Wiki Selling TSLA Options - Be the House

[Tyler34]

But it doesn't have to be all or nothing. For example, if you are going to sell 1000 strike Puts, why not sell 2X 500/1000 BPS?

One of the put spreads in your scenario actually uses more margin than just a put so I couldn't sell twice as many.

 

[BornToFly]

One of the put spreads in your scenario actually uses more margin than just a put so I couldn't sell twice as many.

It depends on if you are using cash or margin (and if you are Option level 3 or 4 at Fidelity).

 

[stealthyc]

One of the put spreads in your scenario actually uses more margin than just a put so I couldn't sell twice as many.

It amuses me that your broker would calculate the full spread value to be greater than the risk adjusted naked put margin. Regardless the difference is that if the stock plummets, the naked put margin requirement goes up quite a bit. The spread has a maximum.

 

[adiggs]

It amuses me that your broker would calculate the full spread value to be greater than the risk adjusted naked put margin. Regardless the difference is that if the stock plummets, the naked put margin requirement goes up quite a bit. The spread has a maximum.

Though I would personally do the calculation as if its cash secured / retirement account, I've seen Fidelity put a much smaller margin requirement on these spreads than what we'd calculate. I.e. it wouldn't surprise me if that $500 wide spread example made up above had a margin requirement of closer to $20k than the $50k that spread width would imply (and would be used in a retirement account).

As pointed out here - that $20k margin requirement can and will change as the share price moves around, and if one is using that lower margin requirement to sell more than one's cash will support, then that can get into the same issue that any use of margin can get into.

 

[samppa]

In addition to the spreads I mentioned earlier (re-stated here as reminder):
All 1/21 exp:
1x 1100/980
1x 1100/960
2x 1080/950
1x 1050/900

I also have 2 "protective puts" +900 strike for 1/21 exp. I am playing around with using those as my long legs and pairing with some of the short legs above to give me more flexibility. It seems to be helpful. For example, I am replacing the long legs on the 1100/980 and 1100/960 with 2x +900p which gives me much better rolling opportunities. If I understand it correctly. Then I am pairing one -1080 with the remaining +900, and the other -1080 with the +950 and finally the -1050 with the other +950 which leaves me with the +960 and +980 as my protective puts and creates the following new structure:

All 1/21 exp:
2x 1100/900
1x 1080/900
1x 1080/950
1x 1050/950
1x +960 (pp)
1x +980 (pp)

So I am sort of mix and matching my positions to find the optimal spread and rolls and protective puts. I've been using the "Analyze Tab" in Thinkorswim to play with all of these scenarios and how it affects my margin, credits, etc.

Here is what I am rolling all of that to:

1x 1/21 1100/900 --> 1x 1/28 1100/930 $9.15 credit and small margin improvement
1x 1/21 1100/900 -->1x 1/28 1090/910 $5.27 credit and small margin improvement
1x 1/21 1080/900 --> 1x 1/28 1080/950 $3.18 credit and small margin improvement
1x 1/21 1080/950 --> waiting until tomorrow
1x 1/21 1050/950 --> waiting until tomorrow
1x 1/21 +960 --> 1/28 +900 (protective put for margin management) roll tomorrow for a small debit
1x 1/21 +980 --> 1/28 +900 (protective put for margin management) roll tomorrow for a small debit

Ugh. My brain is tired. I feel like I *really* don't know what I'm doing, but I *am* learning a lot. Thank you all for the great input and feedback.

I've been in a similar situation (lots of slightly different small spreads) and it was getting really confusing when I had to roll.. so in the end I cleaned it up by rolling everything to one spread.

Simpler to manage 10 contracts of one spread, than 10 different spreads of 1 contract.. not advice.

 

[EVCollies]

And here I am feeling overextended because i've used 50% of my margin

I've received a margin call everyday this week, easily solved, but I need to cut back!!!

If I had margin left, I would be opening 1/28 600/900 and 650/950s BPS like they were going out of style....

And with that non-advice, I've made my first 300 spread BPS.

 

[traxila]

Seems like a buyer's strike here fellas.

I closed out 01/28 BPS 910/870 earlier today for small profit. Guess that was smart.

Love TSLA earnings coming up! They will be great! The SP afterwards - I have no idea. Like to believe we will scream up but think will take time. Think my 01/28 730 / 670 BPS is a lock !

Macros need to buck up and stop crying all the time.

 

[M3Rider]

Closed all my bps for 1/21
Added 1/28 -910/710 bps @11
And bought 1 1/24 900c @380

Today completed converting my 2019 calls into shares.

 

[wooter]

One moment you're wondering if you need to roll. The other, you wonder if you need to wait, or just take 75% profit. On the same bps.

Hey look, I'm again looking to roll.

 

[adiggs]

I have no idea if this is considered a technical indicator but something that gives me hope for next week, after the big expiration tomorrow, is that it seems like every day this week has started green by a little or a lot, and then slid either late in the day or throughout the day. That sort of looks to me like there is buying interest that is then being overwhelmed by position interest. The nature of the market and the ability of short sales to manufacture shares on demand is that if you want to push the share price in some direction, down is the easiest way to go.

So next week when the stuff going on this week is in the rear view mirror, I am hoping to see that resistance to moving up lifted. As a bonus all those buyers this week get some sweet deals.


Partly I'm thinking this because of my own experience 2 or 3 years ago (I lose track ). I had purchased some reasonably far OTM 500 and 600 strike calls expecting the shares to take off. That expiration week the shares close at $507(ish). I shouldn't have held nearly that long, but I did, so I got $7 for the 500s and nothing for the 600s.

The next week the shares went to $650. One way of looking at that was I was off by 1 week on my 18-20 month gamble. Or the way I look at it I never had a chance - the January expiration week has so many outside influences that it otherwise just needs to be survived. Having that in the back of my mind is why I rolled out 2 weeks instead of 1 when I pushed out the reckoning on the 950/1100s I have.


Which doesn't make me right. Just because I think it doesn't make it so.

 

[bkp_duke]

NFLX just cratered 10% after hours on earnings. Many analysts had hoped for a beat that would stoke the tech market in general. Guess not.

 

[InTheShadows]

Hey look, I'm again looking to roll.

Yea really wishing I would have taken the 75% gains earlier today and the small gains on the stuff I’ve been rolling since P&D.

 

[InTheShadows]

NFLX just cratered 10% after hours on earnings. Many analysts had hoped for a beat that would stoke the tech market in general. Guess not.

Wow. That back to June 2020 levels.

 

[CHGolferJim]

• STO 012122C1075 at 3:40pm for $10.95 -- 45% drop during the day, dang it waited too long hoping for a Monday rebound/FOMO, looks like nothing much happening with SP this week.
• Above is in a $1073 buy-write which has returned 11% in 2 months, 53% annualized, excluding SP change.
• Not doing anything this week against core shares, unless temptation strikes tomorrow (I do have a 10-day trip to FL coming up).

• Rolled above to 020422C1075 for a $29.26 credit, weird action today almost like NFLX news got out
• Fully expect to roll these while watching the crazy action over the next 10 days, but the high premium should leave plenty of room to make the trade profitable

 

[EnzoXYZ]

I was able to close out all my BPS this morning when share price was up 25-30 range THANKFULLY. Once share price were up near $40 I was itching to open some 1/28 -900/700 BPS for ~$6 per spread and break one of the golden rules- selling into strength. THANKFULLY I stopped myself in fear of a close like today. The -900/700p became $13 quickly so over -100% loss had I opened the position from this morning’s FOMO.
@adiggs thanks for the reminder of only selling into strength!

 

[ChefBoyardee]

Jeez, NFLX down 18% now.

Today I took the rest of my short term risk off the table:
- Closed some small 950/930 positions to lock in gains
- Rolled next weeks 980/960 out to feb 11 900/880
- Rolled next weeks 1090/1050s to April 14 1000/975

Now 3/4 of my positions expire in March and April, and 1/4 expire in September. Everything is below the long term trend line.

Thankfully I did all this while tsla was in the 1010-1030 range… after hours looks scary

I’m taking a 2 month break from options selling while I wait for the rolled positions to expire, and honestly it feels great lol - these last two months have been super stressful

Hang in there! Eventually the good news will affect the SP again - it’s just a matter of time

 

[LightngMcQueen]

This is something I've begun pondering as well. Go all the way into a naked put mindset, but then add a small amount of leverage / risk with something like a 50% wide spread for 2:1 leverage. In your example there will still be an effective roll with a share price of $750. That's a lot of room to the downside, especially using 1 or 2 week expirations enabling frequent strike resets.

This can get really complex so my lazy approach to finding the right balance of spread width risk and safe margin use is to:

1. let myself use almost all (~90%) margin selling plain naked PUTs relativelly close to ATM,
2. when I get in trouble then:
- I can restructure those PUTs into BPS and recover margin
- roll some of the weekly/monthly PUTs into ITM LEAP PUTs and recover cash (because leaps have sizeable vegas this lets me capture volatility spike which tends to coincide with SP drop).

I believe it leaves me plenty of cushion not to get wiped out, without coming up with some [BPS width/margin %] heuristic, for which ultimately I do not have any statistically sound proof.

 

[st_lopes]

I am kicking myself for not having stopped what I was doing today to take a roll. Seems like I had the chance to strike improve materially and widen for a decent credit. That will evaporate on open tomorrow if this AH is indicative of where we are heading.

So lesson: roll early dumba**

 

[vikings123]

I am kicking myself for not having stopped what I was doing today to take a roll. Seems like I had the chance to strike improve materially and widen for a decent credit. That will evaporate on open tomorrow if this AH is indicative of where we are heading.

So lesson: roll early dumba**

Is this for tomorrow's expiry? Yeah I took the opportunity to close some 1025 puts and also roll some to 975 next week. I also had 15X 1020/920 BPS that I rolled to 950/850 01/28 expiry. I still feel like we close above 1000 tomorrow but wanted to roll early like you said.

BTW, anybody looking at buying calls? I mean the markets can stay irrational but something like 6 weeks out 1250 strike or if you want take a flyer on the next couple of weeks the Feb 04 1200 strike calls are going for $8. Pretty decent risk/reward IMHO.

 

[BornToFly]

Hopefully NFLX money pours into TSLA tomorrow....