Wiki Selling TSLA Options - Be the House

[FS_FRA]

New week - new luck!

With the meteoric rise today so far - and assuming we can get some momentum going here - I will try to:

- roll my May 22 -800/+600 back as soon as I can get a credit for it
- roll my Apr 22 -850/+650 back as soon as I can get a credit for it. Pro-level would have me also roll it down to -800/+600 while doing so....

I'm not going to touch my 2/11 -900/+700 for now, will roll if need be, but actually really looking forward to close this for >80%.

Question to the pro's here: I have protective 2/4 820p I bought last week to help with margin almost-call... Other than letting it expire, any creative non-advices? Actually never bought a put before

 

[adiggs]

EZ Mode decision to close the 700/500 puts for this week expiration. Net is a about 3.50 on a $200 wide spread in 1 day - I approve.

I've got some shares that I need to sell by tax day - decided to open 950 strike covered calls on those at $16. It is amazing how a decision to sell with an ending date makes it easy to sell very aggressive strikes. The risk here is that the shares go back down and don't come back. The benefit is that if we're in the vicinity of the 950 strike in a couple of months then I'll have had 5+ weeks of selling aggressive strikes for income.

These earned $27/share last week. At a 2/3rds close these will collect an additional $10/share. Holding off another day on cc for the rest of my cc 'slots'. If we get a second up day in a row (which doesn't seem unreasonable) then I'll be selling close ATM calls on those as well.

 

[BornToFly]

New week - new luck!

With the meteoric rise today so far - and assuming we can get some momentum going here - I will try to:

- roll my May 22 -800/+600 back as soon as I can get a credit for it
- roll my Apr 22 -850/+650 back as soon as I can get a credit for it. Pro-level would have me also roll it down to -800/+600 while doing so....

I'm not going to touch my 2/11 -900/+700 for now, will roll if need be, but actually really looking forward to close this for >80%.

Question to the pro's here: I have protective 2/4 820p I bought last week to help with margin almost-call... Other than letting it expire, any creative non-advices? Actually never bought a put before

Maybe wait until tomorrow to do something with the protective Put, in case we give back half the gains tomorrow....

 

[ReddyLeaf]

STO 2/4 -c995s at $7.20 (preset buy). Damn, what am I doing? This puppy is running. Canceled all other CCs. STOP, don’t sell any more CCs. My puts that I rolled 6+mo are looking fine however. Edit: anybody else wonder why the SP hit almost exactly +10% before dropping like a rock?

 

[BornToFly]

Decision time!

This day saved my bacon. I've given back almost everything I made in the last 6 months to close out most of my BPS.

I can close the remaining 850/1050s for Friday now and free up a lot of margin. I'm thinking of selling 1200 strike CC for Jan 23 on 1/3 of my shares to do two things:
1) Give me cash to live off of for the rest of the year, and give me more non-Margin buying power to help cover my remaining Dec. BPS.
2) Potentially sell 1/3 of my shares from those CC in Jan (if the stock is over 1200) so I'm trading with cash instead of margin next year.

The problem I'm having mentally is I hate the thought of selling my shares at 1200 next year if the stock is at 1500....

But taking losses because I'm trading with TSLA share margin and getting margin calls is not productive!!!

 

[FS_FRA]

Maybe wait until tomorrow to do something with the protective Put, in case we give back half the gains tomorrow....

I wasn't planning to do anything with it until end of the week. Just trying to figure out some ideas for when the time comes.

 

[dc_h]

I'm holding off rolling 2/4 960-860 BPS. I think the stock is way undervalued, but macro events can still override underlying fundamentals in the short term. I'd like to BTC this week and sell out of the money BPS after closing these this week. Putin has something to say about the market now and short term, that could be more significant than J Powell. I have been stuck with 1120 Puts in a no margin account for the last 4 weeks now. Annoying not being able to roll for more than a few dollars per contract. This is a trade I want to roll back and forth with calls, so losing what was a $20+ weekly profit per transaction until this is close to in the money.
Impressed, once again, by @adiggs ability to play close to the money and not get burned.

 

[BornToFly]

I've discovered something VERY, VERY, VERY important to know about selling spreads. With a BPS, if it is ITM, and you get a margin call because the stock you are backing the position with losses value, buying back the spread at a loss does NOTHING for your margin. It makes sense, because if full loss is $20k on a 850/1050, you needed $20K of margin when you opened the position, and you need $20k to close it. So nothing changes with your margin when you close a fully ITM position, you are just $20k poorer. If it was half way in the spread, you would close for $10k, and then get a margin improvement of $10k.

So it is definitely "safer" to do BPS with an all cash account because you can't go into a margin call situation. However, if your positions go to full loss, and you were using 90% of your cash to back the positions, you lose 90% of your account for ever. At least if you have shares, you can sell covered calls to generate income to roll positions further out. With a cash account, what you got is what you got.

Personally, I might be done with BPS after this, and go back to regular old naked puts and covered calls.

Edit: This is different from selling naked Puts. If you sell a naked Put, and the SP drops and you get a margin call because the Put is requiring more margin, (and your shares are giving you less margin because the SP has dropped), you can resolve the margin call by buying the naked Put at a loss. As explained above, with a fully in the money BPS, buying back the spread at a loss does not help your margin at all. The only things you can do are: 1)Bring more money into the account. 2) Sell your shares to increase your margin. 3)Sell CC against your shares for income.

I want to be sure that people saw the Edit I added to the previous post, because this is SO important.

The margin problem with ITM BPS is different from selling naked Puts. If you sell a naked Put, and the SP drops and you get a margin call because the Put is requiring more margin, (and your shares are giving you less margin because the SP has dropped), you can resolve the margin call by buying the naked Put at a loss. As explained above, with a fully in the money BPS, buying back the spread at a loss does not help your margin at all. The only things you can do are: 1)Bring more money into the account. 2) Sell your shares to increase your margin. 3)Sell CC against your shares for income. 4) Turn it into an iron condor (but the call side will generate very little income if the BPS is at full loss).

So if you are selling BPS in a non-cash account (with TSLA shares as your collateral), make sure you leave a lot of Margin available. Don't use much of it.

 

[euro2012]

Decision time!

This day saved my bacon. I've given back almost everything I made in the last 6 months to close out most of my BPS.

I can close the remaining 850/1050s for Friday now and free up a lot of margin. I'm thinking of selling 1200 strike CC for Jan 23 on 1/3 of my shares to do two things:
1) Give me cash to live off of for the rest of the year, and give me more non-Margin buying power to help cover my remaining Dec. BPS.
2) Potentially sell 1/3 of my shares from those CC in Jan (if the stock is over 1200) so I'm trading with cash instead of margin next year.

The problem I'm having mentally is I hate the thought of selling my shares at 1200 next year if the stock is at 1500....

But taking losses because I'm trading with TSLA share margin and getting margin calls is not productive!!!

I know you know this, but selling a Jan 23 1200 covered call nets $135 at the moment, meaning we would need to be over 1335 on Jan 2023 for you to be worse off. Plus you get money up front, which should be worth something.

 

[Blue horseshoe]

Decision time!

This day saved my bacon. I've given back almost everything I made in the last 6 months to close out most of my BPS.

I can close the remaining 850/1050s for Friday now and free up a lot of margin. I'm thinking of selling 1200 strike CC for Jan 23 on 1/3 of my shares to do two things:
1) Give me cash to live off of for the rest of the year, and give me more non-Margin buying power to help cover my remaining Dec. BPS.
2) Potentially sell 1/3 of my shares from those CC in Jan (if the stock is over 1200) so I'm trading with cash instead of margin next year.

The problem I'm having mentally is I hate the thought of selling my shares at 1200 next year if the stock is at 1500....

But taking losses because I'm trading with TSLA share margin and getting margin calls is not productive!!!

CC for Jan 2023 at $1200 strike just seems so low. I think we'll end up around $2000 by then. Why not select a strike closer to $2000 (if you think thats roughly where we would trade at in jan)?

 

[BornToFly]

I know you know this, but selling a Jan 23 1200 covered call nets $135 at the moment, meaning we would need to be over 1335 on Jan 2023 for you to be worse off. Plus you get money up front, which should be worth something.

Exactly, and if the SP is near 1200 I can roll it up and out another year for more profit. I just dream about a $3000 share price and all the islands I could buy if that happened and I still have my shares....

 

[BornToFly]

CC for Jan 2023 at $1200 strike just seems so low. I think we'll end up around $2000 by then. Why not select a strike closer to $2000 (if you think thats roughly where we would trade at in jan)?

Only because it gives me a lot less cash, which I will need this year.

 

[adiggs]

Heck, I know I've stopped aggressively paying down my mortgage just from the pain that has happened this month. Some large purchases were put on hold as well.

My wife and I are doing the same. Our annual income and expenses don't actually change at all due to the results of this month, and yet we're pulling back a bit for our own comfort

Impressed, once again, by @adiggs ability to play close to the money and not get burned.

I've been badly burned as many with put spreads. Badly burned is in the neighborhood of an 85% loss on high % of cash positions. It kills me that a single 5 minute bit of insanity / greed / FOMO has cost me so dearly. If I hadn't made that one trade that violated my own trading guidelines then the last couple of weeks would still have been bad but I also wouldn't have an 85% realized or unrealized loss right now. I also realize that the end result of that greed is still way better than most and still completely comfortable for an outstanding retirement.


The call sales being so close to the money are a component of a very specific strategy for generating income and are most definitely not advice . Better to think of those as buy-write (where the write is ATM) or an all cash account with the long calls as the insurance for the income generating covering calls (an alternative to call credit spreads).

Those calls aren't me making an attempt to grab a few $$ in front of the steamroller. I plan and expect for those covered calls to go ITM and stay there on a move up. If the share price were 1020 today then I'd probably be selling ITM - something like 1000s and then be rolling those to ITM positions for good premiums as long as the actual strike to strike difference offsets the cost to purchase the calls. Those ITM rolls will also bias towards credits rather than strike improvements, which means that I will see the long calls called away on a significant move up. I am swapping potential future gains for high income now and on a more consistent basis.

To the degree that the shares are either moving up steadily or they are flat the aggressive cc's will do really well. I might even keep all of the leveraged gains that the long calls provide. It is a really sharp move up with no return that will hurt, and will still generate very nice income.

 

[TheTalkingMule]

Only because it gives me a lot less cash, which I will need this year.

Anything can happen and Putin can Putin, but I think we're in a very sharp turning point here. I'd carve these transaction up over as much time as possible to avoid "selling low". Selling CC's now is not too different than us joyfully selling BPS at $1200 less than a month ago.

I'm of the opinion 1Q earnings will confirm this new profitable reality and set the floor well above our current SP. Granted.....I assumed 4Q would convince folks of the fundamentals as well. Another $2-3 EPS is going to flip all the models on their heads.

Nothing wrong with setting a plan in place now, but maybe carve it up into tranches that get triggered if SP happens to drop a bit? I'd hate to see you sitting on $1200c if we cross that in early May as we should. I think our current position on the other side of this recent bear raid gives us the luxury of time.

 

[ZeApelido]

I think now people are appreciating the potential benefits of longer expiration spreads: a -20% week or worse -20% day (gap down at open) won't lose all your money. Sure a recession still might lose all your money so there are still risks. However, now the talk about getting a reasonable 1% a week, well that's 52% a year and guess what, you can get that with a long dated spread with less stress. In fact I think you would net more given the same level of risk. A Jan 24 800/1600 spread would net you over 200% (avg 100% per year) if 1600 is hit. 35% if the stock somehow only stays around $1000.

A Jan 23 600/800 spread nets you 60%. 400/800 gets you 44%

Sell puts when stock is a reasonable valuation. When it dips big (like now), convert to longer expiration with maybe a wide spread.

When the stock goes high, sell calls on any shares. When it absolutely goes bonkers high and you think the stock is at a local peak, maye only then sell wide BCS spreads.

 

[traxila]

I confess I capitulated today on my short term calls. I thought I could stomach it but being down 8 figures since the beginning of the year (granted most of it in my untouched long term accounts) frazzled my brains.

I had a plan to liquidate all of them post earnings anyway, but obviously not like this. Had been accumulating since the 600 dip last year and had unloaded some for good profit in the 1100 range but not enough.

You should all be encouraged as I have historically been terrible at this. I sold them all in the 850 to 840 range. Took a while….

Left with a bunch of sold puts and some CCs. What a difference between buying and selling options as time grows short.

Look for a rebound next week

Wanted to touch base here and point out how they played me like a fiddle.

Best part is that as soon as I was done raising cash I felt really bad about it. Did not like my decision at all. Figured I would see how the Monday open went and jump back in so that my deltas would be similar at hopefully lower cost. Of course, this AM I was really busy and unable to even look at trading websites until 1PM or so.

I liked to think that I had learned something over the years, but a recent cash drain had eaten into my reserve pile until I felt uncomfortable with the situation (not complaining... bought real estate) and I literally lost my mind over the reaction to the earnings call and these huge paper losses that I am only lucky to have by HODLing TSLA for years.

No worries for me as my long term accounts were untouched.... and looking great today. But I did ditch a good amount of delta at the lows (around 850). Sad statement for me. Would like to think I would be nimble given the opportunity this AM to make it up, but these are the hazards of not being a full time trader. Of course, that comes with its own issues...

I hope everyone took my cue! I told you the rebound was coming!

 

[ChefBoyardee]

We're not out of the woods yet - hitting resistance right here. But I think 850 is locked in as the floor now that we're back in the channel. I converted a few of my rolled put spreads to IC's today. I'll convert more if we test the medium-term downwards trendline at 1020ish, and will close some if we re-test 850-860ish.

What a relief to have a big up day though haha

 

[WattsHappening]

Decision time!

This day saved my bacon. I've given back almost everything I made in the last 6 months to close out most of my BPS.

I can close the remaining 850/1050s for Friday now and free up a lot of margin. I'm thinking of selling 1200 strike CC for Jan 23 on 1/3 of my shares to do two things:
1) Give me cash to live off of for the rest of the year, and give me more non-Margin buying power to help cover my remaining Dec. BPS.
2) Potentially sell 1/3 of my shares from those CC in Jan (if the stock is over 1200) so I'm trading with cash instead of margin next year.

The problem I'm having mentally is I hate the thought of selling my shares at 1200 next year if the stock is at 1500....

But taking losses because I'm trading with TSLA share margin and getting margin calls is not productive!!!

I would be very hesitant to be selling Jan 23 cc1200s. I think you will be leaving a lot of money on the table.

But I certainly understand the move if you need cash flow this year. It's better than selling shares at today's prices.

I'm in agreement with @TheTalkingMule. Perhaps stagger the CCs, both in strike price and expiration dates? And sell only what you need to based on timing of cash needs?

 

[TheTalkingMule]

Widened and rolled slightly lower my remaining $1060/$960 BPS from 2/4 to 2/11 at $1050/$900 for $15 credit. (sorry for the earlier misprint)

Hopefully this is a good middle ground solution as I wait out the chance to close these and not one of these ongoing life lessons that seem to be raining down with regularity in 2022!

 

[GeoX750]

I would be very hesitant to be selling Jan 23 cc1200s. I think you will be leaving a lot of money on the table.

But I certainly understand the move if you need cash flow this year. It's better than selling shares at today's prices.

I'm in agreement with @TheTalkingMule. Perhaps stagger the CCs, both in strike price and expiration dates? And sell only what you need to based on timing of cash needs?

I imagine those cc1200 could be rolled to keep the covered shares until they could catch up with the SP ?

Also, what about adding BCS to make an IC with a pretty wide BPS -1040/+770 that was rolled out to 16 Sept 22 ?

TOS will not require any more margin (as long as the expiration and spread widths match, or smaller) and the BCS can be made pretty wide (-1200/+1450) so they can be rolled.

But, already sweating the -1040/+770, is adding the IC just asking for more trouble ? They can't both go bad . . .