Wiki Selling TSLA Options - Be the House

[mau1010]

I find this thread interesting in that members post options trades. What I find that is missing is any discussion of money management in setting up these trades. For traders I feel this is just as important than the actual trade itself.

I try to risk 1% on each of my cfd trades. Most system traders try to have a similar risk profile on each trade. I would be interested if people on this thread start to post what they are risking on each trade.

I think this would allow people new to options looking at this thread to consider money management in their trades and not do too risky trades resulting in a total capital loss.

 

[Xepa777]

I’m a total degen but I used this opportunity to force myself to convert my cc into DITM leaps in 2024. That’s only way I can justify the opportunity cost to myself hahahha, force myself to do something I otherwise wouldn’t. Given what I think will happen with inflation in the next few years expanding multiples across the board and Tesla roadmap with their factories and AI, I think it’ll turn out okay.

I remember in 2013 the first time I bought tesla shares was the same day I saw a biotech stock in my portfolio drop 93% in a day lol. I had been eyeing tesla but was too scared to buy it. At that moment I was like “screw it” and put all my cash into it hahaha. Worked out well enough!

 

[CHGolferJim]

I’m a total degen but I used this opportunity to force myself to convert my cc into DITM leaps in 2024. That’s only way I can justify the opportunity cost to myself hahahha, force myself to do something I otherwise wouldn’t. Given what I think will happen with inflation in the next few years expanding multiples across the board and Tesla roadmap with their factories and AI, I think it’ll turn out okay.

I remember in 2013 the first time I bought tesla shares was the same day I saw a biotech stock in my portfolio drop 93% in a day lol. I had been eyeing tesla but was too scared to buy it. At that moment I was like “screw it” and put all my cash into it hahaha. Worked out well enough!

Those were DITM CC converted into DITM LEAPs? If you are comfortable doing so, please disclose the figures (perhaps not the number of contracts/total size).

 

[bballshinobi]

Full disclosure, I bought 11/5 $1150 puts at the end of the day (I feel a little dirty)

Don't feel bad. I actually prefer making money on puts than calls, because that means I get to buy even more shares .

 

[M3Rider]

I am considering too in one of my IRA accounts where I don't trade to max out on LEAPs. It had a bunch of 700 etc CCs for 22/23 most of which were bought ~Feb and not performing well. Some other ala carte strikes. Sold them all yesterday hoping for a correction...which may or may not come. Anyway, 1/24 1000ccs @465 (selling @450 earlier today) starting to become interesting. Some $300 premium for 2 years. Somewhat ITM. We could get a pullback after Q1/Q2 with margins being bad due to Berlin/Austin, who knows. But if robotaxis start within 2 years, this can be a jackpot too.
The good part is set and forget, no daily worrying.

 

[buttershrimp]

OK, you asked for it..... get ready to plunge. I'll buy one to test the theory.... one buttershrimp call is usually equivalent to a 50 point price drop.

Shall I buy another to cause another 50 point drop?

 

[M3Rider]

Shall I buy another to cause another 50 point drop?

Please. 1100 is a good PT.
My CCs can prob catch up in 3 weeks

 

[AquaY]

Thanks to TSLA, Options & confidence from here i had my best month ever.
+406.8% gain in one month on the entire portfolio - at least to the statistics of IBKR.

Thank you, guys

Pretty easy for you to figure out if they are corrrect. Do you have a little more than 4 X what you had the previous month? If Yes. Woo Hoo and they are right. If not well……….

 

[bballshinobi]

Shall I buy another to cause another 50 point drop?

I was just about to thank you for your sacrifice too.

 

[Xepa777]

Those were DITM CC converted into DITM LEAPs? If you are comfortable doing so, please disclose the figures (perhaps not the number of contracts/total size).

5 contracts at $950, bought 10 leaps at $1000 strike in Jan 2024. Leftover money I’m gonna use to sell puts on MSTR (I’m also a crypto mega bull lol)

 

[Ogre]

You quasi shorts crack me up. It’s no wonder they keep you all locked up here in a separate room. It’s like witness protection.

 

[BornToFly]

I don’t know if doling out disagrees on other people’s trades is the right approach.

Certainly don't mean to offend. I do feel like we are a team fighting a common enemy, and I like our team. If I post a trade someone doesn't like, I want them to tell me right away, and tell me why, so I can: 1) Fix it if necessary. 2) Learn for the future.

 

[ninpb]

I only see posts about opening the strategy of selling shares to buy (D?)ITM far LEAPS. I don't understand what you do at the end of it? Is the pay off in selling the LEAPS or exercising the call?

 

[Knightshade]

I only see posts about opening the strategy of selling shares to buy (D?)ITM far LEAPS. I don't understand what you do at the end of it? Is the pay off in selling the LEAPS or exercising the call?

There's lots of ways to do it- depends what you're trying to do, and in what sort of account.


Some folks seem to just roll their leaps after 1-1.5 years to out as far as they can, and keep doing so, but staying DITM (but higher as SP climbs)-- so they get exposed to near-1 of delta for 2-3x lower cost and can still sell calls against em.

Some folks sell some to exercise others near expiration (and sell CCs to lower their basis on the way) to reduce tax impact.... obviously if you're in an IRA you'd just sell em to get any dregs of time value and buy shares if you really want.

Some are just trying to leverage up and sell for profit- more delta and more CCs to be sold compared to shares.

 

[MindOverMatcha]

I am considering too in one of my IRA accounts where I don't trade to max out on LEAPs. It had a bunch of 700 etc CCs for 22/23 most of which were bought ~Feb and not performing well. Some other ala carte strikes. Sold them all yesterday hoping for a correction...which may or may not come. Anyway, 1/24 1000ccs @465 (selling @450 earlier today) starting to become interesting. Some $300 premium for 2 years. Somewhat ITM. We could get a pullback after Q1/Q2 with margins being bad due to Berlin/Austin, who knows. But if robotaxis start within 2 years, this can be a jackpot too.
The good part is set and forget, no daily worrying.

I may try this approach with leaps. Not having daily worrying seems nice. A part of me likes having premiums up front from selling BPS and puts, though the downside is having to salvage a bad trade,

 

[ninpb]

There's lots of ways to do it- depends what you're trying to do, and in what sort of account.


Some folks seem to just roll their leaps after 1-1.5 years to out as far as they can, and keep doing so, but staying DITM (but higher as SP climbs)-- so they get exposed to near-1 of delta for 2-3x lower cost and can still sell calls against em.

Some folks sell some to exercise others near expiration (and sell CCs to lower their basis on the way) to reduce tax impact.... obviously if you're in an IRA you'd just sell em to get any dregs of time value and buy shares if you really want.

Some are just trying to leverage up and sell for profit- more delta and more CCs to be sold compared to shares.

I understand the LCC to it but is there also just a HODL aspect to it if you don't intend to write options? This only works if it's DITM and you are 100% sure TSLA is significantly higher than strike at expire?

 

[Drezil]

Pretty easy for you to figure out if they are corrrect. Do you have a little more than 4 X what you had the previous month? If Yes. Woo Hoo and they are right. If not well……….

Those +400% would be 5x. But it was TWR. MWR it is more like +300%

TWR: time weighted return = always all Capital deployed, no deposits/withdrawals. Measures competency of the trader

MWR: money weighted return. The thing ending up in your balance. Will skew up if you deposit funds, will skew down if you withdrawal, takes into account not used capital/margin. Useful if you want to know if your Portfolio is up or down

But I can only guesstimate as I moved funds between accounts and the TWR should approximate the real gains.. without me doing real analysis

MWR for 12 months is an ungodly +9400%
But that is heavily skewed by deposits/withdrawals

 

[Knightshade]

I understand the LCC to it but is there also just a HODL aspect to it if you don't intend to write options? This only works if it's DITM and you are 100% sure TSLA is significantly higher than strike at expire?

Sure.


Below is an example I wrote for a friend asking about this with SP at $909--it does mention selling calls too but you can ignore that part

---thing I wrote him---
As an example, Jan 19 2024 $550 strike is $447.80 per share with SP at $909.50

So you're "only" paying $88.80 for over 2 years of time. You'd only need to sell OTM calls making about 40 cents per share (times 2 for the 2 options you can sell against), weekly, during that 2 years for the "time" to have been free.

And you can buy 2 of them for every 1 share you sold at $909.50.

Delta on the option is roughly 0.88

So with the same ~$900/sh investment options get you a delta of 1.76 by holding two $550 calls versus only delta=1 for holding 100 shares.

Of course this works to the downside as well but the whole premise is we're going up long term.


You can also leverage even higher, for example $810 Jan 19 2024 options are $303.50 so you can buy 3 of those for your ~900. BUT...
You're now paying a bit over $200 for time... you'll need to get roughly 67 cents (since you can sell 3 at a time) in premium per share selling calls to cover the time cost fully.

and

Your delta is lower because you're less deep ITM... 0.686... so not SUPER lower... you're still getting 2.058 total delta versus 1.76 with the deeper ITM options, or just delta=1 with shares... but you're paying more than 2x for the time... and you also have less room to keep selling decently safe covered calls that earn anything if the share price drops significantly during those 2 years.
----end of thing----



So basically at that point in time you could 1.76x or 2.058x your leverage for the same initial $ investment even without selling calls.

Selling calls just made it better.


The risk (if you're just trying to one-and-done this) is there's always dips.... with shares you just wait however long till the most recent dip is over.

With LEAPs you're on a clock. If the dip happens in the last 6 months that could be bad (or anytime if margin is in play)

That's part of why some folks keep rolling their LEAPs out as far as possible soon after they pass 1 year held.

 

[Drezil]

I understand the LCC to it but is there also just a HODL aspect to it if you don't intend to write options? This only works if it's DITM and you are 100% sure TSLA is significantly higher than strike at expire?

Yes. You can i.e. buy 500$ calls with Delta of 0.9xx. they behave like 95 stock when the sp stay quite above them, but only cost you roughly half as much.
This yields you leverage as you get ~ double the gains (&losses) compared to stock.

 

[OrthoSurg]

Besides HODLing shares (less than before, but still plenty) I've been selling naked puts (and sometimes naked calls) for two years now. I focussed on naked puts with an expiry of one month, but recently I moved to an expiry of one week. And I like it a lot. Time is your friend, much more than it is with strikes of a month. It's amazing to see those premiums melt away.

I have been contemplating spreads too, but at the moment they don't look very attractive. I see these disadvantages:

1. You're giving away a lot of premium received for the short leg by buying the long leg.
2. It's more difficult to roll the position and keep the spread intact when the stock moves against you.
3. The spread had to be very large (100, 200 or 300 points) to get some decent money. I know this has a lot to do with the current situation; it was better a few weeks ago.
4. The black swan risk is higher because of the high number of spreads required to get a nice return.

There are also advantages:

1. There's no risk of an infinite loss, thanks to the long leg.
2. The maintenance margin is much smaller, so you can open more positions with the same amount of cash or shares. But this leads to the higher risk described under 4.

So with the way the stock is behaving at the moment and the way premiums are priced right now, I've decided to stick with selling naked options for now.

At what % from the stock price do you sell your naked puts? What is your threshold to change that % and in what factors do you base your decisions?