NOT-ADVICE
I've decided this morning to return to the market but only through Friday this week (3 day positions). I'm also coming back with covered calls and cash secured puts - no spreads. My rationale on these types of positions is that I consider these to be highly manageable and that the outcomes will be desirable (no opening positions for $1 just because I want to open something).
My larger view of TSLA hasn't changed - I see hints today that the Elon poll is behind us, but they're only hints. In particular the uptick rule is going to make trading today somewhat artificial compared to recent behavior. The poll impact could easily be back with us tomorrow along with another big down day (in fact I'm sort of assuming that until proven otherwise).
In my return to the market I've opened cash secured puts at the 995 strike for this Friday. I consider these strikes to be in play this week but I am also confident that I can roll these down to 800 if needed, and I consider 700 to be firm support. I collect a $7 premium now and may be rolling for a few weeks before I earn it.
Naked puts are how I got into trouble back in Feb of this year, but what really got me into trouble was that I was chasing the share price upwards and then I didn't roll back down aggressively enough with the reversal. This time I'm closer to the middle or bottom of a trading range, and I'm more knowledgeable about rolling down if the shares keep going down. I won't be chasing the share price up nearly as aggressively as I did last time (something like an 820 put with shares at 850 early in the year; and then rolling for big credits 1 or 2 times instead of strike improvements).
I've also opened 1100 and 1150 strike covered calls for this Friday for about a $7 premium. My timing opening these was .. bad (but better on the 1150s!). My thinking is that time is short and that I can roll these upwards to the 1200 strike at least, and maybe even 1300, should that need arise. And from there taking assignment at those prices isn't onerous to me in the least. Heck - if I were ready to be assigned last week at 1200, then I'm also willing to be assigned at that strike this week (with a roll or 3). I'll probably be better off in fact to get some of these assigned, but I'm not really seeking that.
The net of these positions is that I've put myself into 995/1100 and 995/1150 short strangles. This is the type of strategy I was using last year into the first few months of this year, and its one that I like. Back then I called this my semi-perma strangle where my objective was to keep both sides of the strangle open nearly full time. The specific value I see in this sort of position is that one side is always winning and if I do it better this time around, then the other side is being managed effectively until the day that it can return to generating income. And sometimes both are winning because the share price is nicely tucked in between the put and call strikes.
I won't be attempting to keep both sides open continuously. Instead I'll bias towards taking early wins and opening positions into strength / closing positions into weakness (open puts on down days; close puts on up days).
Bigger picture is that I believe I've got a wider range of tools that I can make use of. I think that these high volatility times are better served (at least for me) with naked puts / covered calls making up short strangles. Also no margin at all.
The low IV times over the summer were very well served with the put spreads (very well served = most profitable months for me, ever).
I view these on a continuum and will be trying to be more dynamic about the particular type of trade that I choose each week. At the start of the year I couldn't have done this, mostly because I didn't have any experience with spreads.
Something I'll also be considering starting next week will be really wide spreads. Like $400 wide spreads on up to 1/2 share price spreads. The intent with these wide spreads would be to get a little bit of leverage into the puts where I've always made the best money (still no call spreads). My intent as always with the wide spreads is to create positions that behave like naked puts. If I were to do a $400 wide spread today instead of the naked puts, I could be doing 600/1000 put spreads for $7 - $0.03
. Those will have effective rolls down to 800 with good rolls down to 900. Sort of like how a naked put would work, which is what I would be aiming for.
. I personally would take this opportunity to move everything as far from the SP as I can to live to fight another day.
sahilbloom.substack.com
