Sounds scary to me. Then again you receive a 67% of capital at risk credit up front while also starting at a max loss. So a $325k loss when you open the position with Dec '22 as the resolution date. Moving over 1200 between now and December sounds pretty reasonable to me as well, but the overall position is directional and requires the share price to be up. If the macro environment stays bad, Tesla may not care and continue powering through it. But a single bad / meets expectations quarterly report might be enough to stop the shares from ever reaching $1200 this year.
So I see a position that is directional and entirely dependent on Tesla's excellent history of success continuing for at least the remainder of the year, and the macro avoiding a complete meltdown.
I guess a related question - can those 30% OTM trades earn the $325k loss over the 10 months in a reliable fashion? How much weekly credit will that need to be. If the $675k in up front cash reasonably generate the ~50% return over the 10 months, then you're into a worst case break even / zero gain situation, and the possibility of $1M earning $1M over the year. That sounds like a great outcome to me.
I wonder how much that initial credit changes if it were a 1100/1000 BPS. Or maybe a $50 wide BPS. Or ... Since you're starting out in a max loss position, my instant thought is a wide spread isn't all that important. The only real management is a share price greater than the short leg plus the intervening distant put sales.
Another possible issue - do you have the discipline to stay really far / stress free OTM with the ongoing weekly put sales? If you start getting more aggressive with CSP sales, or even selling BPS with that incremental cash, and then start getting a little bit more aggressive, and a little bit more, then you get back to the more stressful work while also creating more and more leverage.
My instant reaction is more ITM cash secured puts. Maybe I'm just risk averse, but in such a way that I create extra risk. What I mean - that $1M would support 8 of the -p1200. The Dec 1200 puts are priced at $320, so selling those as CSP is only good for $32k * 8 = $256k. In theory $960k of the $1M is at risk but a max loss would only occur at a share price of $0 and holding to expiration.
This might be a case where the really big up front credit plus the strong expectation of gains is the better approach.
This is interesting - the -1300/+1250 has a 75% credit. So 200 of these has $1M at risk while producing $750k in up front cash. H'mm... Thanks for bringing the idea up - I need to think through possibilities for myself. I've got a big whack of cash to raise in the next few weeks for taxes. Maybe a trade along these lines will be better for me.
It does look like a $50 wide spread will be the minimum at this later date - maybe smaller using Jan '23. In Dec '22 I only saw strikes that were multiples of $50.
EDIT: The other issue to be aware of - the bid/ask spread is $10 or so. On a $50 wide spread that is a huge difference in results. My numbers are from the midpoint. If you can't get the midpoint of the b/a spread the results fall off fast. Then again if you can beat the midpoint, the results improve fast
