Wiki Selling TSLA Options - Be the House

[tivoboy]

I don’t think FSD price increase is significant news, but it’s definitely not bad news for TSLA valuation. It’s not reflective of increasing cost of developing FSD - it’s a sign of confidence that L4 is imminent.

What we really need is an announcement of Austin or Berlin opening dates. That might not come until earnings, though

I don't actually think it's a sign that L4 is imminent, but rather the buyers (an ever declining number of ) of FSD at purchase are very very LOW price sensitive that the extra 2K upfront or financed over 3-4 years is not going to change purchase behaviour much at all.

 

[MaxPain]

Hello all. I'm looking for some thoughts (not advice yada yada) on how I to manage the situation I'm in (which isn't terrible). First of all I've been doing this for about a year now and have been successful (for my standards/goals) being conservative with one of my brokerage accounts and strikes chosen. I started Jan 2021 with an account balance of ~$400K (includes 400 TSLA and various other holdings + cash) and grew it to ~$750K as of today. Total 2021 options income was ~$175K. I did this by selling weeklies with 10-20% OTM on average and letting the contracts expire/BTC the majority of the time.

Anyway, here is what I have going into next week that is causing me stress (don't laugh). 1/14 +650/-950 BPS. They are 7% OTM and not yet in trouble, but I'm very bearish going into the 1H of 2022 and I think these will go ITM this week due to macros. Whenever I roll I always look to improve strikes and if possible reduce the number of contracts. My goal week to week is to let all the contracts expire (or BTC at 90% profit) and only use 20-30% of my margin. I very rarely roll so that is why I'm posting in anticipation.

Here are some strategies I'm considering...
1) Nothing and hope they expire worthless or close out for a profit on any rise, but I'll be stressed
2) Roll to 1/21 650/950 for small credit while reduce the # contracts
3) Roll to 1/21 600/900 for small debit (I don't love these strikes because they don't meet my 10-20% OTM goal and are 2 weeks out)
4) Roll to 1/21 700/850 and double the # of contracts to increase likelihood of expiring worthless
5) Wait until 900 and then roll for to same strikes and small credit

Oh and I don't have any margin issues yet. I'm only using about 20% of my available margin. Half of these are covered by cash too.

I'm leaning towards #1 until the stock drops below 990. Once 990 hits I'll go to option 2. Option 4 will probably increase my stress level because the quantity of contracts.

Good news is I'm building my risk tolerance muscle

:edited to say my situation isn't that terrible in first sentence and added 5th option

 

[vikings123]

Hello all. I'm looking for some thoughts (not advice yada yada) on how I to manage the situation I'm in. First of all I've been doing this for about a year now and have been successful (for my standards/goals) being conservative with one of my brokerage accounts and strikes chosen. I started Jan 2021 with an account balance of ~$400K (includes 400 TSLA and various other holdings + cash) and grew it to ~$750K as of today. Total 2021 options income was ~$175K. I did this by selling weeklies with 10-20% OTM on average and letting the contracts expire/BTC the majority of the time.

Anyway, here is what I have going into next week that is causing me stress (don't laugh). 1/14 +650/-950 BPS. They are 7% OTM and not yet in trouble, but I'm very bearish going into the 1H of 2022 and I think these will go ITM this week due to macros. Whenever I roll I always look to improve strikes and if possible reduce the number of contracts. My goal week to week is to let all the contracts expire (or BTC at 90% profit) and only use 20-30% of my margin. I very rarely roll so that is why I'm posting in anticipation.

Here are some strategies I'm considering...
1) Nothing and hope they expire worthless or close out for a profit on any rise, but I'll be stressed
2) Roll to 1/21 650/950 for small credit while reduce the # contracts
3) Roll to 1/21 600/900 for small debit (I don't love these strikes because they don't meet my 10-20% OTM goal and are 2 weeks out)
4) Roll to 1/21 700/850 and double the # of contracts to increase likelihood of expiring worthless

Oh and I don't have any margin issues yet. I'm only using about 20% of my available margin. Half of these are covered by cash too.

I'm leaning towards #1 until the stock drops below 990. Once 990 hits I'll go to option 2. Option 4 will probably increase my stress level because the quantity of contracts.

Good news is I'm building my risk tolerance muscle

Just reading the first two sentences of your post I was worried that you were in a lot of trouble

It looks like you are managing your positions really well. You can perhaps add some BCS (turn them into IC) to the positions you have open? Obviously do this on strength.

I’m not that bearish going into next week. I have some BPS positions that are red, worst one is Jan 28 1000/875 but not too worried. That said there is a chance that we see a bear raid to kick things off on Monday. If we break 1010 the next support seems to be around 965-970. If we get a bear raid I expect a violent snap back.

 

[MaxPain]

Just reading the first two sentences of your post I was worried that you were in a lot of trouble

It looks like you are managing your positions really well. You can perhaps add some BCS (turn them into IC) to the positions you have open? Obviously do this on strength.

I’m not that bearish going into next week. I have some BPS positions that are red, worst one is Jan 28 1000/875 but not too worried. That said there is a chance that we see a bear raid to kick things off on Monday. If we break 1010 the next support seems to be around 965-970. If we get a bear raid I expect a violent snap back.

Thanks for the feedback. Sorry to mislead a bit, but risk tolerance is different for everyone and last week's action really took a toll on me.

The 5th option I should have put down is to sack up and wait until it goes half way between the spreads and roll same strikes for even.

 

[M3Rider]

Hello all. I'm looking for some thoughts (not advice yada yada) on how I to manage the situation I'm in. First of all I've been doing this for about a year now and have been successful (for my standards/goals) being conservative with one of my brokerage accounts and strikes chosen. I started Jan 2021 with an account balance of ~$400K (includes 400 TSLA and various other holdings + cash) and grew it to ~$750K as of today. Total 2021 options income was ~$175K. I did this by selling weeklies with 10-20% OTM on average and letting the contracts expire/BTC the majority of the time.

Anyway, here is what I have going into next week that is causing me stress (don't laugh). 1/14 +650/-950 BPS. They are 7% OTM and not yet in trouble, but I'm very bearish going into the 1H of 2022 and I think these will go ITM this week due to macros. Whenever I roll I always look to improve strikes and if possible reduce the number of contracts. My goal week to week is to let all the contracts expire (or BTC at 90% profit) and only use 20-30% of my margin. I very rarely roll so that is why I'm posting in anticipation.

Here are some strategies I'm considering...
1) Nothing and hope they expire worthless or close out for a profit on any rise, but I'll be stressed
2) Roll to 1/21 650/950 for small credit while reduce the # contracts
3) Roll to 1/21 600/900 for small debit (I don't love these strikes because they don't meet my 10-20% OTM goal and are 2 weeks out)
4) Roll to 1/21 700/850 and double the # of contracts to increase likelihood of expiring worthless

Oh and I don't have any margin issues yet. I'm only using about 20% of my available margin. Half of these are covered by cash too.

I'm leaning towards #1 until the stock drops below 990. Once 990 hits I'll go to option 2. Option 4 will probably increase my stress level because the quantity of contracts.

Good news is I'm building my risk tolerance muscle

Wow
I’d be like not worried at all with these kind of strikes. You can just keep rolling the same strikes week to week if we get close to 900-950 and collect nice premiums on them.
I have hard time seeing 900 in 3 weeks(after ER) or 800 before that.
There’s a limit how low we can go after Q3 and Q4 P&D, I think.

I have for next week
-950/850 (a roll from 880 week)
-1020/920 (a roll from last week)
-1050/940

Not stressed out too much yet. May need some rolling, but don’t look too bad.
May change my opinion if we get to 900

 

[BornToFly]

Hello all. I'm looking for some thoughts (not advice yada yada) on how I to manage the situation I'm in (which isn't terrible). First of all I've been doing this for about a year now and have been successful (for my standards/goals) being conservative with one of my brokerage accounts and strikes chosen. I started Jan 2021 with an account balance of ~$400K (includes 400 TSLA and various other holdings + cash) and grew it to ~$750K as of today. Total 2021 options income was ~$175K. I did this by selling weeklies with 10-20% OTM on average and letting the contracts expire/BTC the majority of the time.

Anyway, here is what I have going into next week that is causing me stress (don't laugh). 1/14 +650/-950 BPS. They are 7% OTM and not yet in trouble, but I'm very bearish going into the 1H of 2022 and I think these will go ITM this week due to macros. Whenever I roll I always look to improve strikes and if possible reduce the number of contracts. My goal week to week is to let all the contracts expire (or BTC at 90% profit) and only use 20-30% of my margin. I very rarely roll so that is why I'm posting in anticipation.

Here are some strategies I'm considering...
1) Nothing and hope they expire worthless or close out for a profit on any rise, but I'll be stressed
2) Roll to 1/21 650/950 for small credit while reduce the # contracts
3) Roll to 1/21 600/900 for small debit (I don't love these strikes because they don't meet my 10-20% OTM goal and are 2 weeks out)
4) Roll to 1/21 700/850 and double the # of contracts to increase likelihood of expiring worthless
5) Wait until 900 and then roll for to same strikes and small credit

Oh and I don't have any margin issues yet. I'm only using about 20% of my available margin. Half of these are covered by cash too.

I'm leaning towards #1 until the stock drops below 990. Once 990 hits I'll go to option 2. Option 4 will probably increase my stress level because the quantity of contracts.

Good news is I'm building my risk tolerance muscle

:edited to say my situation isn't that terrible in first sentence and added 5th option

I would do nothing until 950. First choice would then be to just roll out for the same strikes and collect nice premium. If that makes you nervous, then since you are using so little margin, roll down and out to 650/850 and increase the number of contracts so you don't pay a debit. If 850 gets breached I would just roll out for same strikes because I can't imagine 750 would get breached for long.

 

[OrthoSurg]

My margin call error warning of 25k appeared in my brockerage platform on Thursday

On Friday after my first case at the OR, I bought back my 20x -p990 for a 80% profit and it freed 550k margin requirement. By the time I could manage to trade, it was 11PM and my margin call was now of 225k because of the drop in SP.

The margin call warning just disappeared today. This was not a pleasant exercice.

 

[vikings123]

I would do nothing until 950. First choice would then be to just roll out for the same strikes and collect nice premium. If that makes you nervous, then since you are using so little margin, roll down and out to 650/850 and increase the number of contracts so you don't pay a debit. If 850 gets breached I would just roll out for same strikes because I can't imagine 750 would get breached for long.

Question about spreads where the short leg( higher strike) goes ITM. What are the risks of getting assigned and how exactly do the dynamics work?

 

[corduroy]

Hello all. I'm looking for some thoughts (not advice yada yada) on how I to manage the situation I'm in (which isn't terrible). First of all I've been doing this for about a year now and have been successful (for my standards/goals) being conservative with one of my brokerage accounts and strikes chosen. I started Jan 2021 with an account balance of ~$400K (includes 400 TSLA and various other holdings + cash) and grew it to ~$750K as of today. Total 2021 options income was ~$175K. I did this by selling weeklies with 10-20% OTM on average and letting the contracts expire/BTC the majority of the time.

Anyway, here is what I have going into next week that is causing me stress (don't laugh). 1/14 +650/-950 BPS. They are 7% OTM and not yet in trouble, but I'm very bearish going into the 1H of 2022 and I think these will go ITM this week due to macros. Whenever I roll I always look to improve strikes and if possible reduce the number of contracts. My goal week to week is to let all the contracts expire (or BTC at 90% profit) and only use 20-30% of my margin. I very rarely roll so that is why I'm posting in anticipation.

Here are some strategies I'm considering...
1) Nothing and hope they expire worthless or close out for a profit on any rise, but I'll be stressed
2) Roll to 1/21 650/950 for small credit while reduce the # contracts
3) Roll to 1/21 600/900 for small debit (I don't love these strikes because they don't meet my 10-20% OTM goal and are 2 weeks out)
4) Roll to 1/21 700/850 and double the # of contracts to increase likelihood of expiring worthless
5) Wait until 900 and then roll for to same strikes and small credit

Oh and I don't have any margin issues yet. I'm only using about 20% of my available margin. Half of these are covered by cash too.

I'm leaning towards #1 until the stock drops below 990. Once 990 hits I'll go to option 2. Option 4 will probably increase my stress level because the quantity of contracts.

Good news is I'm building my risk tolerance muscle

:edited to say my situation isn't that terrible in first sentence and added 5th option

Sounds like we have similar trading styles. With the macros as they are, I'm expecting some of my positions will need management, especially the -980/780s

Here's what I'm holding (all were opened around 20%OTM):

1/14/2021
-980/780
-950/850
-940/840
-930/830
-880/780

1/21/2021
-830/730

If we do breach the 980s, I'll be looking to keep the # of contracts the same, and roll down/out for max strike improvement. Then add weekly income by opening new positions in the low 800s for 1/21.

 

[Yoona]

I credit AND BLAME @Boomer19 for linking to this thread, now I'm trying to do the calcuation and time allocation for how long it's going to take me to read through 721 pages!

KAAAAHHHHNNN!!!!!!

hello and welcome... i am an expert in bypassing garbage posts and noisy posters on the other thread, but this one i had to re-read again and do a double take. Almost snapped my neck...

"update: for kicks ang giggles I pulled up the Jan'22 750-850 strike PUTS and that ranges trades for between 1 and 25$ 5$ a share.. so there is NO SMART MONEY that thinks we're getting anywhere near this price action in the next two weeks. Or else there is a lot of very QUIET smart money that is going to make a fortune"​

i am curious what is the thinking behind "there is NO SMART MONEY that thinks we're getting anywhere near this price action", which i assume to mean SP will have a very low probability of going below 850 anytime soon.

happy to learn something new...

TIA!

edit: i mean, what does $1-5 got to do with SP not going to 850?

 

[EVCollies]

Hello all. I'm looking for some thoughts (not advice yada yada) on how I to manage the situation I'm in (which isn't terrible). First of all I've been doing this for about a year now and have been successful (for my standards/goals) being conservative with one of my brokerage accounts and strikes chosen. I started Jan 2021 with an account balance of ~$400K (includes 400 TSLA and various other holdings + cash) and grew it to ~$750K as of today. Total 2021 options income was ~$175K. I did this by selling weeklies with 10-20% OTM on average and letting the contracts expire/BTC the majority of the time.

Anyway, here is what I have going into next week that is causing me stress (don't laugh). 1/14 +650/-950 BPS. They are 7% OTM and not yet in trouble, but I'm very bearish going into the 1H of 2022 and I think these will go ITM this week due to macros. Whenever I roll I always look to improve strikes and if possible reduce the number of contracts. My goal week to week is to let all the contracts expire (or BTC at 90% profit) and only use 20-30% of my margin. I very rarely roll so that is why I'm posting in anticipation.

Here are some strategies I'm considering...
1) Nothing and hope they expire worthless or close out for a profit on any rise, but I'll be stressed
2) Roll to 1/21 650/950 for small credit while reduce the # contracts
3) Roll to 1/21 600/900 for small debit (I don't love these strikes because they don't meet my 10-20% OTM goal and are 2 weeks out)
4) Roll to 1/21 700/850 and double the # of contracts to increase likelihood of expiring worthless
5) Wait until 900 and then roll for to same strikes and small credit

Oh and I don't have any margin issues yet. I'm only using about 20% of my available margin. Half of these are covered by cash too.

I'm leaning towards #1 until the stock drops below 990. Once 990 hits I'll go to option 2. Option 4 will probably increase my stress level because the quantity of contracts.

Good news is I'm building my risk tolerance muscle

:edited to say my situation isn't that terrible in first sentence and added 5th option

I would roll to 1/21 950/650. I have quite a few of 1/21 990/790 and feel comfortable they could be rolled further if needed. I previously waited till ITM but discovered rolling early has very little downside. Not advice.

 

[BornToFly]

I would roll to 1/21 950/650. I have quite a few of 1/21 990/790 and feel comfortable they could be rolled further if needed. I previously waited till ITM but discovered rolling early has very little downside. Not advice.

I think it is worth seeing how Monday and Tuesday play out and then plan on 1/21 or 1/28 strikes based on panic level.... If you are going to maintain the same strikes, then rolling early is ok and can give more premium then waiting (if the SP doesn't drop). If rolling down, then I think it is better to wait until closer to expiration as long as the old BPS stay OTM for better credit?

 

[BornToFly]

Question about spreads where the short leg( higher strike) goes ITM. What are the risks of getting assigned and how exactly do the dynamics work?

No different than the risk of getting any other ITM Put assigned. Make sure the premium is larger than the difference between strike price - current SP.

 

[Discoducky]

Interesting to see how 6-week 4% ITM performs versus 4-month 15% OTM (mine).

I've tried that and didn't time the IV well so it ended up losing money. But, that was Q2 earnings lotto ticket. Go figure, I didn't do it for Q3. So let's see what happens this time. Q4 looks like such a big beat that it seems a sure thing. But, I also know that there's no such thing...

 

[Knightshade]

Question about spreads where the short leg( higher strike) goes ITM. What are the risks of getting assigned and how exactly do the dynamics work?

This is always an interesting question to me... what seems like the simple math is this:

When there's decent time value left, if you were the guy HOLDING the ITM put.... would you ask to execute it?

The answer is almost universally no... because you'd get more $ selling the put than you would exercising the put compared to the current stock price.



As an example- let's say you hold 100 shares. And you hold one $1040 strike put expiring Jan 14, which just as Friday was closing was worth $42/share.

And the stock (as it was close Friday) is ~1027 a share. $13 ITM.

You could:

Execute the option, and make $13 a share compared to the open market, and be left with $104,000 and nothing else.

OR

You could sell the option, for $4,200. And sell your 100 shares at $1027. And be left with $106,900.


So why would you ever execute the option early in this case?


I suppose there may be cases REALLY deep ITM, or REALLY close to expiration, where it makes sense--- certainly there's been a few folks here who've had it happen to em-- but I've not seen any good math explaining why it'd ever happen for options with much time value left in em.



As to what happens if you are assigned early on the short leg... depends.

If you have the cash or margin, business as usual. The cash or margin is used up, and you now hold shares.

If you don't have it then you're likely looking at a margin call- which typically you'll have 2 days to handle in any of various ways- adding cash to cover, selling the 100 shares you just bought (and the long put likely unless it went REALLY deep ITM and you're better off executing the long put for max loss), etc...

 

[ChefBoyardee]

Something just came to mind as I was planning for next week and thinking of ways to free up margin to rescue my current positions.

Sell 200 shares and buy 3 x Jan 2023 900/1800 call spreads
- Margin req for TSLA is 70% due to concentration, so 200 shares ties up 140k, whereas the spreads only tie up 67k
- The spreads will outperform the 200 shares if the SP is between 1250 and 1950 by expiration, and my target range for the stock is 1300-1500
- The spreads are less sensitive to near term price action, so are somewhat protective for further tankage
- This move frees up 73k margin, which allows for better rolls for my ITM put spreads

Are there any holes in the logic? Has anyone done this before?

More detail on the spreads: TSLA Call Spread calculator

 

[OrthoSurg]

I've tried that and didn't time the IV well so it ended up losing money. But, that was Q2 earnings lotto ticket. Go figure, I didn't do it for Q3. So let's see what happens this time. Q4 looks like such a big beat that it seems a sure thing. But, I also know that there's no such thing...

Not advice required from everyone here, let’s say you have a -p1150 7/1 that you rolled to -p1115 14/1 for a credit, would you roll it one week ou around Tuesday or Wednesday or would you take 2 weeks out? What is your rational between 1 week or 2 weeks between the balance for risk of assignment if getting DITM and adding time value versus the possibly if profit if a quick rebound occurs?
Thanks everyone

 

[vikings123]

As to what happens if you are assigned early on the short leg... depends.

If you have the cash or margin, business as usual. The cash or margin is used up, and you now hold shares.

If you don't have it then you're likely looking at a margin call- which typically you'll have 2 days to handle in any of various ways- adding cash to cover, selling the 100 shares you just bought (and the long put likely unless it went REALLY deep ITM and you're better off executing the long put for max loss), etc...

Yep my question was related to margin and I think it is inline with how I was expecting this to work. IB will automatically start liquidating positions for you, there is no concept of a "margin call".

 

[Boomer19]

Not advice required from everyone here, let’s say you have a -p1150 7/1 that you rolled to -p1115 14/1 for a credit, would you roll it one week ou around Tuesday or Wednesday or would you take 2 weeks out? What is your rational between 1 week or 2 weeks between the balance for risk of assignment if getting DITM and adding time value versus the possibly if profit if a quick rebound occurs?
Thanks everyone

even if you thought earnings won’t move the stock up, 2 weeks out gets you more premium (theta) and implied volatility may drop off after earnings.
what’s the IV of those examples about right now?…here’s some historical and averages stats from mkt cham

TSLA Implied Volatility Chart Tesla

View volatility charts for Tesla (TSLA) including implied volatility and realized volatility. Overlay and compare different stocks and volatility metrics using the interactive features.

marketchameleon.com

 

[JustMe]

Not advice required from everyone here, let’s say you have a -p1150 7/1 that you rolled to -p1115 14/1 for a credit, would you roll it one week ou around Tuesday or Wednesday or would you take 2 weeks out? What is your rational between 1 week or 2 weeks between the balance for risk of assignment if getting DITM and adding time value versus the possibly if profit if a quick rebound occurs?
Thanks everyone

For me - safety first.. I don’t like holding ITM options, even if I’m sure of a recovery. I’d personally lean towards better/safer strikes than rolling the same ITM option out fir credit.

It’s maybe not the most profitable way, but it helps me sleep better at night.

@Boomer19 makes a good point about IV crush after earnings.