Wiki Selling TSLA Options - Be the House

[vikings123]

Ok. Need some Not-Advise. I’m in trouble below 690. I can sell 2000 of my shares at 700. Then I can do one of two things: 1) Buy 20X 800 strike puts for December to make spreads with 20X 1100 strike naked puts. This would cost me around $400k (plus $160k in taxes on the shares= $560k) and give me (with selling those shares) $1.5 million in margin back. Down side is I still have 1100 strike puts for December. 2) Sell the shares and Buy back 20x 1100 Puts for $900k, and have $1.6m in margin (loss offsets taxes on shares).

Option 2 costs a lot more, but may be better in December if markets are still down. I can also sell the 1100 puts again when the stock is over 900 and markets look better, and get $400k back for end cost of $500k.

Thoughts? Buy protective puts to make BPS or get rid of the puts?

Edited for some math…

I think buying back at least some of the 1100 puts might be the way to play this, especially if you have capital gains from other transactions.

1100 seems so far out. And buying 800 puts and converting them to spreads seems very risky. I might lean towards saving that margin and deploy it to buy some LEAPS if TSLA gets hit even more. TSLA might go further down this year but I just don’t see how this spring can continue to be compressed as you enter Q3/Q4.

 

[euro2012]

Ok. Need some Not-Advise. I’m in trouble below 690. I can sell 2000 of my shares at 700. Then I can do one of two things: 1) Buy 20X 800 strike puts for December to make spreads with 20X 1100 strike naked puts. This would cost me around $400k (plus $160k in taxes on the shares= $560k) and give me (with selling those shares) $1.5 million in margin back. Down side is I still have 1100 strike puts for December. 2) Sell the shares and Buy back 20x 1100 Puts for $900k, and have $1.6m in margin (loss offsets taxes on shares).

Option 2 costs a lot more, but may be better in December if markets are still down. I can also sell the 1100 puts again when the stock is over 900 and markets look better, and get $400k back for end cost of $500k.

Thoughts? Buy protective puts to make BPS or get rid of the puts?

Edited for some math…

I would vote for #2 simply from the standpoint of ‘what is your stomach lining worth?’. Imagine the stock staying depressed all summer, while waking up every day hoping for it to go up. I would (and have, albeit with fewer dollars involved) remove the burden and take the L, with the knowledge that you can always resell some puts. You will sleep better.

 

[elasalle]

Ok. Need some Not-Advise. I’m in trouble below 690. I can sell 2000 of my shares at 700. Then I can do one of two things: 1) Buy 20X 800 strike puts for December to make spreads with 20X 1100 strike naked puts. This would cost me around $400k (plus $160k in taxes on the shares= $560k) and give me (with selling those shares) $1.5 million in margin back. Down side is I still have 1100 strike puts for December. 2) Sell the shares and Buy back 20x 1100 Puts for $900k, and have $1.6m in margin (loss offsets taxes on shares).

Option 2 costs a lot more, but may be better in December if markets are still down. I can also sell the 1100 puts again when the stock is over 900 and markets look better, and get $400k back for end cost of $500k.

Thoughts? Buy protective puts to make BPS or get rid of the puts?

Edited for some math…

Can’t you roll to lower strikes that are further out?
E.g roll 690 to Jun 24 500s? Swap time for money?

Also not sure why most folks think they need to be the house at all costs? When SP is oversold- time to play the other side as well - so if you do sell charges to cover and then sell more puts , might as well also buy some leap calls in 900s/1000 strikes that could shoot up fast on a rebound. Cheers!!

 

[dl003]

Ok. Need some Not-Advise. I’m in trouble below 690. I can sell 2000 of my shares at 700. Then I can do one of two things: 1) Buy 20X 800 strike puts for December to make spreads with 20X 1100 strike naked puts. This would cost me around $400k (plus $160k in taxes on the shares= $560k) and give me (with selling those shares) $1.5 million in margin back. Down side is I still have 1100 strike puts for December. 2) Sell the shares and Buy back 20x 1100 Puts for $900k, and have $1.6m in margin (loss offsets taxes on shares).

Option 2 costs a lot more, but may be better in December if markets are still down. I can also sell the 1100 puts again when the stock is over 900 and markets look better, and get $400k back for end cost of $500k.

Thoughts? Buy protective puts to make BPS or get rid of the puts?

Edited for some math…

I would absolutely roll December 1100s to June 24 950s first before deciding on anything.

Instead of selling shares at 700 today, you can sell June 2024 1200 calls for $15k a piece, then use that $15k to roll Dec 1100s out to June 24 780s

 

[BornToFly]

Thank you for the replies everyone! What is making this extra stressful is that I can’t watch the market like I usually do. I’m on the East Coast right now doing Jet training from 10 AM to 12:30 every day. Luckily it looks like we are green in pre-market this morning, so I may have a little more time to consider my options.

I would absolutely roll December 1100s to June 24 950s first before deciding on anything.

Instead of selling shares at 700 today, you can sell June 2024 1200 calls for $15k a piece, then use that $15k to roll Dec 1100s out to June 24 780s

Rolling down and out the naked put only helps my margin a little bit. I still have to turn it into a spread, but that does help.

 

[corduroy]

This Twitter crap is killing me and I am considering getting out of Tesla if we get above $1100 I just can't deal with this swings anymore. I am at a point in my life that I care more about my own sanity than money.

To be honest I have thought that too recently. Dumping all the cash used for TSLA trading into QYLD and collecting the monthly dividend sounds way more relaxing. I'd still HODL my TSLA shares though, I'm never selling those.

 

[UltradoomY]

Couple of thoughts, might help, probably not.

A quote I once heard from the 1930's great depression era - "I would spend half my fortune, to save the other half"
This merits some thought if you are working through a position that is under water.

We need to think about time as well, if you can manage time - margin should follow.
Even with possibly lower production (we have no idea yet) there is still the upcoming proxy for a shareholders vote to add share capacity - and then a short burning stock dividend that will definitely create upwards pressure.

And, to add to the above, the market is always silly. So Tesla reports 290k (guessing) on the P&D report, everyone and their brother thinks - "THEY MISSED!! Short ITTTT" but the Market Makers and their buddies have decided that wow, that's really impressive for a company with their largest factory shut down for most of the quarter, time to rip since q3 will be a blow out and we want to
1. pick up shares cheap
2. burn the put buyers and call sellers

YMMV but I am still very optimistic.

 

[AquaY]

Ok. Need some Not-Advise. I’m in trouble below 690. I can sell 2000 of my shares at 700. Then I can do one of two things: 1) Buy 20X 800 strike puts for December to make spreads with 20X 1100 strike naked puts. This would cost me around $400k (plus $160k in taxes on the shares= $560k) and give me (with selling those shares) $1.5 million in margin back. Down side is I still have 1100 strike puts for December. 2) Sell the shares and Buy back 20x 1100 Puts for $900k, and have $1.6m in margin (loss offsets taxes on shares).

Option 2 costs a lot more, but may be better in December if markets are still down. I can also sell the 1100 puts again when the stock is over 900 and markets look better, and get $400k back for end cost of $500k.

Thoughts? Buy protective puts to make BPS or get rid of the puts?

Edited for some math…

Selling 2000 shares @ 700 would give you 1.4MM in cash. Of which you'll have to pay 39% in fed taxes this quarter.
I don't think it will give you $1.5 million in margin back since you are using your shares now for margin. Rule of thumb I use is about 50%. Might be less depending on your brokerage.
So that 2000 shares @700 equals 1.4MM in value but gives you somewhere around 700k in margin.
So selling the shares will double your purchasing power but not by the full amount of the sale
I think that's how it goes.

 

[juanmedina]

wow the stock is broken . Sold some 850cc for $1.6-1.8 and I am already up 60%.

 

[adiggs]

Have you considered buying LEAPS? June 2024 $400c are $440 and would double in value at around $1300 with “infinite” upside potential.

Long Call Calculator

Call option profit calculator. Visualise the projected P&L of a call option at possible stock prices over time until expiry.

www.optionsprofitcalculator.com

I haven’t done this myself but it does look appealing

I've been buying the June '24 500c. 400s are even better for why I'm buying these DITM calls - to sell cc against.

I started at seemingly too early of a share price (low 900s and then low 800s). If the shares break significantly below 700 then I'll probably need to buy some more. The nice thing about June '24, and given that I'm not using any margin, is that a year from now today's share price will be a distant memory. We might still have lots of bad macro, but we'll have 2 new big factories ramped alongside of the current big factory back to pre-Q2 production levels.

PE will be getting trivially low, and lots more evidence will be building among investors that Tesla is one of the safe haven companies to be invested in as profitable growth continues and the "demand problem" continues to be a "build more factories / ramp production faster" problem. Many reasons, even within an overall doom and gloom market, for Tesla to be a bright spot.

Or maybe it takes closer to 2 years - that'll be tough, but 2 year options provide a big window in which to be right.

 

[adiggs]

Ok. Need some Not-Advise. I’m in trouble below 690. I can sell 2000 of my shares at 700. Then I can do one of two things: 1) Buy 20X 800 strike puts for December to make spreads with 20X 1100 strike naked puts. This would cost me around $400k (plus $160k in taxes on the shares= $560k) and give me (with selling those shares) $1.5 million in margin back. Down side is I still have 1100 strike puts for December. 2) Sell the shares and Buy back 20x 1100 Puts for $900k, and have $1.6m in margin (loss offsets taxes on shares).

Option 2 costs a lot more, but may be better in December if markets are still down. I can also sell the 1100 puts again when the stock is over 900 and markets look better, and get $400k back for end cost of $500k.

Thoughts? Buy protective puts to make BPS or get rid of the puts?

Edited for some math…

In a somewhat similar position I went with option 2 earlier in the year. Eat the loss, sell some shares that I could suddenly sell without tax consequences (gain offsets loss). Whether that was a good choice or not, it got me out of an 1100 strike put spread early on before I started spending even more money in an attempt to rescue the position.

But I also wasn't managing margin to any meaningful degree. The margin component - I dunno about what to do with that

 

[Chenkers]

wow the stock is broken . Sold some 850cc for $1.6-1.8 and I am already up 60%.

Yep, I sold 830CC for $3.50 early on and they're at 65%. Missed out on 850/900 calls when they stopped at $1.40 and my limit order was $1.50. Overall it's been a tough week to try to sell options.

 

[adiggs]

My thoughts are - I feel okay with where Tesla will be in December. The consensus seems to be Q2 is disappointing but Q3 and Q4 will be strong. You can at least roll those bps spreads for credit if the share price is above $950 by December. But there’s a risk of course - think about what you can do if we’re at $725 in December

I’m getting more concerned about the next month or two. Lots of doom and gloom and people talking about $500 share price before we recover. I’m close to capitulating - sell most of my shares and close out my options contracts at a significant loss.

I’m confident I could recover from a big haircut like that but gapping down to $500 would be catastrophic. There’s something to be said for living to fight another day.

I’ll see how this week plays out and decide what to do.

These mirror my own thoughts. Long term buy and hold investors don't care about disappointing production in Q2 - we know why that's so and it has no impact on the company a year from now.

But in the short term where our option sales operate it matters deeply (and thus the importance of separating out the two ways of thinking).


In addition to the above I see the Fed balance sheet draw down as being inadequately priced into the market. I think we might never know - only that it'll be a year or 3 of wet blanket action.

At some point though we'll also get the share authorization and then, maybe, details on a stock split. Or maybe we won't get a split - only the threat that the board can announce one any time

Q3 or Q4 production will be back to what we're accustomed to. They will also represent increasing profit levels that keep the EPS growing (and at a low share price, the PE multiple dropping).


My short term has been the month of May, with June/July being recovery months around production. Then back to doom and gloom in August (middle month of the quarter, vs. first and last month of quarter). With the Q2 production disappointment coming I'm starting to think doom and gloom through August with recovery in Sept/Oct around end Q2 / start Q3. Yuck.

 

[scubastevo80]

Traded June '24 call spread +1000/-1200 for a debit of $42. Cost of this trade was $4200, breakeven @ $1042, max profit is $15,800 at $1200. I was trying to find spreads in the 900-1300 range that paid 5x the $'s risked, but ended up with this at 4x. Spent about 2hrs trying different trades and none of them hit (bid/ask spreads were $20 wide, and liquidity isn't there in anything not trading in a strike increment of $100).

 

[traxila]

These mirror my own thoughts. Long term buy and hold investors don't care about disappointing production in Q2 - we know why that's so and it has no impact on the company a year from now.

But in the short term where our option sales operate it matters deeply (and thus the importance of separating out the two ways of thinking).


In addition to the above I see the Fed balance sheet draw down as being inadequately priced into the market. I think we might never know - only that it'll be a year or 3 of wet blanket action.

At some point though we'll also get the share authorization and then, maybe, details on a stock split. Or maybe we won't get a split - only the threat that the board can announce one any time

Q3 or Q4 production will be back to what we're accustomed to. They will also represent increasing profit levels that keep the EPS growing (and at a low share price, the PE multiple dropping).


My short term has been the month of May, with June/July being recovery months around production. Then back to doom and gloom in August (middle month of the quarter, vs. first and last month of quarter). With the Q2 production disappointment coming I'm starting to think doom and gloom through August with recovery in Sept/Oct around end Q2 / start Q3. Yuck.

I dig your dates. Think they make sense as does your deduces and predictions.

Wild card: This is TSLA, baby. It is unpredictable.

 

[ReddyLeaf]

Took today’s small SP rise as an opportunity to roll my 5/20 -p970s out to January. Unfortunately, had to sell CCs to free up enough cash to make the trade, so I now have a Jan23 straddle at $1000. This also generated enough extra cash so I sold some 5/20 -p750s. I was thinking about just buying shares, but decided that I am more relaxed selling CSPs. This week’s target is starting to look like $750, so these contracts will probably be in play until 15:59 Friday, but that’s ok since I’m willing to take the shares at these prices.

 

[CHGolferJim]

Nice little 2-day trade. BTC the 0513$850 and 0520$900 at 97% profit for a minor give back of $272. Nice to bag something with all the carnage about. Hope to consolidate most of the above at 6/10 or 6/17 $860 on a Thu/Fri bump. Good luck y’all!

Consolidated all covered calls at 0617$860 this morning (~$110 or 14% OTM), booking a net $29k credit despite not particularly good timing before the 11am-noon spurt. Now back in the black after the SP spurt and decline since 3/14 after rolling up/out and down/in following the bouncing ball. Not expecting much net improvement in SP over the next month or two, but remaining vigilant for opportunities to roll up/out or down/in as macros dictate. I'd like to reduce DTE from 30 days to 7-14. Total return of CC-only strategy after 20 weeks is 23% annualized on current SP. Long calls and LEAPs are quite another matter, but HODLing those for the bright future.

 

[adiggs]

With the bump today I've added 820 (and a few 800) strike cc for this week at $3 (the 800s got me $6). I don't really expect >$800 at end of week, but I also won't be surprised. This reaches my minimal income target for the week (so I don't need to go out further or be more aggressive in strike selection).

I've legged my way into a 710 / 820 strangle (there are some 680 puts and 800 calls in there as well) for this week. Something is going to win

 

[Yoona]

With the bump today I've added 820 (and a few 800) strike cc for this week at $3 (the 800s got me $6). I don't really expect >$800 at end of week, but I also won't be surprised. This reaches my minimal income target for the week (so I don't need to go out further or be more aggressive in strike selection).

I've legged my way into a 710 / 820 strangle (there are some 680 puts and 800 calls in there as well) for this week. Something is going to win

800?!?

 

[BornToFly]

Selling 2000 shares @ 700 would give you 1.4MM in cash. Of which you'll have to pay 39% in fed taxes this quarter.
I don't think it will give you $1.5 million in margin back since you are using your shares now for margin. Rule of thumb I use is about 50%. Might be less depending on your brokerage.
So that 2000 shares @700 equals 1.4MM in value but gives you somewhere around 700k in margin.
So selling the shares will double your purchasing power but not by the full amount of the sale
I think that's how it goes.

Long term shares, so 20% tax…