Well argh - I pulled all of these messages to quote at once, expecting I could then respond to each individually. Ah well - y'all get several messages in one!
Lots of NOT-ADVICE here!
Thanks, going far out would take away some stress and still have margin to work with for the rest of the year.
Another question, is if the -950/+910 is rolled out to 18 FEB for a -$1 debit, I could make an Iron Condor with a matching credit spread -1040c/+1080c for +$3.47 to to pay the cost of the roll (and then some) for no added risk (margin).
Is it fair to factor this IC strategy (with no added margin) as helping the break even of the BPS ?
Sorry to clutter the thread with all the noob questions.
The way I look at ICs - the margin required doesn't change but the risk doubles. A strong move in either direction will put pressure on that side of the IC. Broadly speaking ICs perform best in a sideways market. Sideways can be pretty broad if the put and call spreads are far OTM but its still a sideways market strategy.
I know that if I were adding a BCS to make an IC that I would add that credit to the BPS side credit / debit. I think it is totally legit to use the call spread credit to offset the put spread debit to make an overall credit trade..
Fellow TMCers,
It is hard to imagine the sentiment changing without a bad washout capitulation across the market. The bears are firmly in charge and the frowning 'adults' in the room cannot stop talking about interest rates, PE compression, consumer balance sheet exhaustion (working people ie 98% of population) and inflation, god forbid another variant attack...
Of course in particular it is open season on TSLA and all things Tesla. It is obvious to all that even the current administration is sour on Tesla and looking to level the playing field for its paying 'customers'. Like TSLAQ is not enough....
Why do I say all this? Please be defensive. Look to FB for ridiculous moves that are possible. Ask yourself when further interest rate hikes are off the table. 2024? And remind yourself that the first rate hike has not even occurred, market pricing aside. This is not something that will resolve in a couple of weeks. Large parts of the market believe that the Fed has blown it and there will be a recession. Market is forward looking and will snap back when you least expect it, but it can also go down far beyond what you feel is reasonable (and I do mean FAR beyond), especially for stocks like TSLA. Traders need to expect and be prepared for huge swings and trade accordingly.
Personally I will stick to voting with my wallet. TSLA and all stocks renewable get my investment cash, and if I go down with the ship so be it. I have some small margin in my accounts that I look to pay down with option selling on the fringes. I have a family, so I do keep cash reserves and have little to no debt overall. 'Reasonable' people are investing in fossils now, pounding the table over their cash flows and energy demand. I find them to be most unreasonable.
Above all, the clarion call for a bear market is in the air. That would be a minimum of 20% overall. That would put the QQQs in the mid 320s. SPY in the low 380s. It is hard to see how the QQQs and market can base and march to new highs without these levels at least being visited in the face of rising interest rates. And of course, the market overshoots in both directions. Always... One year ago the QQQs were at 300 and two years ago (pre COVID) were at 200.
All the best and this too shall pass.
The details differ, but this is also how I'm seeing things. One dynamic that I also am trying to think about and put into my own thinking - there is a big pool of investors that haven't ever experienced a really, really big drop in the market. Blood in the streets / full capitulation / the house is burning down kind of drop.
More particularly one where the real economy performs badly, the stock market performs badly, and the two feed on each other. The
07/08 period might qualify. There is a 50% drop in the market that took about 2 and a half years to play out. What do I see different this time around?
1- the heavy market intervention last time around has arguably been what's propped up the market for the last 2 years. Is that tapped out? We certainly don't have the same level of ability to intervene (easy money primarily, but also incremental spending) as we had at the start of the pandemic.
2- It seems to me like each time we do this, the market has better and better information, and these things happen faster and faster. That's a feel and intuition - not something that I've particularly studied or researched. Can we do a 50% drop in 1 year this time? 50% on Tesla would be around $600/share. An overnight 1/5th move would take a pretty good whack at that.
3- I don't know the degree to which short sellers could manipulate the market or individual companies / stock the last time around, but as a close follower of TSLA and observer of other market events it looks to me like the short sellers are better at the game today than they were 10 years ago. They are also increasingly brazen about it (I am particularly reminded of the
Gamestop short squeeze).
4- If any stock is wagged by its option tail it is TSLA.
What I've been doing - taking out leverage right and left. Put spreads are widening and probably going to cash secured puts for the next go-around. I'm also thinking about 50% wide spreads (50% of share price) so I can get some leverage and a lot of naked put like behavior. If I were selling a 700 strike put today that would be a 700/350 and is mostly beneficial in a retirement account. Even in a marginable account I would keep those cash secured.
I'm looking at closing longer dated share replacement calls or at least selling aggressive covered calls against them. If I were buying new share replacement calls today I would be spending 1/2 of the share price for at least 1 year to expiration.
Again - not-advice.
At open, I am going to roll my 980 2/25 puts out to August or September and down as far as possible. I do think we are headed towards a not fun environment and better safe than sorry.
EDIT: Rolled everything to August 19th 850 Puts for enough of a credit to pay my tax bill. This will also let me sleep better at night and it will give me the freedom to roll forward should we get closer to ATH. I largely wanted to avoid getting my ITM puts exercised in the middle of the night.
Thank you for this idea. Not the put specific idea but the idea of selling further out dated options to raise significant cash today. In my case I'm looking at "pre-selling" shares that I want and need to sell anyway out in March 2023. I prefer March to January as I want to stay away from the Jan expiration and I'd like a couple of extra months to time the actual close of the position for tax reasons while keeping it early in the year. To some degree that will postpone my tax bill reckoning, or at least spread it out.
for LEAPs as share replacement.. what would the not-advice here be about safe strikes?
For me buying today and with a desire to lower my leverage I would be looking at 2 for 1 with at least a 1 year expiration. I might even go 3 for 2 and a 2 year expiration. So shares at $920(ish) - I'd be finding the 2 year option that I would be paying $460ish. I'd guess that is around the 600 strike. So I might keep going down to something closer to a $600 cost option - probably around the 400 or 450 strike.
That is a fairly small amount of leverage and provides a lot of room for the shares to go down and come back and at least break even while providing a lot of time for selling covered calls.
Update - I just checked my cost basis on these Puts that were early assigned and they are $857..... between time value left and share price over cost basis, seems fishy.... Either way - Yay more shares and time for some WHEEL!
I'd be very interested in hearing how this particular position evolves. The number of positions isn't so important but sort of a running tally of the credits and cost basis, how close / far from the money the call side is, and how it all works out for you emotionally.
The one time I intentionally turned the wheel I found that turning shares into cash (once I decided to do it) was easy. But once I was in cash I was spending way too much time thinking about when the call assignment would happen, whether that assignment would be for a lower price eating up the credits, or if the shares would take off and I would leave a bunch of money on the table.
But this is one reason for me to go back to naked puts. Takes the last bit of leverage on that side off of the table while also re-enabling the wheel as a fall back position. Its interesting to me that you were around $200 ITM on these puts before assignment happened - that is a big window to keep rolling for credits. Of course its based on IV as well so $200 ITM at low IV is not at all like $200 ITM today. Still even that much is already informative.
