Wiki Selling TSLA Options - Be the House

[Drezil]

Hey Guys & Girls & Enbies,

as i am in *a bit* of a pickle with my trading i thought about writing some trading software.

I am offended by the utter brokenness of the IBKR-Workstation & the lack of usable(!) Features, that i wanted to write my own anyway. And the company i trade in is *officially* a software development company for finance anyway

Long story short: I want to write software that interfaces with IBs Software (in Settings you can just click 1-2 buttons & any application can interact with it) and boost it up by a wide margin.

Things i want to do first: Proper sorting/grouping of positions in my portfolio. Have "Strategy"-Groups that can be tracked individually over time (even if you leg in/out of a spread for example) without IB breaking the Spread apart & you have to manually track what goes together.
Also: Assigning orders to a strategy. Like "do i have a closing-order set?", "on which position can i write a CC?", ..
Also: Have automatic commitment of orders. So that you can play both sides (this gives you a "You are not a Market Maker"-Warning in IB). Like "buy x iff we drop >10%, sell y iff position is >50% green" and other things. Basically: Implement your Strategy as a "set of rules" that fire even when you are not at your PC.
Also: Rolling-proposals. Select a strategy/spread/... and a target like "roll out for credit, but max 2 months", "notify me if i can roll this to next week for a credit without moving my strikes", "roll out 2 weeks without margin impact", etc. so i don't have to search the option-chain & waste 30 minutes to find a "good" roll.

That is just the things i personally miss in "order management" alone.

Next: Charting. The Level2-Interface is HORRIBLE. I have a bit of knowledge in Data-Vis & had courses about this stuff at university. I want simple(!) visualizations that enable you to "see patterns" before they happen.
Things like: Heatmap in Trading: How to Learn What Market Depth is Hiding? | Bookmap - but not as ugly, better configuration, yada yada yada.

Also: automatic analysis of "support"/"resistance" with those L2-data & visualization directly in the chart.
Also: everything described that you can "see" distinctively can be input as "triggers" for orders above (instead of static "x% green" think of "take profits near resistance, revert position in after breakthrough & next resistance" etc.).

You may know that i am high into Automatisation ..
I mean .. i played EVE-Online, wrote a whole automatic accounting-thingy (yes, as "real" as accounting gets in a spaceship game) to keep track on my trades. Even wrote a undetectable trading bot for fun (it used the visual inputs of the game, decided things & traded. No hijacking of binaries, sniffing in RAM or other "cheap" shortcuts). I want to transfer that knowledge to real-life trading now

As i think most of you are more active traders here (opposed to the other thread with the HODL-guys), would you be willing to throw a few bucks each month in my direction for such a service? Just DM me & if enough people show interest i open another Thread for it. I wont answer here to not clog the thread & go too much OT.

Oh, before i close: the usual "why should i trust you and your software not to steal stuff?". Answer: you should not. In IB the default setting is that external software can only "read" stuff, but not "write" stuff (i.e. execute orders). If i cannot submit orders, then i would just list the "things you should do manually in TWS" like "sell 950/1000 BPS @2.12$" and if i manage to learn the syntax of IBs Order-Name-Field (where you type in i.e. TSLA, you can also type in voodoo to select individual spreads etc.) then it is more like "copy/paste this, set price, check, submit". If you trust me & the software than this can be automated as well - but that is your decision.

 

[Drezil]

For a noob that doesnt understand Greek option well, this 5 mins video brilliantly explained it

Really good video for people that have no higher math education. To me the following compression encompasses everything said there & more:

δ = ∂SP/∂1$
γ = ∂²SP/∂²1$
θ = ∂SP/∂1 Day
ν = ∂SP/∂1% IV

Maybe this is a help to some people who also had math in university or use it otherwise in their day-jobs. If you used simple differential equations a bit then you should be familiar on how to "euler out" these things into the future and what this actually means

For those who are not that lucky the video above is a definitive MUST.

PS: Am I a nerd for having those greek/math thingies directly available on my keyboard?

 

[wnorris]

Hey Guys & Girls & Enbies,

as i am in *a bit* of a pickle with my trading i thought about writing some trading software.

I am offended by the utter brokenness of the IBKR-Workstation & the lack of usable(!) Features, that i wanted to write my own anyway. And the company i trade in is *officially* a software development company for finance anyway

Long story short: I want to write software that interfaces with IBs Software (in Settings you can just click 1-2 buttons & any application can interact with it) and boost it up by a wide margin.

Things i want to do first: Proper sorting/grouping of positions in my portfolio. Have "Strategy"-Groups that can be tracked individually over time (even if you leg in/out of a spread for example) without IB breaking the Spread apart & you have to manually track what goes together.
Also: Assigning orders to a strategy. Like "do i have a closing-order set?", "on which position can i write a CC?", ..
Also: Have automatic commitment of orders. So that you can play both sides (this gives you a "You are not a Market Maker"-Warning in IB). Like "buy x iff we drop >10%, sell y iff position is >50% green" and other things. Basically: Implement your Strategy as a "set of rules" that fire even when you are not at your PC.
Also: Rolling-proposals. Select a strategy/spread/... and a target like "roll out for credit, but max 2 months", "notify me if i can roll this to next week for a credit without moving my strikes", "roll out 2 weeks without margin impact", etc. so i don't have to search the option-chain & waste 30 minutes to find a "good" roll.

That is just the things i personally miss in "order management" alone.

Next: Charting. The Level2-Interface is HORRIBLE. I have a bit of knowledge in Data-Vis & had courses about this stuff at university. I want simple(!) visualizations that enable you to "see patterns" before they happen.
Things like: Heatmap in Trading: How to Learn What Market Depth is Hiding? | Bookmap - but not as ugly, better configuration, yada yada yada.

Also: automatic analysis of "support"/"resistance" with those L2-data & visualization directly in the chart.
Also: everything described that you can "see" distinctively can be input as "triggers" for orders above (instead of static "x% green" think of "take profits near resistance, revert position in after breakthrough & next resistance" etc.).

You may know that i am high into Automatisation ..
I mean .. i played EVE-Online, wrote a whole automatic accounting-thingy (yes, as "real" as accounting gets in a spaceship game) to keep track on my trades. Even wrote a undetectable trading bot for fun (it used the visual inputs of the game, decided things & traded. No hijacking of binaries, sniffing in RAM or other "cheap" shortcuts). I want to transfer that knowledge to real-life trading now

As i think most of you are more active traders here (opposed to the other thread with the HODL-guys), would you be willing to throw a few bucks each month in my direction for such a service? Just DM me & if enough people show interest i open another Thread for it. I wont answer here to not clog the thread & go too much OT.

Oh, before i close: the usual "why should i trust you and your software not to steal stuff?". Answer: you should not. In IB the default setting is that external software can only "read" stuff, but not "write" stuff (i.e. execute orders). If i cannot submit orders, then i would just list the "things you should do manually in TWS" like "sell 950/1000 BPS @2.12$" and if i manage to learn the syntax of IBs Order-Name-Field (where you type in i.e. TSLA, you can also type in voodoo to select individual spreads etc.) then it is more like "copy/paste this, set price, check, submit". If you trust me & the software than this can be automated as well - but that is your decision.

Something that may be useful to yourself and others is a script to calculate Gamma exposure. Below are charts that I pulled for Tesla yesterday. This is a concept I am trying to learn more about, but basically it gives you a potential data point on how market makers (MM) are hedged against their options exposure. I won't go into detail here, but if you are interested this link is a decent primer from the same author.

The above are outputs of the script. I'd love to hear from someone who understands this better than I as we are sitting on top of a possible gamma flip to negative gamma which could create an increase in volatility. Something to watch out for in Monday's trading.

 

[Right_Said_Fred]

I am not knowledgeable enough to post about Russia/Ukraine, but I disagree with removing all discussion (especially on the weekend when there is no trading). This thread in particular relies on short term stock movements, and I think that the Russia issue, along with the "protestors" shutting down the bridge between Canada/US (impacting trade), are issues we need to be aware of and understand. On the plus side, the market seems to do the opposite of what everyone expects, so at some point it has to go up when everyone thinks it will go down farther....

General discussions can be held in the main thread, not here. The strength of this thread is its focus on options. That evaporates when we allow discussion on everything that affects short term SP movements. Before you know we are wading through pages and pages of discussions about Russia-Ukraine, China-Taiwan, Evergrande, oil prices, CPI and PPI numbers, Fed policy, GDP numbers, MSFT-AAPL-GOOG-AMZN earnings, Elon tweets, Teala recalls, Berlin and Austin openings, etc, etc. That’s what the main thread is for.

 

[Drezil]

The above are outputs of the script. I'd love to hear from someone who understands this better than I as we are sitting on top of a possible gamma flip to negative gamma which could create an increase in volatility. Something to watch out for in Monday's trading.

Very interesting.

You can see gamma as an accelerator OR decelerator on SP movements.

Think about being a delta-hedger. You want your delta to be 0. Therefore you have to buy/sell the gamma for every $ the stock moves. These movements naturally increase volatility. If the market cannot absorb those movements, then you get a "gamma squeeze". Meaning, that delta-hedgers dominate all buying/selling currently on the market. This happens in many "runaway-situations" we so often see (i.e. -10% a day, +10% a day, etc.).

The "gamma flip"-point is the point where delta-hedgers will flip from buying to selling (or vice versa). That is not the interesting part - as we know that they do that.
The interesting part is the steepness of the curve. If SP moves 10$ up they need to cover the difference of those 2 points on the curve times their net position.
For Tesla this "steep" region is around 925 and basically nonexistent under 800. So this effect cannot cause a "squeeze down", but only a "squeeze up".
Note: the maximum steepness should be around the maximum pain for that expiry (as this is just another way to look at the same data!).

Edit: See the one of the images in the link you posted: https://perfiliev.co.uk/wp-content/uploads/2022/01/GammaExposure.png - The critical thing is the steepness to the left/right, not that it coincides with the current SP or net-gamma being 0.

 

[traxila]

General discussions can be held in the main thread, not here. The strength of this thread is its focus on options. That evaporates when we allow discussion on everything that affects short term SP movements. Before you know we are wading through pages and pages of discussions about Russia-Ukraine, China-Taiwan, Evergrande, oil prices, CPI and PPI numbers, Fed policy, GDP numbers, MSFT-AAPL-GOOG-AMZN earnings, Elon tweets, Teala recalls, Berlin and Austin openings, etc, etc. That’s what the main thread is for.

I apologize for the previous post I made. Actually thought I was on the main thread...

 

[BornToFly]

Something that may be useful to yourself and others is a script to calculate Gamma exposure. Below are charts that I pulled for Tesla yesterday. This is a concept I am trying to learn more about, but basically it gives you a potential data point on how market makers (MM) are hedged against their options exposure. I won't go into detail here, but if you are interested this link is a decent primer from the same author.

View attachment 768481
View attachment 768483View attachment 768485
The above are outputs of the script. I'd love to hear from someone who understands this better than I as we are sitting on top of a possible gamma flip to negative gamma which could create an increase in volatility. Something to watch out for in Monday's trading.

The Put Gamma exposure was huge at 900, and we fell through that hard. There is a fairly large green bar at 850 and another at 800. Does the Put Gamma do anything to stop a decline in the SP?

 

[Drezil]

The Put Gamma exposure was huge at 900, and we fell through that hard. There is a fairly large green bar at 850 and another at 800. Does the Put Gamma do anything to stop a decline in the SP?

gamma exposure usually AMPLIFIES movements, not soften them.
We fell through hard, BECAUSE delta-hedgers had to sell more when the SP dives ~900 (see "steepness of curve" ). Same will be true on a reversal.

But this is just ONE effect. There are many others (i.e. macro-behaviour) that CAN dominate.
Sharp SP-spikes/drops happen if MULTIPLE actors do the same. Often they cancel out.

Think about SP running to 1000. Delta-Hedgers will (because of gamma-squeeze) buy more shares even faster, accelerating the rise. BUT we would be way above Max-Pain and Market-Makers would then like to have a word with the SP and drop the short-selling hammer against that. When they overcome hedgers, then the gamma works in reverse! On the other hand they can also use this to sell even more OTM calls to retail before they drop the hammer - while raising max-pain in the meantime and needing only a smaller drop to make good profits.

I mean .. planning on doing that would be illegal.. but they opened large short positions because the SP was nearing a technical resistance line - not because if would fit in their agenda .. *cough* *cough*..

Also delta-hedgers don't HAVE to stay delta-neutral in the short-term, but can also take profits on their positions to reduce delta-exposure (i.e. close the trade instead of hedging the trade).

All in all it is just informed guesswork. Because there is not one Market maker (i think there are 13 or so in TSLA), not one hedge fund, etc.
Everyone of those will have different "max pain"-points, different strategies and targets. The thing we see via Open Interest (and everything derived from it) is merely an agglomeration of many many individual market participants.

I mean: How much of that 1000$ call-wall is by market maker and how much is by WSB buying options or by Theta-Gang selling options?
How many of the sold options are backed by shares and not a hedge-mechanic?
We just don't know and can only guess.

 

[GeoX750]

I have been rolling since January earnings 3X -p950/-p910 expiring this Friday 18 FEB.

With the SP at $860, I am considering closing it out this week and just taking near the max $12K loss.

If I were closing and taking the loss on -p950/-p910, any reason not to open up the IC by adding 30X -c950/+c1070 18 FEB for $4 to recover up to $12k of the loss ? Of course, I get the SP could shoot up past $950, but that does not seem realistic before Friday.

I have the margin and can’t loss on both positions, and at $950 can win both.

Also considering just widening the spread to -p950/+p900 to roll 1 week to 25 FEB for $3.55 credit.

 

[LightngMcQueen]

Hey Guys & Girls & Enbies,

as i am in *a bit* of a pickle with my trading i thought about writing some trading software.

I am offended by the utter brokenness of the IBKR-Workstation & the lack of usable(!) Features, that i wanted to write my own anyway. And the company i trade in is *officially* a software development company for finance anyway

Long story short: I want to write software that interfaces with IBs Software (in Settings you can just click 1-2 buttons & any application can interact with it) and boost it up by a wide margin.

I believe there are 3rd party workstations that integrate into IBKR APIs. I suspect real pros don't use TWS. I remember seeing one commercial product in $50-100 / mth range. There are quite a few listed here: Third party Integration | Interactive Brokers LLC

Personally I think I should trade less not more so I will pass on the trader workstation development

However if someone is considering developing and backtesting different strategies I might be interested in the future. We could split cost of historical data dump and cross check each others code. Not very committed to that yet, but it did pass my mind few times in the past year.

 

[BornToFly]

I have been rolling since January earnings 3X -p950/-p910 expiring this Friday 18 FEB.

With the SP at $860, I am considering closing it out this week and just taking near the max $12K loss.

If I were closing and taking the loss on -p950/-p910, any reason not to open up the IC by adding 30X -c950/+c1070 18 FEB for $4 to recover up to $12k of the loss ? Of course, I get the SP could shoot up past $950, but that does not seem realistic before Friday.

I have the margin and can’t loss on both positions, and at $950 can win both.

Also considering just widening the spread to -p950/+p900 to roll 1 week to 25 FEB for $3.55 credit.

Futures are green at the moment, and China numbers should be out, so maybe see what happens tomorrow morning? Piper Sandler just raised the price target to 1350. If China numbers are good, and the Russia situation improves, I could see 950 by Friday. I'm looking to make an IC with my 650/750 BPS, and I was thinking 1000 or 1050 for the short leg on a pop up. Of course I can also imagine 750....

 

[doddiozil]

Did anyone just get their 1099 statement from E-Trade and notice a large disallowed wash-sales due to selling BPS?

 

[MP3Mike]

Did anyone just get their 1099 statement from E-Trade and notice a large disallowed wash-sales due to selling BPS?

Was it actually disallowed or just rolled in to another position? Did you trade the same strikes/dates in both a taxable and IRA account?

 

[doddiozil]

Was it actually disallowed or just rolled in to another position? Did you trade the same strikes/dates in both a taxable and IRA account?

I suppose it was rolled into another position since I had to roll most of my BPS as of year end. Something to be aware of next year.

 

[adiggs]

Twelve post about Ukraine, some of them whole dissertations, have been removed. Even in the main thread they would have been off topic, but in this thread such discussions are a cardinal sin. Don’t let yourself get carried away.

No comments or thoughts about the moved posts - can you help us find the dividing line between on-topic posts about macro and other factors affecting the market short term, and off-topic posts that cover the same areas?

My first pass at this, without a lot of thinking, is that on-topic is a mention / link to something informative on a topic ALONG WITH some indication of how a person is reacting to / trading the information. Off-topic would be the link to the information, a general warning to be safe out there, but no particular information about how the information is influencing the poster's own positions. As always details about positions, especially sizing, are entirely at the discretion of the poster, but the information about skin-in-the-game is the change from off-topic to on-topic.

Or at least that's my first pass. I know that an important source of the value from this thread is the rationale for trades, rather than the trades themselves. Why now and not later or earlier? What other positions considered? Stuff like that. The short term factors influencing those decisions, which includes both Tesla specific news / actions / results, as well as macro news / actions / results are an important part of the input into those short term factors.

Thanks

 

[Right_Said_Fred]

No comments or thoughts about the moved posts - can you help us find the dividing line between on-topic posts about macro and other factors affecting the market short term, and off-topic posts that cover the same areas?

My first pass at this, without a lot of thinking, is that on-topic is a mention / link to something informative on a topic ALONG WITH some indication of how a person is reacting to / trading the information. Off-topic would be the link to the information, a general warning to be safe out there, but no particular information about how the information is influencing the poster's own positions. As always details about positions, especially sizing, are entirely at the discretion of the poster, but the information about skin-in-the-game is the change from off-topic to on-topic.

Or at least that's my first pass. I know that an important source of the value from this thread is the rationale for trades, rather than the trades themselves. Why now and not later or earlier? What other positions considered? Stuff like that. The short term factors influencing those decisions, which includes both Tesla specific news / actions / results, as well as macro news / actions / results are an important part of the input into those short term factors.

Thanks

- On topic would indeed be like you said: mention what is going on (for example ‘According to US intelligence Russia will soon invade Ukraine, so I expect the market to drop more’) and how that affects your trading, positions, etc.

- Off topic is a post about how Ukraine was formed, what Russia’s objectives could be, how the Ukrainian population will suffer, where Hitler’s armies stranded in WW2, what sanctions the US and EU will impose, from what date the soil will be too soft for tanks, which weapons the UK has shipped, etc, etc, etc.

 

[JustMe]

- On topic would indeed be like you said: mention what is going on (for example ‘According to US intelligence Russia will soon invade Ukraine, so I expect the market to drop more’) and how that affects your trading, positions, etc.

- Off topic is a post about how Ukraine was formed, what Russia’s objectives could be, how the Ukrainian population will suffer, where Hitler’s armies stranded in WW2, what sanctions the US and EU will impose, from what date the soil will be too soft for tanks, which weapons the UK has shipped, etc, etc, etc.

Folks, please also refrain from posting your political opinions about word affairs, taxes, laws, economics, etc. Even though you’re 100% right, it’s a sure-fire way to blow up this thread.

 

[wooter]

Even though you’re 100% right

Thank you for aknowledgeing this.

I rolled my 2/18 870/820 on Friday to 840/790, and hope to enjoy a little profit to offset some losses, and then get out of the way of Putin's party until the party gets going and markets go back to business.

In retrospect very smart of me to get cash only just before TSLA started tanking on Thursday.

 

[BornToFly]

Opened some 1000/1100 BCS to make IC with half my 650/750s for Friday. Will sell 1050/1150 to IC the rest if we keep climbing.

 

[samppa]

Sold 03/18 -c975 covered calls for $25. These are covered by shares that I wouldn't mind selling, and going all cash. But I didn't quite want to sell at todays prices.
Might roll these calls a few cycles, depending on where we are heading.