Wiki Selling TSLA Options - Be the House

[CHGolferJim]

Will the recovery be a sharp V, or more of a flat bottom U? I worry that a 4-week CC will crush you if it is the former.

You're right, but the odds? Maybe $50 OTM better with weekly rolls to maintain $50 OTM. I have 50% profits on the recent sale of 3/18's at $975 and $1075 ($80-$180 OTM at the time), so possibly I'll close Tuesday and experiment with 2 contracts. I could bring the others forward 2 weeks and down at no cost.

 

[BornToFly]

Help. I just received a letter saying that I might have to register with the SEC as a "Large Trader," and get an Identification Number and then file as required. Anyone else have to do this?

 

[Knightshade]

Help. I just received a letter saying that I might have to register with the SEC as a "Large Trader," and get an Identification Number and then file as required. Anyone else have to do this?

SEC.gov | Responses to Frequently Asked Questions Concerning Large Trader Reporting

www.sec.gov

 

[BornToFly]

SEC.gov | Responses to Frequently Asked Questions Concerning Large Trader Reporting

www.sec.gov

Thanks. I had found that as well, but I'm still confused.
I was opening as many as 900 BPS/week before the January drop forced me to roll to December and reduce the number because of a Margin call. Now I'm doing 200/week for around a $2 premium. If I calculate as Tesla share value, I'm looking at 90,000 share equivalents X $1000/share = $90,000,000 in a day. But if I look at the section I **** below where they talk about the VALUE of the Equity Options, then I should be ok.

From the SEC FAQ site:

Question 1.3: How are options calculated for purposes of the identifying activity level?
Answer: As provided in Rule 13h-1(a)(7), the identifying activity level means aggregate transactions in NMS securities that are equal to or greater than:

1. During a calendar day, either two million shares or shares with a fair market value of $20 million; or
2. During a calendar month, either twenty million shares or shares with a fair market value of $200 million.

The Rule defines “transaction” to mean “all transactions in NMS securities, excluding the purchase or sale of such securities pursuant to exercises or assignments of option contracts,” except for certain specifically enumerated transactions.
For equity options, Rule 13h-1(c)(1)(i) provides that “the volume or fair market value of the equity securities underlying transactions in options on equity securities, purchased and sold, shall be aggregated.” For index options, Rule 13h-1(c)(1)(ii) provides that “the fair market value of transactions in options on a group or index of equity securities (or based on the value thereof), purchased and sold, shall be aggregated.”
As noted in the Adopting Release (34-64976), “for purposes of the identifying activity level with respect to options, only purchases and sales of the options themselves, and not transactions in the underlying securities pursuant to exercises or assignments of such options, need to be counted.”
Volume Calculation
Equity Options. To calculate the volume of equity options for purposes of Rule 13h-1, the number of contracts should be multiplied by the applicable multiplier. For example, 500 contracts x 100 shares of the underlying per contract = 50,000 shares.
Index Options. Volume does not need to be calculated for index options.
Fair Market Value Calculation

****
Equity Options. Subsequent to the Adopting Release (34-64976), where the value of equity options was to be calculated by using the value of the securities underlying the option, the Commission issued an Exemptive Order (34-76322) to permit equity options to be valued using premium paid. Accordingly, the fair market value of equity options may be calculated based on the premium paid for the option. The following example shows how to calculate the value of an equity option using premium paid:
An investor a person purchases 200 call options on ABC stock, each with a 100 multiplier, for a premium of $15 per share. The fair market value of the options trade would be calculated as follows: 200 contracts x 100 shares per contract x $15 premium price = $300,000.
*****


Index Options. The following example shows how to calculate the value of an index option:
An investor purchases 100 put contracts on an index for $51.00 per unit, at a strike price of 1375, and where the option uses a 100 multiplier. The value of these index options for purposes of Rule 13h-1 would be $510,000, calculated as follows: 100 contracts x $51.00 price per unit x $100 contract multiplier = $510,000.

 

[CHGolferJim]

Help. I just received a letter saying that I might have to register with the SEC as a "Large Trader," and get an Identification Number and then file as required. Anyone else have to do this?

Suggest you not respond by insulting them on social media.

 

[ChefBoyardee]

Finally some good news:

"Putin and Macron agree to try to secure ceasefire in eastern Ukraine and urgent summit"

"The two leaders spoke on the phone for 105 minutes, and the outcome, broadly confirmed by the Kremlin, suggests Russia might be willing to step back from the brink of a full invasion of Ukraine to allow renewed diplomatic discussions."

If this kind of news continues, I could see last Friday being just a retest of the channel on our way back up.

 

[BornToFly]

Finally some good news:

"Putin and Macron agree to try to secure ceasefire in eastern Ukraine and urgent summit"

"The two leaders spoke on the phone for 105 minutes, and the outcome, broadly confirmed by the Kremlin, suggests Russia might be willing to step back from the brink of a full invasion of Ukraine to allow renewed diplomatic discussions."

If this kind of news continues, I could see last Friday being just a retest of the channel on our way back up.

The problem is Putin has been Gaslighting the world for months and saying that they aren't preparing for war, etc., while they continuously add troops and weaponry at the boarder. I won't believe anything he says. I want to see meaningful withdrawal.

—

Mod: and that’s enough analysis of the Russia-Ukraine conflict. Several other insights with no bearing whatsoever on TSLA have been deleted.

 

[OrthoSurg]

Help. I just received a letter saying that I might have to register with the SEC as a "Large Trader," and get an Identification Number and then file as required. Anyone else have to do this?

I think SEC is now officially designing you as a whale. Have you come across any info about change of taxation %?

 

[adiggs]

From over in the new Ford thread, there is a link that helps kick it off. I followed that, and in there somebody has a write up on The Wheel strategy which I thought I'd be doing when I kicked this thread off 2 years ago.

I bring over that Wheel link for those looking for another view into, and description of, the strategy.

Wheel

Rolling puts

 

[BornToFly]

I think SEC is now officially designing you as a whale. Have you come across any info about change of taxation %?

I have not. Are you aware of different tax rates for Large Traders?

 

[ChefBoyardee]

So I've decided to make a pretty drastic change to my account since after rolling things for months, converting to IC's, adding new BPS, rolling those, and trading, I now have a pretty messy spiderweb of positions.

Going nuclear

• Tomorrow I'm going to close all positions including stock. With the proceeds, I'll set aside tax money and buy 1400/1600 Jan 2024 call spreads.
• These give 726% returns if TSLA passes 1600 by then, which will allow my account to fully recover and then some
• With this clean slate, I'll buy shares each paycheck, and use 25% margin to sell 5-10% return weekly BPS.
• This has the benefit of using my short term losses to offset long term gains on my shares

Why 1400/1600?

• I see this as safe. It's under the channel and I expect TSLA to rise at least 50% per year which would easily pass 1600.
• These strikes have decent open interest and volume (hard to get good fills for this expiration)
• A prolonged downturn could mess this up, but I can re-assess after a year and roll further out in time
• IV contraction will hurt in the short term, but by 2024 it won't matter

Why 25% margin?

• Cash secured leads me to take too much risk since I feel pressured to outperform buy n hold
• Margin is purely additive so I'm free to choose safe strikes and not worry about performance
• 25% margin can survive a 75% drop in the SP before getting a margin call

Why 5-10% RoC?

• This was the level I stayed at last summer, leading to easy rolls and decent gains. When I went beyond this, I got myself in trouble
• Provides .25% - .5% total account gains, after tax, per week. Or around +20% per year

The end goal

• A mix of 50% Tesla shares, 30% other shares, 20% LEAPS spreads

Additional thoughts

• Simplicity in a portfolio is underrated. It takes a lot of mental energy to track many positions. This is also the reason I don't like CC's and IC's - It's one more thing to worry about. With this strat, I only need to monitor two things - short-term drops, and long-term appreciation.
• Buy n hold has many advantages over premium-selling: Low stress, low time commitment, lower taxes, capital gain appreciation, and exposure to big moves. I'd rather ride the bull and nudge it to go a little faster than spend energy racing the bull.
• This last year has been a huge learning experience and I feel like I'm now equipped to put a better, safer strategy in place. Even if this is the bottom right now, ya gotta rip the bandaid off at some point lol.
• I'm so excited to de-stress

 

[ReddyLeaf]

Thanks @ChefBoyardee. That’s a lot to think about. I’m worried about future IV compression and the possibility that TSLA is not valued at more than $1600 in 2024. What happens if Wall Street ignores growth and values at p/e of 15-17 or war breaks out and Russian cyber attacks shut down world commerce, etc.etc.

However, if I understand, buying a call spread, even DITM, is a way to leverage. So, a +700c/-800c Jan 2023 is $272.60/$224.00 or about $48-$50 net. So, if we assume with 100% confidence that the SP is over $800 next year, then for a $50 debit, one receives $100 (the difference in strikes) or double your money. Hmmm, this is not something that I had considered before. Thinking

 

[ChefBoyardee]

Thanks @ChefBoyardee. That’s a lot to think about. I’m worried about future IV compression and the possibility that TSLA is not valued at more than $1600 in 2024. What happens if Wall Street ignores growth and values at p/e of 15-17 or war breaks out and Russian cyber attacks shut down world commerce, etc.etc.

However, if I understand, buying a call spread, even DITM, is a way to leverage. So, a +700c/-800c Jan 2023 is $272.60/$224.00 or about $48-$50 net. So, if we assume with 100% confidence that the SP is over $800 next year, then for a $50 debit, one receives $100 (the difference in strikes) or double your money. Hmmm, this is not something that I had considered before. Thinking

Yeah pe compression is the big risk. But since theta decay is so low, as long as we’re at least flat in 1 year I’ll be able to roll out another year without paying too much.

ATM leap call spreads are a super viable strategy IMO. You can beat returns from stock pretty easily. The reason I’m going this far OTM is because I want to maintain my chance of full recovery, otherwise I would probably choose lower and wider strikes, like 1000/1500 or something. I also have a long time horizon with good income so if I lose out on these it’s not that bad.

The other nice thing about choosing lower strikes is during downturns you can buy back the short call for a gain to unlock more upside, whereas that’s not a great idea if the spreads are far OTM to start with

 

[dm28997]

With TSLA in the S&P 500 playing with options is no longer of interest. I did make incredible profits in the past and do hold one leap now but doubt that I can compete with the AI trading funds. I recall that a dead person does much better than trading his position. HODL is my game along with a few crypto investments.
Happy Presidents day.

 

[Tyler34]

Futures just opened down another 3/4 percent from where they closed 5 hours ago.

 

[MrMoo]

Futures just opened down another 3/4 percent from where they closed 5 hours ago.

I now know why people sell going into long weekends.

 

[adiggs]

Thanks @ChefBoyardee. That’s a lot to think about. I’m worried about future IV compression and the possibility that TSLA is not valued at more than $1600 in 2024. What happens if Wall Street ignores growth and values at p/e of 15-17 or war breaks out and Russian cyber attacks shut down world commerce, etc.etc.

However, if I understand, buying a call spread, even DITM, is a way to leverage. So, a +700c/-800c Jan 2023 is $272.60/$224.00 or about $48-$50 net. So, if we assume with 100% confidence that the SP is over $800 next year, then for a $50 debit, one receives $100 (the difference in strikes) or double your money. Hmmm, this is not something that I had considered before. Thinking

I sure do love this thread

Ideas, building on ideas - people helping people. We just need some and we're good to go.

 

[BornToFly]

It looks like things are really getting bad in the part of the world we can't discuss. I'm worried about my 100X 720/620 BPS for Friday. I could sell 10,000 shares at the open and try to get them back at 720 with the Puts. But that will generate a $1.6M tax bill on long term gains for next year. The other option is to roll down and out aggressively tomorrow. Maybe go to 600/500 out two more weeks and hope that level holds.

 

[CHGolferJim]

It looks like things are really getting bad in the part of the world we can't discuss. I'm worried about my 100X 720/620 BPS for Friday. I could sell 10,000 shares at the open and try to get them back at 720 with the Puts. But that will generate a $1.6M tax bill on long term gains for next year. The other option is to roll down and out aggressively tomorrow. Maybe go to 600/500 out two more weeks and hope that level holds.

Well, there's now a thread about Ukraine/Russia effect on TSLA, why not another thread about options without all these discussion restrictions? Let's see which one people want. I don't read half the posts on the two main investment threads anyway, so if that rate goes up, no biggie.

 

[kabin]

Help. I just received a letter saying that I might have to register with the SEC as a "Large Trader," and get an Identification Number and then file as required. Anyone else have to do this?

Yes, it's not unusual as you'd think. The broker usually handles it.