Wiki Selling TSLA Options - Be the House

[Drezil]

Another question - playing with the optionsprofitcalc this morning and noticed that the trades recommended to me (for a price >1200 by the end of 2023) were the following:
1. Bull call spread +1140/-1150. Probability of profit is 39%, return at target price is 960%.
2. Bull call spread +930/-940 Probability of profit is 49%, return at target price is 582%.
3. BPS -1110/+1100 Probability of profit is 40%, return at target price is 273%. This also provides an $81k credit on 100 contracts.

I strongly believe we'll be easily above $1200 by the end of next year, even with macro headwinds. What risks (aside from IV moves and the obvious company non-performance) am I missing here?

(everything on 100 contracts, jan24 expiry)
1. is currently
22k margin reserved, Theta -2.32$/day, Delta is 42.68$ - interesting play for a rise, but 22k margin for mere 42 δ is bad.
2. is currently:
28k margin reserved, Theta 6.84$/day, Delta is 47.4$ - ok-ish .. but too much margin locked up for 1 year for the gain.
3. is currently
24k margin reserved, Theta 1.33$/day, Delta is 42$ - too little for my taste.

I think classical LEAPs with short term covering of the theta-cost would be more profitable - but you have to "manage" the short leg. Your ideas are more "set & forget".

 

[UltradoomY]

WTH is going on with the 1000$ Call-Wall today? It was not there yesterday - or at least as high as the 950/1050 points..

I just calculated that IF we get to 1k then delta-hedging alone would imply buying 140k TSLA per Dollar rise(!).
I mean .. i don't see 1000 today - but if it would be an epic gamma-squeeze.

So if anyone wants to play with fire: keep that in mind

And next weeks $1k is already slightly higher - if the $950 level can get ITM then that would beget the start of a gamma that could easily roll to next week creating a nice pop!
The mid - BB capture at around $938 would start it off if we can get there!

Let's see how things look at 11am

 

[OrthoSurg]

My order to BTC my 20x 1050 18/2 CCs for 75% profit filled in on the dip. Hope for a recovery to sell CCs into strength at the end of the day if max pain is still a thing.

 

[scubastevo80]

(everything on 100 contracts, jan24 expiry)
1. is currently
22k margin reserved, Theta -2.32$/day, Delta is 42.68$ - interesting play for a rise, but 22k margin for mere 42 δ is bad.
2. is currently:
28k margin reserved, Theta 6.84$/day, Delta is 47.4$ - ok-ish .. but too much margin locked up for 1 year for the gain.
3. is currently
24k margin reserved, Theta 1.33$/day, Delta is 42$ - too little for my taste.

I think classical LEAPs with short term covering of the theta-cost would be more profitable - but you have to "manage" the short leg. Your ideas are more "set & forget".

Thanks - these went away quickly when Schwab didn't let me place the limit order (I couldn't enter my limit, they were calculating margin based on the delta between the mid which was above my limit). That or because I don't have options level 2 setup. Ugh.

How do you not recommend short-term theta covering? Can you provide an example please? I'm looking at $500 Jan'24s for $480, but the options 1 month out at $1200 are worth like under $2. Doing 24 of these over the next 2 years won't even net $50 assuming 100% success.

 

[JustMe]

Another question - playing with the optionsprofitcalc this morning and noticed that the trades recommended to me (for a price >1200 by the end of 2023) were the following:
1. Bull call spread +1140/-1150. Probability of profit is 39%, return at target price is 960%.
2. Bull call spread +930/-940 Probability of profit is 49%, return at target price is 582%.
3. BPS -1110/+1100 Probability of profit is 40%, return at target price is 273%. This also provides an $81k credit on 100 contracts.

I strongly believe we'll be easily above $1200 by the end of next year, even with macro headwinds. What risks (aside from IV moves and the obvious company non-performance) am I missing here?

Tbh, I think the biggest risk is being overconfident in your share price prediction. I think TSLA will be worth well over $1,200 by then, but that doesn’t always translate into a rational share price. All things considered, believe TSLA could be anywhere between $800 - $2,000 in December 2023.

 

[wooter]

Tesla is going very sideways since after ER week, between 875 and 950.

As this goes, I expect a pushdown below 900 end of Friday just to fsck some bps holders.

Heyy

 

[wooter]

In the meantime my 2/18 820/870/1005/1055 IC was doing alright until slightly red and then IBKR nanny stepped in. Not much harm done, and I still have the 1055 call which is slightly red and I will close when we go back up.

I've also opened a 2/18 870/815bps expecting a rebound.

 

[Drezil]

Thanks - these went away quickly when Schwab didn't let me place the limit order (I couldn't enter my limit, they were calculating margin based on the delta between the mid which was above my limit). That or because I don't have options level 2 setup. Ugh.

How do you not recommend short-term theta covering? Can you provide an example please? I'm looking at $500 Jan'24s for $480, but the options 1 month out at $1200 are worth like under $2. Doing 24 of these over the next 2 years won't even net $50 assuming 100% success.

Get more aggressive with the short-term options.

If you have i.e. 1000$ LEAPs, then much is time-value (or not yet, because we are under 1k). Then you sell aggressive 1000$ calls expiring weekly against it (and take profits early, double dip, the whole shebang). If your short call get ATM you can usually roll it for free up by the amount of volatility. You won't "earn" that week, but you can i.e. rise it to 1030. If they go under, then sell the whole diagonal spread.
Vega on your LEAP work to make this profitable even when you have to close. And then you can reposition. You will "give up" the gains on a short-term ralley, but you can harvest (Best case, ATM sold, expire worthless) ~25 bucks per option & week. Or not be THAT aggressive.

I currently have 950$ "LEAPs" dated April that i sell 1000$ CC against. Worst-case: i "only" get 50 bucks (wich is still 3x or so), but this week alone i managed to use the daily swings to make ~$2.5 with short calls.
I currently have no calls open against them, but orders set (if we should rise to >950 on monday). But that is (as said) not a long-term play.

If you want to do it more long-term, then buy LEAPs a year out & look how much Theta they cost. Most likely 0.1$/day or so. Then you look for short-calls with a Theta higher than that & look for a good entry. Theory is: They should be "away" far enough to not go ITM, but cover your daily costs of holding the long position. If they get triggered: well.. you get paid a year early. And hope for a "dip" to reenter If not, you lower your theoretical cost-basis on the LEAPs over time with the target of making them "free".

 

[corduroy]

Back in with a couple of "old school" -790 cash secured puts, NOT BPS. I went closer to the money than I would with BPS, since they are easier to manage and might do some income rolling.

 

[Yoona]

this is the 5th time the 150SMA was breached this year... methinks my future BPS should always stay around 200SMA

 

[Runarbt]

this is the 5th time the 150SMA was breached this year... methinks my future BPS should always stay around 200SMA

View attachment 767739

Yeah.. my conclusion today.

I rolled my next week bps out one week, and got it down from -850/800 to a -820/770.. I am sick and tired of this grind of the SP.. I am sure we will get a bounce next week so this wasnt really needed, but doesnt hurt to be proactive... and I will sleep better knowing 200SMA has my back. ;-)

 

[Zhelko Dimic]

this is the 5th time the 150SMA was breached this year... methinks my future BPS should always stay around 200SMA

View attachment 767739

Yes, 200 SMA has been solid backstop for years, except with short submerging and fight that ensued over it... 50 weekly has been absolute boundary, if I remember correctly

Edit: I hope that continues to hold true - as we're going trough tightening cycle. I expect interesting dynamic between Tesla growing earnings, and worsening macro, that could result in truly jaw-dropping drops...
Furthermore, it seems that harvesting theta has become popular sport. I think MMs will not tolerate much of competition, and we may have seen some of their defence - ridiculously quick changes of direction to hurt both BPS and BCS, until they bankrupt some of the players, including some of the people on this board.
Every system that starts working reliably, eventually stops working as more and more people people start using, i.e. when screwing them becomes profitable.

 

[ChefBoyardee]

I wonder how bad of an idea it would be to convert my March spreads to Iron Flys (1000 midpoint) and use the proceeds to sell BPS for next week at 860/850 for around 45% RoC... It's under the trendline, under the 883 resistance...

Trying my best to sit on my hands and do nothing, but this looks like such a great opportunity

 

[Zhelko Dimic]

Yes, 200 SMA has been solid backstop for years, except with short submerging and fight that ensued over it... 50 weekly has been absolute boundary, if I remember correctly

Edit: I hope that continues to hold true - as we're going trough tightening cycle. I expect interesting dynamic between Tesla growing earnings, and worsening macro, that could result in truly jaw-dropping drops...
Furthermore, it seems that harvesting theta has become popular sport. I think MMs will not tolerate much of competition, and we may have seen some of their defence - ridiculously quick changes of direction to hurt both BPS and BCS, until they bankrupt some of the players, including some of the people on this board.
Every system that starts working reliably, eventually stops working as more and more people people start using, i.e. when screwing them becomes profitable.

@Yoona please see my update to the post, I added many more thoughts...

 

[ninpb]

Getting a rhythm going with these <10DTE 15%+ OTM BPS
- BTC yesterday 780/680 2/11 for 95%
- STO yesterday 750/650 2/18
- STO today 730/630 2/18

Some are breaking my 20% OTM rule but damn them if they get us back to pre-q3 2021 SP.

 

[Ad Astra]

After my traumatic Jan, I’ve been hesitant to open more BPS, so I’ve been sticking to good old fashioned CC. The downward pressure on the stock seems to be much more pronounced than the upward pressure at the moment, given the macro environment, so I’ve stuck to writing $1000 CC for 2/18 a few times this week on any strength. I’ve closed the position at >50% profit a few times; securing the small wins where I can. (I’d rather not wait to get closer to expiry just to pinch pennies in case of a huge move to the moon). I’m not sure if this is the right approach (if anyone has any insights into what can be done better, please let me know), but at least I am sleeping much better at night.

Looking forward, I’m still uncertain about where the true bottom lives but I do feel more comfortable with small conservative BPS positions at strikes of $800 or less (currently in for small -800/+750 BPS; narrower spread but it’s small enough that I have plenty of reserves in case I need to manage these aggressively). @BornToFly I share your sentiments about feeling almost like I’m Jim Cramer lite as far as contrarian indicators go. It’s gotten to the point where my non-advice is to just do the opposite of whatever I do for guaranteed success.

 

[intelligator]

I wonder how bad of an idea it would be to convert my March spreads to Iron Flys (1000 midpoint) and use the proceeds to sell BPS for next week at 860/850 for around 45% RoC... It's under the trendline, under the 883 resistance...

Trying my best to sit on my hands and do nothing, but this looks like such a great opportunity

I'd STO -830/+730 BPS this morning for 2/18 @ $9... anything that brings in 50% or better between now and then, I'm game. Yesterday I worked the CC side at 985 for 2/11 expiry, was able to close at 90% near the end of the day. As was said in a previous post, not sure who it was, active management is required.

 

[BornToFly]

this is the 5th time the 150SMA was breached this year... methinks my future BPS should always stay around 200SMA

View attachment 767739

So do you feel that a 750/650 is safe for next week because it is below the 200sma even if it is not 20% below SP?

 

[Yoona]

So do you feel that a 750/650 is safe for next week because it is below the 200sma even if it is not 20% below SP?

looks like 94% chance of success

 

[vikings123]

So do you feel that a 750/650 is safe for next week because it is below the 200sma even if it is not 20% below SP?

IMO 780 also should be safe(non-advice). The drop today is on such low volume and there is no ER volatility. The only thing to worry about is any weak China numbers, expected to be released Monday early AM, that shorties/hedgies/media can use to create some volatility.

Personally I closed most of my CCs for close to 75% profits and still have 5X Feb 18 puts open.