Wiki Selling TSLA Options - Be the House

[MaxPain]

Can someone help me figure out how to calculate options spread requirement? I have 3x 650/880 BPS and 6x 650/900 BPS. Schwab is saying I have $162,020.00 spread requirement, but I calculate $219K.
(880-650)*100*3 = 69K
(900-650)*100*6 = 150K

What am I missing?

 

[WattsHappening]

As great as the news P&D results are, I keep remembering all the times the SP did the opposite of what we expect.

Of course it should go up on Monday, but I won't be surprised if it goes down, just because everyone thinks it's going up.

My sentiments exactly. Too many times we have seen ‘sell the news’ on great news like this. I am cautiously optimistic this is going to buck the trend.

I’ll be watching the ticker closely tomorrow morning. I’d like to think my BPS plays will be safe. I’m hoping for a big gap up to possibly sell some LCCs.

 

[WattsHappening]

Can someone help me figure out how to calculate options spread requirement? I have 3x 650/880 BPS and 6x 650/900 BPS. Schwab is saying I have $162,020.00 spread requirement, but I calculate $219K.
(880-650)*100*3 = 69K
(900-650)*100*6 = 150K

What am I missing?

I think you’re missing the premiums expected. That gets subtracted from the gross spread requirement to get to net spread requirement?

 

[adiggs]

Can someone help me figure out how to calculate options spread requirement? I have 3x 650/880 BPS and 6x 650/900 BPS. Schwab is saying I have $162,020.00 spread requirement, but I calculate $219K.
(880-650)*100*3 = 69K
(900-650)*100*6 = 150K

What am I missing?

Personally I calculate my 'real' margin using your method. That's also the method that a US retirement account will support.

However brokerages can reserve less margin than what you calculate and that's a calculation that I don't know either. The main thing to realize is that $162k margin requirement will change with the share price going up and down though I see no reason for it to exceed $219k. That lower number is just an enticement to sell a few more


Conceptually I think its straightforward to understand. As a thought experiment instead of a 900/650 ($250 wide spread) consider a 500/250 position. Still a $250 wide spread but from a risk point of view that latter position is clearly much lower risk than the first. Lower risk will have a lower margin requirement.

 

[adiggs]

I think you’re missing the premiums expected. That gets subtracted from the gross spread requirement.

I don't think that explains it (and cheerfully defer to anybody and everybody that actually knows something about this ).

The premiums received have no constraint on them - one can use them to buy a car or a house or whatever right there on the spot. When calculating max loss we include that premium as we'll have something of value when its all said and done, even in a max loss situation. But for the brokerage the premium received doesn't lower the risk.

 

[WattsHappening]

I don't think that explains it (and cheerfully defer to anybody and everybody that actually knows something about this ).

The premiums received have no constraint on them - one can use them to buy a car or a house or whatever right there on the spot. When calculating max loss we include that premium as we'll have something of value when its all said and done, even in a max loss situation. But for the brokerage the premium received doesn't lower the risk.

Thanks for the correction. I’m new to this and saw the same dynamic of having less spread requirements than I expected when I placed BPS orders so I assumed that was the case.

One point of clarification for me. All my trades are done in a rollover IRA, and I still see a smaller spread requirement.

 

[st_lopes]

Can someone help me figure out how to calculate options spread requirement? I have 3x 650/880 BPS and 6x 650/900 BPS. Schwab is saying I have $162,020.00 spread requirement, but I calculate $219K.
(880-650)*100*3 = 69K
(900-650)*100*6 = 150K

What am I missing?

While @adiggs is right that max loss is 219k, most brokerages will net premium received against the margin requirement.

 

[Cobos]

As great as the news P&D results are, I keep remembering all the times the SP did the opposite of what we expect.

Of course it should go up on Monday, but I won't be surprised if it goes down, just because everyone thinks it's going up.

Thanks for the tips for me last option question. I did get everything setup and bought a "risky" 1320 strike call and 4 safer 1350 calls. I feel fairly safe as ATH is 1240 after all, but as you say if somehow the stock falls tomorrow morning and doesn't gap up $50-100 I think closing my calls now would be the safe move. Someone is trying to keep all the live worms inside the glass jar without the cap on.

 

[M3Rider]

I’d like to remind to some who forgot that it takes couple of days to institutions to process the info.

We may see more growth by Wednesday if SP doesn’t take off on Mon.

Be careful selling CCs.

 

[MikeC]

I’d like to remind to some who forgot that it takes couple of days to institutions to process the info.

We may see more growth by Wednesday if SP doesn’t take off on Mon.

Be careful selling CCs.

Agreed. I'm also wary when everyone is so sure it will go up the next day, but I think with these numbers it kinda has to. This isn't a "sell the news" that everyone saw coming like Elon finishing selling. Analysts will have to boost their numbers in the coming days and if the SP doesn't move up, post-ER calls will start to get stupidly cheap.

 

[scubastevo80]

If we get a 3% move Monday we may write 20% OTM BCS for Friday expiry if the premium is decent. Definitely not worried about the 1/7 BPS at $950 - here’s to a good first week of the year!

 

[BornToFly]

Yeah, these numbers are incredible. If we don't see +10% Monday, it should get there by Wednesday. I'm feeling really good about all my 800/1000 BPS now, and will get more aggressive with my mom's IRA, and roll her 650/800s up to at least 950 (and maybe go to $100 wide spreads and double the contracts for Friday). The implications for Q4 earnings are just too good for a sell the news event, and the first week of January is usually good anyway. Not touching BCS until I see a big jump in the SP, and then I will still go 25-30% OTM on a weekly only.

 

[bkp_duke]

I'm just waiting to see what the FUD machine can cook up in the next 15h or so . . .

 

[intelligator]

I have the first three weeks BPS in place. Week 3 - 1/21 -1090/+890 , although in the money , has about $42 extrinsic left in it. If I were assigned, wouldn't be terrible, would rather BTC on a good run up. If we do get a dip in the morning (FUD machine call by @bkp_duke), thinking of sticking with several BPS high 9's 1/28, fewer contracts per spread , 200 wide; trying to better manage margin. If we trend up, will consider a 1/7 BCS 25-30% OTM, I like that @BornToFly ... I have no courage nor enough insight to play the week after.

 

[MikeC]

For anyone who wasn't around 2 months ago with Hertz - be cautious with BCS. Seems like most of the ugly losses on this thread came from them, mine included.

 

[GeoX750]

For anyone who wasn't around 2 months ago with Hertz - be cautious with BCS. Seems like most of the ugly losses on this thread came from them, mine included.

What happened to the Hertz BCS ?

Would like to hear, as I am sitting on 20 JAN 2023 +1100c/-1200c call spread.

Also, considering STO BPS 14 JAN 2022 -1150p/+1080p (ITM). 5 contracts would be almost $25k at opening with $10k risk ?

 

[BornToFly]

What happened to the Hertz BCS ?

Would like to hear, as I am sitting on 20 JAN 2023 +1100c/-1200c call spread.

Also, considering STO BPS 14 JAN 2022 -1150p/+1080p (ITM). 5 contracts would be almost $25k at opening with $10k risk ?

I for one lost about $3 Million (erasing about 2 months of BPS income) on -1000/+1050 BCS (Bear Call Spread) that I had sold after we hit the ATH on the Friday before, thinking there was no way we were going to blow 10% past the previous ATH. Go back and read all the posts from that week and the week after. Your spread is different - it isn't a Bear call spread if you bought a 1100 and sold a 1200.

 

[MikeC]

What happened to the Hertz BCS ?

Would like to hear, as I am sitting on 20 JAN 2023 +1100c/-1200c call spread.

Also, considering STO BPS 14 JAN 2022 -1150p/+1080p (ITM). 5 contracts would be almost $25k at opening with $10k risk ?

Bear call spreads can get run over really quickly and, with rising SP and IV, they can’t be rolled out without widening the spread or taking a debit. But you have bull call spreads as already pointed out.

 

[InTheShadows]

What happened to the Hertz BCS ?

Would like to hear, as I am sitting on 20 JAN 2023 +1100c/-1200c call spread.

Also, considering STO BPS 14 JAN 2022 -1150p/+1080p (ITM). 5 contracts would be almost $25k at opening with $10k risk ?

If I personally had that call spread I would ditch it at market open tomorrow, and I’d enter an order to buy it back for more than the ask.

Call spreads probably cost this thread close to $50M in losses.

My biggest losses last quarter were from that week and I only had LCC and CC that I closed for slightly over 300% loss.

Edit: posted too soon. Just noticed from other replies that you have a bull call spread. I’d hold that to what I thought was a peak and then enter a trailing stop to close it. Or just close it at 80% max gains.

 

[juanmedina]

Any here considering buying more calls at open tomorrow? this feels like the day after the split announcement. The stock could run up for days.