Wiki Selling TSLA Options - Be the House

[Zhelko Dimic]

I've been rolling these more or less weekly since mid-March after the fiasco that had us run towards ATH. I originally STO these as 3/18 890CC in mid-March.

Always rolling up & out for a max strike improvement and min. $1 credit.

I bought back half the position at a loss already couple of weeks ago. Prefer not to repeat and prefer to keep my shares. Biggest issue with loosing the shares is that in Germany I'm taxed FIFO, and the shares backing this CC have a cost basis of around $60....!

So, now I'm just going to roll until I get caught, or I can get out of it. Anything over 1200 I'm willing to part with some shares (also for another reason), until then (or I get caught) I will roll up for as long as I can at a buck credit.

Got it.
If we get deep ITM, all time premium will be lost, and you will need to add lots of time to be able to roll. With short time frames you run a risk of being assigned. For examples of time premium, you could look at $700 strikes today, and how much premium they have.
If you're ready to immobilize your portfolio for months, or years, you will be able to roll with better strikes for sure, but your hands will be tied for long times. Again, personal experience - some I saved, some I sold for 50% of eventual SP...

 

[FS_FRA]

Got it.
If we get deep ITM, all time premium will be lost, and you will need to add lots of time to be able to roll. With short time frames you run a risk of being assigned. For examples of time premium, you could look at $700 strikes today, and how much premium they have.
If you're ready to immobilize your portfolio for months, or years, you will be able to roll with better strikes for sure, but your hands will be tied for long times. Again, personal experience - some I saved, some I sold for 50% of eventual SP...

Yeah...like I said, I will keep rolling these up & away for a credit until I get caught (or we get so close to ATM/OTM that the BTC is worth it). For now I'm happy to immobilize that part of my portfolio to avoid assignment and the mind-bending tax-bill.

My long-term strategy for these ITM CCs is the be out of the position before the AGM either way. I don't want to be holding ITM CCs when the FOMO buying before the stock-split happens. I might be buying these back at a loss then whether I like it or not. For the next months I'll be rolling...

 

[ReddyLeaf]

Yeah...like I said, I will keep rolling these up & away for a credit until I get caught (or we get so close to ATM/OTM that the BTC is worth it). For now I'm happy to immobilize that part of my portfolio to avoid assignment and the mind-bending tax-bill.

My long-term strategy for these ITM CCs is the be out of the position before the AGM either way. I don't want to be holding ITM CCs when the FOMO buying before the stock-split happens. I might be buying these back at a loss then whether I like it or not. For the next months I'll be rolling...

Seems like a prudent strategy. Another suggestion is to “day-trade” your roll. Buyback during an obvious run on the SP, then sell next week’s CCs after the SP rises $10-$20, much like this morning’s action. Of course, this does involve risk in not guessing the future SP movement. To your 2nd point, I would expect the FOMO buying to really start in earnest in mid to late June.

 

[FS_FRA]

To your 2nd point, I would expect the FOMO buying to really start in earnest in mid to late June.

Is there a consensus on when the AGM will be held? Back to June as in '17-'19 or later? I don't remember from last time, but how much time between the shareholder approval and the split date?

 

[Knightshade]

Is there a consensus on when the AGM will be held? Back to June as in '17-'19 or later? I don't remember from last time, but how much time between the shareholder approval and the split date?

Previous split did not require shareholder approval as they had enough authorized shares in the original articles of incorporation to do it.

I think we can't really suss out the split action right now because there's multiple ways Tesla could do this

Everything from May 2nd proxy info that says "We will be voting to add X more shares, with the meeting with the vote results happening on date W and pending approval of that will do a Y:1 split with an ex-date of Z" to "We will be voting to add X more shares" and no added info... then they dole out the meeting date by itself later... then they dole out the split info by itself later still.

And depending on the authorized shares they could do more than one split as well (I'd certainly expect the initial one to use only a small fraction of newly authorized shares).

 

[adiggs]

Quick question....

Are you able to day-trade spreads under this setup? I often get warnings about my ability to say trade positions as I place orders, but I think that's rooted in not having cash margin on hand.

I can't tell if this is an IRA rule in general or something specific to Fidelity. Would love to be able to open BPS in an MMD and close out in the afternoon +30%>

I haven't had any problems with same day open/close. I don't think I've ever needed / wanted to do a same day open/close/open. I also have the limited margin which, as mentioned elsewhere, can take care of that.

 

[Zhelko Dimic]

Yeah...like I said, I will keep rolling these up & away for a credit until I get caught (or we get so close to ATM/OTM that the BTC is worth it). For now I'm happy to immobilize that part of my portfolio to avoid assignment and the mind-bending tax-bill.

My long-term strategy for these ITM CCs is the be out of the position before the AGM either way. I don't want to be holding ITM CCs when the FOMO buying before the stock-split happens. I might be buying these back at a loss then whether I like it or not. For the next months I'll be rolling...

Last comment - at the risk of offending you, I'm not quite sure I made my point obvious, as you mentioned AGM, as to me that's a short-term!

Hypothetical scenario - we explode to $1300 in a week or two; (one needs to suspend disbelief and check historically how many times this happened)

Now your $1000 CC will behave as a $700 CC at SP=1000
In this situation, you could roll for strike improvement and almost no credit:
a) to May for $5 strike improvement to $1005. If in May we're at $1450, how do you feel?
b) to July for $25 strike improvement to $1025. If in July we're at $1500, how do you feel?
c) to December for a $100 improvement to $1100. In in December we're at $2200, how do you feel?
d) Roll into Jan $2024 would net you $300 to $1300. But, what if we're at $4000 at that time?

Couple of those happened to me. Not saying it's bound to happen, I just want to convey my experience of thinking the worst case scenario...

 

[ReddyLeaf]

Interesting. Somebody doesn’t want the SP over $1000. Then, there’s another somebody who does. I think I’ll just wait it out and see who wins before selling the rest of my CCs. Wouldn’t mind taking assignment on my -p1000s (but will probably just roll again, this time actually waiting until Friday afternoon). Trying to be more patient.

 

[WattsHappening]

Last comment - at the risk of offending you, I'm not quite sure I made my point obvious, as you mentioned AGM, as to me that's a short-term!

Hypothetical scenario - we explode to $1300 in a week or two; (one needs to suspend disbelief and check historically how many times this happened)

Now your $1000 CC will behave as a $700 CC at SP=1000
In this situation, you could roll for strike improvement and almost no credit:
a) to May for $5 strike improvement to $1005. If in May we're at $1450, how do you feel?
b) to July for $25 strike improvement to $1025. If in July we're at $1500, how do you feel?
c) to December for a $100 improvement to $1100. In in December we're at $2200, how do you feel?
d) Roll into Jan $2024 would net you $300 to $1300. But, what if we're at $4000 at that time?

Couple of those happened to me. Not saying it's bound to happen, I just want to convey my experience of thinking the worst case scenario...

Excellent point. I agree that we should be careful about assuming the SP won't spike 20-30% quickly. It's happened many times. I know empirical evidence indicates weeklies going 20% OTM is safe. But when you're rolling ATM calls, there is a danger that the SP will make it difficult to keep rolling.

I found myself in this position with mis-timed CCs during the run-up from $800 to $1,000+. Rolled them for several weeks, but the rolls kept getting tougher and tougher as the strike price went further ITM. After the earnings announcement, I watched in agony on Thursday morning as the SP spiked to almost $1,100. As the SP incredulously continued to drop throughout the day, I bit the bullet and closed out the CCs at a loss.

Who knows if I was premature with my decision. SP could easily continue to move sideways or down from here. But I experienced serious FOMO on my CC position and was thrilled the SP dropped so I could cover at an acceptable loss. I'm sleeping way better at night knowing I am fully long TSLA.

 

[ZeApelido]

Last comment - at the risk of offending you, I'm not quite sure I made my point obvious, as you mentioned AGM, as to me that's a short-term!

Hypothetical scenario - we explode to $1300 in a week or two; (one needs to suspend disbelief and check historically how many times this happened)

Now your $1000 CC will behave as a $700 CC at SP=1000
In this situation, you could roll for strike improvement and almost no credit:
a) to May for $5 strike improvement to $1005. If in May we're at $1450, how do you feel?
b) to July for $25 strike improvement to $1025. If in July we're at $1500, how do you feel?
c) to December for a $100 improvement to $1100. In in December we're at $2200, how do you feel?
d) Roll into Jan $2024 would net you $300 to $1300. But, what if we're at $4000 at that time?

Couple of those happened to me. Not saying it's bound to happen, I just want to convey my experience of thinking the worst case scenario...

Good example.

Jives with what my simulations last year showed - you can usually get away with rolling up and out to cover a doubling of share price, but above that chances increase that you will have lose the shares at only $2000 even if the shares are valued at $3000.

Opened 790/650 BPS near the open, and some 1200/1350 BCS.

The NASDAQ is near the YTD low at this point, so I'm hoping that macros don't drop much further, and don't continue to pull TSLA down. If macros recover, TSLA should hit 1200 easy.

Are you trying to Jedi mind trick the market?!

 

[scubastevo80]

Happy Monday - back from our family trip to Canada and daytrading BPS in the parents account. Sold 4/29 BPS -820/+700 around the open for $1.50 and closed out around 2pm for $0.70. Still unsure of market direction, so contemplating more IC exposure tomorrow.

 

[scubastevo80]

Happy Monday - back from our family trip to Canada and daytrading BPS in the parents account. Sold 4/29 BPS -820/+700 around the open for $1.50 and closed out around 2pm for $0.70. Still unsure of market direction, so contemplating more IC exposure tomorrow.

Replying to myself - have some hail mary 15% OTM BPS for this Friday out there. Assume TSLA will sell off on the TWTR bid acceptance news but we'll see by how much.

 

[BornToFly]

I think I did well on my timing today. Sold all the BPS 790/650s I wanted for the week near the open. Sold half the 1200/1350s early when premiums were higher. Now I'm hoping that we get a reversal tomorrow and can sell the remaining BCSs on a pop. If not, I might get more brave on Wednesday and lower my strikes for the remaining BCS.

 

[samppa]

sold some july 15th TWTR -p52.50 for $2.50 each. no idea how long Elons buying of twitter will take, but I think 3 months should be enough time.

 

[Yoona]

The stock market is poised to rebound this week as corporate buybacks return, JPMorgan's quant guru says

To position for upside in the stock market, JPMorgan's Marko Kolanovic recommends investors take a barbell approach to their portfolio.

markets.businessinsider.com

 

[EVCollies]

Maybe he means taxes? What the hell are you guys paying per trade?

I'm on track to make more than 1500 trades this year and I got my fees down to $.50 per options trade on TDA

Thanks for the info on trading costs. I reached out to Schwab as I'm an active trader with a large account and paying $.65 per trade. I asked for $.40 per trade thinking I might get $.50 but they accepted $.40. This could save me $10K/y now and when TSLA splits will save me more in the future.

 

[BLSmith2112]

I really want to get into this but would love to dip into a quick conversation if I had questions, which I will have. A revolving monthly 1% on my 1500 shares would effectively change my life as I've only made 60k in liquid a year for over a decade. Adding a few grand in the coffers would be huge, but I know I will screw it up. Going to start watching the 30 hours now but I am convinced there will be a huge mistake by me at some point. I'm so far up percentage wise on my position that if I had to liquidate I'd have a $300,000 tax bill which is 5 years of salary

 

[WattsHappening]

I really want to get into this but would love to dip into a quick conversation if I had questions, which I will have. A revolving monthly 1% on my 1500 shares would effectively change my life as I've only made 60k in liquid a year for over a decade. Adding a few grand in the coffers would be huge, but I know I will screw it up. Going to start watching the 30 hours now but I am convinced there will be a huge mistake by me at some point. I'm so far up percentage wise on my position that if I had to liquidate I'd have a $300,000 tax bill which is 5 years of salary

Welcome. Hang out for a while and learn from the esteemed group of posters here who are so generous with advice/not-advice. 1% per month should be very do-able while taking on little risk. There are many here who aim for 1% per week. Many ways to play it for that kind of return. Deep-out-of-the-money covered calls is probably a good starting point for you to research since you are long shares.

Ask questions. Read and absorb. The good folks here are more than happy to help.

 

[BornToFly]

I really want to get into this but would love to dip into a quick conversation if I had questions, which I will have. A revolving monthly 1% on my 1500 shares would effectively change my life as I've only made 60k in liquid a year for over a decade. Adding a few grand in the coffers would be huge, but I know I will screw it up. Going to start watching the 30 hours now but I am convinced there will be a huge mistake by me at some point. I'm so far up percentage wise on my position that if I had to liquidate I'd have a $300,000 tax bill which is 5 years of salary

As soon as you start thinking: "Wow, this is like free money! Why doesn't everyone do this?!?" Get ready to have your account nuked by a "black swan" event.

P.S. - We had two of those in 5 months, and many of us have still not recovered... It's easy to make money when the market is behaving and the stock is slowly moving in one direction. If you're aggressive and leveraged, one surprise can cause you to lose more money than you thought possible.

 

[EnzoXYZ]

I really want to get into this but would love to dip into a quick conversation if I had questions, which I will have. A revolving monthly 1% on my 1500 shares would effectively change my life as I've only made 60k in liquid a year for over a decade. Adding a few grand in the coffers would be huge, but I know I will screw it up. Going to start watching the 30 hours now but I am convinced there will be a huge mistake by me at some point. I'm so far up percentage wise on my position that if I had to liquidate I'd have a $300,000 tax bill which is 5 years of salary

This is what I would tell myself couple years back:
-ALWAYS Sell into strength (puts and call have different meanings)
-ALWAYS Sell deep out of the money
-NEVER chase premiums
-Do nothing until expiration day
-Know what to roll to if the position is in the money
-Remember the tortoise won the race. Slow and steady is the name of the game.
-Keep reading and asking questions

Seems like just a few K a week would make a significant impact so I would sell covered calls and cash/margin secured puts. Spreads are dangerous if done wrong. Greed is what got me couple of times. The “free money” thing really gets you.