Wiki Selling TSLA Options - Be the House

[elasalle]

OK, some margin based trade (within 10-15% of margin if things go south).
Sold Feb 22 naked 800 puts for ~ $25 premium. More time, but feel more comfortable with selling under 800

Used proceeds to partially offset some Feb 1150/1250 verticals I bought as well


@BornToFly your comments from last week got me doing some thinking on margin trades. thx
cheers!!

 

[traxila]

All I’m saying is…. My straight up call buys from last week are killing it, making my put sells look meager, and making my CCs look like the very epitome of penny gathering. Am underwater on all of them except for the 1600s. And forget about the 1500s I had the audacity to to sell for Dec 3. Got 1280 CCs expiring this week and I am kinda sweating them. Sold them with a 250 point cushion last week.

Still think 30% weekly cushions should be OK.

 

[UltradoomY]

Logged in this morning (WFH this week before trip) to roll my $1200 Puts again - I like rolling into strength (down day) on Mondays to keep the time value consistent.....
Well, It is just too nice to end the experiment - BTC $1200 P's for $38 each - total premium (per wingman) was $177 per contract.
Not bad for opening an intentionally ITM P for a couple of weeks.

Also saw that my $995's I sold on Friday for 12/03 were at 60% - also not bad for a day of holding - now completely out other than Stock and leaps till next week.
Good luck all!

 

[chiller]

For those paying attention, both UltradoomY and I sold the same 1200 puts way back on the Monday before the big drop when the SP was around 1180 if I remember correctly. The premium at the time was 62. While he chose to roll the 1200P onwards collecting more premium, I tried to improve my strike.

Doing this while the stock was in free fall meant I had to go out to Dec17 to improve it to 1160, with a very small credit.

Wanting to learn more, my next move was to go from 1x Dec17 1160P to 3x Dec03 1070P for 11.25 credit. This was done on Friday.
Today I closed them all out at a cost of 15.55 for the three.

So while UltradoomY ended up with 17,700 per contract my approach gave only 5,700 for my one initial contract.

 

[scubastevo80]

Need some not advice - stock hovering at $1200, my BCS 1200/1300 not looking so hot right now. Would folks wait until later in the week to see what happens, roll immediately (I can only get about $25 and go a week out, which doesn't really buy me much), or just close and take the loss? This is the second time I've been caught not setting up trades well - the first was taking a bit hit on BPS when the price dipped down to $1k, now I'm getting hit on the upside.

 

[tradenewbie]

I haven't opened any BPS / CC / BCS this week yet. Last friday I was thinking to open a BPS for 12/3 as everyone suggested, esp. it's a short week this week, but at that time I was worried about 3 things: 1) The FED decision of Powell, 2) The uncertainty about Baiden / Kamala, 3) Anything that Elon may say during weekend.

Maybe this week I would just take a rest.

Obviously all uncertainty gets clear this morning, but that means there's no way for me to open BPS for 12/3 since premium for BPS -900/+700 is no longer attractive with 2 weeks as expiration. So I would just sit back and relax this week until anything change.

 

[adiggs]

she will probably run away the minute you say you do option trading

3 of my friends are currently following the 30hours of Optionalpha course after they asked me how were doing my investments. Hope they will not buy OTM SPY Calls expiring the following day. It’s never good when a newbie answers the questions of other newbies. It never ends well when the blind is leading the blind. The only difference here is that I know I am blind.

Suggestions I have to help with the beginners (or n00bs if they embrace that idea ) - make sure they understand that there is no such thing as free money (as much as being a surgeon looks like free money from the outside ), there are always risks and rewards, costs and benefits. If they ever can't identify what those are then make sure that they at least talk to you "hey - this looks too good to be true; what am I missing!?!".

And if it looks like free money, you've had enough experience by now that you know it isn't - have them come and visit.


And of course the other golden oldie - strongly suggest starting small. Think of this as earning coffee money, a really expensive night out, or something really small (like 1 contract). 1 Cash Secured Put is coffee money when its really far OTM while putting $8-10k at risk. Of course Tesla isn't going to $0 but that is the theoretical risk. There are more easily defined risks though - with a $1000 put contract, if the shares go to $900, you'd be looking at $1000 loss. $1000 more reasonable (and unlikely) loss vs $100 gained. That's a risk and reward balance (and I made up those numbers for contracts and premiums to illustrate the idea, not to identify a specific trade one might make today).


Another one - point out that the OA courses are both beginner / basic education, AS WELL AS teaching a particular option trading strategy. The basics is something that is valuable to everybody. The particular option trading strategy shares a lot of common components with what we've been doing, but is VERY different in that we are trading 1 (or a very, very small #) underlying. We use our knowledge and close following of the company as additional knowledge that we believe gives us an edge in the market.

This really is a very big difference with what OA is doing. My simplistic view into their strategy - they are using technical indicators (such as when an underlying is in its top 50% of IV) to initiate a trade, with the higher the IV is relative it itself (60, 70, 90%) the better and better their trade indicator becomes. They are indifferent to what that underlying is as long as it meets some minimal threshold of a business. That's a list that is different trader to trader, but they're talking hundreds of underlying to be evaluating regularly on which ones meet that technical indicator.

And then they do 1-2% of capital types of trades, where I'd say all of us are doing much higher % of capital trades.

 

[adiggs]

When I first started visiting this thread last year I remember seeing (or at least that's what I think I saw) a lot of spreads with a small bandwidth: 20, 30 maybe 50 points. I'm now seeing spreads with a bandwidth of 100, 200 or even more points. I always thought spreads were meant to limit risk, with the longest leg being the safeguard, but do such wide spreads still do that?

What happens to such wide BCS in the unlikely but not completely impossible event of a 300 to 400 point overnight drop? There are some black swan events that can cause such a drop: something happening to Elon, a big earthquake destroying the Fremont factory, a hack which puts control of all Teslas in hackers' hands, and probably some scenarios I am overlooking.

I know that with my naked puts I also run a risk when such a black swan strikes, but that risk is that the shares get assigned and I am forced to buy shares that are worth a lot less than what I pay for them. But it doesn't wipe me out. If the shares are assigned I have enough cash to buy them. For each naked put that I sell I need a lot of initial margin and maintenance margin, so I can only sell a limited number of them. That means less premium earned, but also less risk.

The advantage of spreads is that they require a lot less initial margin and maintenance margin, which means you can sell many more and earn more premium. And a lot of people take this opportunity. But what happens with spreads that are a few hundred points wide if the stock opens lower than the longest leg? 100 BPS with a width of 200 points will then be $2 million in the red. Doesn't that mean that the maximum maintenance margin could be exceeded and the broker closes the positions, resulting in a total loss and maybe worse (a bigger loss than the cash and shares in the account, resulting in a debt)?

Am I wrong? I don't want to scare anyone, but would also not want any of my TMC friends to ever end up in such a situation.

You are absolutely correct. Talking put spreads - I opened some 750/1150s this morning (I'll post about those later). With that really wide spread width I opened fewer contracts than I would have otherwise while using the same $ at risk. Let's compare those to a $1200 strike put - I need $120k to back that put or I need $120k to back 3 of those put spreads.

The short put can lose as much as $120k but requires a $0 share price to do so.

Meanwhile the 3 put spreads have $120k at risk and reach that max loss at a share price of $750. This is absolutely use of leverage, and the thing about leverage is it cuts both ways - I can triple my money over the short put (less the .30 cost of the $750 insurance put), but that also means I can triple my loss much more easily.

I could also have sold 1050/1150 ($100 wide spreads) put spreads for $10k of backing each and been selling 12 of those for 1 cash secured put!?! Zowie! That won't be 12x - probably more like 8 or 9x - the reward, but now I can reach max loss at 1050 (this trade is definitely NOT-ADVICE).


We've seen how hard this knife can cut using call spreads. They share the same mechanical dynamics as the put spreads, while having the liability that they're in the way of the trend line. But the recent large loss call spreads we've seen - those size losses are equally available to the downside, at least in theory.

 

[adiggs]

11/22/21 todos....

At Mid Morning Dive, my new name for MMD given EM stock sale for the tax man:
Roll 11/26/21 -p950/+p750 hopefully to same strike. 12/3/21
Roll 11/26/21 CCP 950 also to same strike 12/3/21 in my last remaining options level 1 account.

Still processing the best spread for my conservative BPS strategy. Happy with 200 but when strikes rise above $1000 will increase proportionally.

Spread = strike / 5?

Didn't this thread start life as the wheel (seems things were simpler back then ? )
BPS seems to have worked great when SP was in the lows and climbing back and mainly sideways ...
For SP going ballistic I don't think BPS will give the best return, as compared to being Long stock or calls? And after a big run up one must always be wary of the reversion back to mean ...

(mainly distant observer on this thread until recently). ... cheers!!

An important observation to call out - put spreads - will never keep up with the gains available from stock ownership or call purchases on a fast rising stock such as we've seen recently. For anybody focused on capital accumulation the closest thing to advice I have is owning stock. That won't max out on your capital accumulation but it also makes it easy to focus on the company and ignore the share price.

As one example of this - I can be active in this thread today because I bought shares back in 2012; and then more in 2013; and more off and on since then. I was more focused on my career, getting a Master's degree, and other such stuff that -most- people should be focused on. I just followed Tesla on the side. And it was really easy for me to hold through the drops, and the years of sideways trading. Because none of that mattered - the investment thesis hadn't changed.

Today though I have different needs, and additional capital accumulation isn't a priority; income is. If it takes 1 pile to retire, then what does one do with 3 piles? Finding something to spend the money on isn't really an issue, but watching the numbers spin upwards is fun. And my wife and I still have a serious emotional attachment to our shares. Even though we'd probably be 'best' off by just selling shares as needed, about the only thing we've proven to both our satisfaction is that we're not ready for that

Then again - selling options excels in a sideways trading market. There are always costs and benefits, risk and rewards.

cough... Yours Truly made it popular starting April this year

Good thing we have some NEWBIE TRADERs around here. We might be lost otherwise Thanks @Yoona!

BPS is what I learned about a month ago, all here. Thanks to all !!! It's been a useful trade, good way to leverage margin, admit it can get you in trouble quick. I can't trade naked and CC are a bit risky short term... for me. I do have a decent long position, it's in a cash account, so don't want to sell for a while.

BCS, I have to better understand before I give that trade a try. At level 3, not sure I can enter some of the other trades like straddles and strangles. Probably best I can't given I don't know how those work.

Hoping for a climb, support, sideways, climb, support, sideways.... will trade BPS until they really get dicey.

Also worth calling out and reinforcing - if you don't understand a trade, then don't do it. Or at most, on a trade type that looks interesting, trade 1 of them (or as few as possible while also getting one's attention). If the account is too small then even 1 is too many. These would be experimental trades to try and at least gain a better understanding of the mechanics.

That still won't teach you the dynamics in the trade - big moves up, big moves down, steady moves up, steady moves down, whipsaw action up and down, etc..


If you don't understand it, then don't do it. I guess that is advice!

 

[generalenthu]

Those of you looking at theta decay, keep in mind that not only is Thursday off, Friday is a half day with markets closing at 1 PM with typically way less than average volume.

edit: if you're planning to roll spreads on Friday, liquidity might be a bit tight too.

 

[mickificki]

Obviously all uncertainty gets clear this morning, but that means there's no way for me to open BPS for 12/3 since premium for BPS -900/+700 is no longer attractive with 2 weeks as expiration. So I would just sit back and relax this week until anything change.

I’m not opening any bps positions the week of 12/10, or if I am I’m exiting before 12/9!

Premiums are small for 12/3, not sure what to do. Probably just sit tight.

 

[Ogre]

For those paying attention, both UltradoomY and I sold the same 1200 puts way back on the Monday before the big drop when the SP was around 1180 if I remember correctly. The premium at the time was 62. While he chose to roll the 1200P onwards collecting more premium, I tried to improve my strike.

Doing this while the stock was in free fall meant I had to go out to Dec17 to improve it to 1160, with a very small credit.

Wanting to learn more, my next move was to go from 1x Dec17 1160P to 3x Dec03 1070P for 11.25 credit. This was done on Friday.
Today I closed them all out at a cost of 15.55 for the three.

So while UltradoomY ended up with 17,700 per contract my approach gave only 5,700 for my one initial contract.

Nice, I did I think quite well on some naked puts myself, sold some Dec 3 1085s when it dropped to $1100 and collected $47 then sold some more for $99 a bit later. I was upside down on these for a while and thinking I might end up with shares.

But right now my big winners are some call spreads I bought for December. I got a mix of some long shot spreads at 1270/ 1290 and some safer ones around 1100/ 1150. Right now they are all about doubled. Trying to play the game of when to take profits and how much to leave on the table on “House“ money.

 

[Yoona]

i like this SP action, so far... predictable, range-bound, and remaining below the highest call wall...

how about another Short Straddle @1190 today $63 credit and close it tomorrow?

breakeven 1130/1250

 

[adiggs]

With the big move up this morning I find my new 1160 cc for this week already ITM. These started life as 1110s for last week - 1110s that had a closing opportunity for about 40% profit early on Friday, 5-10% profit later that day, but got rolled with shares at $1115 and looking like they weren't coming back to $1100 as I expected (and then kept going to $1133). Good time to roll, better time (earlier) to take the small win and be out. I wanted to be out to see how this week would start.

But that isn't what happened because I didn't pull the early trigger . This has happened to me before, about a year ago. I think that there's a lesson here - if I arrive at expiration day and I have a small gain available, then just take it and don't sweat out relative pennies on the final day. Take the modest win and be thinking about the next position. EDIT to add: that small win wasn't available on Thursday - I needed the big time decay first thing on Friday to get to the modest win.

So now I have 1160s for this week. I have looked briefly at a roll, but we're so early in the week that there is a lot of time value in the current calls so I'm letting that ride. That isn't necessarily a good choice. If the shares keep going quickly to $1300 when I'll have wished that I had rolled today, even if I can only get up to $1200 or so. One reason I'm waiting is that we're not yet very far ITM and I've still got a reasonably long list of management choices available.

What I HAVE done is open some 750/1150 put spreads for nearly $16 credits, also for this week. Those credits might be going right back out if I choose, as debits to improve those short calls that expire on Friday. I might also choose to take assignment (which really means a BTC on those short calls, and a STC on some long calls with further out expirations). I have additional management options / choices on those covering calls, and I'm holding off on any of those for now, even though I know that the shares could just keep going and make rolling progressively more difficult / bad.

Think of these put spreads as adding to my available management choices.


Why that put position?
- I wanted to open a large put position designed to offset the call position to some degree. This puts me into a position where I'll be earning those credits whether the shares are going up or down. The net position is a lot like an 1150p / 1160c strangle (which would be short puts and short calls; I'm short put spreads and short calls). I don't expect both to finish OTM, but if the shares drop back down to $1100 then the calls will be earning close to max profit while the puts will be losing (rolling those down).

- I went with the $400 wide spread because I figure these are highly manageable down to $1050 and I'm comfortable with that risk.

- I also used the wide spread to offset how aggressive I'm getting with the short put strike.

- I also used the wide spread as that got me to a similar number of spreads as I have open calls. Actually only kinda true, but that was the thinking.

- I should probably have looked at the 900/1100 put spread as well, but I didn't.

 

[Ogre]

I’m not opening any bps positions the week of 12/10, or if I am I’m exiting before 12/9!

Premiums are small for 12/3, not sure what to do. Probably just sit tight.

The 12/9 rumor is why I opened some very aggressive Dec 17th call spreads. I figure even if it’s all nonsense it’s gaining enough momentum as an idea that the stock will ride up a bit on it and I can clear out a few days prior.

Super tempting to dig deep for these, but I got burned hard getting greedy on options so always try to keep some reserves… I’ll sell deep ITM BPS against that!

 

[adiggs]

What I HAVE done is open some 750/1150 put spreads for nearly $16 credits, also for this week.

And another reason to open these spreads - throw out a magnet to draw the share price back down. After all, nothing like an aggressive position to taunt the share price towards it

 

[adiggs]

i like this SP action, so far... predictable, range-bound, and remaining below the highest call wall...

Heh - range bound; right until it isn't.

 

[juanmedina]

Elon to the rescue. I have 1090 puts and 1220cc's for Friday.

 

[Tempus]

Closed most of this weeks BPS on the way up this morning (got around 85% for most of them), just missed one set that i was a bit too aggressive on the value - tried to eek out a few too many pennies.

Glad i did that as I was able to open some new 850-950 BPS on the dip for 12/3. Those positions are up over 30% already right now. Nice little dip/bounce there.

I usually don't catch things so neatly - but the opportunity was there because i was closing out the BPS early today.

 

[EV forever]

Closed most of this weeks BPS on the way up this morning (got around 85% for most of them), just missed one set that i was a bit too aggressive on the value - tried to eek out a few too many pennies.

Glad i did that as I was able to open some new 850-950 BPS on the dip for 12/3. Those positions are up over 30% already right now. Nice little dip/bounce there.

I usually don't catch things so neatly - but the opportunity was there because i was closing out the BPS early today.

Closed out all my BPSs for 11/26 as well as for 12/03 early this morning- all were over 80% profit. I usually set GTC closing orders for about 80-85% profit, so they all triggered on the way up to 1200! But, I completely missed the dip to open new positions. So now, I have nothing open and have not identified any BPSs I want to open. Plus, I am traveling through Thanksgiving till Dec 2nd, so maybe I will hold off.

Was that dip Elon sale? It is a concentrated bit of selling in a short time