Wiki Selling TSLA Options - Be the House

[BornToFly]

another not-advise:

Why not sell CC and buy PUT for the same money you get from the CC, i.e. create Risk Reversal combo?
In my experience that has a much stronger margin enlarging effect than just the cash from the CC.
Typically, you can get a PUT at same expiry date as your CC a bit below SP-Delta strike price, if your CC is at SP+Delta strike.
Difference from SP gets wider on PUT side if you go for later expiry dates, so I prefer to go out only a few weeks,
then create new ones when close to expiry. If the SP goes down in the meantime, you have the opportunity to close down the combo
with good profit too.

I’ll plug that into the margin calculator. The problem I see is that I probably need a 650 Put or higher, and a safe CC won’t generate that kind of premium.

Edit: A 650 put for Friday is $25. No way to pay for that with a safe CC

 

[juanmedina]

https://twitter.com/x/status/1527686856661516288

This guy thinks that there will be more pain on Monday and Tuesday and that the recovery will be a checkmark recovery instead of a V shape... a more gradual recovery. I noticed that at the end of Friday the premiums for the 27th were decent on the calls 20% OTM; a $790 cc was paying $2.1 so we might gap up on Monday...

 

[BornToFly]

https://twitter.com/x/status/1527686856661516288

This guy thinks that there will be more pain on Monday and Tuesday and that the recovery will be a checkmark recovery instead of a V shape... a more gradual recovery. I noticed that at the end of Friday the premiums for the 27th were decent on the calls 20% OTM; a $790 cc was paying $2.1 so we might gap up on Monday...

I don’t know…. My brother’s neighbor’s housekeep’s friend heard from a guy that Monday will be green.

Who’s ES?

 

[wnorris]

not-advice

I'm running things differently, but I also have an income focus rather than a capital appreciation focus. I don't have a return target - just looking for a strike to strike improvement and a bunch of cc credits along the way while awaiting the share price move that gets me that strike to strike improvement.

My purpose in buying leaps is for them to act as share replacements. A bit of leverage on the share price change side, and 2x the cc I can sell.

My larger pattern is to be adding leaps (or shares) when we're below what I peg as the midpoint of the trading range (about 950 right now) and be selling some of these as we go above that midpoint. In my case that meant buying some leaps in the low 900s share price, and some more around the mid 800s share price. That used up most of my cash - if we see low 600s again then I'll be adding even more leaps and be tapped out.

At a higher share price, above that midpoint, I'll get really aggressive with some of the call strikes covering leaps that I want to sell anyway. I'm using the %cash in the account to make my decisions and would like cash to be around 30-50%. Next purchase of leaps might push me down to 10% cash, so I'll be selling off leaps as we get back above my midpoint to bring cash back to that 40% ish range.

The larger picture - I'd like to be 50% cash (maybe 40%) the next time we reach ATH, and only have 50% exposure to the upside from there. Not because I'm trying to avoid those additional gains - this is the cost to me for the benefit of regular income.

Buying at a relatively low point - I won't be holding these to expiration. Some fraction (20%?) will get sold around 950 or 1000 share price. Another 20% around 1100? That should set me up at about 40-45% cash the next time we reach an ATH - the real cash level that I'm looking to maintain.

If the shares regress from the ATH then I've completed a cycle (wheel!?!) of buying some of the position low, and selling that fraction of my position high. As we break into ATH territory I'll be missing out on some of the gains, but will still be seeing 1/2 of them. And I'll have a lot of cash on hand pretty much all the time, damping out swings + and -, while generating something resembling income on a monthly basis.


I haven't yet sold shares to convert into leaps, though I've begun thinking about it. So far these mid / upper 600s share price haven't been tempting enough. Low 600s though ... I'm keeping an eye on this choice.


For me - share replacement options are always max DTE options. I've played with shorter duration calls and regretted that; won't do that again. I also go DITM. For choosing my initial June '24 position, shares were low 900s at the time, I was able to get 7 leaps for the price of 400 shares at the time. These were 500 strike.

I've continued buying that strike as I add more and the shares go down.

Were I buying calls today with no other positions for that expiration, I would be looking at something more like 350 to 450. The focus here is on calls that provide a little bit of leverage and behave a lot like shares as the share price goes up and down (for me). Not speculative calls where I'm looking for 2x, 10x, or something. I'm really looking to earn $100 or 200 on strike to strike improvement plus sell cc along the way for income.

BTW - when I opened my original June '24 500 strike position, those calls were about .90 delta. That's what I'll be looking for when the Jan '25 option chain opens up (or that 7:4 ratio). I found 3:2 to be too conservative, and 4:2 to be much too aggressive / close to the money.

Thanks...appreciate your and @mongo thinking on this. I was partly asking to see if taxes played into your thought process. When I think about converting shares to LEAPs the eventual tax hit comes to mind (outside my IRA that is). This type of strategy would increase time risk due to theta as well as the need to make back whatever tax burden would eventually be incurred. This is what keeps me from converting long held shares to LEAPs. On the other hand, if you were holding shares currently at a loss at these levels it would make more sense to do the conversion.

I am leaning toward using profits from other strategies to buy LEAPs. These last six months or so have me a little hesitant to do anything that would increase risk to my core shares.

 

[juanmedina]

I don’t know…. My brother’s neighbor’s housekeep’s friend heard from a guy that Monday will be green.

Who’s ES?

It seems that he runs a fund and called the top of the market with Apple last year. His fund is at -14% for the year certainly better than most of us. But I agree with you no one really knows anything...

 

[vikings123]

With short sellers limited on Monday, I’m certainly hoping for a Green Day. But hoping and doing nothing when things drop is not a strategy. So my plan is to watch the SP and MACD indicator. If it looks like there is selling, then I will sell 30% of my shares to generate cash. Let’s say the SP is 650 when I sell. I have just enough margin at that level. I plan to put in a Buy Stop-loss order at 648, so if the SP rebounds, I buy the shares back. Rinse and repeat as necessary. Obviously it will generate a long term capital gain on the first sell, but they should be basically free to rebuy and sell after that. If it drops all the way to 500, I then rebuy the shares at 500 (if margin allows) and use the difference for my taxes once the threat is over. It seems like a V shaped recovery is around the corner, but as others have said, we could go lower and stay there a while. I need large cash reserve for my stupid ITM Decembers BPS, but I don’t want to miss the recovery either. Is there a flaw I’m not considering?

I’m not fully aware of your specific circumstances but instead of selling shares have you looked into selling some some ITM or slightly OTM calls expiring in 3 months? Would that generate enough cash to give you margin cushion?

 

[BornToFly]

I’m not fully aware of your specific circumstances but instead of selling shares have you looked into selling some some ITM or slightly OTM calls expiring in 3 months? Would that generate enough cash to give you margin cushion?

The problem with calls, is the losses can grow fast if the SP climbs. I like the idea of selling shares when the MACD is dropping and then putting a Buy Stop Loss order to rebuy if the SP rebounds. Thoughts on that? I’m assuming I need to keep an eye on intraday buying power… How fast do stock buy and sell post to the account - 1 day or 3?

 

[vikings123]

The problem with calls, is the losses can grow fast if the SP climbs. I like the idea of selling shares when the MACD is dropping and then putting a Buy Stop Loss order to rebuy if the SP rebounds. Thoughts on that? I’m assuming I need to keep an eye on intraday buying power… How fast do stock buy and sell post to the account - 1 day or 3?

Not advice but this is how I’m processing based on the information we have. I think there is too much negative sentiment in TSLA stock so even if macros climb I just do not see a scenario where our typical beta will hold to the upside. I expect any TSLA dips to be sold. We need some catalyst and maybe that’s Shanghai production ramping to 2K cars per week this week. I hope I’m wrong and TSLA rips higher next week. The fact that we are below S&P entry price is probably a decent catalyst. Maybe look to see what happens on Monday. What If TSLA cannot hold it’s gains(assuming we open positive) on a day when uptick rule is in effect and it’s below S&P price?

I’m not a big fan of technicals on a broken chart. People can interpret these things in so many different ways. So unless you know the full implications of MACD it’s better to just ignore those. Right now we are obviously trending negative so even if the SP climbs sell the rip will become the new BTD.

I think it takes two days for the transaction to post. It is best to confirm with your broker if you will have enough buying power to set the buy stop limit like you intend to.

 

[JustMe]

The problem with calls, is the losses can grow fast if the SP climbs. I like the idea of selling shares when the MACD is dropping and then putting a Buy Stop Loss order to rebuy if the SP rebounds. Thoughts on that? I’m assuming I need to keep an eye on intraday buying power… How fast do stock buy and sell post to the account - 1 day or 3?

For day trading I prefer to watch the EMA relative to the VWAP as a sign of bullish/bearish breakout. The ema crossing the VWAP on volume is a strong sign of sentiment shift. I do not use the macd.

This is just a suggestion. Everyone should use what they’re comfortable with or what works for them.

Good luck

 

[JustMe]

Futures are green

 

[FlamingPIG]

Hey guys and gals, I'm trying to write down a summery of the primary reason why the stock market meltdown. Please help by add, remove, or correct any info here that you think that you think are the primary causes for this market meltdown in 2022


Summary since start of 2022

Macro negative

1. April 2022 - Inflation is around 8% YOY due to trillion of dollars printed
2. Trillions were printed since 2020 for covid relief and assets buying, causing many asset prices to skyrocket. In 2022, Fed stop printing and effectively reversing the printing by taking back “buy back asset” 80B a month in asset and…….. (help me on this point)
3. Interest rate hike .5% monthly until inflation under control, causes fear and uncertainty.
4. Ukraine war causes gas and oil prices to go up, inflicting pain to transportation which causes goods and service prices to go up. Add more to inflation.
5. Supply chain disrupted since covid, causing lots of missing part for sold goods. Add more to inflation.
6. China covid lock down (~2 months) causing shut down many companies which disrupt even more supply chain. Add more to inflation.

Tesla negative-

1. Elon sold around 9.6M TSLA shares for Twitter acquisition.
2. Shanghai Tesla covid shut down for ~22 days, Tesla paused production. Tesla supply chain got worse.

Tesla positive -

1. 2022 Q1 amazing earning reports - 19.2% op margin, 32% gross profit
2. Guidance reiterate 20m auto sale by 2030 and 50% growth in 2022
3. Sexy car order backlog ~6m to over 12months, even with more than 20% price increases yoy
4. The Ukraine war causes many EU countries and other to accelerate away from their dependent on fossil fuel
5. Gas price increases almost 100% YOY causes EV demands sky rocket

 

[ZeApelido]

So I have Jan 23 600/800 BPS. I somehow have not been worried about these, but now I’m thinking there is something wrong with my wiring and I should take some conservative move to roll them out further.

Would you:

1) roll right now
2) roll on the next stock climb (10-20%)
3) you think stock will climb above 900 at some point before end of year so deal with it then
4) don’t do anything, stock will be above $740 (break even point) at expiration

Thoughts?

 

[BornToFly]

So I have Jan 23 600/800 BPS. I somehow have not been worried about these, but now I’m thinking there is something wrong with my wiring and I should take some conservative move to roll them out further.

Would you:

1) roll right now
2) roll on the next stock climb (10-20%)
3) you think stock will climb above 900 at some point before end of year so deal with it then
4) don’t do anything, stock will be above $740 (break even point) at expiration

Thoughts?

If you roll now I’m assuming a tax loss for this year. Does that help?
I wouldn’t be worried, but you can always try to roll down and out on the next pop if you are. If we are below 800 next January I think we must have other things to worry about….
( I have Dec 850/1150s)

 

[vikings123]

So I have Jan 23 600/800 BPS. I somehow have not been worried about these, but now I’m thinking there is something wrong with my wiring and I should take some conservative move to roll them out further.

Would you:

1) roll right now
2) roll on the next stock climb (10-20%)
3) you think stock will climb above 900 at some point before end of year so deal with it then
4) don’t do anything, stock will be above $740 (break even point) at expiration

Thoughts?

Pardon my consultant speak but it depends. It depends on margin availability and your goals. Do you want more Tesla shares?

I’d say 4 if you have margin available and 2 If you want to be conservative.

Edit: if you are looking to own more shares perhaps leg out of your long position if the stock drops to the 540 range like most Twitter experts seem to be predicting.

 

[JustMe]

So I have Jan 23 600/800 BPS. I somehow have not been worried about these, but now I’m thinking there is something wrong with my wiring and I should take some conservative move to roll them out further.

Would you:

1) roll right now
2) roll on the next stock climb (10-20%)
3) you think stock will climb above 900 at some point before end of year so deal with it then
4) don’t do anything, stock will be above $740 (break even point) at expiration

Thoughts?

I have a couple similar bps. I’m leaning towards rolling down and out next time we’re at 800 or so. It feels like the safest thing to do. I expect that to happen before December

 

[BornToFly]

So I have Jan 23 600/800 BPS. I somehow have not been worried about these, but now I’m thinking there is something wrong with my wiring and I should take some conservative move to roll them out further.

Would you:

1) roll right now
2) roll on the next stock climb (10-20%)
3) you think stock will climb above 900 at some point before end of year so deal with it then
4) don’t do anything, stock will be above $740 (break even point) at expiration

Thoughts?

I could take one for the team…. I guarantee that if I sell 30% of my shares on a pop tomorrow, we will never see under 700 again….

 

[ZeApelido]

If you roll now I’m assuming a tax loss for this year. Does that help?
I wouldn’t be worried, but you can always try to roll down and out on the next pop if you are. If we are below 800 next January I think we must have other things to worry about….
( I have Dec 850/1150s)

Pardon my consultant speak but it depends. It depends on margin availability and your goals. Do you want more Tesla shares?

I’d say 4 if you have margin available and 2 If you want to be conservative.

Edit: if you are looking to own more shares perhaps leg out of your long position if the stock drops to the 540 range like most Twitter experts seem to be predicting.

These are cash secured so no margin concerns. I do have some long term and short term cap gains this year so maybe I should definitely roll a portion just to zero those out, and wait and see on the rest.

Most scenarios I would be okay unles the stock price stays this low or lower until Jan 23.

I would think inflation easing up will jolt markets up before then but WTF I’m no macro expert!

 

[CyberBro]

is anyone else selling PUT LEAPS? i remember emmett peppers sold some 1000p leaps a while back. i am tempted to sell some leap puts since tesla stock price is so low.

 

[MrMoo]

is anyone else selling PUT LEAPS? i remember emmett peppers sold some 1000p leaps a while back. i am tempted to sell some leap puts since tesla stock price is so low.

The market is different now, just know what you are getting yourself into if you plan to do this.

 

[Blue horseshoe]

is anyone else selling PUT LEAPS? i remember emmett peppers sold some 1000p leaps a while back. i am tempted to sell some leap puts since tesla stock price is so low.

I was selling 1500/1400 put spreads each month, but I've stopped all option trades for the short term until Tesla recovers. The June 2024 1500/1400 put spreads have a 9.8x max return right now. Was selling about $20k every other week with a max loss on those spreads at under $2k.