Wiki Selling TSLA Options - Be the House

[EVNow]

What was the expiration date?

Interesting. I know we’ve gone over these types of assignments before, but I just thought of a variable that hasn’t been discussed: weeklies vs monthlies or quarterlies. I would posit that dATM weeklies have a higher probability of assignment vs quarterlies. Traders do weeklies while hedgers or investors do quarterlies. I was $200 ATM in June 2021 (almost $300 at one point), and was never assigned early. Food for thought.

I sell weeklies (ofcourse monthlies/quarterlies become weeklies near expiration).

From whatever assignments I've had - usually assignments happen when SP is ~200 below strike (or about 20%) - but it doesn't always happen. This time I saw some assignments in my account on Friday. So, I guess someone requested those on Thursday, when SP hit a low of 821 ... ? Rest of the puts I didn't roll and let them be assigned.

I actually don't care ... if I'm under water and rolling, I've already accepted that to come out of loss, SP needs to come up.

ps : When I roll, if the SP is close to strike, ofcourse I can roll down, which would be beneficial (in case of future assignment). But once SP is 100+ below strike, usually I can't roll down. I just roll at the same strike and get $2 or $3 premium. Sometimes I've to roll 2 weeks at a time to make any premium. Like now - I've to sell 5/13 calls.

 

[Chenkers]

Interesting. I know we’ve gone over these types of assignments before, but I just thought of a variable that hasn’t been discussed: weeklies vs monthlies or quarterlies. I would posit that dATM weeklies have a higher probability of assignment vs quarterlies. Traders do weeklies while hedgers or investors do quarterlies. I was $200 ATM in June 2021 (almost $300 at one point), and was never assigned early. Food for thought.

Of course any DITM Put that's a month out is much less likely to be assigned due to it's time value. For example a June 3 1015P has a value of $128 when the SP is at $915, or $28 time value. No one in their right mind will exercise that Put and give up $28 per share value. The same 1015P expiring this week currently only has about $1.50 time value and this will rapidly decrease approaching Friday, making exercise much more likely.

Btw this has been a crazy day for seesaw up/down SP action. Would be a great day to day trade options for anyone so inclined/game.

 

[stealthyc]

I sell weeklies (ofcourse monthlies/quarterlies become weeklies near expiration).

From whatever assignments I've had - usually assignments happen when SP is ~200 below strike (or about 20%) - but it doesn't always happen. This time I saw some assignments in my account on Friday. So, I guess someone requested those on Thursday, when SP hit a low of 821 ... ? Rest of the puts I didn't roll and let them be assigned.

I actually don't care ... if I'm under water and rolling, I've already accepted that to come out of loss, SP needs to come up.

ps : When I roll, if the SP is close to strike, ofcourse I can roll down, which would be beneficial (in case of future assignment). But once SP is 100+ below strike, usually I can't roll down. I just roll at the same strike and get $2 or $3 premium. Sometimes I've to roll 2 weeks at a time to make any premium. Like now - I've to sell 5/13 calls.

When assigned you can also basically just sell the shares at market and re-sell the same DITM put if you are so inclined. Obviously overnight price action can make that go in your favor or against, but you don't have to hang onto shares if lets say you are on margin and you don't want to pay interest

 

[Chenkers]

Regarding being DITM, I've developed a lot of experience having to roll DITM BPS of late. I'm currently keeping alive some 1040/1080, 980/1030 and 920/960. Being DITM these are typically worth just under $40-50 per contract depending on time value. My strategy has typically been to roll them forward at the same strikes waiting for the SP to recover so I can eventually close them out. I've learned over time that widening the spread to roll for credit can just end up digging the hole deeper. So these are typically a debit roll and can get quite expensive the later the roll is left. A typical roll at the start of the expiry week might be $2-3 per contract getting up to $6-10 if left too late (at which point its often better to take the loss).

I typically pay for these rolls by selling weekly CC's and BCS, aiming to more than cover the roll cost. Otherwise it eats into the cash balance. This is only OK if you're confident the share price will rebound in a reasonable time. Prolonged down periods like the start of this year can make this a very expensive proposition. You also have to watch margin as a DITM BPS typically provides margin support through the lower P+ and rolling can reduce available margin.

What I've been doing with these DITM rolls lately is to accept that it will take more than a couple of weeks for the share price to rebound. This allows rolls to happen 1,2 or 3 weeks out, lessening the chance of exercise. The other thing this does is reduce the roll cost each week to as low as $1-2. Put another way this will allow 20 weeks for a $40 DITM BPS with $2 rolls to recover for break-even (excluding initial premium). From now, 20 weeks would be around the time of Q3 earnings. For a modest number of contracts this has been a doable proposition for me of late so its a recovery strategy I'm continuing with.

 

[EVNow]

When assigned you can also basically just sell the shares at market and re-sell the same DITM put if you are so inclined. Obviously overnight price action can make that go in your favor or against, but you don't have to hang onto shares if lets say you are on margin and you don't want to pay interest

True. Not on margin ...

 

[jeewee3000]

True. Not on margin ...

That's basically the caveman answer that we've come up with in this thread after cycling through many a options strategy:

MARGIN BAD! RISK BAD! SAFETY GOOD!

(BUT HODL TOO BORING!)

 

[intelligator]

Someone mentioned this before, apologies for not recalling who.

Last week I opened and closed a BPS at a profit. Today I opened an IC for the same Put spread now coupled with a Call spread. Although the Put strikes are the same, they are technically a different security (different CUSIP).

Would the wash sale rule apply here?

 

[bkp_duke]

Someone mentioned this before, apologies for not recalling who.

Last week I opened and closed a BPS at a profit. Today I opened an IC for the same Put spread now coupled with a Call spread. Although the Put strikes are the same, they are technically a different security (different CUSIP).

Would the wash sale rule apply here?

Wash sale rule applies if they have the same expiration date. If the expiration date is different, then they are considered different securities.

 

[EnzoXYZ]

Looking for some data on trade strategy here- would we be better off not betting big/risky positions around earnings and P&D reports? These events are what I see as controllable and events like Hertz, Russia war, Twitter purchase as uncontrollable.
My over confident belief of a singular controllable event has almost gotten me into trouble by decreasing strikes and thus many close calls. For example Q1 financial release dates I was closer to 12% OTM vs the usual safer 17-18% OTM.
Are we suckered in with high premiums around these events? I feel I am and probably not alone?

 

[mongo]

Someone mentioned this before, apologies for not recalling who.

Last week I opened and closed a BPS at a profit. Today I opened an IC for the same Put spread now coupled with a Call spread. Although the Put strikes are the same, they are technically a different security (different CUSIP).

Would the wash sale rule apply here?

Wash sales impact recognition of losses. However, since the original position is closed, even if the new put were a loss you can claim the loss against the gain (30 days after the last time you close it).
Not a CPA

 

[EnzoXYZ]

Wash sale rule applies if they have the same expiration date. If the expiration date is different, then they are considered different securities.

Agree. I believe that’s how I have some wash sales last year on the long leg of the BPS. The amounts were so little that I didn’t bother to verify.
This is the times I wonder if getting a professional trader status would help.

 

[mrmtb]

Looking for some data on trade strategy here- would we be better off not betting big/risky positions around earnings and P&D reports? These events are what I see as controllable and events like Hertz, Russia war, Twitter purchase as uncontrollable.
My over confident belief of a singular controllable event has almost gotten me into trouble by decreasing strikes and thus many close calls. For example Q1 financial release dates I was closer to 12% OTM vs the usual safer 17-18% OTM.
Are we suckered in with high premiums around these events? I feel I am and probably not alone?

I usually stay away from earnings trades because I feel like the moves are always 50/50 up or down regardless of results. I prefer to sell based off charts/big moves and sell into strength. edit: and sell a lot of index options when Vol is high. Not sure what you mean by suckered in... Vol is always pumped in around earnings, open the position or don't.

 

[Max Plaid]

Looking for some data on trade strategy here- would we be better off not betting big/risky positions around earnings and P&D reports? These events are what I see as controllable and events like Hertz, Russia war, Twitter purchase as uncontrollable.
My over confident belief of a singular controllable event has almost gotten me into trouble by decreasing strikes and thus many close calls. For example Q1 financial release dates I was closer to 12% OTM vs the usual safer 17-18% OTM.
Are we suckered in with high premiums around these events? I feel I am and probably not alone?

I've certainly taken my fair share of beatings around both P&D and ER, I think my inherent bullishness on $TSLA has been my undoing on many occasions

As of late I've paid less attention to Tesla and looked more to macro and sentiment, has led to much better results. $TSLA always seems to do the opposite of what I expect based on fundamentals, news and logic, so now I'm somewhat doing the opposite, or at least taking the possibility more seriously

 

[jaspa]

I usually stay away from earnings trades because I feel like the moves are always 50/50 regardless of results. I prefer to sell based off charts/big moves and sell into strength. edit: and sell a lot of index options when Vol is high. Not sure what you mean by suckered in... Vol is always pumped in around earnings, open the position or don't.

Curious, what's your strategy with index options? selling both puts/calls if IV is 30%+? SPX/SPY/QQQ?

 

[mrmtb]

Curious, what's your strategy with index options? selling both puts/calls if IV is 30%+? SPX/SPY/QQQ?

It's been mostly QQQ and SPY lately. I should have specified spreads. ICs I guess (are they "proper ICs" when sold at different times?) but I never open both sides at the same time, sell puts in the down move and calls when they rally. About .2 delta short leg. edit: been buying long puts when they rally because of the crappy market. edit: I'll also adjust to get closer to the money if the prices moves a lot, like yesterday, rolled some call spreads down.

I've had something open for several months now, but yeah I sell more when Vol spikes... Most often put spreads because things are tanking. Usually $10 wide spreads but when things sold off yesterday, I sold May SPY 380/340 spreads for 2.65 because I didn't think it was staying down.

I used to sell a lot wider but I really want to keep what I have so I've been overly conservative. I'm still learning what works. Like maybe I should sell closer to the money because they're so narrow. This thread is helping my reevaluate what I'm doing.

 

[scubastevo80]

Looking for some data on trade strategy here- would we be better off not betting big/risky positions around earnings and P&D reports? These events are what I see as controllable and events like Hertz, Russia war, Twitter purchase as uncontrollable.
My over confident belief of a singular controllable event has almost gotten me into trouble by decreasing strikes and thus many close calls. For example Q1 financial release dates I was closer to 12% OTM vs the usual safer 17-18% OTM.
Are we suckered in with high premiums around these events? I feel I am and probably not alone?

I don't have hard data, but I've observed over the last 5-6 quarters that there are three factors which could impact you (not counting actual results which continue to be phenomenal) . First, the market's reaction to the stock which could be adverse to actual results and rationale thought on direction. Tesla beats and the stock is flat or down - how? Second, the macro environment could overshadow earnings. If Tesla releases numbers on the back of extremely bad inflation report, Russia aggression, or weak tech earnings, we've seen nothing short of Tesla moving 2x that of the Nasdaq. Third, and the only item that should favor option writers, is the IV crush. Others can probably comment on this item better than me, but I've written options with strikes too close to the current price where IV doesn't drop off as quickly as I'd like, especially if volatility persists.

Not advice, but don't chase premium. I've posted this before, but I had 3 successful months when I started doing this for my parents last year, and then got crushed in January trying to take premiums 4x that of what I was used to (one trade was 9% out of the money, was rolled a week and closed at loss that wiped out 3.5 months of trading gains). If you want to take higher risk trades, perhaps consider a defined exit strategy if it doesn't go your way. Many here talk about rolling and there's the perception that this is free insurance - it is not. Perhaps not advice from some folks who admit to closing losers and how they think about bailing would be helpful. I have set tolerances for myself to close losers on "opportunistic" trades, but I'm not doing them right now.

 

[saniflash]

Not advice, but don't chase premium.

truer words were never spoken. Stay patient

 

[intelligator]

ICs I guess (are they "proper ICs" when sold at different times?) but I never open both sides at the same time, sell puts in the down move and calls when they rally. About .2 delta short leg. edit: been buying long puts when they rally because of the crappy market. edit: I'll also adjust to get closer to the money if the prices moves a lot, like yesterday, rolled some call spreads down.

Interesting approach to capture max credit on each wing. Assuming the spreads are the same width, wouldn't an IC formed by BPS and BCS opened separately use twice the margin?

 

[Discoducky]

truer words were never spoken. Stay patient

and I'm sitting here patiently waiting for the FED to say something stupid more hawkish so I can get a higher premium on puts. But, yeah, have an exit strategy as I got out of some puts yesterday per my exit strategy of >70% profit.

and if this doesn't happen then yeah, all my CCs and LEAPs will rejoice, along with my core HODL

 

[stealthyc]

Interesting approach to capture max credit on each wing. Assuming the spreads are the same width, wouldn't an IC formed by BPS and BCS opened separately use twice the margin?

not if they are the same expiration. Both can't lose.