Wiki Selling TSLA Options - Be the House

[CHGolferJim]

These are great plays for those of us who expect the SP to rise over the next year or two.

But assuming 100% cash covered (in an IRA), there are opportunity costs to consider. Specifically, the opportunity cost of NOT being long more TSLA. This is what I'm thinking through right now as I am short some CCs which I may just let get exercised rather than continuing to roll.

Don’t forget about the opportunity cost of allowing CC to be assigned. If SP is close to strike price, the lost appreciation may be minor, but if the CC have gone significantly ITM, it could be a large amount ($100/contract/$1SP). That should be considered when deciding whether and how far to roll out during a price uptrend imo.

 

[ReddyLeaf]

@Papafox or anyone else seen such blatant attempts to manipulate TSLA premarket? Looks like someone really wants to target $1000. Will be an interesting day. My CCs are above $1100, so three major call walls required to be broken before I start worrying. TSLA definitely stronger than the market, way above Feb 947 high, while QQQ is still below 370 high. Bullish.

 

[LightngMcQueen]

I think if I had cash or adequate margin I would just be selling -1000 Puts for Jan 2023 for $200. Worst case you get shares in January for cost basis of $800. I would pay taxes in April 2024 with small penalty. Or, -1200 for $325.

I was doing something similar since Dec dip … thought it was a good plan but:

- burned most of earnered premium on post Q4 delivery report fomo trades (bought short term calls/BCSs for different dates throughout Jan/Feb)

- when SP tanked in Jan/Feb I’ve ended up with insufficient margin and had to buy expensive (IV spike) protective puts converting -PUTs into BPSs

- that margin would have much better used for buying call spreads on major down days .. I bought only a few because I did not have enough funds.
850/900 call spreads for May which I have bought when SP was close to 700 will likely produce slightly over 3x return in 3 months

I could have bought 10 times more of them if I did not go all in with -PUTs … that last thing really PUT me OFF from selling PUTs in the future
I think I will decrease my options selling margin budget by 4x
… when/if I get this margin back (Jan 23)

 

[JustMe]

According to Stock Option Max Pain there is now an enormous call wall at $1,100 that is almost double the OI of $1,000 calls (3/25 exp)

So we may not see a push below $1,000 today by MMS after all.

Cheers -

 

[Knightshade]

do you have a link to an offer like this? i haven't seen one before - a whack at my tax bill like that would be really valuable

The signup bonuses there's usually a good up to date list here:

Normally you'd want to start a bit earlier, but if you have a spouse they too can do signups, making it easier to get a bunch in a relatively short time if you have the spend available which you do via the tax bill.

Also don't be put off by half of these being "business" cards... If you say you have a business- you do. Sole proprietorship using your SSN and there ya go.

Best Current Credit Card Sign Up Bonuses & Offers For May, 2024 - Doctor Of Credit

View all of the best credit card sign up bonuses. We list all of the best bonuses, unlike other sites that only list cards that pay them a commission!

www.doctorofcredit.com

A few examples with larger spend requirements since you have a 6 figure bill I'd imagine? Note- in all cases you get additional points for the spend itself, though mainly this will offset the 1.x% fee for paying taxes with a card, leaving the main bonus as net profit.


Chase Ink Preferred gets you 100k chase points for 15k spend (so that's $1000 if taken as cash, if used for travel the value will range from $1250 to as potentially over $5000)... that'll knock out 30k spend alone if you get one for you and one for spouse.

Amex Biz Plat is 150,000 Amex points for 15k spend per card ($1500 taken as cash, considerably more used for travel)

Capital One Business Spark Cash Plus - $3000 cash for 50k spend

Amex personal gold 90k pts on 4k spend (90k will be $900 cash, so over a 20% return on spend- again considerably higher value if used for travel).


Normally when you have more time you can also swap referral links between you and your partner to increase the bonuses too though in your case you likely don't have time before 4/15 to wait for one of you to get cards and then refer the other to them.

I'm assuming you have a 6 figure plus tax bill and very few cards will give you the credit limit you need. I did this 10 years ago when I graduated dental school to temporarily reduce interest on student loans

This site has a list of 0% offers. 12-21 months of 0% interest is possible, but the credit limit will be the limiting factor.
Best 0% APR and Low Interest Credit Cards of March 2022 - NerdWallet

The 0% interest is a different/alternative strategy thing- there's SOME overlap in that those cards do usually have a signup bonus, though it's usually a smaller one with smaller spend.... we mainly do it for the signup bonuses rather than the extra time- and you can of course sign up for more than one card, we've got more than enough to cover a 6 figure tax bill for example and we're knocking several more large signups out with this past years tax bill.

We also mainly use the bonuses for premium travel, so for us 100k pts instead of $1000 cash will go to buying a roundtrip business class plane ticket that'd normally cost $5000 or something...pretty good return on just paying your taxes.

 

[BornToFly]

According to Stock Option Max Pain there is now an enormous call wall at $1,100 that is almost double the OI of $1,000 calls (3/25 exp)

So we may not see a push below $1,000 today by MMS after all.

Cheers -

Yeah, I think the MMs were using the dips to reposition themselves. I'm a little worried about my 1050s today. They might stop defending until 1100 now. I can't believe how much the 1050s and 1080s still cost this morning. Less than 8 hours of trading, and the 1080s are still worth more now than when I sold them Monday.

 

[UltradoomY]

The signup bonuses there's usually a good up to date list here:

Normally you'd want to start a bit earlier, but if you have a spouse they too can do signups, making it easier to get a bunch in a relatively short time if you have the spend available which you do via the tax bill.

Also don't be put off by half of these being "business" cards... If you say you have a business- you do. Sole proprietorship using your SSN and there ya go.

Best Current Credit Card Sign Up Bonuses & Offers For May, 2024 - Doctor Of Credit

View all of the best credit card sign up bonuses. We list all of the best bonuses, unlike other sites that only list cards that pay them a commission!

www.doctorofcredit.com

A few examples with larger spend requirements since you have a 6 figure bill I'd imagine? Note- in all cases you get additional points for the spend itself, though mainly this will offset the 1.x% fee for paying taxes with a card, leaving the main bonus as net profit.


Chase Ink Preferred gets you 100k chase points for 15k spend (so that's $1000 if taken as cash, if used for travel the value will range from $1250 to as potentially over $5000)... that'll knock out 30k spend alone if you get one for you and one for spouse.

Amex Biz Plat is 150,000 Amex points for 15k spend per card ($1500 taken as cash, considerably more used for travel)

Capital One Business Spark Cash Plus - $3000 cash for 50k spend

Amex personal gold 90k pts on 4k spend (90k will be $900 cash, so over a 20% return on spend- again considerably higher value if used for travel).


Normally when you have more time you can also swap referral links between you and your partner to increase the bonuses too though in your case you likely don't have time before 4/15 to wait for one of you to get cards and then refer the other to them.





The 0% interest is a different/alternative strategy thing- there's SOME overlap in that those cards do usually have a signup bonus, though it's usually a smaller one with smaller spend.... we mainly do it for the signup bonuses rather than the extra time- and you can of course sign up for more than one card, we've got more than enough to cover a 6 figure tax bill for example and we're knocking several more large signups out with this past years tax bill.

We also mainly use the bonuses for premium travel, so for us 100k pts instead of $1000 cash will go to buying a roundtrip business class plane ticket that'd normally cost $5000 or something...pretty good return on just paying your taxes.

I guess I am interested because I am lucky enough to have a high tax bill????
I was not aware that the IRS allows credit card payments - or do you get a check from the CC company and then deposit in personal account then pay them?
Sorry for the OT!

 

[jeewee3000]

Continuing to think about this - I've got a tax bill due in the next month and it has me thinking about whether I'm better off paying the bill or using the tax money (and then some) for something like this to raise the tax cash.

Doing some math gymnastics in my head, and including taxes on gains, I get a first order approximation that this would be a good idea for me. I'll be doing detailed math soon / this evening and see what it looks like. The fundamental problem with that tax bill is that it is large enough to represent a capital impairment - it'll make a dent in the resources I have for earning an income, so using that cash (plus some extra) that can pay the taxes is looking better than bad. I'll post later when I have details looking for mistakes and missing stuff.

To piggyback on this, I've also been theorycrafting on methods of raising cash now in a "safe" manner.

The selling of ITM BPS as @Yoona suggested seems too risky for my taste. I sold some ITM BPS by rolling out of trouble a few weeks/months ago and now I'm holding many ITM BPS, the worst ones being JAN2024 -1350p/+1100p. I'm quite confident these will expire worthless, but if the market were to stay crazy/low and TSLA SP does not exceed $1225 by then I can't roll these profitably.

Odds are SP will be well above $1225 by then, but no one can tell with certainty.

I'd personally go more with selling ITM cash secured puts, for example if you sell JAN2024 -1500puts now you'd receive $65,100 per put. In other words, you receive 43% return on exposed capital.

If the put expires worthless, all is well.

If the put stays ITM, you can roll it for a credit since it is fully backed by cash.

There are only two risks with this strategy IMO:

1) odds are TSLA will find a new trading range well before JAN2024 (I'm talking +$2000) in which case the above strategy has a great opportunity cost. You could have made way more chasing the SP with weekly/monthly puts or BPS.

2) there is always the risk of early execution by the buyer, in which case you are assigned some very expensive (by today's standards) TSLA shares. This risk is however minimal since the put buyer is throwing the time value away. If this happens you just sell $1500 or higher cc's if you want to recoup the losses. Or you just HODL the shares until TSLA catches up to what you paid for your shares.

As always we're assuming TSLA will not go bankrupt and the SP will exceed a multiple of $1000 in the coming decade.

The benefits of this strategy are instant cash generation and little loss of sleep.

 

[Knightshade]

I guess I am interested because I am lucky enough to have a high tax bill????
I was not aware that the IRS allows credit card payments - or do you get a check from the CC company and then deposit in personal account then pay them?
Sorry for the OT!

Yeah if there's a better thread for this I'll be happy to move it-- just seems this thread is most likely folks with big ST cap gains tax bills


And yes they allow CC payments.... there's a couple of payment processors they specifically approve... they charge a fee but it's under 2%, as I say usually the points earned on the spend itself will cover the fee, so the much larger (relatively to size of spend) sign up bonus is all "free" money in that sense.

Pay your taxes by debit or credit card or digital wallet | Internal Revenue Service

Make your tax payments by credit or debit card. You can pay online, by phone or by mobile device no matter how you file. Learn your options and fees that may apply.

www.irs.gov

Note: any SINGLE payment over 100k you need to call the processor rather than do it online... but in this case you'd be making multiple payments (one for each new credit card) so likely never putting more than 50k or less on any single payment.

 

[elasalle]

I think if I had cash or adequate margin I would just be selling -1000 Puts for Jan 2023 for $200. Worst case you get shares in January for cost basis of $800. I would pay taxes in April 2024 with small penalty. Or, -1200 for $325.

Selling PUTS hasn't worked for me so far, because each time there is a bad dip, I take the losses, free up margin and go back to buying calls the losses are worth it, due to the amount of margin that gets freed up to buy calls on the cheap

Each time I am selling PUTS that are deep ITM and thinking I don't need to manage at all ... (lessons learnt each time )

Still sold some Jan 23 600s for $42 .... just because the margins were there to take advantage of ...

 

[BornToFly]

Selling PUTS hasn't worked for me so far, because each time there is a bad dip, I take the losses, free up margin and go back to buying calls the losses are worth it, due to the amount of margin that gets freed up to buy calls on the cheap

Each time I am selling PUTS that are deep ITM and thinking I don't need to manage at all ... (lessons learnt each time )

Still sold some Jan 23 600s for $42 .... just because the margins were there to take advantage of ...

Yeah, you need to decide ahead of time if you're a Put seller or a call Buyer, and stick with the decision...

 

[elasalle]

Yeah, you need to decide ahead of time if you're a Put seller or a call Buyer, and stick with the decision...

Bread is Stock
Butter is CC
Jelly ... all the rest (so not a big part of my strategy)

 

[MP3Mike]

From the options volume it looks like they are shooting for a close near $1010...

 

[Zhelko Dimic]

...
With naked put, yes, you're in loss for around $110K (10x100x(1013-900)), but if things turn for worse trough the year, you can always buy some cheap puts ($400 or something), and then roll for another 6 months, or a year.
...

My math is wrong, loss would be 300K (10x100x(1200-900)), so the whole message is muddled with this change, but position is still rollable...

 

[BornToFly]

From the options volume it looks like they are shooting for a close near $1010...

It looked like we were just following the NASDAQ, but just now we have climbed 3X. I'm going to have to watch this the entire today to possibly manage my 1050s.

 

[wnorris]

@Papafox or anyone else seen such blatant attempts to manipulate TSLA premarket? Looks like someone really wants to target $1000. Will be an interesting day. My CCs are above $1100, so three major call walls required to be broken before I start worrying. TSLA definitely stronger than the market, way above Feb 947 high, while QQQ is still below 370 high. Bullish.
View attachment 785599

This is something I have been watching with interest this week. Someone big is making sure this thing stays over $1000. Any movement approaching or below $1000 and you start to see large buying come in. It's been like this since Wednesday.

Edit: The # of calls at the $1k mark has shifted up and out (it appears) so hard to say if this will hold as we get closer to EOD and expiration.

 

[BornToFly]

This is something I have been watching with interest this week. Someone big is making sure this thing stays over $1000. Any movement approaching or below $1000 and you start to see large buying come in. It's been like this since Wednesday.

The # of calls at the $1k mark has shifted up and out (it appears) so hard to say if this will hold as we get closer to EOD and expiration.

I sold BPS 800/650 for 4/1 near the low during the morning dip. I'm thinking Q1 P&D should make the 4/1 800 very safe.

 

[LightngMcQueen]

From the options volume it looks like they are shooting for a close near $1010...

Can you explain why do you think so?
I want to understand the reasoning ... I can never get convinced if option volume is driven in changes of behaviour of option holders or option writers.

 

[mickificki]

Yeah if there's a better thread for this I'll be happy to move it-- just seems this thread is most likely folks with big ST cap gains tax bills


And yes they allow CC payments.... there's a couple of payment processors they specifically approve... they charge a fee but it's under 2%, as I say usually the points earned on the spend itself will cover the fee, so the much larger (relatively to size of spend) sign up bonus is all "free" money in that sense.

Pay your taxes by debit or credit card or digital wallet | Internal Revenue Service

Make your tax payments by credit or debit card. You can pay online, by phone or by mobile device no matter how you file. Learn your options and fees that may apply.

www.irs.gov

Note: any SINGLE payment over 100k you need to call the processor rather than do it online... but in this case you'd be making multiple payments (one for each new credit card) so likely never putting more than 50k or less on any single payment.

So do you sign up for new CCs every year to take advantage of the signup bonuses? And then cancel after finishing the payments?

Sold a few 4/1 870/770 bps earlier this morning. Seems like tsla is very strong right now, with no major tsla news coming out within the next week. No huge macro news either(at least lets hope).

 

[MP3Mike]

Can you explain why do you think so?
I want to understand the reasoning ... I can never get convinced if option volume is driven in changes of behaviour of option holders or option writers.

It is from watching how things play out. Look at the options volume:

See the put spike at 1000 and the call spike at 1020? And they sort of meet at 1010... It doesn't guarantee anything, but it does seem to be a good predictor. (At least on the last trading day of the expiration.)

I will say that normally the gap is wider, ~$50, instead of the $20 gap seen this week.