Wiki Selling TSLA Options - Be the House

[Chenkers]

Amazing.
Wondering, what's your calculation behind to choose 1304-1330 as your short leg on Wed/Thurs? Esp Thurs, the SP at that time was already close to 1250 at that time

I felt the run and volume was running out of steam and that a major level like $1300 with resistance between would prove a bit too far with the amount of trading left. I was confident in the level but could have set a higher strike and collected much more premium. Trading hours here for me is currently 12.30am-7am and I'd set my limit orders at 3.30am before going to bed and before the late run-up. The orders filled when TSLA was under $1200 but if I'd been awake I might have timed it closer to the peak. That late run-up did give me some concern but I was mainly annoyed that I could have got a bit higher strike for the same premium.

 

[Ogre]

closed my -1200/+1155 bps for today, and opened -1200/+1150 bps for next week. $12 of credit.
my major position for Nov12 is -1000/+800 bps.
Also opened smallish -1100/+900 bps.

Been doing more buying than selling lately so I have done exceptionally well in my pee wee “Trading” account.

Seems like we’re going to stability so going to try to do what popped into this channel for… selling.

Following samppa here with a couple smaller positions (I have a baby/ trading port)

Nov 12 -1050/ +1000 bps
Nov 12 -1000/ +800 bps

Also sold some Nov 12 CC at 1290 for $24. Those might hurt me.

 

[tradenewbie]

I felt the run and volume was running out of steam and that a major level like $1300 with resistance between would prove a bit too far with the amount of trading left. I was confident in the level but could have set a higher strike and collected much more premium. Trading hours here for me is currently 12.30am-7am and I'd set my limit orders at 3.30am before going to bed and before the late run-up. The orders filled when TSLA was under $1200 but if I'd been awake I might have timed it closer to the peak. That late run-up did give me some concern but I was mainly annoyed that I could have got a bit higher strike for the same premium.

When you set limit orders, do you mean you set an exact amount of premium you want to achieve? And if so, how do you decide what premium you want to aim for? Trying to learn from everyone of you with different types of strategy.

By the way, you mentioned you didn't intend to open a BPS yet for next week. So your original plan is to open the BPS on next Monday/Tues instead?

 

[Right_Said_Fred]

But Jan 24 is available now.
So Sep 23 and Dec 23 are not released yet, but Jan 24 is available already. Do other people see the same?

That’s because the January series are always the first ones to appear. As we get closer the quarters will follow, then the months and eventually the weeks.

 

[Right_Said_Fred]

I've been a bit quiet posting here of late, being busy on a number of fronts, but thought I'd do a quick recap of this weeks trading so far. I'm also still taking a bit of a different approach to a few others here so may offer a different perspective.

Last week I opened 430 x BPS in the 930/950 and 950/980 ranges. These were rolled up on Wednesday to 990/1020 and 1010/1040. I tried rolling up again on Thursday but there wasn't enough credit to make it worthwhile. I'd also opened 55 x 960/990 for 11/12 by accident (should have been 11/5) but they've done OK. Today I've opened another 300 X BPS for next week at 1050/1080 getting $3.80 on the dip.

On Wednesday I also felt confident enough to open BCS with 455 x 1305/1345 and 1325/1360 to make most into IC's. On Thursday I also opened another 150 x 1330/1360 by accident when an order I forgot was open, exercised on the peak just after open. I had plenty of margin buffer and it's worked out OK so all good. I also did CC on most of my shares between 1300 and 1325.

So I've resisted making a move to wider BPS/BCS and have kept to $25-$40 spread ranges. I get around 3-5 times the return on my used margin compared to a very safe BPS. So I'm still backing my judgement of where the stock will go but I am being more conservative (than before) in my strike choices. The higher IV makes it easier to choose further out strikes without sacrificing too much premium. The other main difference is that I will not let the stock run away before closing off losing positions. I took about a $400k loss 3 weeks back, mainly by waiting too long in hope for the positions to recover.

So far it's looking like I should (hopefully) clear a bit over $250k this week, so a quick recovery from the odd (and hopefully less likely) major loss shouldn't take too long.

That’s a lot of money you ‘accidently’ earned

 

[Ogre]

When you set limit orders, do you mean you set an exact amount of premium you want to achieve? And if so, how do you decide what premium you want to aim for? Trying to learn from everyone of you with different types of strategy.

By the way, you mentioned you didn't intend to open a BPS yet for next week. So your original plan is to open the BPS on next Monday/Tues instead?

The market determines the premium.

You set limit orders so you aren’t subjected to random fluctuations in the market price. If you place a market order, you might get half the premium you expected. If you set a limit, you will either get nothing or what you expect.

 

[adiggs]

That’s a lot of money you ‘accidently’ earned

There are accidents, and there are accidents

 

[samppa]

Man, compared to @samppa and @Chenkers I'm a total chicken. And I even thought my 1050/1100 BPS opened yesterday morning for some gravy this week was ballsy.

Hah, I'm normally _not_ this aggressive.. the -1200/+1150 is an experimental position, I'm trying to get into a situation where I have to manage it. It's only 1 contract. But 5k is real money for me - max loss won't break me, but I really don't want to go there.

 

[MindOverMatcha]

Welp, had a feeling I'd be walking into a trap with the stock trading sideways. I got impatient seeing it trade sideways for an hour and decided to roll my BPS to more aggressive positions. Of course, as soon as I did it, the stock started gyrating from a flat 1233 up to 1239, then down to 1220...for now. Looks like I decided to roll at the least profitable point. Lesson learned to know when traders go to lunch and wait for them to come back to spike IV. I'm still optimistic that theta decay from the weekend will still work in my favor to negate any serious concerns. Next time, I'll go walk my dog instead of staring at my screen.

I do like having a red day Friday for TSLA and tech indices like QQQ. Having people take profits at the top makes it more likely we'll rebound further up next week.

 

[corduroy]

Finally bit the bullet and took the loss on my short calls in my IRA. The correction will now commence for sure.

Edit: see

 

[elasalle]

Finally bit the bullet and took the loss on my short calls in my IRA. The correction will now commence for sure.

Vol seems to have shrunk linearlly past couple of days.

Sold some BCS around 1400 mark.

Accounts actually +ve with all the Jan 23 CC's losing value today. (too early to know what will happen to them - but the more sideway it trades the better - for this part of the trades)

 

[Chenkers]

When you set limit orders, do you mean you set an exact amount of premium you want to achieve? And if so, how do you decide what premium you want to aim for? Trying to learn from everyone of you with different types of strategy.

By the way, you mentioned you didn't intend to open a BPS yet for next week. So your original plan is to open the BPS on next Monday/Tues instead?

Adding to what @Ogre replied. I always trade a limit order and have live OPRA data in IBKR so I can see the bid/mid/ask along with an up to date option price chart. (the OPRA live data is free if commissions/month > $20 and I'm well above that). I usually look at where the option has traded against the stock price recently and place a limit order for the option at the point where I expect the stock price to fluctuate to. If I want a quick fill I will just set a limit a few points above the current mid and it usually fluctuates enough to fill.

I had one small order of 55 BPS that went through as the 12th instead of the 5th. They've declined 80% this week so have actually gained more premium than the original 11/5 BPS would have. The other 300 BPS for next week were opened intentionally earlier today during the big dip. I've been opening these on the Friday prior lately as Monday is usually a pop and they will lose value quickly (33% so far). I can then add a BCS once I'm comfortable with the trading range to make an IC. I generally get around $1 more for IC ($5.5 vs $4.5) compared to opening both sides of the IC on Monday. Note I'm doing this on the expectation of the market generally rising Monday. In a dropping market I would alter the approach.

I've now closed out all positions for this week at between 0.01 and 0.03 per contract.

 

[UnknownSoldier]

Traded 100x -900/+850 11/19 BPS and collected around 15k premium. With volume declining again, it seems like IV will start declining too. We'll see.

 

[MP3Mike]

I'm surprised that the 11/12 990/940 BPS I bought yesterday is already at >60%, after just one day... I'd close it out, but I don't know what I would replace it.

 

[adiggs]

Closed my 11/12 BPS this morning - they were ahead around 60%. I go for these early close opportunities like these when they present for two reasons - lowers risk by removing my exposure to a big move against; and creates an opening to open a replacement at a better price when the shares regress. In this case I realized a 60% profit on a position that was designed to be next week's income. So I get 2 incomes realized this week (gotta love that).


It also turns out that yard work can be awfully profitable - I went away to do some leaf management, and came back to red shares and some (but not nearly all) of a recovery on yesterday's put premiums. So opened 895/1045 put spreads for 11/12. 1045 is all the way up to .10 delta - the new position has a lot more premium to decay over the next week than the one I closed earlier ($5 vs $1.60).

Also with some short puts at 1095 and an $11ish premium. Not as many of these as the spreads, but I consider the short puts to be have significantly better management characteristics, so I'm taking on more risk with these (.16 delta).

In both cases I'm choosing the first strike beyond a high volume / 'round' strike, figuring that the 1100 and 1050 strikes will act as some level of support

 

[ammulder]

For @Lycanthrope and anyone else who tracks trades with spreadsheets:

How do you organize your trades into weeks to calculate your weekly profit/loss? Based on the day you opened the trade, the day you closed the trade, the expiration date of the option/spread, or something else?

Most of my trades are opened on one week and closed on another, but some of them are closed early on the same week they were opened, which might not be the week they expire, so no matter what I do it seems like there are some exceptions. I think I don't want to be in a position where I have to go back and change the total for a prior week, so I'm thinking the best way might be to group into weeks based on the day I close a trade, even if I got the income for opening those trades on a prior week, except then longer-dated options just hang out in the "future" bucket for a while (and if I sold them and got paid up front, I may have a lot of cash that's not yet reflected in the weekly totals).

Or do you just track the cash in/out instead of making the individual trades the thing? That seems weird because you get the cash up front for selling options, but you don't know at that time how much of it you'll get to keep (or how, much more you might lose, worst case).

How is this normally done?

 

[scubastevo80]

@ammulder - I have just started trading, but track by expiration date. I include trade type w/ expiry, strikes, cash received, cash to cover, and P&L. I want to include trade date and some other data like IV, underlying price, etc - but I'm not there yet with the organization of the info.

 

[Oil4AsphaultOnly]

closed all my BCS (the 1400/1600 were closed at a slight loss though) near the close today. I'm going to assume that rise or fall, the IV will rise on monday, making it a better time to sell options. Steadily recovering from the black swan of 10/25.

And that's the lesson for me. Believe that selling options is net profitable, despite the setbacks.

 

[adiggs]

For @Lycanthrope and anyone else who tracks trades with spreadsheets:

How do you organize your trades into weeks to calculate your weekly profit/loss? Based on the day you opened the trade, the day you closed the trade, the expiration date of the option/spread, or something else?

Most of my trades are opened on one week and closed on another, but some of them are closed early on the same week they were opened, which might not be the week they expire, so no matter what I do it seems like there are some exceptions. I think I don't want to be in a position where I have to go back and change the total for a prior week, so I'm thinking the best way might be to group into weeks based on the day I close a trade, even if I got the income for opening those trades on a prior week, except then longer-dated options just hang out in the "future" bucket for a while (and if I sold them and got paid up front, I may have a lot of cash that's not yet reflected in the weekly totals).

Or do you just track the cash in/out instead of making the individual trades the thing? That seems weird because you get the cash up front for selling options, but you don't know at that time how much of it you'll get to keep (or how, much more you might lose, worst case).

How is this normally done?

I track based on the close date and I think that is pretty typical.

However there is an additional idea to think about:


There are really two ideas at work within the broad category of trades we're doing. There is cash flow, and there is realized P/L. Especially with the short durations most of us are using, these two are very similar over longer periods of time. But over any short period they can be quite divergent. Especially if you've got some long dated options mixed in.

Cash flow measures the change in cash. So selling an option generates cash. This is the most visible reason that its valuable to roll for a credit - the net change in cash is always positive as long as you're getting a credit - any credit. Positive cash flow is a good thing

But cash flow isn't everything - what you'll be taxed on, and your actual change in portfolio value, comes from the realized P/L, and that doesn't happen until positions are closed.

It's also not that hard to dig a really deep unrealized loss with positive cash flow. This happened to me with my hell puts / deep ITM puts back in Feb- June roughly. Eventually I had something like a $200 premium that I'd realized losses on along the way that I hadn't earned back yet. My realized P/L was strongly negative (about $200/share in fact ), but my cash flow getting there was always positive. The portfolio value was shrinking and I'd realized the $200 loss along the way. However I had this open $200 position that if I could have earned its value, then I could have gotten back all of the losses I'd accumulated along the way. If an event had come along that forced me to close before I'd earned it back then I would have lost the position that could have gotten back most of the loss by itself (rolling perpetually waiting for the shares to come back).


Personally I now consider the realized P/L to be the income (that I can spend as I like) and not the cash flow. That's consistent with more general accounting principles. Realized P/L is the income - cash flow is what keeps us in business.

 

[MikeC]

Eventually I had something like a $200 premium that I'd realized losses on along the way that I hadn't earned back yet. My realized P/L was strongly negative (about $200/share in fact ), but my cash flow getting there was always positive. The portfolio value was shrinking and I'd realized the $200 loss along the way. However I had this open $200 position that if I could have earned its value, then I could have gotten back all of the losses I'd accumulated along the way. If an event had come along that forced me to close before I'd earned it back then I would have lost the position that could have gotten back most of the loss by itself (rolling perpetually waiting for the shares to come back).

This dynamic can matter for tax purposes. If you roll a lot and into next year, the realized losses can shrink or eliminate your gains for this year and defer them to next year.

Is this in the gray area of wash sales? Brokerages don't consider rolling trades to be wash sales but this seems similar in the sense of a strategy to defer taxes.

I think the problem is it can mean two things to be "substantially identical": "considerably but not completely identical'; or "identical in substance" (e.g., a position in common stock and a synthetic long.) To me, the first meaning is nonsensical as it introduces a modifier to distort what the word "identical" means, which is "exactly alike", a yes/no binary condition.