Agreed. I closed out -c930s & -c935s for $0.20 (98% profit). Didnāt need to, but expected a bounce and was trying to resell -c880s. Oh well. Picked up a couple $79#.## shares and still have buys in for the 780s, 770s and 760s. Sure looks like thereās no bottom. Edit: still holding -p910s.This is crazy. I bought 5 shares at $796 and sold a 830p Jan 23 for $184
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
The problem is that you're already in max loss.
Someone already ran the numbers, and you can only roll for a credit at the midway point of the spread (~875 in your case). After that all rolls are debits. Below the price of your long leg, there's no point to rolling it.
Now, if you think the stock price will recover to anything above 875 by friday, then you can wait for that point. Max pain is 860 for this week, so I wouldn't bet on that happening.
Sorry, unless you have some unused covered calls and can flip-split the 950p to a few LEAP covered calls, you're kind of stuck.
the stress of BPS is extremely high due to defined max loss
for now, i am shifting to CSP temporarily (why? higher chance of preserving capital in exchange for lower income)
QUESTION: as i understand it, one can "roll this forever" and even better if it is timed on dips, AMIRIGHT?
TIA!
for now, i am shifting to CSP temporarily (why? higher chance of preserving capital in exchange for lower income)
QUESTION: as i understand it, one can "roll this forever" and even better if it is timed on dips, AMIRIGHT?
TIA!
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It is very much luck of the draw.
What I remember reading, and the way I understand it, when somebody exercises their option then step 1 is the OCC (options clearing house) chooses a broker that will handle the assignment. Then the broker randomly assigns one of their customers, and that is who actually satisfies the early exercise.
Do you remember or know how much time value you had in the position when it was early assigned? All of us can make use of that info to calibrate how far ahead of time we should roll our own positions to reduce the possibility of assignment. That position is most of $200 ITM - if I had that position (NOT-ADVICE) I would plan on rolling something like that a week early. So roll the 2/25 expiration on 2/18. That is really a proxy for watching the time value. I don't have a specific value in mind but if I had something like .50 left (most likely it doesn't matter how long to expiration) then I would roll.
You might also consider 2-4 week rolls when that deeply ITM. If nothing else the longer roll will get you more time to ignore the position, even if the week by week credit for a 4 week roll is lower than the week by week credit for 1 weeks rolls.
Outside of covered calls that are expiring worthless which I am too afraid to sell more of with the stock plummeting daily, I have a range of puts that I was selling regularly which are almost all deeply in the money now. I have halted new sales and have been rolling for credits. It really does appear that, short of TSLA going to zero, I will to be able to roll forever.
Pretty low stress compared to what had been going on, and honestly, I can happily wait. TSLA will hit new highs again, and I will get paid in the meantime. Even a couple of years out, it should not matter.
Does anyone see a scenario where infinite put rolls are losers or dangerous outside of stock descending 90% or more?
NOT-ADVICE
In a somewhat similar situation I decide to take the loss. I still had $20 value remaining in the position. And that was how I needed to start thinking about the position - that I still had $20 remaining value vs. a max loss. I was also significantly more DITM on the insurance put than you are and that will change the calculus.
Being so deeply ITM is where the spread behavior starts work on your behalf to some degree. WIth time to go to expiration the time value in the insurance put is significantly larger than the time value remaining in the long put. That is the current value remaining in the position. That amount shrinks to $0 at expiration. With expiration on Friday that remaining time value is going to fade more and more quickly. So one ah-hah I had is that rolling sooner is better than rolling later.
But I'd still expect to be paying a debit for the roll. And in the end may still leave you looking at a max loss, except then you'd have paid out some incremental premium in order to buy time on the max loss. There is some value in that but you're already on the clock for a large turnaround. A roll for time isn't going to take you off the clock for the big turnaround - it'll just put some more time on the clock.
Fully cash secured puts can be "rolled forever"(*) given a few important constraints.
One is that the cash backing is taken out of circulation - you won't be able to make use of it for other purposes. This is mostly important in a brokerage account that also has margin - its easy to lose track of things and start using margin as the backing.
Two is that you stay close enough to the money and/or roll early enough to avoid early assignment. Obviously the early assignment will end the roll forever dynamic
Three is that you really are ready and willing to buy shares at the strike price.
I suppose that Four is the weekly (or whatever frequency) rolls are still yielding enough income that you'd prefer rolling over taking assignment and starting to sell CC.
Five is that Tesla shares need to continue trading. If Tesla were to go bankrupt and the shares stop trading then those puts won't be rollable. Worse is that thay will definitely be exercised as the owner of the put can sell you Tesla shares at the strike price that you can't sell.
For #2 when I was DITM a year ago, my rolls tended to be 1 week ahead of expiration. Using current dates I would roll 3/4 expiration puts that were DITM this week - probably on Friday depending on how DITM they were. My real trigger would be the remaining time value - somewhere around .50 I'd stop messing with it and hopefully that time value back up to $2 or so. Then wait a week for 3/4ths of that to age out and roll again.
Or as I plan to do - pick a series of lower and lower prices and take assignment on a subset of those CSP each time. That way I'll be steadily buying shares at a lower and lower price, planning to take assignment on CC if/when the shares start going back up in order to return to cash. Of course I'd be looking at call assignment at equal or higher strikes than the put assignment, but I'd also be pretty aggressive about the first few CC assignments in order to get back into that cash.
If you're not ready to take assignment at the put strike (buy shares) then you really don't have a roll forever dynamic. In my mind that is the key characteristic.
In addition if you have a required use for any of that CSP cash (such as a tax bill) then that timeline for the cash usage imposes an external constraint on the roll forever dynamic.
NOT-ADVICE
The more and more DITM you go, the increasing likelihood of an early assignment. What you're really watching is the remaining time value.
For myself I'd be rolling as time value gets low - I think .50 in my own case. I would also be looking at longer and longer rolls. Probably in the 2-4 week range with a reasonably strong bias when that DITM to getting a small strike improvement each week or roll as possible. The position has already stopped being a meaningful income generator, so if you're not taking assignment and beginning CC sales on the position, then the strike improvements will shorten the timeframe to when it recovers. Even if the strike improvement comes from a 4 week roll. I think 4 weeks will be my own limit but a 12 week or 1 year roll will buy you increasingly large credits that can be spent on those strike improvements.
My own plan is to also be using some of the earnings from other positions to get strike improvements on some of the positions. Even DITM you'll find that $4 buys you a $5 strike improvement. You only earn that extra $1 by taking assignment at some point, but you can improve the assignment strike at a pretty good return (a 20 or 25% return from this sort of activity, even if the $4 loss is immediately recognized and the $5 gain is unrealized, maybe for awhile, is .. uhmm .. good).
One activity I can foresee - selling some cc that generate relatively large credits due to being OTM but not as deeply OTM. Maybe these generate $12. Use $10 of that credit to buy $10-15 better strike on the put side. You also don't need to improve everything equally. If I sold 10 CC at $12, then with $100 "excess" credit I could buy a really big strike improvement in 1 or 2 puts. Repeat each week and 1-2 puts are 'healed'.
Also for myself I would tend to do this to improve a put pretty dramatically while also planning to take assignment on that put immediately (the drastically improved strike is also the last improvement). For example if I had $1000 strike puts in the same setup, I might spend that $100 excess credit on a $120-140 (my guess as to size) strike improvement with the additional plan that I'll take that $880 assignment from that roll. That way 1 put is resolved and that resolution lets me turn $100 now into $120 (or whatever) later, as well as reducing the # of puts that need healing.
In this particular instance I might try a second roll, but if I rolled another $120 down to 760 and then that put finished OTM, I would have payed out $200 in order to 'save' the position. What actually happened is that I converted a $240 loss into a $200 loss which is a nice improvement but still realizing a loss to end a position and miss out on the roll forever dynamic.
Really for real.
The way I think of it I might be able to roll forever but I'll be realizing losses along the way.
What I actually saw when DITM a year ago is that some weeks had larger or small realized losses than other weeks. Its actually better than that as some weeks will realize gains, though the overall position will continue to show a loss. The total credit will keep increasing each week so the window to finishing OTM and finally realizing the net gain is shrinking to that degree.
Therefore the better way, again MHO, to think about rolling forever is that you need to stay reasonably close to the money. One measure for close enough is whether a 2 week roll can yield a strike improvement for a credit. That is somewhere around $100 right now though the number increases and decreases with IV. You might extend that out to 4 weeks depending on how badly you want to take assignment.
My own plan is to take assignment periodically on puts as the shares go down, and then take assignment on calls as the shares move back up. Its really just a different way of handling the overall dynamic and can also lead to realized losses to the degree that put assignment strikes are higher than call assignment strikes.
Curious on your assumptions of SP reaching bottom - are you considering a few indicators or more gut feeling?
I don't remember exact time value because I don't remember tracking it closely yesterday before it got executed, but it was definitely <0.50. Thanks for the not advice, I think I will apply those principles, esp for DITM.
The readiness to take assignment as the shares go down on a subset of the position is part of handling going DITM and is a manifestation of the larger wheel strategy. Assuming that I take assignment this Friday on a some of my 790 puts, those purchased shares will continue losing money to the extend that the shares keep going down.
If I take assignment, immediately sell the next week 800 strike call (close to the money / big credit) and then take assignment on that position because the shares are back to $820, then I have earned $10 strike to strike improvement along with whatever credits were received on those two contracts. That's a great outcome for me, and depending on my feeling about the overall market might be exactly what I do.
I might also continue selling CC against those shares until taking assignment at $850 for an even bigger strike to strike improvement.
And if the shares keep going down to $700, even if my calls are able to follow it down to some degree, then maybe my CC sales are at the $730 strike. If the shares turn around fast and I can't roll up effectively, then I'll end up taking assignment at $730 something I bought for $800. I'll have earned the credits but I'll also realize a $70 loss (per share) on the strike to strike change.
These are all part of the wheel dynamic, and this is why the components that make this work for me are:
1) all positions fully owned / cash secured. So there's no clock on how long I can keep any one of these going
2) ready and willing to take assignment, especially puts at relatively low share price, and calls at relatively high share prices
3) a per contract weekly target credit, so that I can easily spend excess credits from either side on improving badly performing sides. As long as I'm hitting my weekly income credit target ($2 for me) then the excess isn't excess profits, but it IS increasing the odds I avoid early assignment when I don't want it. Taking assignment provides an upper bound on just how much I'm willing to spend to avoid the early assignment.
It also helps that I think of each CSP and each 100 shares as a "slot". The total of the CSP and share 'slots' is how I get to my overall per contract amount. WIth 10 slots and $2 credit / week, I'm looking at $2000/week credit as my minimal result. If I actually earn $5000 credit in a week then one choice I can make is to spend $3000 of that credit ($30/share on a single contract) to improve to improve it rather dramatically. That $30 might buy a $40 strike improvement on that 1 contract, and that might get that 1 contract back in range to roll week to week on its own.
All while still hitting my minimal income target.
I don't need to limit myself to same week expenditures to improve positions - that's where tracking overall results matters. If my target is $10k/month and I actually earn $35k in a month, then I've also got $25k in the bank (so to speak) to spend improving positions I don't want assignment on yet.
Again - this is where ready and willing to take assignment provides an upper bound on how much I'll spend to save a position.
So this is one reason why I'm planning (right now) to take the 790 assignment this Friday should that be ITM. If its close to the money then I probably move that strike to be ATM (big credit!) and look for that put to be assigned. Big picture I'd like (current plan) for roughly 1 assignment at 800, 1 at 750, 1 at 700, and 1 at 650. Maybe also 1 at 600. I chose these strikes as I consider the shares going a long ways below 600 to be very unlikely. And by taking assignment every $50 (strikes - not share price) I should have a pretty good range of options for assignment on the way back up, as aggressive CC should still be rollable to keep individual call assignments profitable relative to a put assignment.
(I'm typing all of this out as its also helping me think through the plan for myself. I'm also looking for insights about stuff I haven't thought about!)
If I take assignment, immediately sell the next week 800 strike call (close to the money / big credit) and then take assignment on that position because the shares are back to $820, then I have earned $10 strike to strike improvement along with whatever credits were received on those two contracts. That's a great outcome for me, and depending on my feeling about the overall market might be exactly what I do.
I might also continue selling CC against those shares until taking assignment at $850 for an even bigger strike to strike improvement.
And if the shares keep going down to $700, even if my calls are able to follow it down to some degree, then maybe my CC sales are at the $730 strike. If the shares turn around fast and I can't roll up effectively, then I'll end up taking assignment at $730 something I bought for $800. I'll have earned the credits but I'll also realize a $70 loss (per share) on the strike to strike change.
These are all part of the wheel dynamic, and this is why the components that make this work for me are:
1) all positions fully owned / cash secured. So there's no clock on how long I can keep any one of these going
2) ready and willing to take assignment, especially puts at relatively low share price, and calls at relatively high share prices
3) a per contract weekly target credit, so that I can easily spend excess credits from either side on improving badly performing sides. As long as I'm hitting my weekly income credit target ($2 for me) then the excess isn't excess profits, but it IS increasing the odds I avoid early assignment when I don't want it. Taking assignment provides an upper bound on just how much I'm willing to spend to avoid the early assignment.
It also helps that I think of each CSP and each 100 shares as a "slot". The total of the CSP and share 'slots' is how I get to my overall per contract amount. WIth 10 slots and $2 credit / week, I'm looking at $2000/week credit as my minimal result. If I actually earn $5000 credit in a week then one choice I can make is to spend $3000 of that credit ($30/share on a single contract) to improve to improve it rather dramatically. That $30 might buy a $40 strike improvement on that 1 contract, and that might get that 1 contract back in range to roll week to week on its own.
All while still hitting my minimal income target.
I don't need to limit myself to same week expenditures to improve positions - that's where tracking overall results matters. If my target is $10k/month and I actually earn $35k in a month, then I've also got $25k in the bank (so to speak) to spend improving positions I don't want assignment on yet.
Again - this is where ready and willing to take assignment provides an upper bound on how much I'll spend to save a position.
So this is one reason why I'm planning (right now) to take the 790 assignment this Friday should that be ITM. If its close to the money then I probably move that strike to be ATM (big credit!) and look for that put to be assigned. Big picture I'd like (current plan) for roughly 1 assignment at 800, 1 at 750, 1 at 700, and 1 at 650. Maybe also 1 at 600. I chose these strikes as I consider the shares going a long ways below 600 to be very unlikely. And by taking assignment every $50 (strikes - not share price) I should have a pretty good range of options for assignment on the way back up, as aggressive CC should still be rollable to keep individual call assignments profitable relative to a put assignment.
(I'm typing all of this out as its also helping me think through the plan for myself. I'm also looking for insights about stuff I haven't thought about!)
The details vary but the same general idea applies to rolling CC that are DITM forever.
As with the CSP I see the readiness to take assignment on those CC as being really important to the overall strategy. And I think this is where it will be most difficult. WIth a really long term investment horizon taking assignment on puts at lower and lower share prices just sounds like the market giving up valuable assets
But with higher and higher share prices leading to higher and higher call strikes, it may be a lot harder to sell those shares by taking call assignment on DITM calls
I think my solution is to aim for a 50/50 split in CSP and cc at relatively high share prices. I see relatively high as approaching ATH, but that will probably come down somewhat if the shares go down and stay down for a significant period. Today I'd say I want to a 50/50 in my option sale slots at $1100 share price.
When I'm in the midrange which I would put at ~$900 today I would like to be around 1:2 puts to calls. So 4:8 ratio given 12 slots.
As we drop from 800 down, I might take assignment at 800, 750, 700, and then 650 to convert those 12 slots to 100% calls. I might have generated enough incremental credits along the way to also take assignment at 600 (which means the share price is at least somewhat under 600 - maybe a lot under). If that were to happen then I'd probably be looking to take the first call assignment at 650 or 700 on the way back up. I have a strong desire to get some cash and CSP going again plus I want some put sales to help pay for strike improvements on CC should that need arise.
And I don't want to be so heavily stacked on calls as I'm designing all of this around net income and I see that income coming from a balance of puts and calls, with the bias towards calls providing exposure to the big upwards moves I see as inevitable for Tesla.
My plans - NOT-ADVICE
Now really tempting to sell shares and buy DITM leaps.. Jan 24 c700 is 28k
can you imagine if Q1 is not so great. I am also holding a -P910 in my parents account.
john tanglewoo
2012 Roadster Owner
Ok, going to have to start taking some losses on those underwater puts to free up some margin.
Unless I start selling sell some agressive close ITM CCs. I thought there would be a V shaped recovery in the low 800s but it looks we are visiting the farm corners of the abyss.
Unless I start selling sell some agressive close ITM CCs. I thought there would be a V shaped recovery in the low 800s but it looks we are visiting the farm corners of the abyss.
My worry here is that we havent seen ANY support on this drop down. Where is the bottom? We are far past any technicals at this point and IMO, we might touch the 695 mark (where the S&P index funds bought in) before we go back up.
Does anyone know where the other gaps are? I saw someone post about a Fibonacci retracement around 768...Grasping at straws here.
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