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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
bkp_duke
Well-Known Member
Transparent pushdown in the extreme. Such obvious desperation gives cash rich investors a great spot to buy/sell options for next week.
I don't see any way TSLA stays below $1060 today or $1100 tomorrow. At least in the neighborhood. Not advice, obviously just guessing.
You are the penultimate contrarian indicator. I need to base my trades upon your posts.
Rolled my 1/21 1050/900 BPSs to 1/28 same strikes for $13.25 earlier today. Could have done better if I waited a bit, but still pretty pleased with the credit.
The next to last? I suspect you mean ultimate. Sorry for the pedantry.
@TheTalkingMule is just unrealistically optimistic about the stock price in general 24/7 365.
Question.
As I mentioned just above, I was able to roll my 1/21 1050/900 BPS out a week for a nice credit.
I also placed an order to roll my 1/28 1070/995 BPS to 1/28 1055/930 BPS. Lowering both strike prices (which is the main goal) but widening the spread. As I'm now tracking this order, the credit decreases as the SP moves up and vice versa. I'm trying to wrap my head around this. Explain please?
As I mentioned just above, I was able to roll my 1/21 1050/900 BPS out a week for a nice credit.
I also placed an order to roll my 1/28 1070/995 BPS to 1/28 1055/930 BPS. Lowering both strike prices (which is the main goal) but widening the spread. As I'm now tracking this order, the credit decreases as the SP moves up and vice versa. I'm trying to wrap my head around this. Explain please?
Closer to ITM = higher chance of ITM = higher cost for the buyer, higher reward for the seller.
You can always decide on a higher or lower credit yourself, but obviously sellers want the highest credit and buyers the lowest, so you average out on a price that's similar for everyone trying to sell puts around the same strike price, taking in account scarcity of the amount of available put contracts, volatility of the SP and nearby of ITM.
Spreads and more complicated strategies are even weirder, because there the credit you decide to sell, is the credit of the sold puts vs the cost of buying puts at a lower strike price (and the credit of sold calls vs cost of buying calls at a higher strike price).
If with puts the SP goes up, the value of those puts lowers because they get further OTM and your unrealised P&L turns green. You can then decide to buy back those puts and cash in the difference. That's what generally is described when closing a position, and with this you can even do day trading with options.
Similar, if you've sold a put spread and the SP goes closer to your strike price, you will see your P&L turn red. If the SP is getting too close to the strike price for your comfort, and you're approaching expiry date, you can then decide to roll this position over to a safer position. Rolling means you're closing your previous position with the loss, and with a new position possibly recover the loss by choosing a wider spread.
Now, suppose you sold puts which are -20% OTM, and the SP drops to -15%. You will also see your unrealised P&L in the red, but the value of those puts are also dependent on time left to expiration date, the so-called theta. The closer to expiration date, but still OTM, the less value those puts keep, so you might go back to green and keep your credit, as long as your puts never reach strike price by expiration date.
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bkp_duke
Well-Known Member
dang that IV spike was sweet but I was too chicken to roll my position sideways this early on the week 
I have to admit I did buy short term calls immediately once when Mule threw in the towel on a post and did really well!
But I must ask, who would be the ultimate contrarian indicator?
TheTalkingMule
Distributed Energy Enthusiast
Wait......did I miss the close today?
Ok, as I predicted, the bastards pushed the SP below 1000 to try and flush out some of that put/call wall. I had a few buys hit, then put in some market orders just to make sure. Got a few chairs 998-1005. Realized that I was closing in on another round lot, just a few $$$ short, so rolled a 1/28 -p1075 out to 1/2023 -p1000 for $141 cr and, bingo, enough cash. Put in another market order at 1021.xx. Now, some might remember that I made a similar error last year about this same time (sold Jun21s 800p when the SP was 900, spent the premiums, and got stuck taking the shares when the SP was 620). This year, I’m still a newbie, but slightly smarter, so I won’t let that happen again. Lots of 1/28 -p1075s left and lots of time (and cash) to roll. I’m more judicious in my stock purchases, saving cash for the “next” drop (still holding 1-2% for my 938-958 gap filling prediction).
I'm still holding these but now deciding whether to roll them tomorrow or roll the dice on Friday since I dont mind getting them assigned
As long as you have the cash or margin to get put the shares. Remember, several folks up thread have reported that their brokerage have automatically closed positions on Friday morning, even though the position eventually closed OTM.
With shares in the 1015ish range I rolled some 1010 calls for this week out to 1050 next week and a $10 credit. I am intentionally riding close to the share price with these, with an additional desire to keep them within shouting distance of a roll to 1100 where they break even (strike plus purchase price).
I've been thinking about this steady down move we've been seeing since P&D and I think I've figured something out - made it conscious that was previously unconscious. If I hadn't stuck myself into a bad put spread then I'd have been selling put spreads right through this and continuing to make money each week. I'd have probably sold 800/1000s the day after the P&D reaction (instead of the 950/1100s I sold the day of). And every week since then I would still have been selling winning positions, with each position going down as the share price drifts down. As far down as we've moved it looks to me like the conservative put spread sellers (and those that obeyed the rule about selling into strength) have had no trouble moving down with the share price.
So there is a pace to this, where weekly winners beget weekly winners (as the weekly strike reset enables the position to move with the share price). Yet another reason for me to do a better job of following my own rules. I did that really well summer and fall of last year and the results were outstanding. I've kicked off the new year with a bad violation of those rules and am not only deeply in the hole I've also lost 2 or 3 weeks now of opportunities to be earning a little bit each week.
This move has been big in the aggregate but the individual days and weeks have not been big - not in the context of being $150+ / 10%+ OTM as we are typically positioning our puts and put spreads. The 2 days that would have been problematic were covered calls the day after P&D (but holding 1 extra day would have cleared that up) and the day after for puts. The put side would have been cleared up by following the rule of selling into weakness (and selling puts on a +$100 day is NOT selling into weakness).
I hope that makes sense and its helpful to somebody. Mostly me writing this down to help me!
I've been thinking about this steady down move we've been seeing since P&D and I think I've figured something out - made it conscious that was previously unconscious. If I hadn't stuck myself into a bad put spread then I'd have been selling put spreads right through this and continuing to make money each week. I'd have probably sold 800/1000s the day after the P&D reaction (instead of the 950/1100s I sold the day of). And every week since then I would still have been selling winning positions, with each position going down as the share price drifts down. As far down as we've moved it looks to me like the conservative put spread sellers (and those that obeyed the rule about selling into strength) have had no trouble moving down with the share price.
So there is a pace to this, where weekly winners beget weekly winners (as the weekly strike reset enables the position to move with the share price). Yet another reason for me to do a better job of following my own rules. I did that really well summer and fall of last year and the results were outstanding. I've kicked off the new year with a bad violation of those rules and am not only deeply in the hole I've also lost 2 or 3 weeks now of opportunities to be earning a little bit each week.
This move has been big in the aggregate but the individual days and weeks have not been big - not in the context of being $150+ / 10%+ OTM as we are typically positioning our puts and put spreads. The 2 days that would have been problematic were covered calls the day after P&D (but holding 1 extra day would have cleared that up) and the day after for puts. The put side would have been cleared up by following the rule of selling into weakness (and selling puts on a +$100 day is NOT selling into weakness
).I hope that makes sense and its helpful to somebody. Mostly me writing this down to help me!
Game plan is to close them at a gain, but that may be fleeting. We’ll know tomorrow.
One back up game plan would be flat roll for a credit, but reduce the number of contracts (still generate overall credit). Then use the freed up margin to widen and improve the 1170 for a credit as well.
Earlier today (we were at 1020) I was seeing the option to shift 170x 1000/950 BPS 1/21 and 36x 1170/1080 BPS 1/21 to 90x 1000/950 BPS 1/28 and 36x 1100/900 BPS 1/28 for an additional 35k in total credit and the same overall margin req between both positions. Havent checked what options I have now at 1010, but I’d guess it’s closer to 140x and 130 wide on the other position.
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Thanks @wooter. All of your points make perfect sense. I completely understand the relationship between SP, time to expiration, impact as the SP gets closer to strike price.
I'm still a bit fuzzy on the direction of credit movement for my particular roll.
This reminds me of when I studied the cash flow statements for the first time and couldn't get my head around the idea that increases in asset balances resulted in a decrease in cash. It seemed counter-intuitive and took a long time to get absorbed by this ant brain.
In this case, your spread had a leg ITM, and it was slowly moving in the direction of being OTM. This also influences the price.
Oh and trust me, I'm regularly confused too. I've had to calculate in a separate spreadsheet to understand the relations in all the columns in IBKR's Trading Work Station. It all makes sense, but at first sight it's very confusing to understand where 'unrealised P&L' comes from if you don't have the column 'cost basis' and only a column 'market value'. Or why suddenly my cash got less because I closed a put spread, I was meant to make money, no?!
Flehmenlips
Member
I have so much to learn yet. I don't understand how a BPS that is so far underwater for this Friday expiration could possibly be rolled for a credit (the 1170/1080 1/21)? Can you provide further details so I can deepen my understanding of how these spreads and rolls work?
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