Flehmenlips
Member
Could this possibly be called a “ Poor Man’s Cash-Secured Put”? Is there such a thing?
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
The point of a BPS is to increase leverage so you can sell more puts for the same amount of buying power. If you only had enough margin to buy 100 shares and you limit yourself to only 1 BPS to stay within that margin, then you've limited your potential profit. Selling a second BPS would expose you to potentially being assigned 200 shares, but would net you the additional put premiums, which is the whole point of selling a BPS.
In other words, if you're doing the wheel, and are worried about having enough margin to be assigned shares, then cash-secured puts is the way to go. Selling BPS is because you're willing to run the risk of being assigned beyond your means.
This is probably a very basic question and likely answered in here already but I haven’t been able to find it. I have x shares. If I want to sell covered calls, can I sell just on those x shares? Or must it be in lots of 100?
Contracts are in multiples of 100 underlying, there are some exceptions as some brokers now trade partial contracts, but pretty limited I think
SpeedyEddy
Active Member
So 1 contract always regards 100 shares: Be aware!
@torifile
===>SERIOUSLY<===
take courses etc =>first<= before you lose everything, and more.
here’s a link to one from the first page of this forum
Free Options Trading Courses | Option Alpha
100% free options trading courses on-demand. Self-paced, guided learning paths that help you reach your goals and make smarter trades.
optionalpha.com
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Not always!
Post Solar City merger, their options became, I think, 11 TSLA shares.
I’ve got 92 (that was the money I had to invest) so I could still sell one and risk a few hundred loss if it gets executed.
Understood and noted. Thanks for the real talk. Its easy to get a little exuberant in here!@torifile
===>SERIOUSLY<===
i’ve been in the markets since probably 1982-83 or so.
I personally _do not_ have the mind set to do options as i’m quite lazy and a bit of a dilettante, but i learn from here
it takes a _very_ long time to recover from massive losses, turning 2+ years salary into _zero_ for example, and 11 years retirement funds with that.
(i’ve been married 50+ years to a very forgiving spouse)
take courses etc =>first<= before you lose everything, and more.
here’s a link to one from the first page of this forum
Free Options Trading Courses | Option Alpha
100% free options trading courses on-demand. Self-paced, guided learning paths that help you reach your goals and make smarter trades.
scubastevo80
Member
Informative post - the only thing I'll add to @torifile is know what you're getting into and plan an exit strategy. Cut losses if you have to... if you have the mindset that every trade needs to be a winner, you'll end up doing what I did, which was extremely costly. $4k loss on $9k gains over a period of 3 days due to greed. If we had an account like some of the folks here with 7 figure balances, I probably would pack it in and just go long. Start small, learn through actual experience, and post questions. The folks on this forum have helped us tremendously, and we wouldn't even have the $5k to show for it if it weren't for the not advice here.@torifile
===>SERIOUSLY<===
i’ve been in the markets since probably 1982-83 or so.
I personally _do not_ have the mind set to do options as i’m quite lazy and a bit of a dilettante, but i learn from here
it takes a _very_ long time to recover from massive losses, turning 2+ years salary into _zero_ for example, and 11 years retirement funds with that.
(i’ve been married 50+ years to a very forgiving spouse)
take courses etc =>first<= before you lose everything, and more.
here’s a link to one from the first page of this forum
Free Options Trading Courses | Option Alpha
100% free options trading courses on-demand. Self-paced, guided learning paths that help you reach your goals and make smarter trades.
I learned some really hard (and costly) lessons back in 2013 playing options. I was up huge and lost a ton. Left the entire market for years. Now, I just go long stocks I like and hold. This strategy feels better to me.
The only reason I was looking at covered calls is because it feels like a limit sell order that may not execute but I get some money out anyway.
@mongo
also, not long before SCTY merged with TSLA the SP of the 2 had an oscillation that was out of phase so you could buy/sell between the 2 and gain a few extra shares of both pre-merger with somewhat semi precise trades
jeewee3000
Active Member
As others have pointed out: understand before you dabble. (thanks @winfield100 )
Many posters here were in shares years ago, which were multiplied by 5 due to the stock split and those shares gained in value enormously.
Given the question "how much $ is enough $?" many here started dabbling in options with a part of their (by then) large TSLA holdings. Originally some wanted to play "The Wheel", which means selling covered calls against TSLA shares to convert those into $$. Then, with the money you sell puts until you are assigned shares again. And hopefully you end up with shares and some extra cash. (Not less shares, which can also happen).
The Wheel wasn't very popular though, because of a plethora of reasons. Some had to pay tax every time their calls were exercised by the buyers. Some didn't find the risk/reward profile appealing enough.
Because of this, people branched out into many forms of option selling. The most popular ones right now are BPS (for when you think the stock can't go below a certain price level) or covered calls (and for the daredevils BCS) (for when you think the stock can't go above a certain price level).
What all these strategies have in common though is that they can go wrong, in which case you need to truly understand what you sold/bought and how to turn the situation into a more favourible one. Why I told the story of the current thread is to make you see that many here only risk (small) parts of their portfolios with option plays. (At least at the beginning. Some members were so succesful and comfortable with options trading that they eventually (after months of practice/training) switched their entire portfolios to cash, but know that this is the exception to the rule. I believe most here hold TSLA shares also.)
By your first question ("how many shares do you need for one CC?") it is clear you don't have enough knowledge to jump in the fray without further preparation. I don't mean offence, of course. Anything can sound rude on the internet, but I mean the opposite. I'd like your future experiences with options to be positive ones.
I suggest you do some more research (for example by watching some videos on covered calls, the most basic of strategies) and in the meantime save up to buy some TSLA shares to get you to that nice round 100 number. After that, you can start selling one covered call at a time, preferably on days where the stock has rallied and easily another 20% out of the money with an expiration date not too far off (one-two weeks IMO).
This should net you some "gravy", i.e. quite risk-free cash income to your portfolio. Once you will have reached this point, your knowledge will have grown greatly and you can start tuning your option trades according to your risk-reward profile, personal goals and time horizon.
TL;DR: stay safe out there and good luck.
Your broker might not let you, without the shares to back it. (Unless you have margin/cash to cover it.) But it wouldn't be a few hundred, it would be 8 shares that you would have to buy at market price. (Or just under $9k right now.)I’ve got 92 (that was the money I had to invest) so I could still sell one and risk a few hundred loss if it gets executed.
Yup, that was when we bought into Tesla (no back and forth, just part Solar for the discount)
Yes, you definitely need to stick with what works well for you. Selling options is a form of gambling, and some people can handle it without pushing the risk limits too far, others get sucked in more and more until they lose everything. Everyone needs to look in the mirror and be honest with themselves, because if they're not, they will eventually end up with a lot less than they started with.
Not-advice, but I really think we go up from here into Q4 numbers this weekend. I already had met my contract number "limit" for the week, but I just had to sell 20% more today. 800/1000 BPS for 12/31 (I don't see us dropping 10% this week). Deep down I'm confident I could have sold 900/1100, but I would rather say "Ha, I knew it!" then say "Why didn't the market do what it was supposed to do!!!" 
It sure looks like an 'Elon is selling' graph today. My c1245's, c1250's and c1300's for 12/31 don't mind. And the p1025's for 1/7 feel confident enough with P&D and earnings coming up.
I sold a chunk of my TSLA to buy SCTY at that time to gain 10% additional TSLA shares after the merger, because SCTY was trading at less than an 11:1 ratio. Hat tip to neroden for that idea.
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