Wiki Selling TSLA Options - Be the House

[MindOverMatcha]

Spending my night crafting some BPS 11/12 strategies using margin. I was too nervous today to do one for next week. But I have a feeling that the FOMC tells the markets what they want to hear. Tomorrow at 7 AM PDT is the big moment.

Today I did a BPS 11/5 BPS at 1080/1040, 1000/970, 1010/985 which netted me a small 3k total. I wanted to dip my toes back in after two weeks off, mainly to train my mind. So this was more of a trial run for my nerves. I find that I need to set good boundaries when I trade, engage in good self-care like exercise, sit in the sauna for 20 minutes, and make sure my girlfriend doesn't get stressed from my stress. Lo and behold, I slacked on my self-care and she knew that I had dipped back into options trading without me telling her. Will aim to be more "professional" these next few days.

Using Options Profit Calculator for these calculations aftermarket (can change drastically tomorrow).

Writing this out made me realize that being 20% OTM still delivers pretty good premiums, more than I thought it would. I was unnecessarily riding closer to the edge, outside of my comfort zone.

Option #1
11/12/21, 50 contracts, -1,000/+970 (net premium is 2.60). 50 contracts times $260 = $13,000

Your risk of loss is $3,000 x 50 = $150,000, but your max gain is $13,000.
Probability of success: 93.8% (I don't give the options profit calculator much validity here in regards to TSLA but it helps a bit).

The risk is if TSLA drops down, and your puts become closer to ATM, making it very costly to bail yourself out.

Option #2
11/12/21, -900/850 (net premium $2), 30 contracts; $6,000
The benefit here is you are further OTM, you have a wider spread distance of 50 so that you can salvage the trade and the long leg doesn't sell your shares in a surprising gap down.

As I write this, I realize I may have been better off doing Option #2 today instead of my trade this week. It's further OTM and gives me more premium.

Probability of success; 99%

Option #3
11/12/21 -950/925, $155 x 60 contracts = $9,300

Mindset: Feeling confident that the price won't go down to 1,000 allows me to keep a thin spread, allowing for more contracts. Option 3 to me feels pretty good and mixed. Hard for me to believe we touch down past 1,000 next week, but even if that fear arises, I'll close this spread.

Success Probability: 97%

Depending on tomorrow, I may switch to this spread for next week and then close it out for a 50%-60% gain on Monday or Tuesday. Hard to tell now where we're headed, but it'll be easier to see come Wednesday and Thursday.

 

[OrthoSurg]

What would be the yearly yield of a strategy where someone sets a wide strangle every Monday? Let’s say someone would have 1000 shares and they sell CC against all their shares for a price they would be comfortable letting all their shares go, let’s say the stock price is $1000 and they sell 10 Covered calls at $1500 strike price expiring the same Friday. At the same time they sell 10 Put contracts at $500 if they are ready to double down the number of shares in margin at that price for an expiration on the same Friday, has someone tried this but the premiums are so low that the strategy would be uninteresting because too far OTM so the premium are ridiculously low?

 

[Buckminster]

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

Wow - so mostly from selling BPS'?

 

[MindOverMatcha]

Anyone using ETrade to roll or close BPS? I am looking to roll or close in the future, but see that I have to roll or close each leg individually. In a margin account or IRA, does this trigger any difficulties such as a margin call when a long leg is rolled before the short? I messaged my rep at ETrade but just wanted to know if others have been able to roll each put leg individually without issues.

Thanks!

 

[FlamingPIG]

Noob here, any input would be appreciated.
Have 4.5k share, learning to make low income, low risk.

Want to try out weeklies (bit over a week on this example)

1. bear call spread, expiry 11/12
sell 10X call $1400 strike for $7.80 ; buy call $1450 strike for 5.36
gain: $2,440 risk: $47,560

Sell 10X call $1300 for $18.14; buy $1320 for $15.50
gain $2,640 risk $17,360


2. sell call 10X $1,500 for $3.8, no call buy.
gain $3,800 risk: infinite, 1k shares called
It has a very, very low chance of being called. Even if it did get called, the stock will most likely tank afterwards. Sell then buy back? Tax consequences, ewwwww.
Risk: stock split announcement may rocket stock $300 in a week.

3. Better strategy?

Is there any flaw to my understanding of BCS?
When using BCS, my core shares is safe when it expire ITM?

 

[Tslynk67]

Spending my night crafting some BPS 11/12 strategies using margin. I was too nervous today to do one for next week. But I have a feeling that the FOMC tells the markets what they want to hear. Tomorrow at 7 AM PDT is the big moment.

Today I did a BPS 11/5 BPS at 1080/1040, 1000/970, 1010/985 which netted me a small 3k total. I wanted to dip my toes back in after two weeks off, mainly to train my mind. So this was more of a trial run for my nerves. I find that I need to set good boundaries when I trade, engage in good self-care like exercise, sit in the sauna for 20 minutes, and make sure my girlfriend doesn't get stressed from my stress. Lo and behold, I slacked on my self-care and she knew that I had dipped back into options trading without me telling her. Will aim to be more "professional" these next few days.

Using Options Profit Calculator for these calculations aftermarket (can change drastically tomorrow).

Writing this out made me realize that being 20% OTM still delivers pretty good premiums, more than I thought it would. I was unnecessarily riding closer to the edge, outside of my comfort zone.

Option #1
11/12/21, 50 contracts, -1,000/+970 (net premium is 2.60). 50 contracts times $260 = $13,000

Your risk of loss is $3,000 x 50 = $150,000, but your max gain is $13,000.
Probability of success: 93.8% (I don't give the options profit calculator much validity here in regards to TSLA but it helps a bit).

The risk is if TSLA drops down, and your puts become closer to ATM, making it very costly to bail yourself out.

Option #2
11/12/21, -900/850 (net premium $2), 30 contracts; $6,000
The benefit here is you are further OTM, you have a wider spread distance of 50 so that you can salvage the trade and the long leg doesn't sell your shares in a surprising gap down.

As I write this, I realize I may have been better off doing Option #2 today instead of my trade this week. It's further OTM and gives me more premium.

Probability of success; 99%

Option #3
11/12/21 -950/925, $155 x 60 contracts = $9,300

Mindset: Feeling confident that the price won't go down to 1,000 allows me to keep a thin spread, allowing for more contracts. Option 3 to me feels pretty good and mixed. Hard for me to believe we touch down past 1,000 next week, but even if that fear arises, I'll close this spread.

Success Probability: 97%

Depending on tomorrow, I may switch to this spread for next week and then close it out for a 50%-60% gain on Monday or Tuesday. Hard to tell now where we're headed, but it'll be easier to see come Wednesday and Thursday.

My immediate reaction to this is that your strike widths are way too marrow and certainly for option 1, the 1000 short strike is not so far below the SP, certainly reachable if we were to get this epic dip many are expecting, then the whole spread could go to max loss very quickly, without recourse to recover

I'm assuming you have $150k margin/cash you're willing/able to put at risk, but you could also consider 20x 770/845 for ~$4k premium: TSLA Put Spread calculator

This is a 99.9% profit probability trade and returns nearly 3% on roic

To my mind this is way safer that anything with a strike 900 or above and gives some width depth to give a chance of managing the spread if it goes Texas Institute on you

If there's anything I've learned by playing this game and from the others here, is that lots and lots of low-risk, winning trades, are a great way to operate, especially if you're learning the ropes

 

[ammulder]

Anyone using ETrade to roll or close BPS? I am looking to roll or close in the future, but see that I have to roll or close each leg individually. In a margin account or IRA, does this trigger any difficulties such as a margin call when a long leg is rolled before the short? I messaged my rep at ETrade but just wanted to know if others have been able to roll each put leg individually without issues.

Thanks!

In the Web interface, go to your Portfolio and click Trade next to one of the options. On the screen that comes up for a one-option trade, click holdings or positions (I forget the exact name) on the right side, then check the boxes for the two legs, and click the Roll or Close button below that. It should set up a roll or close trade with both/all legs on the left.

 

[Drezil]

Wow - so mostly from selling BPS'?

Most from my "leaps" .. like Dec 1200, Jan 800 etc. I used to sell CCs against. This was part of the "there will be a breakout"-theory.
Add BPS to that for more consistent income. (those 1200 were bought at 12$, doubled down @2$, cost basis 7.69$. under water for months. Initially ~15k investment. In August only worth 2.5k or so. Now worth ~250k or so..)

BPS income is just a basis with 5-10k/week.

Otm-Calls are more like lottery tickets & written off after buying. That's what made the gains here.

Itm-calls are used as share-replacement to sell CC against & gain leverage.

On a downturn I can always go short Stock (even after-hours & premarket) to annihilate my delta-exposure until the market opens. That's why I don't have stock.

Also in my country there are no short/long-term capital taxes. You pay 25% flat whatever you do. So I regularly adapt things. Yesterday I rolled the Jan 800 to Jan 1200 to take profits & limit downside-risk (300k max loss -> 80k max loss, but loss more probable) while not giving up completely on further breakouts.
Basically I ignore taxes and pay the taxman when his time comes.

 

[Drezil]

When using BCS, my core shares is safe when it expire ITM?

Depends on you Broker. Never let things expire.

The short calls will force you to sell 100 shares.
If the long side gets exercised before the short side lifo-accounting will save you.
If the short side gets exercised first you will sell your core shares & then get new one via the long side. Tax implications and all.
I don't know if one can wiggle itself out of this.

Better not have the hassle & close everything in expiry day.

 

[Right_Said_Fred]

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?

I used to sell naked puts ATM or slightly OTM. When I expected a rise I would even sell naked puts deep ITM (which paid off handsomely when we went from 1500 to 2500 pre-split and recently from 600 to 850). But it's a stressful strategy.

I've now opted for a strategy of less risk and a lower, but steadier income. Choosing the strikes depends on the volatilty. At this moment, with a highly volatile stock, I'm selling options with 1 week or 1,5 week expiry at strikes that are about 300 points away from the SP. So that's about 25%. When the stock calms down (and premiums come down) I will start getting closer. But 15% will probably be the minimum distance. I'm currently making about $15k per week, which is a 1% return. More than plenty for me.

I could earn more premium with more risky strikes or a higher number of positions (which would have to be spreads), but I don't need to anymore, thanks to TSLA's performance in 2019 and 2020. I can sell my company and retire if I want to (but I'm not going to do that at age 53), I paid off my new penthouse, have a Roadster reservation and can buy what I want and travel where I want. I don't need an island, big boat or villa on the Bahamas, so there's no need to take unnecessary risks with my trading account.

The stressful and painful moments some of the option writers here recently experienced reinforce this belief.

 

[CHGolferJim]

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?

I, for one, focus on appreciation, rolling and pruning/harvesting. Pending results, the LEAPs position will probably become a permanent allocation. Preliminary data (October daily values) suggest close to ATM perform the best until the some of the long calls go ITM, then those surge ahead. In October, returns on my long calls were 2x-3x the return on shares. Looking at rolling 50% of shares and current long calls into Jan’24 1000, 1200 and 1400 long calls.

 

[AquaY]

Anyone using ETrade to roll or close BPS? I am looking to roll or close in the future, but see that I have to roll or close each leg individually. In a margin account or IRA, does this trigger any difficulties such as a margin call when a long leg is rolled before the short? I messaged my rep at ETrade but just wanted to know if others have been able to roll each put leg individually without issues.

Thanks!

Try Power Etrade
You can go to Account, Positions then click on your position and hit roll ( that is of course if etrade hasn't changed your positions to fit a better margin profile. If they have you would have to match it up the way you intended. I forgot how to do that. If that is an issue call them and ask .
Anyway, if the spread trade is shown when you click roll it will bring up a ticket with all 4 positions and then you simply modify what you want in that and input your order.

Another way that should work with Power Etrade is to Go to Trading. Click on Trade Lab, Click on Build strategy and simply add legs via "add option"

 

[Knightshade]

I, for one, focus on appreciation, rolling and pruning/harvesting. Pending results, the LEAPs position will probably become a permanent allocation. Preliminary data (October daily values) suggest close to ATM perform the best until the some of the long calls go ITM, then those surge ahead. In October, returns on my long calls were 2x-3x the return on shares. Looking at rolling 50% of shares and current long calls into Jan’24 1000, 1200 and 1400 long calls.

FWIW the second half of my email to my friend the other day had some math on comparing ITMness vs return at a few prices, in case it's useful I copy it here (again this was written with SP at $909.50)- I picked the 3 strikes in question specifically because he was asking about only selling 100 shares to go to LEAPs and these were the strikes he could get 2, 3, or 4 LEAPs respectively with the $.





Sell 100 shares at $909.50, use # to buy Jan 19 2024 calls- SP hits $2000 by expiration for Jan 19 2024.

2 $550 - net profit is about $200,000

3 $810 calls- net profit is about $266,000

4 $1000 calls -net profit is about $309,000.


Now in all these cases, the SP ends up WAY higher than the strike... so the OTM calls look best. But what if the SP only ended up at $1200

Those 4 $1000 calls actually LOSE you money (about 12k net loss total).

The 3 $810 calls are profitable, but only by about 25k total....

Best result is the 2 $550s at about 40k total profit.


At $1600 SP you're looking at:

$550 strikes- 120k profit
$810 strikes- 146k profit
$1000 strikes- 112k profit.



So basically if you believe it's going WAY up buying more OTM calls gets you more leverage= more profits at the end. Harder to make income on selling calls in the meantime... and if SP doesn't go as high as you think you might've ended up better off with ITM calls. ITM calls give you more range in which to be wrong about the eventual price and still make a profit.

 

[CHGolferJim]

FWIW the second half of my email to my friend the other day had some math on comparing ITMness vs return at a few prices, in case it's useful I copy it here (again this was written with SP at $909.50)- I picked the 3 strikes in question specifically because he was asking about only selling 100 shares to go to LEAPs and these were the strikes he could get 2, 3, or 4 LEAPs respectively with the $.





Sell 100 shares at $909.50, use # to buy Jan 19 2024 calls- SP hits $2000 by expiration for Jan 19 2024.

2 $550 - net profit is about $200,000

3 $810 calls- net profit is about $266,000

4 $1000 calls -net profit is about $309,000.


Now in all these cases, the SP ends up WAY higher than the strike... so the OTM calls look best. But what if the SP only ended up at $1200

Those 4 $1000 calls actually LOSE you money (about 12k net loss total).

The 3 $810 calls are profitable, but only by about 25k total....

Best result is the 2 $550s at about 40k total profit.


At $1600 SP you're looking at:

$550 strikes- 120k profit
$810 strikes- 146k profit
$1000 strikes- 112k profit.



So basically if you believe it's going WAY up buying more OTM calls gets you more leverage= more profits at the end. Harder to make income on selling calls in the meantime... and if SP doesn't go as high as you think you might've ended up better off with ITM calls. ITM calls give you more range in which to be wrong about the eventual price and still make a profit.

Appreciate that info = support for a ladder at 1000/1200/1400 although possibly those numbers are a smidge high. Had been thinking 100 less for each over the weekend / before Monday.

Any thoughts on the possible effect of rolling up to 20%ITM/ATM/20%OTM annually or so?

 

[corduroy]

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.

We aren't shorts. We all want the stock to go up, but just in an orderly fashion.

 

[samppa]

Noob here, any input would be appreciated.
Have 4.5k share, learning to make low income, low risk.

Want to try out weeklies (bit over a week on this example)

1. bear call spread, expiry 11/12
sell 10X call $1400 strike for $7.80 ; buy call $1450 strike for 5.36
gain: $2,440 risk: $47,560

Sell 10X call $1300 for $18.14; buy $1320 for $15.50
gain $2,640 risk $17,360


2. sell call 10X $1,500 for $3.8, no call buy.
gain $3,800 risk: infinite, 1k shares called
It has a very, very low chance of being called. Even if it did get called, the stock will most likely tank afterwards. Sell then buy back? Tax consequences, ewwwww.
Risk: stock split announcement may rocket stock $300 in a week.

3. Better strategy?

Is there any flaw to my understanding of BCS?
When using BCS, my core shares is safe when it expire ITM?

if the short leg is ITM at expiry, it will be automatically assigned and shares called away. Also there is always the risk of early assignment if you have short options itm.

Advice: start learning from the very first page of this thread.

 

[samppa]

Spending my night crafting some BPS 11/12 strategies using margin. I was too nervous today to do one for next week. But I have a feeling that the FOMC tells the markets what they want to hear. Tomorrow at 7 AM PDT is the big moment.

Today I did a BPS 11/5 BPS at 1080/1040, 1000/970, 1010/985 which netted me a small 3k total. I wanted to dip my toes back in after two weeks off, mainly to train my mind. So this was more of a trial run for my nerves. I find that I need to set good boundaries when I trade, engage in good self-care like exercise, sit in the sauna for 20 minutes, and make sure my girlfriend doesn't get stressed from my stress. Lo and behold, I slacked on my self-care and she knew that I had dipped back into options trading without me telling her. Will aim to be more "professional" these next few days.

Using Options Profit Calculator for these calculations aftermarket (can change drastically tomorrow).

Writing this out made me realize that being 20% OTM still delivers pretty good premiums, more than I thought it would. I was unnecessarily riding closer to the edge, outside of my comfort zone.

Option #1
11/12/21, 50 contracts, -1,000/+970 (net premium is 2.60). 50 contracts times $260 = $13,000

Your risk of loss is $3,000 x 50 = $150,000, but your max gain is $13,000.
Probability of success: 93.8% (I don't give the options profit calculator much validity here in regards to TSLA but it helps a bit).

The risk is if TSLA drops down, and your puts become closer to ATM, making it very costly to bail yourself out.

Option #2
11/12/21, -900/850 (net premium $2), 30 contracts; $6,000
The benefit here is you are further OTM, you have a wider spread distance of 50 so that you can salvage the trade and the long leg doesn't sell your shares in a surprising gap down.

As I write this, I realize I may have been better off doing Option #2 today instead of my trade this week. It's further OTM and gives me more premium.

Probability of success; 99%

Option #3
11/12/21 -950/925, $155 x 60 contracts = $9,300

Mindset: Feeling confident that the price won't go down to 1,000 allows me to keep a thin spread, allowing for more contracts. Option 3 to me feels pretty good and mixed. Hard for me to believe we touch down past 1,000 next week, but even if that fear arises, I'll close this spread.

Success Probability: 97%

Depending on tomorrow, I may switch to this spread for next week and then close it out for a 50%-60% gain on Monday or Tuesday. Hard to tell now where we're headed, but it'll be easier to see come Wednesday and Thursday.

These spreads are still quite thin..

Right now I'm cautious after this huge rally, so I'm using $200 wide bull put spreads.. I know I'd get more leverage with thinner spreads but these give me enough income.
Yesterday I opened bps for 11/5
-1100/+900 (small, risky position)
-1050/+850
-1000/+800

 

[stealthyc]

What would be the yearly yield of a strategy where someone sets a wide strangle every Monday? Let’s say someone would have 1000 shares and they sell CC against all their shares for a price they would be comfortable letting all their shares go, let’s say the stock price is $1000 and they sell 10 Covered calls at $1500 strike price expiring the same Friday. At the same time they sell 10 Put contracts at $500 if they are ready to double down the number of shares in margin at that price for an expiration on the same Friday, has someone tried this but the premiums are so low that the strategy would be uninteresting because too far OTM so the premium are ridiculously low?

This is pretty backtestable using various tools out there I would think.

 

[BornToFly]

What would be the yearly yield of a strategy where someone sets a wide strangle every Monday? Let’s say someone would have 1000 shares and they sell CC against all their shares for a price they would be comfortable letting all their shares go, let’s say the stock price is $1000 and they sell 10 Covered calls at $1500 strike price expiring the same Friday. At the same time they sell 10 Put contracts at $500 if they are ready to double down the number of shares in margin at that price for an expiration on the same Friday, has someone tried this but the premiums are so low that the strategy would be uninteresting because too far OTM so the premium are ridiculously low?

To add to what "Fred" said, on naked Puts, I really take into account how over or under valued the stock is. Back in January, I was more than 10% below the SP, and then I still had to roll down a little with the big drop. When we got to around 600 and below, I felt that the SP was at the bottom, so I was selling Puts ATM one month out so that I could roll one week out and avoid assignment of the shares. Right now, after the big climb, I would be selling naked Puts with strikes 900 and lower. $500 is much lower than you need to go. Remember, Puts are protected because the stock can't keep going lower on you (Tesla is growing >50%/year). Calls are much more dangerous because it can climb to $5,000/share and make it impossible for you to roll up fast enough. I would be a little cautious with Puts after the big climb now, until we get to mid-December when the early January P&D report starts giving down side protection. I would always be cautious with Calls because TSLA can take off anytime (even after hitting ATHs as I discovered with my losses last week).

 

[OrthoSurg]

To add to what "Fred" said, on naked Puts, I really take into account how over or under valued the stock is. Back in January, I was more than 10% below the SP, and then I still had to roll down a little with the big drop. When we got to around 600 and below, I felt that the SP was at the bottom, so I was selling Puts ATM one month out so that I could roll one week out and avoid assignment of the shares. Right now, after the big climb, I would be selling naked Puts with strikes 900 and lower. $500 is much lower than you need to go. Remember, Puts are protected because the stock can't keep going lower on you (Tesla is growing >50%/year). Calls are much more dangerous because it can climb to $5,000/share and make it impossible for you to roll up fast enough. I would be a little cautious with Puts after the big climb now, until we get to mid-December when the early January P&D report starts giving down side protection. I would always be cautious with Calls because TSLA can take off anytime (even after hitting ATHs as I discovered with my losses last week).

My wife wanted me to stay 50% away from being caught ITM, learned a bit with my 1325 CC from this week. I opened up a straddle 805 and 1475. Still feel comfortable, I am studying my comfort zone before moving in close in the 15% range and starting with vertical spreads which are harder to adjust. This week has been crazy at work so I barely have 15 minutes in the day to watch the stock so I will stay far OTM for the moment while volatility is high.