Wiki Selling TSLA Options - Be the House

[CHGolferJim]

With the drop in the share price I was able to get a 1 week roll on some 800 cc's I had, gaining a $20 strike improvement and truly minimal credit ($0.10 ). Since I started the day with a $10 strike improvement available and was considering spending as much as $10 of the original credit for a strike improvement I like this outcome better(*).

I chose to roll now instead of waiting tomorrow and a possible drop again as I've got a good roll now, I'm late in the week, and this leaves me in a good roll without depending on a particular direction tomorrow. There was also nearly $0 time value so the position would be just about fully dependent on a share price move in the right direction. The short version - Roll Thursday

Leaves me with 750, 820, 830, and 840 cc for next week, all on rolls from 750 and 800.

(*) Unless the shares shoot up tomorrow or next week. But that's always a possibility.

Exact same situation and logic for me — after 3pm, rolled 0304CC820 to 0311CC840 for a $4.19 credit, and value increase of $24.19. That transaction was running at a slight debit earlier in the day and on Wednesday when SP was higher, so I waited willing to accept $10-$15 strike improvement but managed to get $20. I was tempted to wait to do the STO until Monday, but went ahead to lock in the good-not-exceptional credit.

 

[bkp_duke]

I got a day trade call for selling and buying back a covered call on the same day - Fidelity used 25% of value of the strike price instead of the actual price of the contract in their calculation.

This never happened to me before in years of selling CCs. Anybody have experience with a similar situation?

I've had it happen twice with Fidelity. My go-to solution has to trade "nearly the same" options, but not the same ones, so they don't do this in the future. I.e. if I close a 800/700 BPS Exp 3/4 and want to re-enter, I might do 790/690 for the new position.

 

[MikeC]

I've had it happen twice with Fidelity. My go-to solution has to trade "nearly the same" options, but not the same ones, so they don't do this in the future. I.e. if I close a 800/700 BPS Exp 3/4 and want to re-enter, I might do 790/690 for the new position.

I think it's because I sold it designated as "margin" instead of "cash" in a limited margin IRA, meaning the system considered it a naked call on margin instead of a covered call even though I had the shares backing it. So annoying that Fidelity requires a distinction in the first place, and moreso that it defaults to "margin". Schwab and TD don't handle limited margin IRAs that way.

 

[Zextraterrestrial]

I think it's because I sold it designated as "margin" instead of "cash" in a limited margin IRA, meaning the system considered it a naked call on margin instead of a covered call even though I had the shares backing it. So annoying that Fidelity requires a distinction in the first place, and moreso that it defaults to "margin". Schwab and TD don't handle limited margin IRAs that way.

I thought TD says it is day trading if you do 5 of the same strike trades within a 5 day window, so any day you do multiple of 1 strike it adds to the count. After 5 in a week they change requirements for margin. (though there was something about 25% in there)
maybe nothing to do with your situation though. I just try to avoid the exact same strikes on the same day,
(still remember that your car was the first other S I saw up here & took pictures of in Arcata ; ) ...time flies

 

[MikeC]

I thought TD says it is day trading if you do 5 of the same strike trades within a 5 day window, so any day you do multiple of 1 strike it adds to the count. After 5 in a week they change requirements for margin. (though there was something about 25% in there)
maybe nothing to do with your situation though. I just try to avoid the exact same strikes on the same day,
(still remember that your car was the first other S I saw up here & took pictures of in Arcata ; ) ...time flies

I still think of that when I see you post! How far we’ve come since the pioneering days of the early Model S.

I think you’re describing “pattern day trading” which is related but a separate issue from the day trade call I received.

 

[adiggs]

I think it's because I sold it designated as "margin" instead of "cash" in a limited margin IRA, meaning the system considered it a naked call on margin instead of a covered call even though I had the shares backing it. So annoying that Fidelity requires a distinction in the first place, and moreso that it defaults to "margin". Schwab and TD don't handle limited margin IRAs that way.

I have this problem with my Fidelity IRA as well. One of these days I plan to call them up and see if they'll move the Cash designated shares over to Margin. Since that's the default then I should be able to go back to taking the default and not caring

 

[adiggs]

NOT-ADVICE
I call this "When a bad decision works out... it's still a bad decision"

Yesterday I was presented with an early opportunity to close -800p for today expiration for about 1.20. I originally opened these around 6,.50 so I was looking at a ~80% gain. But I wanted a bit more and entered my order at .60.

So far not great but not bad.

Most of my attention yesterday was on rolling calls and then doing other stuff (like getting our well pump / water system working - running water = good), so I have a good excuse (a bad decision is still a bad decision, whatever excuses are available).

Nevertheless later in the trading day I decided that the likelihood of a big move down today and the corresponding pain should that happen was too large to incorporate into the income strategy I am pursuing, and that I should take my 80% and not think further about this one. Especially since the potential upside was on the order of .60, and because the position was already >2x my week $/contract target. Maybe if the upside had been $6 instead of .60, but it wasn't and I'm doing might-have-been.

By the end of the trading day the available close was at $2. I probably would have taken that anyway but was a few minutes late to the computer to make the trade. I won't know and the 2/3rds close might have easily been enough for me to leave it alone. The point here is that I made a conscious decision to finagle a few extra dimes out of a position I had decided to close. I've been in a similar situation in the past - mostly they work out as this one has. But a few times they have gone disastrously bad; one situation that was bad enough to wipe out months of gains. The risk of a disastrously bad move ($50 down would have done the trick, and we were down $20 after hours - $50 down wouldn't have been a surprise at all this morning) was too high to risk it for .60.


This morning I wake up and I don't have that disastrous open I was worried about and I got a ~.90 close, good for a .30 better outcome than I had available yesterday. Woot! I was right! Actually no, I made a bad decision in the context of my own knowledge and experience - it just worked out well, this time.


The larger observation here is that a quality decision is a quality decision, regardless of the outcome. That doesn't mean I'll be successful overall if I only make quality decisions, but I really like my odds when I'm doing so within the context of my own knowledge and experience. I like them well enough that I've staked my family's financial health, and my ability to be retired, on the outcome.

Which also means that a bad decision is a bad decision, regardless of the outcome. In this specific instance I had a good result. That doesn't mean I want to generalize from this decision and outcome and repeat in the future. I would rather generalize from the $1 close where I went chasing after an extra dime, and ended up paying over $100 later that day to close (don't do that). That earlier experience is why this time around I made a bad decision for me.

 

[TheTalkingMule]

I think it's because I sold it designated as "margin" instead of "cash" in a limited margin IRA, meaning the system considered it a naked call on margin instead of a covered call even though I had the shares backing it. So annoying that Fidelity requires a distinction in the first place, and moreso that it defaults to "margin". Schwab and TD don't handle limited margin IRAs that way.

I think it may be a general IRA rule, or at least a Fidelity IRA rule. Anything more than a handful of day trades and you're flagged. A day trade is any movement at the same strike/expiration on the same day you buy/sell.

 

[Right_Said_Fred]

This week I had my first experience rolling naked calls. When on Monday we steamed from 815 to 840 I sold 10 x c925 3/4 for $3,05 and as we continued climbing above 860 I sold another 10 x c955 3/4 for $3,00. Total premium received: $6k. The idea was to sell into strength.

Everything looked fine on Tuesday as we slowly drifted down to 850, until suddenly we moved up towards 890. I got the jitters and decided it was better to roll out by a week to higher strikes before that would become too hard. With closed wallet I rolled to 10 x c970 3/11 and 10 x c1015 3/11.

Ofcourse I rolled at the top and it also turned out to be unnecessary as the old positions would have expired far OTM today. But the new positions have already lost 60% and 80% of their value, so I’m not complaining. I also think it’s better to be safe than sorry. And I like the learning experience: I was able to get a nice strike improvement without losing money. It gives me confidence for future trades.

 

[jeewee3000]

This week I had my first experience rolling naked calls. When on Monday we steamed from 815 to 840 I sold 10 x c925 3/4 for $3,05 and as we continued climbing above 860 I sold another 10 x c955 3/4 for $3,00. Total premium received: $6k. The idea was to sell into strength.

Everything looked fine on Tuesday as we slowly drifted down to 850, until suddenly we moved up towards 890. I got the jitters and decided it was better to roll out by a week to higher strikes before that would become too hard. With closed wallet I rolled to 10 x c970 3/11 and 10 x c1015 3/11.

Ofcourse I rolled at the top and it also turned out to be unnecessary as the old positions would have expired far OTM today. But the new positions have already lost 60% and 80% of their value, so I’m not complaining. I also think it’s better to be safe than sorry. And I like the learning experience: I was able to get a nice strike improvement without losing money. It gives me confidence for future trades.

Just to share some theory: we've had discussions before when the best time is to roll calls (out and/or up), and the data showed:
-ATM (so just OTM or just ITM, no more than 2-3%)
-upon volume and therefore IV spikes
-when SP is high/rising basically.

You followed the above today it seems, on purpose or by accident.

On the contrary, rolling calls back in time (closer) is best done upon dips and low IV.

 

[MP3Mike]

I needed some walking money this week so the trade I went for was an IC: 790/795/905/910 for $1.65 (legged in at different times.)

I closed for a ~92% gain, or about 37% return on risked capital.

The BPS side looked at risk in after hours last night, but it worked out.

Not sure if I will do a similar trade next week or not. I will have to spend some time reviewing things and see how the market looks on open Monday.

 

[Right_Said_Fred]

Just to share some theory: we've had discussions before when the best time is to roll calls (out and/or up), and the data showed:
-ATM (so just OTM or just ITM, no more than 2-3%)
-upon volume and therefore IV spikes
-when SP is high/rising basically.

You followed the above today it seems, on purpose or by accident.

On the contrary, rolling calls back in time (closer) is best done upon dips and low IV.

I would love to say ‘on purpose’, but the truth is ‘by accident’

 

[Oil4AsphaultOnly]

Just to share some theory: we've had discussions before when the best time is to roll calls (out and/or up), and the data showed:
-ATM (so just OTM or just ITM, no more than 2-3%)
-upon volume and therefore IV spikes
-when SP is high/rising basically.

You followed the above today it seems, on purpose or by accident.

On the contrary, rolling calls back in time (closer) is best done upon dips and low IV.

Just thinking this one through, wouldn't the best time be in times of spikes AND low IV? Since you want the SP to go lower (so it has a higher chance of closing OTM), a dip would have a higher likelihood of a recovering SP and thus higher chance of putting your calls ITM. Or is the dynamic more complicated from what I'm thinking?

 

[juanmedina]

I end up closing most of my CC for a 70-80% profit. Rolled the 2x 890's to $930 for next week way too early and I still have 2x 850cc that I am going to let go and sell puts.

another successful week of selling CC. I really thought the stock was going to move higher with the Berlin news.

 

[ReddyLeaf]

Crazy macros, sad Ukrainian situation, but still a profitable options week (~10x my modest weekly needs). I’m starting to add a few short term call buys into my repertoire (learning from @TheTalkingMule ) and they accounted for 55% of this week’s profits.

2/25 BTO 3/4 $850s at $7.80-$10. 3/1 STC at $24.20 (too early).
3/1 STO 3/4 $855s & $885s at ~$19 (again, $855s too early).
BTC those waaaaaaay too early since they expired worthless.
3/2 STO 3/4 $880s & $890s $8.00 & $9.40 (again closed early).
3/3 BTO 3/4 $850s at $5.70. 3/4 STC at $8.50 (well-timed).

What did I learn? (1) Confirmed that timing, and getting the SP direction correct, is extremely important for profitable trading, even with buying options that eventually expire worthless. These were all modest trades, not enough at risk to make me nervous, and still generated 10x my weekly needs. I think that with judicious call buying I could stop selling CCs all together and just HODL stock. (2) Writing covered calls in front of the Austin and Berlin factory openings is not like picking up pennies in front of a steamroller. It’s like trying to clean bugs off of a launching rocket. I really shouldn’t be selling CCs, and I wouldn’t if I didn’t have so many -p1000s & -p1100s rolled to Sept/Jan. (3) When the stock runs, and the MMD is minimal to nonexistent, just get out of the way and don’t trade (sell CCs or STC held calls) until near the day’s close, even if profits are greater than 2-3x. Also, don’t hold those winning positions overnight because the SP seems to revert back. (4) I’m often wrong about predicting the Friday closing SP (in both directions), so try to stay far enough OTM on CCs that the premium has decayed significantly by Friday AM and BTC before afternoon. For example, this week I really expected $850-$855, and was very nervous about selling the 855s, so much so that I closed early, rolled up to 880-890s and was STILL worried enough to close those early as well (left a week’s profits on the table closing early). Last week, with plenty of cash for rolling, I was more mellow and held ATM CCs into Friday afternoon and they refused to decay. It’s just too much wasted time watching the SP.

Be careful out there. With war and new factories, $TSLA could go anywhere, but will probably wallow around $850+/- until Q1 results are out.

 

[wooter]

I really thought the stock was going to move higher with the Berlin news.

Positive news at the end of the week is working against option expiration. If the news was in the beginning of the week, there would be more of a pop.

I made money this week by the climb on monday and consequent drop on Thursday. Puts for monday, calls for 2nd half of the week. As nothing crazy happens.

 

[mickle]

So I've been trading BPS and CCs for about a year and doing fairly well. I stay with pretty safe trades (like 15-20% OTM), but I still need to sit at my computer most of every trading day to keep on eye on things and make adjustments, especially with all the news events lately. And there have been a number of stressful weeks where I had to do lots of rolls and such at the last minute. In addition, I spend an hour or two more every day reading TMC and watching YT videos to keep up on everything. Its been fun. But with spring coming and Covid appearing to end, I am planning to get out and do more travelling and try to enjoy my 'retirement' with all the TSLA profits.

What I've been looking into is whether or not I can still make decent income, but with farther out trades that don't require daily babysitting. I've found in general I try to get around $1/share selling a weekly CC, or about $1/share per 100 point spread weekly BPS (usually selling both 7-9 days before expiration).

In looking around I'm find pretty good candidates for Dec 16 2022 trades.

Dec 22, CCs at 1500 strike are going for about $45 (if I time a SP upswing). That's about my $1/week and seems like a fairly unlikely price to hit. In my IRA, maybe spread a few calls out at 1400/1500/1600 to average it. In my taxable accounts maybe go for >=1600 and take less profit.

For Dec 22 BPS I was looking at maybe 500/700 paying about $65-70 (again waiting for a SP dip to time it better). (about 44 weeks from now with a 200 pt spread, my approximate goal would be $88, but getting $70 or so would be pretty good). Willing to give up some profit for less work.

Maybe I would just open these new trades about 6-9 months in advance, just 3-4 times/year, using about 1/4 of my shares/margin each time, to spread the risk around to different times of the year. And keep about 20% for short term play money for when I see a good opportunity.

Wondering if anyone else has tried or thought about this strategy and if there are any good or bad things about it?

A lot may depend on whether or not you can make enough profit each year for your financial goals. For me, I've already got plenty and even these lower yearly earnings would give me more than I envision spending each year.

 

[corduroy]

So I've been trading BPS and CCs for about a year and doing fairly well. I stay with pretty safe trades (like 15-20% OTM), but I still need to sit at my computer most of every trading day to keep on eye on things and make adjustments, especially with all the news events lately. And there have been a number of stressful weeks where I had to do lots of rolls and such at the last minute. In addition, I spend an hour or two more every day reading TMC and watching YT videos to keep up on everything. Its been fun. But with spring coming and Covid appearing to end, I am planning to get out and do more travelling and try to enjoy my 'retirement' with all the TSLA profits.

What I've been looking into is whether or not I can still make decent income, but with farther out trades that don't require daily babysitting. I've found in general I try to get around $1/share selling a weekly CC, or about $1/share per 100 point spread weekly BPS (usually selling both 7-9 days before expiration).

In looking around I'm find pretty good candidates for Dec 16 2022 trades.

Dec 22, CCs at 1500 strike are going for about $45 (if I time a SP upswing). That's about my $1/week and seems like a fairly unlikely price to hit. In my IRA, maybe spread a few calls out at 1400/1500/1600 to average it. In my taxable accounts maybe go for >=1600 and take less profit.

For Dec 22 BPS I was looking at maybe 500/700 paying about $65-70 (again waiting for a SP dip to time it better). (about 44 weeks from now with a 200 pt spread, my approximate goal would be $88, but getting $70 or so would be pretty good). Willing to give up some profit for less work.

Maybe I would just open these new trades about 6-9 months in advance, just 3-4 times/year, using about 1/4 of my shares/margin each time, to spread the risk around to different times of the year. And keep about 20% for short term play money for when I see a good opportunity.

Wondering if anyone else has tried or thought about this strategy and if there are any good or bad things about it?

A lot may depend on whether or not you can make enough profit each year for your financial goals. For me, I've already got plenty and even these lower yearly earnings would give me more than I envision spending each year.

Less work babysitting weeklies definitely sounds appealing. I've been tracking that same -500/-700 BPS at different long term expirations like May 20, Aug 19, and Jan 2023. The sweet spot for me looks like the Aug 19th, currently trading at $53, which would be about $2.30 per week. That seems like a pretty good risk/reward. I might pull the trigger on some of these if it hits $60 or more on a big dip.

 

[InTheShadows]

So I've been trading BPS and CCs for about a year and doing fairly well. I stay with pretty safe trades (like 15-20% OTM), but I still need to sit at my computer most of every trading day to keep on eye on things and make adjustments, especially with all the news events lately. And there have been a number of stressful weeks where I had to do lots of rolls and such at the last minute. In addition, I spend an hour or two more every day reading TMC and watching YT videos to keep up on everything. Its been fun. But with spring coming and Covid appearing to end, I am planning to get out and do more travelling and try to enjoy my 'retirement' with all the TSLA profits.

What I've been looking into is whether or not I can still make decent income, but with farther out trades that don't require daily babysitting. I've found in general I try to get around $1/share selling a weekly CC, or about $1/share per 100 point spread weekly BPS (usually selling both 7-9 days before expiration).

In looking around I'm find pretty good candidates for Dec 16 2022 trades.

Dec 22, CCs at 1500 strike are going for about $45 (if I time a SP upswing). That's about my $1/week and seems like a fairly unlikely price to hit. In my IRA, maybe spread a few calls out at 1400/1500/1600 to average it. In my taxable accounts maybe go for >=1600 and take less profit.

For Dec 22 BPS I was looking at maybe 500/700 paying about $65-70 (again waiting for a SP dip to time it better). (about 44 weeks from now with a 200 pt spread, my approximate goal would be $88, but getting $70 or so would be pretty good). Willing to give up some profit for less work.

Maybe I would just open these new trades about 6-9 months in advance, just 3-4 times/year, using about 1/4 of my shares/margin each time, to spread the risk around to different times of the year. And keep about 20% for short term play money for when I see a good opportunity.

Wondering if anyone else has tried or thought about this strategy and if there are any good or bad things about it?

A lot may depend on whether or not you can make enough profit each year for your financial goals. For me, I've already got plenty and even these lower yearly earnings would give me more than I envision spending each year.

I’m just finishing up a vacation and moved everything out so I wouldn’t have to mess with trades this past week. It was weird not knowing what the market was doing all day long. It also made me think about doing something like you mentioned above.

I was looking at some bps if I sell 2 months out, it would reduce the amount of time I need to actively monitor my trades as well as reduce the risk because I would capture more premium for the same amount of capital. The overall annual return would be less, however less risk, less time, and still a decent return all look good to me.

 

[CrunchyJello]

Here is a 1-1-2 play I’ve been pondering:
Buy 830x1
Sell 820x1
Sell 725x2

Max profit has a $95 range; under a worse case scenario,
you’re purchasing 200 shares @ 725 (or lower, depending on your lower strike)
Edit: 200 @ (725 - net credits)

Any thoughts?