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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
Definitely not advice because I'm just winging it most of the time but I roll into strength. I buy LEAPs with a Delta of 0.80 and roll when they hit >0.90. I take some profit and deleverage a bit when the stock goes up. I'm curious what others do so I can learn.
A little semi-OT option mechanics experience I wanted to share. I was trying an experimental arbitrage position in another stock and got early assignment on one of the DITM legs. No real effect to the position I think (I'll just reset it on Monday), but it did answer a long-standing question I had about early assignment. I had 40 contracts open and only 15 were early assigned. I don't know if it's already common knowledge for most here, but I found it good to confirm that early assignment doesn't necessarily affect your whole position in a particular contract.
No, but it could be an early warning sign. Years ago I had deep ITM naked PUTs out 1-2 years. Some got assigned. And then shortly after they all did....
(I don't remember any more details).
gabeincal
Active Member
Ouch that sounds like an uncomfortable situation. How bad was it and how did you recover, may I ask?
It was ugly. Worst margin call I ever got. Summer 2019. Account value had gone from a couple million down to less than $700k. I had to borrow $100k from my father to avoid selling my shares. Learned a Valuable lesson about Margin, and that the SP can go down much more than you think possible based on what we think are a lot of promising future catalysts. I almost threw in the towel. TMC kept me in it. I kept all my shares, so I recovered nicely....
gabeincal
Active Member
Glad you have recovered. Exactly the situation I'm trying to avoid, while still selling enough puts weekly to keep income flowing / account growing...It was ugly. Worst margin call I ever got. Summer 2019. Account value had gone from a couple million down to less than $700k. I had to borrow $100k from my father to avoid selling my shares. Learned a Valuable lesson about Margin, and that the SP can go down much more than you think possible based on what we think are a lot of promising future catalysts. I almost threw in the towel. TMC kept me in it. I kept all my shares, so I recovered nicely....
As for myself, I'm holding -15 x 1130p into next week with triple the margin excess I used to have, so not feeling very nervous..
How do you set your margin excess? Do you have some refined risk management formula or ratio that you use? Thinking I might as well learn from your mistake....
No idea why so many people on this forum as well as the main thread are freaking out so much over Elon selling 10% of his shares. This will be a nothing burger. He had already warned that he may have to sell some stock due to expiring options next year, I think it is just simply his typical way of doing exactly that. If he was to just quietly sell some stock, can you imagine to hoopla over him selling - this about how the reaction is every time ARK sells TSLA even though their by-rules are well known.
My opinion - Elon is just playing 4D chess as always. He needs to sell anyways to generate cash to exercise his stock options. He could borrow, but those numbers are getting ridiculous. It is better to sell this year and pay 2021 taxes than wait till next year when the tax rates for the highest bracket will have already increased. The Twitter poll is his way of getting the opportunity to sell, get all the public awareness to the nonsense about taxing billionaires, not cause backlash from people asking what happened to his "first in last out" philosophy. For him, it is all win-win. Plus, give him some credit, he is not stupid to dump 2% of TSLA shares suddenly on the market. This will be done with a plan in place and we will hardly even notice.
Back on topic - the results on this forum continue to amaze me. I just finished my spreadsheets - it appears for the month of October, I made about 22% return on the margin risked in my individual brokerage, 20% return on the cash used in my IRA and Roth IRA accounts. That is astounding returns for someone just getting into this game. Also, remember all my BCSs that were such a thorn in my side - well turns out I had a tiny profit overall on those! At one point on the Hertz news days, I was looking at a net loss of 300K, but ended overall with a gain of $1560. OK, that's a tiny profit, but it is not a loss!
I have a bunch of BPSs open for next week already, and was planning on adding more on Monday, but now let's see how the market reacts to these tweets over the weekend. The positions I have open are -p1060/+p960 and -p995/+p795.
My opinion - Elon is just playing 4D chess as always. He needs to sell anyways to generate cash to exercise his stock options. He could borrow, but those numbers are getting ridiculous. It is better to sell this year and pay 2021 taxes than wait till next year when the tax rates for the highest bracket will have already increased. The Twitter poll is his way of getting the opportunity to sell, get all the public awareness to the nonsense about taxing billionaires, not cause backlash from people asking what happened to his "first in last out" philosophy. For him, it is all win-win. Plus, give him some credit, he is not stupid to dump 2% of TSLA shares suddenly on the market. This will be done with a plan in place and we will hardly even notice.
Back on topic - the results on this forum continue to amaze me. I just finished my spreadsheets - it appears for the month of October, I made about 22% return on the margin risked in my individual brokerage, 20% return on the cash used in my IRA and Roth IRA accounts. That is astounding returns for someone just getting into this game. Also, remember all my BCSs that were such a thorn in my side - well turns out I had a tiny profit overall on those! At one point on the Hertz news days, I was looking at a net loss of 300K, but ended overall with a gain of $1560. OK, that's a tiny profit, but it is not a loss!
I have a bunch of BPSs open for next week already, and was planning on adding more on Monday, but now let's see how the market reacts to these tweets over the weekend. The positions I have open are -p1060/+p960 and -p995/+p795.
InTheShadows
Active Member
Yea I have been trying to figure when to roll. Mine are at delta 94 now and I like being around 80 for entry as well. Delta says roll up into strength but if I’m understanding the other Greeks, I was thinking maybe rolling up into weakness would be better because the higher strike would have a higher gamma during a drop.
Just like Lycanthrope, I also only consider gain or loss when I close the position. I have been using the Numbers on my mac as my spreadsheet software - with data organize, sort and categories as a way to calculate gains/losses. Usually can get the weeks calculations done in about 10-15 minutes. Used Excel earlier - with pivot tables as a way of calculating, but now finding Numbers so much easier.
Steps I follow
- Download last 30 days of activity and orders history from Fidelity
- Open in Numbers
- Delete the top and bottom rows which have the general information and disclaimers from the brokerage
- Designate the top row which has the column titles as category row
- Sort all data by 'Action' column. Then delete all the rows which have info from any non-option related transactions
- Sort all data by settlement date in descending order
- Add category for "symbol" - this groups all the open and close orders under each symbol. I generally also click "collapse all groups" so that there is only one line per symbol displayed.
- Right click on the 'Quantity' to display "sum" this displays the total quantity of options for each symbol. If you have opened and closed the position completely, the sum will be "0". If a position was opened but not yet closed, there will be a positive number in this cell.
- Right click on "Amount" to display "sum". This gives you the net gain or loss for that position
- Right click on "Settlement date" to display "maximum"
As explained on step 8 above, if you have closed a position, the net quantity of that particular symbol will be "0". Then all you have to do is select the cells under "amount" corresponding to the cells with "0" in quantity for settlement dates in that week to know your total gain/loss for that week. I usually just type that out manually into a different sheet as gain/loss for that week for that particular account.
I don't track the positions when I open or close. Too lazy, doing the above once/week for each account takes me 10-15 min for each account at most.
i don’t know where we land tomorrow, but I do believe tomorrow will clarify exactly how powerful the gamma squeeze was in the stock price ascending.
I’m wrong two or three times a day…. But I kind of think this will be similar to Elon’s tweets about Bitcoin. If price dives, there will be a lot of triggered people.
If it rises, there will be a lot of “in your face Gordo!”
I’m packing change of underwear tomorrow, and I’m hoping I have a face like the congressman Elon roasted at market close.
I’m wrong two or three times a day…. But I kind of think this will be similar to Elon’s tweets about Bitcoin. If price dives, there will be a lot of triggered people.
If it rises, there will be a lot of “in your face Gordo!”
I’m packing change of underwear tomorrow, and I’m hoping I have a face like the congressman Elon roasted at market close.
TheTalkingMule
Distributed Energy Enthusiast
The only thing that's gonna affect TSLA this week is institutional buying and selling. Any scared retail people selling a hundreds or thousands of shares isn't gonna overwhelm the dynamic of so many funds having a dramatic TSLA imbalance.
I keep pointing to the Thursday/Friday chart to illustrate how hard it was for MM's to even keep this thing around 1200. Why should that subside? I guess funds could keep gambling that TSLA won't roll higher and leave them in the dust.
I'll LMAO if we pop 5% tomorrow. Could easily see the normal +3% on covering of the MM shorting Thurs/Fri. More likely they push us down immediately and sharply Monday to trigger as much selling action as possible, then equally massive rebound to neutral. That sounds profitable for the house.
I keep pointing to the Thursday/Friday chart to illustrate how hard it was for MM's to even keep this thing around 1200. Why should that subside? I guess funds could keep gambling that TSLA won't roll higher and leave them in the dust.
I'll LMAO if we pop 5% tomorrow. Could easily see the normal +3% on covering of the MM shorting Thurs/Fri. More likely they push us down immediately and sharply Monday to trigger as much selling action as possible, then equally massive rebound to neutral. That sounds profitable for the house.
I'm on board with the "nothingburger" camp. If nothing else even if Elon wants to carry out the vote and sell immediately, he can't. His sales will be subject to a trading plan that will program those sales for some time in the future and put them inside of specific windows when he's allowed to trade.
Heck - as @TheTalkingMule points out its the institutional buying that matters, and I imagine they're licking their chops at all the 'cheap' shares they're about to get.
But this isn't a technical / mechanical situation - its an emotion thing.
So while I believe its logical that nothing will happen, my positions are sufficiently big that I've entered close orders for all of my puts (mostly 895/1045 BPS for Friday, but also some 1095 short puts also for Friday). The close orders are all for gains in the pennies - effectively break evens if they fill. If they don't fill by the time I'm up in the morning then I'm likely to take the losses and close. A 10% loss on capital at risk will hurt bad, but its also recoverable in a month or less. A 1 month break from the earnings rate of the last 3 months is barely a speed bump and that's something I have control of.
I'd probably be much safer going ahead and offering the positions up at about 2x my entry price - around a 6% exit on a 3% entry, but I think I'm getting greedy (is that rule #1 or #2 that I'm in violation of!?!
)
Heck - as @TheTalkingMule points out its the institutional buying that matters, and I imagine they're licking their chops at all the 'cheap' shares they're about to get.
But this isn't a technical / mechanical situation - its an emotion thing.
So while I believe its logical that nothing will happen, my positions are sufficiently big that I've entered close orders for all of my puts (mostly 895/1045 BPS for Friday, but also some 1095 short puts also for Friday). The close orders are all for gains in the pennies - effectively break evens if they fill. If they don't fill by the time I'm up in the morning then I'm likely to take the losses and close. A 10% loss on capital at risk will hurt bad, but its also recoverable in a month or less. A 1 month break from the earnings rate of the last 3 months is barely a speed bump and that's something I have control of.
I'd probably be much safer going ahead and offering the positions up at about 2x my entry price - around a 6% exit on a 3% entry, but I think I'm getting greedy (is that rule #1 or #2 that I'm in violation of!?!
)Lol, yup, institutional buyers have been driving this stock up. Friday's sideways was a show of strength. A few weeks ago, Institutions out-bought retail by almost 10-1. Tonight, I'm seeing price analyst upgrades from Wedbush to $1800, Jefferies to $1400, and who knows what else will come. I just went from "Dear Grandpa, please help me." to Raging Bull. My forecast for Monday just went from -7% drop to +5%. Glad today wasn't a trading day. My emotions would've let me get swindled in an instant.
Either way, I'm emotionally feeling more optimistic but still waking up early Monday to be ready for what may come. Most likely will roll my BPS on the morning drop.
The biggest things I've learned is how to use the Margin Calculator tool in Fidelity that will let you see how much margin you have if the SP drops to a certain number, to never assume the SP can't drop 50% for almost no reason, and to not be Greedy and keep selling more and more Puts because it's "free money" while assuming the SP can't possibly drop to that level....
gabeincal
Active Member
Wish e-trade had a margin calculator that lets you simulate a share price...
But in a nutshell, I verify every move with the margin calculator and make sure that it meets my rule for margin excess. That rule keeps getting more and more conservative, now that I'm managing a fairly large portfolio.
Recovering already - now €984 -6.76%
I'm starting to feel more comfortable about the three hundred 1050/1080 BPS I opened on Friday. Pre-market is recovering now to around -5% but I still expect a further push down for the MMD. That should be a good opportunity to add some much lower BPS as a strong recovery wouldn't surprise. Then it's watch and see where it settles and whether I need to get defensive or can add a few BCS.
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scubastevo80
Member
Any not advice when you have a BPS and BCS positions 20% away from Friday’s closing strike? Close the BCS for profit into the 5% dip? Would anyone roll the BPS or just sit given the safety margin? I could close everything but this is where the “what do I roll into and is it an improvement” comes into play…
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