Wiki Selling TSLA Options - Be the House

[jeewee3000]

Thanks for listing all the things that are making me freak out and want to buy back sooner rather than later....

Let me be the voice of reason:

1.-
In the SHORT term (i.e. right up until X-mas) there are no huge catalysts that we expect. Only the last week of December I expect a SP rally into P&D report.

This is around 8 weeks full of possibilities for a drop.

2.-
Since when does TSLA zoom up for weeks in a row without ever dropping? That's right, (almost) never. And definitely not when we just rallied 33% BEYOND ATH.

3.-
Disregarding TSLA itself, macros won't behave for 8 weeks straight.

4.-
Possible catalysts analysis:
- FSD? Meh. The beta videos don't spike the SP. Only cause more problems (recalls, possibly a crash coming, etc). No influence in the short term.
- Start of production in Berlin/Austin? Maybe a slight confirmation bump of 2-3%, but this news fact is expected and already priced in IMO. If we hear of any delay regarding Austin/Berlin, TSLA will have a bloodred day.
- Hertz deal was shot down by Elon as having no economic impact, so that gives the shorts ammunition in fighting off that good news.
- Biden EV tax credit bill: Meh. Expected already IMO. Maybe slight bump but more likely huge drop if this does not go TSLA's way and it benefits the OEMs more than it does Tesla. <Insert competition is coming quotes>
- battery production / insurance updates: these might be the greatest possible short term catalysts IMO. But then again, I doubt this is for Q4. We have been doing so well recently that I think Tesla will want to save some good news for Q1.

So yeah, I think $1200 is the local top for now, unless macros rally in which case TSLA will join the ride.

More likely we are rangebound between $1000 and $1200 until P&D.

Most solutions to your (non pressing) situation are better at lower SP:
- flipping the cc's to long dated puts or BPS;
- buying them back

I'd personally wait for a drop to around $1000 and then give the premiums a second look. Until then, just give yourself time until December.

Not advice of course, but I don't see us shooting to $1500 in Q4. After Q4 earnings call? Maybe, but more likely not that high.

Edit: P.S. I am a superbull in the long term. Don't shoot me, TMC

 

[st_lopes]

I am really torn about my Jan 2024 $1500 strike CCs. I sold them last week for $164, expecting a pull back, and a plan to buy them back at a profit. Instead, they are now at $295 (80% loss). The fact that yesterday's drop isn't continuing today is making me less confident that we are going to have a drop below $1000 and an opportunity for me to buy them back without a loss. So time for another poll.... I expect the SP to be $3000+ in 2024. Taxable account. Do I

1) Let them expire in 2024 and take my $1,500/share and cry about what could have been.
2) Wait until 2024 and then slowly roll up/out.
3) Sell 10% of the shares now to buy them back and eat the loss.
4) Buy them back using most of my cash without selling shares (and then rely more on margin for my BPS).
4) Do something else (like buying Jan 2024 800 strike LEAPS)?

I'm starting to lean toward #4

I tend to default to wait. So #2. I'll join you in the waiting as I keep rolling $795/800 ccs. Though I likely will let those get assigned if we hit 900s which is actually my breakeven on those from my cumulative premium sold through rolls. At which point I will likely skew my mix of leaps/shares heavily back to leaps.

Thanks for listing all the things that are making me freak out and want to buy back sooner rather than later....

I find that we collectively put too much weight on those individual catalysts. It's not like the day that 4680 cells are going in to vehicles that we suddenly see a step up in valuation. It's a piece of the puzzle. One that will only be recognized by Mr. Market over time as the existence of 4680 starts to convert in to stronger margins or higher volume sales. Until then, it's exciting AF and we all know what it means for the future, but Market tends to wait for more execution before according real value. I feel the same way about Austin and Berlin. We know Tesla will execute, but market may not recognize probability of success until Tesla is pumping out at volume from those locations.

A good example (tangental) is LMND. Today they tweet that their Car Insurance is finally available in ONE state. Everyone has known their car insurance offering was coming, they've been talking about it for over a year. Only when they finally EXECUTE and it finally confirms that TAM is growing immediately (car is 70-80x larger market than home/renters), and not maybe some time in the future, does Mr. Market react.

 

[ReddyLeaf]

I am really torn about my Jan 2024 $1500 strike CCs. I sold them last week for $164, expecting a pull back, and a plan to buy them back at a profit. Instead, they are now at $295 (80% loss). The fact that yesterday's drop isn't continuing today is making me less confident that we are going to have a drop below $1000 and an opportunity for me to buy them back without a loss. So time for another poll.... I expect the SP to be $3000+ in 2024. Taxable account. Do I

1) Let them expire in 2024 and take my $1,500/share and cry about what could have been.
2) Wait until 2024 and then slowly roll up/out.
3) Sell 10% of the shares now to buy them back and eat the loss.
4) Buy them back using most of my cash without selling shares (and then rely more on margin for my BPS).
4) Do something else (like buying Jan 2024 800 strike LEAPS)?

I'm starting to lean toward #4

I would wait a bit, at least a week, then do #4, if you have the cash. Look at the bollinger bands right now, they are as wide as they have ever been (even on a percentage basis). They are similar %-wise to the Sept 2020 5:1 split, when there was a huge shorts burn. IV is very high, and just a little consolidation will bring IV back down. It’s certainly difficult to hold on right now, but this run has been epic. I know that most of us cannot comprehend your situation and the desperation that caused you to sell those Jan 24 c1500s, so just ignore most comments. Good luck with your choice and I hope you find peace in the resolution.

FWIW, I’m nowhere near your situation, but have felt my own desperation, incorrectly traded it, and lost money because of it. Had I waited, another day or two, the positions would have resolved for a profit. Now, I’m trying to wait longer before jumping on any trade (which unfortunately, wasn’t the best financially during $100/day runs).

FYI, I have been selling CCs on ALL of my shares, not necessarily the smartest thing to have done last month. In the current situation, I’m down over $300/sh on some sold CCs, and lost some shares at 800, 860, and 905. Thankfully, these are all fully covered and in my IRAs, so no tax implications, and more importantly, NO LEVERAGE! Yes, I sold shares too low, yes it really is a significant amount of money lost (way, way more than my annual salary), but I’ve still made 2x on TSLA in less than a year, way more than my old mutual funds, bonds, and cash reserves. I’m a decade or more before needing the IRA funds, so there is comfort in that, plus I live a modest life in a low cost area. Finally, with the cash instead shares, I can now sell cash-secured puts near ATM for $20-$40/wk, TEN TIMES what I was doing on CCs. The only risk is that I get back fewer shares at a higher price than before.

I’m very thankful for getting into TSLA, even losing shares during this epic run, but I’m also realistic that 1%/wk returns on selling OTM puts is more than enough for my IRAs. The current 2%-4%/wk premiums that I’m getting are ludicrous and will eventually come down. With such high IV, now is the time to be selling options, not buying them.

 

[MindOverMatcha]

I am really torn about my Jan 2024 $1500 strike CCs. I sold them last week for $164, expecting a pull back, and a plan to buy them back at a profit. Instead, they are now at $295 (80% loss). The fact that yesterday's drop isn't continuing today is making me less confident that we are going to have a drop below $1000 and an opportunity for me to buy them back without a loss. So time for another poll.... I expect the SP to be $3000+ in 2024. Taxable account. Do I

1) Let them expire in 2024 and take my $1,500/share and cry about what could have been.
2) Wait until 2024 and then slowly roll up/out.
3) Sell 10% of the shares now to buy them back and eat the loss.
4) Buy them back using most of my cash without selling shares (and then rely more on margin for my BPS).
4) Do something else (like buying Jan 2024 800 strike LEAPS)?

I'm starting to lean toward #4

I wonder if your experience with BPS would allow you to generate enough safe and weekly income to cover the loss. It might seem like a big upfront cost now, but over these months, you'd be able to pay it off. Much like a car loan. A small weekly/monthly payment. Then you'll convert your net loss to 0, and be on your way back to making huge gains like before. Once you cross over those points from negative, neutral, then positive, you won't even care about how much you lost months prior. All that'll matter in the end is how you're finishing off strong with your gains.

I vouch for 4), since financially and psychologically you would win out. In the other options, it takes more mental labor to wait things out, watch the ticker, part with your shares (losing out on gains) etc. First, you're cutting your losses now and early, compared to waiting over 2 years. Second, I could not let this thing live rent-free in my mind for 2 years. The psychological cost is one thing that I take into account, even if it's harder to quantify compared with the financial cost.

This is just my limited experience with CCs, but TSLA can turn on you faster than I thought possible. I'm of course still learning with BPS, but have stayed away from CCs for a couple of months. If people are making huge gains buying LEAPS, then those selling LEAPS aren't doing too well. I know you're very experienced and probably don't need me to tell you anything you don't already know. Though I know in these moments, fear and uncertainty can cloud our minds, making it hard to make decisions. Hope my thoughts can give you some clarity about the right decision for you. Best of luck!

 

[adiggs]

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?

Main suggestion - I suggest reading at least the first page of the thread. The first post has a pointer to some option basics training via video. It's about 20-30h worth of videos in 3 chunks and represents basic options info that is assumed in the thread.

There is also a pointer to the FAQ for the thread, but that's new enough and still developing, that it might not be as useful (yet!). As a newcomer to the thread, a request I like to make is that if/when you find historical threads that you find particularly helpful for some topic, please reply to the thread with a link to that post (make it easy for me to find ) and ideally a short blurb about what its about / why it was helpful to you. Info like this will help us build of the FAQ, and is part of how we all contribute to making this thread.

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.

One of the huge benefits to this thread for me, is this ability to learn from other's experience. I believe that single component, and the volume of that info this thread affords me, has increased my own results by 2-5x or something. I could probably put specific numbers to it if I really cared - what I know with certainty is that its huge.

One easy measure is the monthly realized p/l in the account I care most about has been going up roughly 50%/month from July through October. And it isn't like July was a wimpy month. A lot of that range was a low IV environment that is usually considered suboptimal for option selling. I attribute that massive acceleration in my own results to primarily be a function of the rapid iteration on gain in knowledge and experience that I can't get if I were going this alone / in a vacuum.

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.

The emotional comfort zone - it's as important in one's optimization as the financial results. As is the time and energy component.

The way I look at this, at least for myself, is that I'm not looking for something I can do a few trades with, win some $, and then go do something else. This is an income for me, and that means this is something I'd like to be working well in 10 years, and every week between now and then. Or 20 years. Then again I also enjoy it so its not like a job, though I also need to keep it down to not very much time

I had Sep 22 1200 CC's lurking in my account. Didn't notice them till yesterday. Closed. Negated losses with other gains. Closed 5 CCs and 2 Calls. (0 sum)
Immediately sold Jan 23 2000 on the 3 that became free and deployed that into BPS for next week .... +so 80-90% of CC's losses, regained
BPS/BCS is not my main strategy, need to get hang/ full confidence of it based on time Mgmt with job - so supplemental income for now

I'm a big fan of small, exploratory positions, to get the hang of the mechanics and dynamics of new trades. And the great thing, the way I see it, is that you're not on a clock to figure your way into this. As you say its supplemental income which by its nature means you're not dependent on it.

 

[adiggs]

I wonder if your experience with BPS would allow you to generate enough safe and weekly income to cover the loss. It might seem like a big upfront cost now, but over these months, you'd be able to pay it off. Much like a car loan. A small weekly/monthly payment. Then you'll convert your net loss to 0, and be on your way back to making huge gains like before. Once you cross over those points from negative, neutral, then positive, you won't even care about how much you lost months prior. All that'll matter in the end is how you're finishing off strong with your gains.

In some respects this is exactly what managing a position is always really doing. One has a bad position, so you find a new position that is frequently more risky than the bad position, but has the possibility to recover the loss quickly (rolling for a small net credit). Or you just eat the losses and instead of offsetting them via roll / riskier positions than one would normally take, instead you just pay for the losses out of the rest of the year and its gains. The latter element - paying for losses from the gains of the rest of the year is something I believe we should all bake into our planning for results.

I've had two big losing positions this year, both large in size and % (the biggie % wise was a call spread that was about a 50% loss). I learned from those trades for sure. I'll do better at rolling puts down with a falling share price, and I'm keeping my call side sales as covered calls rather than call spreads.


Those two big losing positions ultimately were paid for by the rest of the year's successes, and while individually large, are a small fraction of my overall results this year.

 

[st_lopes]

Rolled BCS from 1400/1450 down to 1300/1350 for a 1 credit; was debating doing the same on my BPS legs (750/800 and 850/900), but I'll likely hold off on those as nothing interesting unless I go for 1000/1050 which I'm mentally not prepared for right now.

 

[JustMe]

Folks, we’re down to $1,162 - which seems to be the near-term support level from yesterday and AH. If we drop below that the next stop looks to be $1,100

 

[mickificki]

Macro-wise, later today the Fed will discuss its policy course, and it's likely they'll start tapering, which could cause a macro event and send stonks lower...

" The US Federal Reserve is expected to announce that it will start phasing out its $120bn monthly bond-buying programme, as it confronts more pronounced price pressures and predictions that interest rates will be lifted next year. The US central bank’s Federal Open Market Committee will release its latest statement on Wednesday at 2pm Eastern Time, followed by a press conference by chair Jay Powell."

Fed to start winding back $120bn-a-month stimulus programme

Central bank plans ‘taper’ of bond purchases as US economy contends with surging inflation

www.ft.com

 

[Drezil]

Sold 1350CC for Friday for lunch money against the rest of my calls, widened the 950/850 BPS to 1000/800 for Friday to take even more lunch-money.

Will monitor them closely, but they should lose ~80% until tomorrow because they are so far away from the SP. Orders to de-risk & sell them are set.

 

[adiggs]

Position update - I closed my 700/900 put spreads expiring this week for about 80% gain (earned roughly 2.40 out of 3.00), or about a 1.5% gain on these positions in the week.

The 1200 strike lcc's are still hanging out and are STILL showing a loss since I opened them. They're also getting close to expiration and are OTM, so tracking to a full gain.

I didn't do a roll, but I did open next week put spreads as 750/900s (narrowed the spread a touch and bumped up the premium). The new positions brought in 4.90 or a bit more than 3% on the position. Looks like good income to me.


Somebody asked earlier about position sizes, probably best expressed as a %. I do have some thoughts and info to share, but I'm going to save them for a different post. For now I'll say that I'm running really large and highly concentrated positions that you won't ever find in an options trading course as a good idea.

I want to spend some time developing that info because I don't want anybody just copying what I'm doing without a lot of accumulated knowledge and experience.

 

[EVMeister]

Folks, we’re down to $1,162 - which seems to be the near-term support level from yesterday and AH. If we drop below that the next stop looks to be $1,100

It dropped below then went back above?

P.S. Not into options myself, but I still enjoy following this thread.

 

[vikings123]

I went looking for value on the current dip and opened 15X 1000/925 BPS for 11/12 for a credit of $5.60

It will be interesting to see how the market reacts to the fed meeting but I like this consolidation at this level for $TSLA and there is more news to come.

I will look to open more positions in the afternoon based on the market reaction.

 

[JustMe]

It dropped below then went back above?

P.S. Not into options myself, but I still enjoy following this thread.

Yeah that was amazing. Looks like someone was targeting that level

 

[BrownOuttaSpec]

I'm still new to this but I feel weird closing positions on a Wednesday for 82% (closed 11/5 745/845). Opened a tiny 1x 795/895 for 11/12 $3.60
Still hoping for a little bit of a dip (or increased IV) tomorrow to get a bigger position for next week and add to my spread. I guess I am using DCA to setup my position for next week since I am still unsure about any large swings.

I think someone else said it, but I feel like we are going to end up right under 1200 by close on Friday.

(I wonder if I am going to get a thumbs down vote from anyone because of opening/closing a little early in the week .. just kidding @BornToFly ! Thanks again for the input )

 

[TDog]

I am really torn about my Jan 2024 $1500 strike CCs. I sold them last week for $164, expecting a pull back, and a plan to buy them back at a profit. Instead, they are now at $295 (80% loss). The fact that yesterday's drop isn't continuing today is making me less confident that we are going to have a drop below $1000 and an opportunity for me to buy them back without a loss. So time for another poll.... I expect the SP to be $3000+ in 2024. Taxable account. Do I

1) Let them expire in 2024 and take my $1,500/share and cry about what could have been.
2) Wait until 2024 and then slowly roll up/out.
3) Sell 10% of the shares now to buy them back and eat the loss.
4) Buy them back using most of my cash without selling shares (and then rely more on margin for my BPS).
4) Do something else (like buying Jan 2024 800 strike LEAPS)?

I'm starting to lean toward #4

I'm currently managing some CCs from last Friday that I had to roll out to Jan 24 1650. I rolled those in to Sep 22 1200 yesterday and collected $8.50.

Right now I can roll the Sep 22 1200 to Jan 24 1750 for about even credit. So a $100 improvement from the Jan 24 in just a day plus credit

So consider rolling the Jan 24s in on down days and back out on up days...

I'm a little annoyed at the situation and this is clearly not investing and relies on swing days, but there's a lot of time between now and then.

 

[MP3Mike]

My original 11/5 BPSs closed at ~90% profit and then I managed to grab some 11/5 990/940 BPSs on the dip that are already at a ~30% gain.

 

[Cherry Wine]

I think someone else said it, but I feel like we are going to end up right under 1200 by close on Friday.

I wonder if we'll be able to glean anything about this rally from the action after Friday, with so much gamma expiring.

 

[stealthyc]

In some respects this is exactly what managing a position is always really doing. One has a bad position, so you find a new position that is frequently more risky than the bad position, but has the possibility to recover the loss quickly (rolling for a small net credit). Or you just eat the losses and instead of offsetting them via roll / riskier positions than one would normally take, instead you just pay for the losses out of the rest of the year and its gains. The latter element - paying for losses from the gains of the rest of the year is something I believe we should all bake into our planning for results.

I've had two big losing positions this year, both large in size and % (the biggie % wise was a call spread that was about a 50% loss). I learned from those trades for sure. I'll do better at rolling puts down with a falling share price, and I'm keeping my call side sales as covered calls rather than call spreads.


Those two big losing positions ultimately were paid for by the rest of the year's successes, and while individually large, are a small fraction of my overall results this year.

I'll say again that % loss is mostly under your control. Barring a significant gap up/down against you, you can close the position at any time. Given the big leverage of spreads, I can't see any reason personally to allow a 50% loss (by which I assume you mean 50% of the max loss, not 50% relative to premium gained). I'm not sure there is a perfectly absolute rule though like "always close at 100% loss (relative to premium)" but something along those lines is I believe likely much better than getting in a position where you either are forced to take a huge leveraged loss or find yourself having to tie up capital rolling positions for little to no gain and hoping to get out. You can always re-open positions, and if the stock moves hard and fast against you you will get an even better position.

 

[ABC2D]

Hi all, I'm still learning the spreads and reading all your posts, thank you for the wealth of information and examples. Can you please weight in if I'm understanding this correctly for Nov 21:
-1 $1270P
+1 $1265P
Credit $4.65
Max gain: $4.65, Max loss (1270-1265)=5-4.65 = 0.35
is that right?