillionaire if I would have bought TSLA stock instead of a $167,000 P100D 5 years ago; but the joy I’ve experienced from that vehicle was way better than being like Sawyer Merritt and watching a stock from the side lines and hoarding shares while not owning the car. (No offense to sawyer, he loves that stuff) but there is more to life than being mega rich and having lots of stock.

Options and investing is time consuming and very hard, with the steepest and most punishing of learning curves. Especially if you learn by doing. Sounds like you have a successful skills and education where you actually do something with your life! Rejoice!

How many of us are truly happier or healthier since option trading? Depends when you ask me I suppose. Things that make you go hmmmmm.

I try to look at it from a positive perspective of it's essentially doubled my income the past two years, and it's enabled me to do fun things like take my family down to Disney World, buy a camper, and not have to worry about paying the bills during the time I was working AND trading. It can be difficult to not be a bit bitter as well. I should have stuck with my job for another 6 months or so to build up my nest egg further. C'est la vie.

 

[pz1975]

I used to have 700 shares of Tesla pre-split. That's 3,500 post split. I sold covered calls to make extra income, and buy extra shares... Eventually I couldn't roll my covered calls far enough out into the future to cover them all, and lost shares. I never lost money. I've made $250,000 on an initial $60,000 investment. Yep, I've been the house, making that consistent income...

What did I lose? Let's see.. 3,500 * $1,088 = $3,808,00 - $250,000 = $3,558,000 in potential gains lost.

I played it safe, I played the house as it were, and as a result I missed out on $3.5 MILLION!

I'm back on dice.com and linkedin looking for jobs in the IT field where I was working previously. I seriously messed up, I could have a larger home that fits all my things and a Plaid Model S to boot, doing a bunch of nothing but fun, and instead I'm job hunting with a big gap in my employment that it seems is holding me back from being employed...

Too smart for my own good, and I should have just HODL? I'll go crawl back into my hole, and try not to vomit when I think about what I could have had.

Thank you for sharing this story - that takes balls to post that on here. Hopefully people will learn from this experience and not think selling options is "easy money". Even though I have always been very conservative (more than most on here I think), the stories of this week have made me vow to myself to be even more safe going forward even though my profits will go down.

 

[jeewee3000]

Opened some BPS for next friday: -950p/+700p @7.25/contract

 

[bkp_duke]

STO 925/975 BPS @ $3.85 exp 11/5

Hope I'm not flying too close to the sun on this one.

 

[JustMe]

So if I sell a covered call right now for a 1200 strike, 11/05 exp, they give me $1,170? Is that right? That just seems like too easy of money to me.

Hey that’s just enough to buy one share of TSLA!

 

[elasalle]

ATH is price discovery. We don't know how high it could go, and we can't trust call walls or put walls as much. Selling BCS either far out in time (3 weeks?) and/or money (1300s?) then manage it if we breakout is what I'd do. It will probably find a ceiling next week or the week after and then we can all get back to business as usual with a newly defined channel and trading range, but I think the risk of it going to 1200 next week is very real if we break 1100 on Monday.

It's up 20% in last 5 days.
Risk of going to 1200, is less than risk of going back down to the 900's. IMHO.
However, really amazing prices are holding up so well today. cheers!!

 

[Knightshade]

BTW just because a YOLO friend of mine asked and I could cut and paste the math here- for anyone thinking there'll be another gamma event Monday-

$1300 calls for next Friday wouldn't get profitable at all Monday until it spiked over $1144... $1184 is 50% profit, and about $1172 is double your money.

The $1200 calls are (barely- 1%) profitable Monday at 1125, $1145 is about 50%, and $1159 is double your money.

But theta eats this FAST... For the 1200s $1140 on Monday is 38.2% profit, it's 2% on Tuesday....for the 1300s $144 is just above even Monday but -47% by Tuesday at same SP.

 

[Yoona]

Need some "not advice"....

Trying to decide what to do about another potential mistake I made this week. I was pretty shaken by my losses Monday and Tuesday, and I wanted to repair the damage as quickly as possible. My TSLA shares were all fine, but the cash in my account was wiped out. I was convinced that the SP had gone too high, so I sold 2024 CC against all my shares for 1500 and 2000 strikes with the idea of buying them back after a 25% gain. However, the continued SP climb has increased the value of those calls even more and they are underwater. If the stock pulls back to the upper 900s I will be able to buy them back. Do I

1) Buy them back now for a loss, because the SP is never coming back down....
2) Resign myself to the fact that my shares will get called away in 2024 (unless they are not so ITM by then that I can roll somehow) and just use the money for the next two years to sell BPS (hopefully without big mistakes) and make money to decrease the loss in value of my account if the SP goes to 3000 by 2024.
3) Be patient and see if the SP pulls back in the next month and I can buy them back with minimal loss, accepting #2 if I can't.

What would you guys do?

ouch; happened to me once this summer... very painful

if me, normally i'd choose #1 but will do #3 since it's a CC

my simpleton twisted thinking is this: it's not a max loss situation that i am facing; therefore, i have time to find a solution

but i won't sit back and wait until the right time arrives coz that time might never come (ie big sp drop)

so i will start the fix while waiting but my fix doesn't have to be one-shot; if 10 CC then maybe i rescue 1 CC a month via roll-split, flip-roll, etc

that's to "average out" and also not tie up cash all at once; the fix will get expensive over time (if sp rises), but i will aim for zero $ loss per fix

the only dollar risk that i can think of that will blow up my acct is early exercise by someone, but it's not applicable(?) since it's a CC

time to cook lunch, anyone for spicy spring rolls?

 

[jeewee3000]

ouch; happened to me once this summer... very painful

if me, normally i'd choose #1 but will do #3 since it's a CC

my simpleton twisted thinking is this: it's not a max loss situation that i am facing; therefore, i have time to find a solution

but i won't sit back and wait until the right time arrives coz that time might never come (ie big sp drop)

so i will start the fix while waiting but my fix doesn't have to be one-shot; if 10 CC then maybe i rescue 1 CC a month via roll-split, flip-roll, etc

that's to "average out" and also not tie up cash all at once; the fix will get expensive over time (if sp rises), but i will aim for zero $ loss per fix

the only dollar risk that i can think of that will blow up my acct is early exercise by someone, but it's not applicable(?) since it's a CC

time to cook lunch, anyone for spicy spring rolls?

In my earlier post I omitted this but of course it is implied that, when choosing option #3, you keep actively searching for possible solutions to reduce risk.

Split-rolling is one tactic that took me out of a jam as well. For example if you have 10 cc's ITM: upon your weekly roll of the ITM cc's you roll 9/10 to the same strike or a lower one, and with the credit this move nets you, you roll the last cc up in strike hugely. That one expires the next week and you do the same next week, etc. (And this opens up the shares again, so you can then also start spreading the value of the 9 remaining cc's into 10cc's at higher strikes upon your next roll should you want to).

 

[tradenewbie]

Have a question about the spread.

Originally I am doing BPS -720/+620 for $1 premium, and I also find that BPS -780/+580 has a premium of $2. Since you all have been suggesting a wider spread for safety, would it be better to do 2 X -720/+620 or 1 X -780/+680 since the premium would also be $2?

 

[⚡️ELECTROMAN⚡️]

Hey that’s just enough to buy one share of TSLA!

True, maybe I should lower my sights on a $500 premium instead. Would pay for a few days of rent and be less stressful. Or maybe it would make more sense to risk all of my shares for a total $1200 premium on some crazy impossible strike price?

 

[bonk3125]

BTW just because a YOLO friend of mine asked and I could cut and paste the math here- for anyone thinking there'll be another gamma event Monday-

$1300 calls for next Friday wouldn't get profitable at all Monday until it spiked over $1144... $1184 is 50% profit, and about $1172 is double your money.

The $1200 calls are (barely- 1%) profitable Monday at 1125, $1145 is about 50%, and $1159 is double your money.

But theta eats this FAST... For the 1200s $1140 on Monday is 38.2% profit, it's 2% on Tuesday....for the 1300s $144 is just above even Monday but -47% by Tuesday at same SP.

Isn’t this assuming that IV stays constant though? I’d be surprised if IV didn’t move if we do have a gamma squeeze on Monday.