Wiki Selling TSLA Options - Be the House

[CHGolferJim]

I have been contemplating selling some shares and converting to LEAPS, if we get another dip.

Though I own both shares and LEAPS, I am new to the converting process.

Any tips / not-advice on practical ways to do the conversion in the most efficient and beneficial way ?

I have thought about it before, but recurring nightmares of Elon immediately launching full robo-taxies, FSD, and leaked pictures of Optimus already in production and secretly building a stash of $25K Model 2 plaids - the second I sell; and the price running away from me right after I sell have kept me from selling. And because I will be doing this in a tax-free account, I cant use margin to buy first and then sell.

Thanks in advance for sharing your experiences on how best to do this.

The next time we have an MMD (Monday AM?), you could sell your shares once it starts, then do the LEAPs purchase immediately afterwards, probably at a lower SP-equivalent. When MMD is underway, news is ignored. (I gather from the way your note is phrased, that you’re doing your own trades rather than through a broker and so have pretty good control of the timing.)

 

[scubastevo80]

I did some very basic analysis to see the friday to friday percent changes to see what strikes would have expired safe. I also looked at percent change from previous friday high to current friday close. Based on this 3 month data if you sold one week out at the friday high you'd be safe going 20% OTM for puts. If selling at close previous friday 12% OTM was safe too. I'm using data from Yahoo finance. Obviously not advice and this shouldn't be the only data used to select strikes.

Thanks - below is my data that supports my previous post about my 20% buffer rule (if I could actually reset all current trades and follow my own rules). Second column is the daily move from prior day close to current day close and the 10, 6 and 3 days are rolling aggregate moves to show how far out one would need to go to stay OTM. Those days above the solid line are expiration dates, so those are key. Red highlights are for -5% or greater moves. What does this say to me? Basically that even in the worst 3-10 day periods, one wouldn't be assigned if they stay 20% OTM. I want to go back and see what the magic number is if I write BPS on an intraday 2%+ downward move.

For example, if one is looking at 6-10 DTE, is 15% still safe so long as BPS is written with that 2% buffer. The only missing piece is how to factor in rolls, which are typically done (by me) at less than 3% from strike or when they're in the money. The data may go out the window at that point if the market is directionally moving in one way - down.

 

[kcveins]

Yesterday I sold CC810 expiring today...
Will be interesting to see if they get assigned overnight...

 

[traxila]

I have been contemplating selling some shares and converting to LEAPS, if we get another dip.

Though I own both shares and LEAPS, I am new to the converting process.

Any tips / not-advice on practical ways to do the conversion in the most efficient and beneficial way ?

I have thought about it before, but recurring nightmares of Elon immediately launching full robo-taxies, FSD, and leaked pictures of Optimus already in production and secretly building a stash of $25K Model 2 plaids - the second I sell; and the price running away from me right after I sell have kept me from selling. And because I will be doing this in a tax-free account, I cant use margin to buy first and then sell.

Thanks in advance for sharing your experiences on how best to do this.

You are trying to convert your delta of 1.00 per share to a higher delta for the same amount of money invested.

SO you sell your 1 share at 810 and take a gander at the Jan 24 options, the farthest out LEAPs available.

The 510 calls could be had for about 405 at the close. So you could have bought two calls with the same 810. They closed at a delta of 0.83. Since you bought two you have now converted the delta of that 810 dollars invested from 1.0 to 1.66. So every dollar the SP increases, your profit should equal 1.66 instead of 1. These calls would be considered by most as DITM, and relatively conservative with a breakeven of 915 dollars approximately two years from now. As the SP increases your delta should slowly increase as time value is replaced with intrinsic price. If TSLA moons to 2000 the delta on those leaps would be close to 2 before you know it.

A more aggressive approach would be the 1000 strikes at 202.5 a piece with a delta of 0.56. You pick up four. Now you have a delta of 2.24 amplifying your leverage and increasing your risk. Underwater LEAPs with a breakeven of 1202.5 in 2024. And a faster time decay.

When I buy LEAPS for my retirement account I always go DITM. Enough leverage for me, and you are supposed to live on that stuff in the end, not have it go poof.

TL;DR: Sell the stock and buy your chosen LEAPs immediately, and do not worry about a buck or two in either direction.

 

[adiggs]

You are trying to convert your delta of 1.00 per share to a higher delta for the same amount of money invested.

SO you sell your 1 share at 810 and take a gander at the Jan 24 options, the farthest out LEAPs available.

The 510 calls could be had for about 405 at the close. So you could have bought two calls with the same 810. They closed at a delta of 0.83. Since you bought two you have now converted the delta of that 810 dollars invested from 1.0 to 1.66. So every dollar the SP increases, your profit should equal 1.66 instead of 1. These calls would be considered by most as DITM, and relatively conservative with a breakeven of 915 dollars approximately two years from now. As the SP increases your delta should slowly increase as time value is replaced with intrinsic price. If TSLA moons to 2000 the delta on those leaps would be close to 2 before you know it.

A more aggressive approach would be the 1000 strikes at 202.5 a piece with a delta of 0.56. You pick up four. Now you have a delta of 2.24 amplifying your leverage and increasing your risk. Underwater LEAPs with a breakeven of 1202.5 in 2024. And a faster time decay.

When I buy LEAPS for my retirement account I always go DITM. Enough leverage for me, and you are supposed to live on that stuff in the end, not have it go poof.

TL;DR: Sell the stock and buy your chosen LEAPs immediately, and do not worry about a buck or two in either direction.

Great info.

I would add two things:
- the first is that I have a pretty heavy bias towards a major strike. In this case the 500 strike over the 510. Trading volumes are already skimpy that far out in time and strike. Staying with the round #s at least bulks that up somewhat, and improves the bid/ask spread.

- the other - you can even package the STC stock and BTO leaps into a single trade ticket so you get the relationship between the two that you want.

 

[ChefBoyardee]

I just had an idea and can’t believe I didn’t do it before. I’m just going to open another account.

Investing (main account):
90% of my money - leaps, shares, safe BPS with low margin

Trading:
Cash secured higher return BPS for compounding

Reasoning:
- Caps risk
- Keeps things clean / organized
- Removes margin call risk from the trading account
- Satisfies the urge for big % returns without putting main wealth at risk
- Helps to avoid blurring the line between investing and gambling lol

I think I’ll wait till the market settles down a bit before doing this though

Do you guys use multiple accounts like this? Curious if there are any drawbacks

 

[Chenkers]

I just had an idea and can’t believe I didn’t do it before. I’m just going to open another account.

Investing (main account):
90% of my money - leaps, shares, safe BPS with low margin

Trading:
Cash secured higher return BPS for compounding

Reasoning:
- Caps risk
- Keeps things clean / organized
- Removes margin call risk from the trading account
- Satisfies the urge for big % returns without putting main wealth at risk
- Helps to avoid blurring the line between investing and gambling lol

I think I’ll wait till the market settles down a bit before doing this though

Do you guys use multiple accounts like this? Curious if there are any drawbacks

I'm looking to do just this. The only draw-back is not having access to the main account equity but as you say, this will be to use safer trades against.

My main account and retirement account are both with IB and they only provide Portfolio margin in Australia. The only other broker with full options capability is Tastyworks, so I'll probably set up this account with them using a standard RegT style margin account. Cash will be populated from spare unused reserves and profits from the main account over time. It'll also be a joint account with my wife so I can split the income for tax purposes.

 

[EVCollies]

I just had an idea and can’t believe I didn’t do it before. I’m just going to open another account.

Investing (main account):
90% of my money - leaps, shares, safe BPS with low margin

Trading:
Cash secured higher return BPS for compounding

Reasoning:
- Caps risk
- Keeps things clean / organized
- Removes margin call risk from the trading account
- Satisfies the urge for big % returns without putting main wealth at risk
- Helps to avoid blurring the line between investing and gambling lol

I think I’ll wait till the market settles down a bit before doing this though

Do you guys use multiple accounts like this? Curious if there are any drawbacks

I think this is a great idea!

I have three retirement accounts and after being assigned covered calls on about 20% of my TSLA, kept the cash and trade BPS only. As qualified accounts I'm not allowed to use any margin, have been slowly increasing the number of BPS with the proceeds.

I also have an investment account, Schwab One, that I was using margin accidentally (rookie mistake) for BPS and was burned during the Elon stock sale drop. I converted that to cash only as much easier to avoid margin calls during these wild swings.

 

[Zhelko Dimic]

I have been contemplating selling some shares and converting to LEAPS, if we get another dip.

Though I own both shares and LEAPS, I am new to the converting process.

Any tips / not-advice on practical ways to do the conversion in the most efficient and beneficial way ?

I have thought about it before, but recurring nightmares of Elon immediately launching full robo-taxies, FSD, and leaked pictures of Optimus already in production and secretly building a stash of $25K Model 2 plaids - the second I sell; and the price running away from me right after I sell have kept me from selling. And because I will be doing this in a tax-free account, I cant use margin to buy first and then sell.

Thanks in advance for sharing your experiences on how best to do this.

In a margin account, if interest rate is low enough, just buy more shares by borrowing. Assuming you want to leverage lightly, 10%-20%-30% of additional shares would be relatively cheap to borrow for and quite safe.

In a non-margin account, think about leverage you want.
Maybe 10%? Example: sell 2000 shares of TSLA and buy 22 contracts deep ITM, maybe $400 for Jan '24. Keep remainder of the money for either eventual assignments in '24 or further leveraging at lower prices. But think in terms of shares and leverage, not rushing to spend all of the money you got by selling shares. This BTW makes sense in tax protected accounts, like RRSP.
In TFSA, be careful to not be marked active trader. as tax protection may be challenged by CRA (Canadian IRA). One conversion I think should be fine, especially with a long leaps, but that's just my speculation....

20% leverage in this case: sell 2000 shares, buy 24 contracts

Now, I am aware this is not exactly 10% and 20% leverage, but you can adjust for that yourself, and more importantly, if you're deep ITM, and Tesla moves 2x, 3x in 2 years, it's close enough. With this strategy, you're trading time-value you're buying for slight leverage and flexibility that money on the side provides you.

I used this strategy with great success few years back, to recover from near obliteration I experienced playing with options before it.
I have no need for this strategy with IB, in a margin account, with low interest rate. In these circumstances, I find that paying interest is less expensive than paying for time-value...

 

[ReddyLeaf]

Yeah, I rolled them to -c830's for next week (trying to be sensible here) for +$7 (BTC $9, STO $16)

I finally closed my -c805s for $1.20, and a good thing too. So $3.80 profit on that round, not bad especially when added to the $18-$19 that I got for the 930s & 935s sold late last week. Of course, had to roll the-p910s down and out, so the week is still a four figure loss on paper, and the year is still a six figure loss on paper. Ouch.

Bought 15 shares last week, even one at $700.39, though many were in the 800s because of my lack of restraint. I’m expecting a bounce on Monday, and sustained buying throughout the day, hopefully $50+, so bought c830s for $7.80. I actually expected the drop as well, but thought it would happen Friday, not Thursday, so wasn’t available to trade in time. GLTA as we return to a 4-digit SP, hopefully soon.

 

[traxila]

I just had an idea and can’t believe I didn’t do it before. I’m just going to open another account.

Investing (main account):
90% of my money - leaps, shares, safe BPS with low margin

Trading:
Cash secured higher return BPS for compounding

Reasoning:
- Caps risk
- Keeps things clean / organized
- Removes margin call risk from the trading account
- Satisfies the urge for big % returns without putting main wealth at risk
- Helps to avoid blurring the line between investing and gambling lol

I think I’ll wait till the market settles down a bit before doing this though

Do you guys use multiple accounts like this? Curious if there are any drawbacks

I have multiple accounts.

My long term accounts are invested mostly in TSLA and have made me rich.

My trading account has kept me up at night and provided huge short term returns and eviscerating losses. I like to think that if I could actually do it full time I would have better results but that is only a theory. My trading account is currently at all time lows. Last year was a spectacular success. I made 300K into low seven figures and pulled out half to pay taxes.

The taxes were paid but the account is now around 150K. At least the taxes were paid….

Think the most valuable aspect of my short term trading account is that is satisfies my urge to engage in stupidity and impulse while allowing my long terms be left mostly alone. I do confess to some hedging in my long terms via CCs and CSPs, but those trades are almost always done after great deliberation and have had a great rate of success up to now. Think is because I do all the stupid impulsive nonsense in my short term first and then watch what I thought was a good trade where I got hammered become a screaming buy.

Think your points are on the money.

anyway, not an advice….

 

[ChefBoyardee]

I have multiple accounts.

My long term accounts are invested mostly in TSLA and have made me rich.

My trading account has kept me up at night and provided huge short term returns and eviscerating losses. I like to think that if I could actually do it full time I would have better results but that is only a theory. My trading account is currently at all time lows. Last year was a spectacular success. I made 300K into low seven figures and pulled out half to pay taxes.

The taxes were paid but the account is now around 150K. At least the taxes were paid….

Think the most valuable aspect of my short term trading account is that is satisfies my urge to engage in stupidity and impulse while allowing my long terms be left mostly alone. I do confess to some hedging in my long terms via CCs and CSPs, but those trades are almost always done after great deliberation and have had a great rate of success up to now. Think is because I do all the stupid impulsive nonsense in my short term first and then watch what I thought was a good trade where I got hammered become a screaming buy.

Think your points are on the money.

anyway, not an advice….

Yes, exactly! It's the same for me haha, I'm a lot more impulsive with my trading than the trades I help my partner place or the ones I place in my IRA. When TSLA rocketed to 1200 I had her stop selling weeklies because I assumed we'd tank back to the bottom of the channel soon - whereas I kept going and had a huge drawdown . Definitely the same dynamic in the IRA - Once a position is getting killed and TSLA has dropped way more than I thought possible, that's when I sell some in the IRA. Thanks for the not-advice, feeling good about this move!

 

[MaxPain]

Yesterday I sold CC810 expiring today...
Will be interesting to see if they get assigned overnight...

Did your shares get called AH?

 

[Max Plaid]

So, key Russian banks locked out of SWIFT, foreign Russian assets frozen, maybe peace talks (like just get out of Ukraine, who needs to discuss), more likely a delaying tactic for Vlad to try and salvage what kooks like a pretty pathetic attempt so far, mention nuclear weapons being freely thrown into the conversation

How will the markets react? Logic would say negatively, but since when has that mattered?

 

[Yoona]

So, key Russian banks locked out of SWIFT, foreign Russian assets frozen, maybe peace talks (like just get out of Ukraine, who needs to discuss), more likely a delaying tactic for Vlad to try and salvage what kooks like a pretty pathetic attempt so far, mention nuclear weapons being freely thrown into the conversation

How will the markets react? Logic would say negatively, but since when has that mattered?

i am

• sticking to 5 DTE until sp is above 200SMA again and stays there
• STO CSP and CC only, no spreads for now

 

[samppa]

Ruble will collapse tomorrow, and more in the coming days. Should have shorted it.. but shorting a currency was something I know nothing about, so decided not to..

Maybe a little down day on markets, but I doubt it will matter that much to the rest of the world..

 

[Tes La Ferrari]

You are trying to convert your delta of 1.00 per share to a higher delta for the same amount of money invested.

SO you sell your 1 share at 810 and take a gander at the Jan 24 options, the farthest out LEAPs available.

The 510 calls could be had for about 405 at the close. So you could have bought two calls with the same 810. They closed at a delta of 0.83. Since you bought two you have now converted the delta of that 810 dollars invested from 1.0 to 1.66. So every dollar the SP increases, your profit should equal 1.66 instead of 1. These calls would be considered by most as DITM, and relatively conservative with a breakeven of 915 dollars approximately two years from now. As the SP increases your delta should slowly increase as time value is replaced with intrinsic price. If TSLA moons to 2000 the delta on those leaps would be close to 2 before you know it.

A more aggressive approach would be the 1000 strikes at 202.5 a piece with a delta of 0.56. You pick up four. Now you have a delta of 2.24 amplifying your leverage and increasing your risk. Underwater LEAPs with a breakeven of 1202.5 in 2024. And a faster time decay.

When I buy LEAPS for my retirement account I always go DITM. Enough leverage for me, and you are supposed to live on that stuff in the end, not have it go poof.

TL;DR: Sell the stock and buy your chosen LEAPs immediately, and do not worry about a buck or two in either direction.

Thanks @traxila , @adiggs & @Zhelko Dimic for your thoughts. You and others have raised some valid points to consider.

My online brokerage (major Canadian Bank brokerage) doesn't offer a single ticket entry - at least that I'm aware of. I will call them on Monday to see if this is an option. But it makes me think that with a single entry limit orders, one would risk the conversion not completing if one of the limits weren't met. I guess the solution to this is selling a few more shares than absolutely necessary for the conversion, then buy them back after the conversion is complete.

From a practical strategic standpoint Do you normally have two computers open and logged in, with orders entered and ready to execute (1 for the sale and one for the buy ?)

 

[samppa]

* EU APPROVES BANNING ALL TRANSACTIONS WITH RUSSIAN CENTRAL BANK

 

[adiggs]

Thanks @traxila , @adiggs & @Zhelko Dimic for your thoughts. You and others have raised some valid points to consider.

My online brokerage (major Canadian Bank brokerage) doesn't offer a single ticket entry - at least that I'm aware of. I will call them on Monday to see if this is an option. But it makes me think that with a single entry limit orders, one would risk the conversion not completing if one of the limits weren't met. I guess the solution to this is selling a few more shares than absolutely necessary for the conversion, then buy them back after the conversion is complete.

From a practical strategic standpoint Do you normally have two computers open and logged in, with orders entered and ready to execute (1 for the sale and one for the buy ?)

Multiple positions on a single ticket means that the limit is on the combination, not the individual legs.

So if I enter a BPS with a $7 short leg and a $1 long leg, then I enter those two lines with a limit credit of $6.

later when I'm up 75% and close, then again I use a single ticket with a limit of $1.50.


In both cases it doesn't matter what the actual premiums are on the short or long sides are, open or close. Its the net that is the limit, and its both positions and the net that somebody else is taking the other side of the transaction for.

 

[Tes La Ferrari]

Multiple positions on a single ticket means that the limit is on the combination, not the individual legs.

So if I enter a BPS with a $7 short leg and a $1 long leg, then I enter those two lines with a limit credit of $6.

later when I'm up 75% and close, then again I use a single ticket with a limit of $1.50.


In both cases it doesn't matter what the actual premiums are on the short or long sides are, open or close. Its the net that is the limit, and its both positions and the net that somebody else is taking the other side of the transaction for.

Multiple positions on a single ticket means that the limit is on the combination, not the individual legs.

So if I enter a BPS with a $7 short leg and a $1 long leg, then I enter those two lines with a limit credit of $6.

later when I'm up 75% and close, then again I use a single ticket with a limit of $1.50.


In both cases it doesn't matter what the actual premiums are on the short or long sides are, open or close. Its the net that is the limit, and its both positions and the net that somebody else is taking the other side of the transaction for.

Aaahhh ok, I see. Thanks @adiggs . Am definitely going to call my broker about this tomorrow.