When adding the BCS side to some existing BPS, it is better to sell those into strength. For next week, however, would you not get a better price today, given more theta?
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
That is simply a bet you have to make anytime you open a position. Will it be up tomorrow more than theta decay? Will IV be up or down? You can't really know. You can be opportunistic sometimes, but also you can end up waiting for an opportunity that never comes.
NOT-ADVICE. But my own experience.
I've used the LEAP approach to raise cash and as a rescue for a position. In hindsight I can say that both times - a 1 year roll on some puts and a 2 year roll on some calls worked.
However... the 1 year puts meant that I had a bunch of cash tied up backing those puts for 6 months before I could resolve them. I was doing cash secured puts and rolled them to an ITM position. I think it was the $600 strike when the shares were more like $450. But when January came along they had moved far enough OTM that I was able to close early for a 2/3rds profit. That one worked out really well
The problem with these was that cash was unavailable for other purposes, including living expenses. And that was the account from which I draw living expenses, so .. not great, even though the position did generate a big realized P/L in the end.
The 2 year calls were worse. They DID dig me out of a deep ITM position I got myself into and that was good. I was able to roll them to a MUCH higher strike price. I think from about the $1500 share price to $4200. How could the shares possibly get to $4200 in 2 years, right? Well now they're $5500
But I was able to close them a couple of months ago for break even, maybe 1 month before this latest price explosion (just in time!). All of those shares were tied up backing the calls.I was able to get out of the position by turning shares into leaps for a 20% increase in delta and taking the excess cash to return to selling puts / put spreads in meaningful quantities.
In both cases if a similar situation arose today and I really wanted to avoid assignment for some reason (such as taxes in the brokerage) I might do a multi-month roll, but I'd do my best to avoid the really long rolls. It makes for a static position with little ability to make adjustments along the way. Including a decision to sit things out for a bit while the market and TSLA settles down.
Regarding assignment - early assignment is rare (not like 1% rare - like lots, lots more rare). But more specifically as an option seller, early assignment is good for you. It means that whatever extrinsic / time value remains in the option just got given to you. And this is the key to understanding the dynamics of early assignment.
For a position that is OTM early assignment (ignoring after hours for close OTM on expiration day) won't happen - from a value standpoint you would be given the extrinsic value (which is all of the option price) PLUS the difference between the OTM option and the share price. In a market where high volume participants are scrabbling over pennies and dimes, that won't happen.
For ITM positions where early assignment might happen, keep an eye on the time value. With really deep ITM positions (which I've had) I was rolling 1 week prior to expiration - that was good enough to avoid early assignment, partly because there were still a few dimes worth of time value remaining. It's really hard for the time value to be down to 1 or 2 pennies with a week to go. Though these deep ITM positions might be better off with monthly rolls than weekly rolls while waiting for the shares to come back.
My opinion - those two OTM positions have 0% chance of early assignment. And if it were to happen you will leap up and down with joy because somebody made you buy shares at $900 or $950 that you can immediately sell for $1044. There is no limit to how much of that free money worth receiving, and that WOULD actually be free money (which is why it won't happen).
You've put into words an ill-formed idea that has been forming in the back of my head. I'm thinking similarly, but don't yet know what I'm going to do with that.
Are those different dates or the same expiration date? You can't be both long and short a position at the same time - it doesn't make sense as they would offset.
So change one of those strikes by $5 or make the expirations different and you're good to go.
Yes same 11/19 expiry. Because my plan is to BTC a 1200cc that I opened few days ago at a lower cost, and STO another 1200cc at a higher premium. I have free up some cc that I can STO already, so it won't matter if the BTC cannot be filled. Didn't know it won't let me do it even I set it as two separate order..
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Don't remember of the top of my head, but I documented those trades in this thread, so just search for my posts.
Just keep in mind that when adding a BCS, you are adding topside risk. But it should not increase your max loss, and other side of the trade will always win, unless you go inverted.
By my calculations, if I sell 1 put LEAP, I should be able to close everything out with a small loss, much less than BTC everything now. I have 11/19 and 11/26 BPS, so I am thinking Monday/Tuesday close my 11/19 and sell that 1 Leap. Then wait to see what happens week of 11/26 praying the stock turns up. If stock stays flat, then I guess I'll BTC at a loss instead of rolling.
I guess that is the downside where I'd be unable to invest anything with the put hanging over my head for the next two years.
My other option is BTC my BPS and reinvest in Tesla.
Edit: Also realize, I could sell weekly cash-secured puts instead of the LEAP Put to avoid having my cash tied up that long. May be more work but two years is a long time to be tied down.
Thank you for pointing that out!
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Can you do a triggered order so the first happens then makes the second active?
Closed the BCS side for pennies, rolled -p1100 leg to 11/19 -p1100 for $15 and STC the +p1050 leg. So this became a naked -p1100.
Then I sold BCS for next week, -c1100/+c1150, credit $7.71.
Gotta say I really like this approach where I have an IC or a fly, so that I'm open on both sides.. but I'm still really cautios on the call sides - I really don't want to have any shares called away. That's why these are only 1-2 contracts and I won't let the short calls go DITM. Now the call premiums have creeped up a lot, so it's worth it.. couple months back call premiums were ridiculously low.
InTheShadows
Active Member
I had one remaining -1050/950 position this morning. Yesterday I was thinking it would be ok. Well this morning that changed. Surprisingly I was able to roll it to -1000/900 next week for a .68 credit. SP was 1033 when I did this.
I was really shocked I could get that much improvement and still get a credit. Is that normal for expiration day?
Gosh I look at my spreadsheet and get so mad at myself for thinking we found support Monday at 1150 and opening such aggressive positions. Had I reopened the way I normally do I wouldn’t have had to roll one position this week. I got greedy.
Was looking at chains this morning and I’m really leaning towards 300 spreads and single spreads as large as I can go in accounts where I have less available for selling puts.
I was really shocked I could get that much improvement and still get a credit. Is that normal for expiration day?
Gosh I look at my spreadsheet and get so mad at myself for thinking we found support Monday at 1150 and opening such aggressive positions. Had I reopened the way I normally do I wouldn’t have had to roll one position this week. I got greedy.
Was looking at chains this morning and I’m really leaning towards 300 spreads and single spreads as large as I can go in accounts where I have less available for selling puts.
We did find support at 1150 on Monday. Then Elon.I had one remaining -1050/950 position this morning. Yesterday I was thinking it would be ok. Well this morning that changed. Surprisingly I was able to roll it to -1000/900 next week for a .68 credit. SP was 1033 when I did this.
I was really shocked I could get that much improvement and still get a credit. Is that normal for expiration day?
Gosh I look at my spreadsheet and get so mad at myself for thinking we found support Monday at 1150 and opening such aggressive positions. Had I reopened the way I normally do I wouldn’t have had to roll one position this week. I got greedy.
Was looking at chains this morning and I’m really leaning towards 300 spreads and single spreads as large as I can go in accounts where I have less available for selling puts.
Keep working it and get yourself square. Or even at least
Not necessarily so, while not chronological, Elon's lowest sale on Monday was 1135.05 which was the morning. The afternoon drop may not have been due to the tax sale.
Note also, that sales plan was set up in September.
Edit: or are referring to Tuesday's action?
Now I'm thinking, if share price goes flat or down, I'll just buy to close my ITM BPS the week they expire before they all get exercised. With the cash I have, I can sell puts to make things back. Thinking of selling say, out to February or during a time when share price might go up during a January Earnings report. Then if the put goes OTM, I can buy it back for a profit.NOT-ADVICE. But my own experience.
I've used the LEAP approach to raise cash and as a rescue for a position. In hindsight I can say that both times - a 1 year roll on some puts and a 2 year roll on some calls worked.
However... the 1 year puts meant that I had a bunch of cash tied up backing those puts for 6 months before I could resolve them. I was doing cash secured puts and rolled them to an ITM position. I think it was the $600 strike when the shares were more like $450. But when January came along they had moved far enough OTM that I was able to close early for a 2/3rds profit. That one worked out really well
The problem with these was that cash was unavailable for other purposes, including living expenses. And that was the account from which I draw living expenses, so .. not great, even though the position did generate a big realized P/L in the end.
I was able to get out of the position by turning shares into leaps for a 20% increase in delta and taking the excess cash to return to selling puts / put spreads in meaningful quantities.
In both cases if a similar situation arose today and I really wanted to avoid assignment for some reason (such as taxes in the brokerage) I might do a multi-month roll, but I'd do my best to avoid the really long rolls. It makes for a static position with little ability to make adjustments along the way. Including a decision to sit things out for a bit while the market and TSLA settles down.
I think I may want that flexibility to have access to the cash, but not sure what kind of time frame to look out for. I imagine weekly puts could bring more income, but that's a lot more time management and I think my girlfriend will dump me at that rate
Maybe shoot for selling quarterly puts during Earnings Reports.Yes.
But it seems Mr. Musk is still selling. I have heard rumors.... And of course, we have all the bandwagon jumpers....
Oh he was as of yesterday. Wasn't sure if you were terming him the primary cause or not.
Wednesday's sale had an apparent floor of 1,000. And he has been selling at lows as well as highs.
bkp_duke
Well-Known Member
So everyone else feels better . . . I broke my "Rule #1" this week and paid for it dearly. It was a HARD LESSON to learn, but in hindsight I needed to learn it as my trades were becoming slightly more and more aggressive each cycle. Sadly I didn't learn this the prior weeks by watching everyone else getting burned on their BCS's, I had to experience it for myself for the sting to set in.
Monday, I was so confident that the SP was going to stay over $1100 that I rolled my 950/1000 BPS up to 1015/1065. By Tuesday an hour into the market I was panicking, closed the position and took a $127k loss, wiping out all gains from the past 5 weeks.
In hindsight, it was almost the worst decision I could have made. I could have:
1) closed the position as soon as it started going ITM for a much smaller loss (best option)
2) held onto the position and closed it later in the week for a small credit (very risky given how quickly we were down-trending, putting the account at risk of max loss)
TL;DR - don't be greedy. Given time, it will come back to bite you.
Monday, I was so confident that the SP was going to stay over $1100 that I rolled my 950/1000 BPS up to 1015/1065. By Tuesday an hour into the market I was panicking, closed the position and took a $127k loss, wiping out all gains from the past 5 weeks.
In hindsight, it was almost the worst decision I could have made. I could have:
1) closed the position as soon as it started going ITM for a much smaller loss (best option)
2) held onto the position and closed it later in the week for a small credit (very risky given how quickly we were down-trending, putting the account at risk of max loss)
TL;DR - don't be greedy. Given time, it will come back to bite you.
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