Wiki Selling TSLA Options - Be the House

[MindOverMatcha]

It's getting too rich for my blood. I took off about half of my long term rolling calls today:
STC 22x 12/7 900c

These are my main delta position, but I've still got about that many left on. I expect us to go up to 1300 at least at this point, but fear and greed are getting a little high for my tastes:

Fear & Greed Index - Investor Sentiment - CNNMoney

Fear & Greed is CNNMoney's investor sentiment tool that comprises of 7 markets indicators.

money.cnn.com

Be greedy when others are fearful, and fearful when others are greedy. So I'm going to build cash and lock in some gains. I'll maintain exposure to the upside via ITM put spreads, weekly call options and maybe ATM puts if I'm feeling lucky. So if the stock reverts, I'll only be out those relatively small premiums, but if we keep heading for Mars, those plays will turn small risk into large returns.

My strategy of smaller, riskier positions is paying off huge recently; I've doubled my account size in 8 days (which my wife cannot believe). One of the reasons that I'm raising cash is that I'm very close to my targets for the year for account size, and I don't want to screw that up. When things settle back down, I should be working with multiples of my former options capital, so I also hope to make money back then if we keep going up as well. It's going to hurt watching the SP keep going up (already does in the AH), but I just feel like it's time to risk off a bit, especially with the FOMC meeting tomorrow and Wednesday.

In other news, I'm taking delivery on a Plaid S on Wednesday! I finally decided the wait for the LR version wasn't worth it and got a delivery date like a day after ordering it. Very excited, but I'm not happy to be away from the market when the FOMC minutes come out!

Edit: Forgot to share some example positions for the ITM put spreads:
STO 30x 11/5 BPS 1275/1250 @ $21.91

So that $3.09 risk for probably $10 or $15 gains (I would close this out at 1290 or so). Trades like these have been paying off for me nicely on the run up. Wish I'd held more of them longer.

I'm very curious about your aggressive ITM put spread strategy. A part of me wants to dabble but I will be using margin, so I don't know if that changes things.

I'm guessing that keeping a tight spread, (1275/1250) limits the loss/risk as it can just drop down to 1275 to buy and then sell at 1250. The goal wouldn't be to get exercised but if you did, it wouldn't be a big deal since it's a small loss compared to the massive premium you'd get. I was looking at flying close to the sun with BPS, maybe slightly OTM, giving you massive premiums compared to being 5-10% away.

Don't know if it's too good to be true and what the risks are. I recall reading in this thread about the benefits of a widespread to save your BPS in case the short leg gets caught. So reading about the risk of OTM BPS going ITM made me stay wary so I'm trying to learn about this ITM BPS strategy.

Thanks in advance!

 

[buttershrimp]

I'm trying really hard to only "hit singles and doubles" but it sure it getting tempting to swing for the fences.. MUST RESIST. This run up is messing with my game plan.

At this point, I'm crowding the plate waiting the pitcher to throw one inside. Just get on base baby----Moneyball options.

 

[vikings123]

Confirmed Elon is one of us

https://twitter.com/x/status/1455351085170823169

 

[OrthoSurg]

I tried simulating a flip in my options calculator, but flipping some of my Jan 2024 CC into ITM Puts immediately gave me a margin call. I'm still hoping we drop back into the 900s in the next 6 weeks so that I can buy back my CCs. ALL my big losses in the last two years have come from selling CC that I later regretted as the SP kept moving up, and my "I'm ok selling shares at X price" kept increasing. I believe we will be over $3,000/share by 2024, so my $2,000 strike CC were just stupid.

I even feel stupid for selling some 26/11 $1325. The worst part is that I had placed that order the day before and in the morning I wanted to cancel my order because I thought the stock might do what we never seen before, a sharp hyperkaliema EKG spike. My first week in option trading is a disastrous -200% as of this day, because I forgot to cancel my order in the morning. I don’t know if that make you feel better. At least my core of shares is making up for my stupidity.

 

[bballshinobi]

Confirmed Elon is one of us

https://twitter.com/x/status/1455351085170823169

Lol, the moment Elon earned my complete trust is when he tweeted “stock price too high imo”. You have to love people who doesn’t BS or sugarcoat things.

 

[generalenthu]

Confirmed Elon is one of us

https://twitter.com/x/status/1455351085170823169

I am sure he wishes he exercised his options like Zach after earnings. He now needs to exercise and sell higher than here. That's a pretty tall order.

 

[MikeC]

I am sure he wishes he exercised his options like Zach after earnings. He now needs to exercise and sell higher than here. That's a pretty tall order.

Is it right that the higher the share price, the more shares he has to cover to pay taxes?

Or does the higher share price also cover the higher gains?

 

[UnknownSoldier]

When do we think the rug pull is going to be? When should I sell a monster quantity of CC's?

 

[adiggs]

I can sell share (but not LEAP) covered calls, I can sell cash-only secured puts. I can buy shares or puts (with cash only). I can roll an existing option.

That's it. No spreads of any kind, no custom tickets either.

When you arrive at Fidelity you'll want Level 2 + Spread Trading in your IRA. The leap cc are technically debit spreads (the long call has a MUCH higher premium than the short call). Well - that's what shows up in the Fidelity Option Summary page. If you're reading about them via Goggle then you got there via poor man's covered call or diagonal spread.

However you got there it's spread trading. As of course the put and call vertical spreads that we like around these parts so much.

 

[vikings123]

When do we think the rug pull is going to be? When should I sell a monster quantity of CC's?

Yesterday?

 

[UnknownSoldier]

Yesterday?

Laugh it up, fuzzball!

I might go in on some Bear Call Spreads though, I refuse to leave empty-handed this time like I did during the February to May dip. I demand blood tribute for another round of HODLing through a massive run-up and then a retracement!

 

[mongo]

Is it right that the higher the share price, the more shares he has to cover to pay taxes?

Or does the higher share price also cover the higher gains?

Pretty sure he's maxed out his tax rate so for each share:
$35 to Tesla for option basis
Tax rate * gain to taxes
Stock ptice at SP_op
Net shares = N = (options*(SP_op-35)*(1-tax))/SP

So the higher the stock price, the more shares since $35 is less of a fraction, however the more in taxes, but taxes do not impact end share count (beyond minimal change due to inital lower tax rates and deductions which favor a multi-year execution)

At this point, he can borrow against the value tax free.

Later, when thrn finally sell and stock is at SP_cash
Tax rate is tax_op (likely capital gains)
Net dollars=N*((SP_cash-SP_op)*(1-tax_op)+SP_cash)

From a cash pov, I think early exercise is better due to the capital gains tax rate being lower than income. However, he gets loans against assets instead of cash, so that is less of a factor. He has also changed residency to TX from CA, which I think means the longer he waits to exercise the less tax_op he pays to CA, boosting the share count.

 

[PastorDave]

Where those covered calls? If so, you decided to take the loss instead of continuing to roll?

Those were what I use in place of LEAPs. I hold long calls at around .9 delta about a month out. These don't cost much to roll and are like half the cost of a LEAP. I use the excess to sell puts. So I was taking profits.

 

[PastorDave]

I'm very curious about your aggressive ITM put spread strategy. A part of me wants to dabble but I will be using margin, so I don't know if that changes things.

I'm guessing that keeping a tight spread, (1275/1250) limits the loss/risk as it can just drop down to 1275 to buy and then sell at 1250. The goal wouldn't be to get exercised but if you did, it wouldn't be a big deal since it's a small loss compared to the massive premium you'd get. I was looking at flying close to the sun with BPS, maybe slightly OTM, giving you massive premiums compared to being 5-10% away.

Don't know if it's too good to be true and what the risks are. I recall reading in this thread about the benefits of a widespread to save your BPS in case the short leg gets caught. So reading about the risk of OTM BPS going ITM made me stay wary so I'm trying to learn about this ITM BPS strategy.

Thanks in advance!

I've covered my strategies here before, but for the ITM strategy, it's very similar to just buying a long call, but with capped gains. So in the example I used above 1275/1250 @ $22, I risked about 9k (30 x $3) to make a max of 66k (30 x $22). As the strike gets closer, this slowly gains value until it hits about 50/50 ($13.5 - $10.5 profit) when the SP hits the short strike (assuming short time frame; obviously it hits full value if it goes over the short strike with 1 minute before expiration). The advantage over long calls is that it does well with a more drawn out rise, as you gain theta and delta instead of those two canceling each other out. I'd have probably been better off with just long calls due to the speed of the move (which I also had). Also this loses value more slowly, which should be great for me this morning, lol. I'm not sure exactly were it will be, but that position should be about even as I put it on yesterday morning. If the SP fell down to 1100, it would probably have lost 30-50% (just a wild guess; I should probably do the math, but it's a busy morning for me). Have to say I feel lucky to have risked off yesterday! I'm wondering if we buy the dip this morning or if shorts pile on and we head back to 1100, 1050 or 1000? I'm guessing the market retests one of those levels and then buys the dip, but maybe we shoot up at the open too.

 

[juanmedina]

I started selling my shares... it is probably going to go to $1500 now

Elon ruined the party . So are we going to gamma down now? is it time to get some puts? I hope $1000 holds or $1100 because that's were I have my underwater CC's. I was able to sell some shares at $1205 but not that many, some at $1170 and sold some 1180cc and 1200cc's.

https://twitter.com/x/status/1455493430432473088

 

[JustMe]

Looks like we are in for another interesting day today, apparently thanks to Elon’s tweet.
It seemed clear at EOD yesterday the squeeze would continue but now I have no idea which direction we are headed

BTW, really liking the signal/noise ratio in this thread, folks

 

[traxila]

Opened Dec 3 1700/1800 Bear call spread yesterday for 2. Only dared 10, as I am still new to this. Had small BPS from last week at much lower strikes. All of this action is dwarfed by my daily portfolio movements. Have been investing in TSLA one way or another since 2013…. Should have a lot more really but no complaints.

My goal here really is to get paid for my time obsessing with the ticker. Figure a few grand here and there is something lol. If I get good results maybe I could try and emulate the excellent people posting here, but I am so busy and this is surprisingly time consuming.

Had sold a bunch of CCs at 1300, 1400, 1450, 1500, 1600 and yes 1700 all for Nov 5. They were all losers big time yesterday in percentages. Was actually starting to sweat the 1300s. Maybe I still should….

Elon is like old school Fed Chairman taking the punch bowl away

 

[mongo]

Looks like we are in for another interesting day today, apparently thanks to Elon’s tweet.
It seemed clear at EOD yesterday the squeeze would continue but now I have no idea which direction we are headed

BTW, really liking the signal/noise ratio in this thread, folks

Why would this Tweet impact things when his previous Tweet that said the same thing didn't ?

You’re welcome! If any of this is based on Hertz, I’d like to emphasize that no contract has been signed yet. Tesla has far more demand than production, therefore we will only sell cars to Hertz for the same margin as to consumers. Hertz deal has zero effect on our economics.

https://twitter.com/x/status/1452794619410927625

 

[traxila]

Why would this Tweet impact things when his previous Tweet that said the same thing didn't ?

https://twitter.com/x/status/1452794619410927625

Stock was looking for reason to reverse and Elon provided. What he wrote is not new information but he said “no contract” which is perfect for everyone involved to interpret anyway they like.

I mean, it wasn’t going to get to 2000 by mid November, right?

 

[JustMe]

Stock was looking for reason to reverse and Elon provided. What he wrote is not new information but he said “no contract” which is perfect for everyone involved to interpret anyway they like.

I mean, it wasn’t going to get to 2000 by mid November, right?

Exactly