Wiki Selling TSLA Options - Be the House

[blckdmp]

Just found an interesting margin quirk with IBKR. I'd be interested to know if any one here has practical experience with whether or not it holds up in real life with actual SP rises/dips etc...?

You seem to be able to reduce margin requirements to almost nothing by buying multiple s&*tcalls/puts to offset your sold contracts.

This is an example of what the TWS "Margin Impact" calculator showed me:
Using a -1010p Nov 19 2021 x 1 (~ $2595 USD in premium) as the desired trade.

For the standalone put (no spread) the Margin calculator is asking showing a $68885(CAD) margin impact.
If you add:
+600p Nov 19 2021 x 1, (cost ~ $6 USD in premium) the margin requirement drops to $53530, no big surprise there.
But.... adding more +600p makes a dramatic difference for almost no money down.
2 x 600p = $38194 margin requirement
3 x 600p = $22865
etc... etc...

10 x +600p will reduce your margin requirement on the original -1010p from the original $68885 down to just $1429(CAD), all for the whopping cost of $60!!

Any experience on whether or not this margin impact translates to the real world? Does it evaporate on the slightest SP move? What's the catch? (Asides from the very obvious danger of massively overextending yourself!!!)

Thoughts??

 

[pz1975]

Although of course past performance is no guarantee of future results, I have noticed over the years that usually when TSLA bottoms out in a dip, it usually has a double (sometimes triple) bottom day(s) apart. That’s what I’m looking for to buy back my trading LEAPS I sold at 1,150.

 

[vikings123]

Just found an interesting margin quirk with IBKR. I'd be interested to know if any one here has practical experience with whether or not it holds up in real life with actual SP rises/dips etc...?

You seem to be able to reduce margin requirements to almost nothing by buying multiple s&*tcalls/puts to offset your sold contracts.

This is an example of what the TWS "Margin Impact" calculator showed me:
Using a -1010p Nov 19 2021 x 1 (~ $2595 USD in premium) as the desired trade.

For the standalone put (no spread) the Margin calculator is asking showing a $68885(CAD) margin impact.
If you add:
+600p Nov 19 2021 x 1, (cost ~ $6 USD in premium) the margin requirement drops to $53530, no big surprise there.
But.... adding more +600p makes a dramatic difference for almost no money down.
2 x 600p = $38194 margin requirement
3 x 600p = $22865
etc... etc...

10 x +600p will reduce your margin requirement on the original -1010p from the original $68885 down to just $1429(CAD), all for the whopping cost of $60!!

Any experience on whether or not this margin impact translates to the real world? Does it evaporate on the slightest SP move? What's the catch? (Asides from the very obvious danger of massively overextending yourself!!!)

Thoughts??

I think this holds up fine. From IBKR’s perspective you are reducing the risk by buying the puts. Think of it this as a -1010P/+600P spread where you have established your max loss and the margin then is based on this max loss.

Also, you probably know this already, the margin is just collateral and you are not getting charged any interest until you actually get shares assigned.

 

[blckdmp]

I think this holds up fine. From IBKR’s perspective you are reducing the risk by buying the puts. Think of it this as a -1010P/+600P spread where you have established your max loss and the margin then is based on this max loss.

Also, you probably know this already, the margin is just collateral and you are not getting charged any interest until you actually get shares assigned.

I get that the max loss is reduced with the first +600 put. Total max loss would then be $38405 ($41000 - $2595). But buying the extra +600 puts does nothing to reduce the max loss, which would now happen at exactly $600 (not below) . In fact, you're actually risking $54 more in premium

 

[BornToFly]

Although of course past performance is no guarantee of future results, I have noticed over the years that usually when TSLA bottoms out in a dip, it usually has a double (sometimes triple) bottom day(s) apart. That’s what I’m looking for to buy back my trading LEAPS I sold at 1,150.

I'm hoping for a few more down days. The CCs I want to buy back are being stubborn. Still 39% more expensive than when I sold them, even though the SP is lower now.

 

[samppa]

I get that the max loss is reduced with the first +600 put. Total max loss would then be $38405 ($41000 - $2595). But buying the extra +600 puts does nothing to reduce the max loss, which would now happen at exactly $600 (not below) . In fact, you're actually risking $54 more in premium

Sounds like you're on portfolio margin. The calculations for that are some really complex models and stress tests..

I'm on Ibkr and portfolio margin. Today, when TSLA dropped below 1000, suddenly my maintenance margin equaled my initial margin. Now it's back to normal, where initial or intraday is higher than maintenance. No idea how that happened.

 

[blckdmp]

Sounds like you're on portfolio margin. The calculations for that are some really complex models and stress tests..

I'm on Ibkr and portfolio margin. Today, when TSLA dropped below 1000, suddenly my maintenance margin equaled my initial margin. Now it's back to normal, where initial or intraday is higher than maintenance. No idea how that happened.

I'm pretty sure I'm on Reg-T margin. As far as I know, Portfolio margin isn't an option for Canadian IBKR customers.

Per their site:
"IB Canada customers are not eligible for Portfolio Margin accounts due to IDA restrictions. In addition, all Canadian stock, stock options, index options, European stock, and Asian stock positions will be calculated under standard rules-based margin rules so Portfolio Margin will not be available for these products."

 

[blckdmp]

Just found an interesting margin quirk with IBKR. I'd be interested to know if any one here has practical experience with whether or not it holds up in real life with actual SP rises/dips etc...?

Playing around a bit more and they do seem to drastically increase the margin requirements if you're selling more than 1 contract. But that said, a few dollars of way way OTM contracts will reduce the margin requirement by about 50% in my tests, no matter how many contracts you trying to sell.
ie:
100 x -1000p, 100x +500p = $6.1 M margin,
100 x -1000p, 500x +500p = $3.9 M margin.

Interesting. But dangerous.... *

* Note: I'm not planning on using this to over-leverage, and neither should you! Advice.

 

[BornToFly]

Playing around a bit more and they do seem to drastically increase the margin requirements if you're selling more than 1 contract. But that said, a few dollars of way way OTM contracts will reduce the margin requirement by about 50% in my tests, no matter how many contracts you trying to sell.
ie:
100 x -1000p, 100x +500p = $6.1 M margin,
100 x -1000p, 500x +500p = $3.9 M margin.

Interesting. But dangerous.... *

* Note: I'm not planning on using this to over-leverage, and neither should you! Advice.

In my Fidelity account, if I have a 900/700 BPS, and buy 2X or 5X 700s, it does nothing for my margin. I don't know if that is an error in my margin calculator.

 

[Cherry Wine]

Here's something interesting from a macro perspective - looks like we'll get word on Biden's nominee for Fed Chair soon (Jennifer Jacobs is a Bloomberg reporter):

https://twitter.com/x/status/1460393022248599556

EDIT: Apparently expected to be either Powell or Brainard, either of whom would be seen as dovish. So this will probably be a nothingburger.

Here is a primer from Reuters on possible Fed Chair nominees:

Analysis: Powell favored for Fed reinstatement but investors examine alternatives

Jerome Powell may still be the clear favorite to get renominated as Federal Reserve Chairman, but some investors are considering the long-shot alternative should there be a surprise change.

www.reuters.com

 

[blckdmp]

In my Fidelity account, if I have a 900/700 BPS, and buy 2X or 5X 700s, it does nothing for my margin. I don't know if that is an error in my margin calculator.

That's kind of what I'd expect (no change in margin).

I'm wondering if the IBKR margin calc is "faulty". It seems to allow trades with the new reduced margin (5 x +p contracts) where it would block them before (1 x +p contract). If their system is really using this as a legit margin calculation, it would seem to be an excellent way of protecting from potential margin calls. ie: you could sell fully backed Cash Secured Puts but reduce the margin deficit with a few cheap contracts and buy yourself some buffer for unexpected downturns.

 

[EV forever]

So today I did - nothing!
Well, was traveling for work over the last few days, so had already rolled out everything from last week to this week or later. When SP dropped rapidly this morning, thought I would need to roll out some of the badly performing ones - but my internet was on the blink and by the time I got on the accounts, the SP had miraculously improved.
Anyways following are the positions I currently have open - depending on how things go, may need to consider rolling

• Indv account -p995/+p795 for Nov26 and -p995/+p895 for Dec03
• IRA account -p940/+p840 for Nov19 and -p990/+p870 for Nov26. Also have c690 for Nov19 which were purchased a long time back. Wish I had sold these off a couple of weeks back, but hey hindsight is always difficult to digest.
• Roth IRA account -p1060/+p960 for Nov26 (this is the smallest account as the most leveraged, max loss would wipe out the account)

All of these were rolled over from last week - some with strike improvement, some for small credit. So, I am not yet calculating gain/losses as I have not closed these positions.

Strategy for this week
I think the -p940/+p840 for Nov19 are safe and will hold them longer to see if the SP steadies out and I can get out with good profit.
Those with short leg at 995 or 990 - not sure if I want to roll or just hold them longer. They are 2-3 weeks DTE - so will wait for a few days to see how things play out.
The -p1060/+p960 for Nov26 are in trouble - not sure on what to do with these. May be try selling BCS to make up the IC?

Any suggestions and "not-advice" is most appreciated!

Edit - Plenty of margin available in Indv account and the IRA has sufficient cash buffer. The Roth account has very little cash buffer, so most troublesome to manage out of this.

 

[Zhelko Dimic]

???
100 dollar spread × 100 shares per contract × 250 contracts = $2.5 million max risk.

You are right.
You are right for a broker that would recognize limited risk of credit spread. I spaced out and miscalculated.

However, for my broker (TD Direct in Canada) I would have been right. I guess my brain now measures everything in the most conservative way, so it's 1000 dollar exposure × 100 shares per contract × 250 contracts x 50% + cost of the options themselves.

TD Direct "Risk" department forced me out of similar, yet smaller position based on "over-concentration" in a single stock earlier this year.
They've recognized spread, until they didn't. I tripped some wire in their risk department

TD quoted internal , unpublished rules. There is no talking to these people, firstly, really there is no way to reach them, won't take calls from retail... And secondly, they don't care, you are not their customer, bank is. All they would tell me (pass the message) is to bring margin space on TSLA under $500K, no matter the value of my stock, and existing credit spread. It doesn't count, they said. Spent about 8 hrs on the phone, and eventually gave up.

I repositioned few tens of contracts, and decided to dump them for IB, which I'm yet to do because of laziness, and fear of fudging paperwork related to taxes after I change brokers...

 

[OrthoSurg]

My plan of action I had thought Saturday was to sell some CCs in the 1225s because they looked like a relatively good premium and thought the stock will still be pushed down by Elon’s selling. Finally with the Bernie tweet, these premium were ridiculously evaporated this morning and I ended up selling 5x 19/11 845 puts and 10x 19/11 785 Puts at the low. When it recovered I sold some 5x 1155 CCs. I never thought I would get that close so soon with my strike price but everything point at a small bear cycle with Elon selling, every speculator selling TSLA to jump on the Rivian train to bring the E/P ratio in the ten of thousands before we see the biggest stock collapse of all time. I really thought I was going to sell more covered calls this week because I am more bearish with the actual situation hiwever I ended up selling more Puts because I expect a low in the 850s and I am confident I can roll those Puts out 1-2 weeks at a time if they get close ITM and the premiums were more interesting. I see the Q4 earnings as a way to save Puts I would have to roll.

Ramping up the contracts slowly.

I would like to open BPS however rolling them but doing 4 different transactions in case of a big drop doesn’t sound something that will end well. I will wait for my IBKR account to start BPS

 

[EVCollies]

At SP 982 I crisis rolled:
11/19 BPS -p970/+p770 to 11/26 -p950/+p750 @6.52 and
11/19 CCP -p970 to 11/26 -p950 @4.95

And then SP rose again. At least I can chill for a week while Elon raises funds for the tax man.

 

[mickificki]

Let me know if y’all don’t want to see this posted here. Just figured it’s pertinent to options.

https://twitter.com/x/status/1460421516210884609

 

[st_lopes]

Let me know if y’all don’t want to see this posted here. Just figured it’s pertinent to options.

https://twitter.com/x/status/1460421516210884609

Prefer these posted here than having to wade through the main thread right now. The noise to signal ratio in the main is out of control right now.

 

[vikings123]

Let me know if y’all don’t want to see this posted here. Just figured it’s pertinent to options.

https://twitter.com/x/status/1460421516210884609

Interesting price action today. The rumor from earlier today seemed to line up with the sudden spike in volume. I’m now curious what the rest of the week will bring. I’m now leaning towards the camp that thinks we could see low 900s sometime this week, as early as tomorrow. If we break 980 convincingly next support is 945-950 and then the final gap fill at 910. Not advice etc.

I think it is funny how Elon keeps responding everyday to that same tweet from Bernie, sometimes multiple times a day as though he is sending a message to us. Elon is up to something, I have given up trying to read his 4D chess moves. In Elon Must we trust.

 

[bonk3125]

Positions on Monday open:
1. 990/940 BPS 11/19
2. 930/880 BPS 11/19
3. 1045/995 BPS 11/19
4. 1080cc 11/19
5. 900cc 11/19

Positions on Monday close:
1. 990/940 BPS 11/19. As we were hovering above 990, I rolled half of contracts to
2. 985/935 BPS 11/26 for 0.05 debit.
3. 930/980 BPS 11/19 kept the same.
4. Rolled 1045/995 BPS 11/19 to 1050/1000 BPS 11/26 for 1.50 debit. I'm at max loss anyway, but maybe I can push it out far enough until we get some recovery.
5. Added a few 1100/1150 BCS 11/19 to try to offset some of these debits.
6. 900cc 11/19 as is. Will plan to roll these on Wed-Fri to next week and use credits to improve strike on one contract at a time.
7. 1080cc 11/19 as is. This is the one contract I've been rolling up and out from 900cc. Will see how the week turns out. Maybe I'll be able to liberate these shares this week.
8. Opened 1105cc 11/19. Just trying to scalp some premium.

All trades were done before noon. Was sweating it out until we got that late afternoon spike. Seeing the pattern with the scheduled options exercise on Monday, I hope we don't get a similar Tuesday like last week. Using about 60% of my capital at present. Feeling a little gun-shy to open any more BPS/BCS this week, though it would certainly help to recoup some of my current underwater positions. I may just roll for strike improvements on the next SP spike.

This may have been answered upthread already, but for those trading on Fidelity, have you ever let ITM spreads expire at max loss? My question is related to the mechanics at Fidelity. Will they automatically close both positions for you after Friday close?

Thanks all. Any not-advice appreciated.

 

[bonk3125]

Prefer these posted here than having to wade through the main thread right now. The noise to signal ratio in the main is out of control right now.

While understanding that by replying to this, I am adding to the noise in this thread, I just wanted to say I appreciate these actionable pieces of news, rumor, etc. The info in this thread leads to many concrete decisions that can have large effects on our short/long-term investments, and I really do value all its contributors.