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Wiki Selling TSLA Options - Be the House

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I say do something like this:
You will end up tying up only 5k instead of 10k while raising your short call leg to 1200. Thats the defensive move.
oh, i like that and never thought of it, i am going to add that to my list of tools

but i didn't communicate clearly - i want the position gone by next week so i can start using the 10k again soon

thx
 
Too many daily 10% swings and personal inability to cut losses early are leading me to only tactically trade DTE 3 or less and on the back of a big move. I’m still sitting 50% down with two spreads locked up until Sept and Jan’23. That and a long call spread +1000/-1200 means I really need us to start walking back towards 1000 in the next few months.

How do you guys manage rolls with in the money spreads that are always out. Do you pay to buy more time or is there another option?
 
for me, it has always been about:

Being conservative regarding expectation: Im shooting for 25% cash return on my capital which is 100% TSLA. Ive got 20% already in 5 months.

Being paranoid: I dont wait till a position has been in the money, be it puts or calls. I roll everything out to maintain a $100 cushion on both sides unless there are only a few days left to exp. It may takes 2,3,4 weeks but that doesnt matter. I rather profit consistently than aim for a perfect close. Having PM helps as I have plenty of margin to go back to opening new positions once the existing ones are managed.

Tracking IVs is key. Its like having a real time option flow subscription that tell you exactly what market sentiment is atm. I dont claim to be an expert but it is my key indicator.

Willing to kick the can down the road. This goes back to being willing to live with a position for (much) longer than Im comfortable with. Last week I rolled a bunch of 6/17 930C to August 1200C as the rally resumed unexpectedly on Thursday. That may have been unnecessary but the key is it frees my mind to make unbiased decisions this coming weeks. My favorite sequence is: roll a position that is being threatened out 3-6 months -> go back to selling weeklies taking advantaged of the higher stock price and IVs -> once the rally has faded and it will, use a portion of the extra premium to roll the long dated calls, which has gone down 50%, up $100 or so, guaranteeing it will expire worthless.

Having a long term projection for the stock price is important. I might be wrong but I will readjust once humbled by the market. Technicals are not everything. Its dangerous to be a perma bear in any market.

I dont do spreads. only naked short puts and calls.

Having PM is key in all of this. I can never go back to a reg T account. I can safely say that, though this treacherous market has robbed me of several night of sleep, never has my account been under threat this year, and 20% in 5 months is pretty good for me.
 
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This price action is so demoralizing. At 790 just on Thursday I was on the way to getting out of some ITM bps and being free and clear. Now back at 700 I have to keep an eye out for margin calls and sign an acknowledgment from Fidelity that I am responsible for the performance of my account after it declined 😪
I got the same freaking letter. It says I've done over 100 trades lately and lost over $4 Million. Not exactly accurate. My account is down over $4M thanks to the SP dropping the value of my shares and my ITM December BPS going more negatives, but my recent trades have actually generated income and not lost any money (on a weekly basis).
 
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for me, it has always been about:

Being conservative regarding expectation: Im shooting for 25% cash return on my capital which is 100% TSLA. Ive got 20% already in 5 months.

Being paranoid: I dont wait till a position has been in the money, be it puts or calls. I roll everything out to maintain a $100 cushion on both sides unless there are only a few days left to exp. It may takes 2,3,4 weeks but that doesnt matter. I rather profit consistently than aim for a perfect close. Having PM helps as I have plenty of margin to go back to opening new positions once the existing ones are managed.

Tracking IVs is key. Its like having a real time option flow subscription that tell you exactly what market sentiment is atm. I dont claim to be an expert but it is my key indicator.

Willing to kick the can down the road. This goes back to being willing to live with a position for (much) longer than Im comfortable with. Last week I rolled a bunch of 6/17 930C to August 1200C as the rally resumed unexpectedly on Thursday. That may have been unnecessary but the key is it frees my mind to make unbiased decisions this coming weeks. My favorite sequence is: roll a position that is being threatened out 3-6 months -> go back to selling weeklies taking advantaged of the higher stock price and IVs -> once the rally has faded and it will, use a portion of the extra premium to roll the long dated calls, which has gone down 50%, up $100 or so, guaranteeing it will expire worthless.

Having a long term projection for the stock price is important. I might be wrong but I will readjust once humbled by the market. Technicals are not everything. Its dangerous to be a perma bear in any market.

I dont do spreads. only naked short puts and calls.

Having PM is key in all of this. I can never go back to a reg T account. I can safely say that, though this treacherous market has robbed me of several night of sleep, never has my account been under threat this year, and 20% in 5 months is pretty good for me.

I know portfolio margin was discussed here before, but it's caught my attention this time.

I am reading that PM will never give less margin than a reg T and that you get credit for long calls - are those the main advantages for an account that is mostly TSLA common and LEAPS?
 
I know portfolio margin was discussed here before, but it's caught my attention this time.

I am reading that PM will never give less margin than a reg T and that you get credit for long calls - are those the main advantages for an account that is mostly TSLA common and LEAPS?
I would like to know more as well. Fidelity says you may not qualify if you are not diversified, and I'm 100% TSLA. I'm afraid to call them and ask because I don't want them to get any ideas and change the 40% margin requirement on my TSLA shares to a higher number in my reg T account.
 
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I know portfolio margin was discussed here before, but it's caught my attention this time.

I am reading that PM will never give less margin than a reg T and that you get credit for long calls - are those the main advantages for an account that is mostly TSLA common and LEAPS?
the main advantage with a PM account is the calculation of margin impact of each position - by actual delta. If you have a reg T account, each call you sell is essential viewed as having a 1.0 delta. What I mean by this is it matters not how FOTM the call is, the broker automatically assumes that it is equally likely to get ITM as a 100C; it will hold an entire 100s lot as collateral for it. A PM account looks at the actual delta. So, if you sell a 0.15 delta call, you can use 100s as collateral for 6 of those suckers. As the calls get closer to expiration their delta goes down which frees up more margin. So what happens if you have a few calls totaling 0.4 delta that you dont like, given the current momentum? You can roll them out 3 months for $0, decreasing their delta to maybe 0.25. Now, you have 0.75 left. You just gave yourself a second chance to observe the price action. You can then sell a second rounds of weeklies from a more advatageous entry.

*This is oversimplifying the calculation for the sake explaining the concept. A lot more go into the calculation: expected move, IV, all the greeks, etc… the primary idea is still the same: the more calls you sell, the closer to itm they are, the more volatile the stock is, the more collateral it will cost you.

Same goes for puts. The lower the put strike is, the less collateral it requires. Im especially fond of naked puts because for the same premium, I can sell naked puts at a lower strike than the short leg of a BCS. Sure, I dont have the protection of the long legs but thats the cost Im willing to pay. You can look at a few examples to see how much safer naked puts are compared to a bcs.

To sum it up: PM takes the training wheels off and you are able to take full advantage of your positions, be it cash or long stocks. However, its just a tool. It can backfire big time if you dont respect the risks.
 
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the main advantage with a PM account is the calculation of margin impact of each position - by actual delta. If you have a reg T account, each call you sell is essential viewed as having a 1.0 delta. What I mean by this is it matters not how FOTM the call is, the broker automatically assumes that it is equally likely to get ITM as a 100C; it will hold an entire 100s lot as collateral for it. A PM account looks at the actual delta. So, if you sell a 0.15 delta call, you can use 100s as collateral for 6 of those suckers. As the calls get closer to expiration their delta goes down which frees up more margin. So what happens if you have a few calls totaling 0.4 delta that you dont like, given the current momentum? You can roll them out 3 months for $0, decreasing their delta to maybe 0.25. Now, you have 0.75 left. You just gave yourself a second chance to observe the price action. You can then sell a second rounds of weeklies from a more advatageous entry.

*This is oversimplifying the calculation for the sake explaining the concept. A lot more go into the calculation: expected move, IV, all the greeks, etc… the primary idea is still the same: the more calls you sell, the closer to itm they are, the more volatile the stock is, the more collateral it will cost you.

Same goes for puts. The lower the put strike is, the less collateral it requires. Im especially fond of naked puts because for the same premium, I can sell naked puts at a lower strike than the short leg of a BCS. Sure, I dont have the protection of the long legs but thats the cost Im willing to pay. You can look at a few examples to see how much safer naked puts are compared to a bcs.

To sum it up: PM takes the training wheels off and you are able to take full advantage of your positions, be it cash or long stocks. However, its just a tool. It can backfire big time if you dont respect the risks.
Do you know what margin requirement they give for shares you own if you're concentrated in one stock?
 
Do you know what margin requirement they give for shares you own if you're concentrated in one stock?
Its different from one broker to the next. As far as I know, IBKR used to be more generous than TOS but that all changed with their latest round of margin squeezes. I call them squeezes because why else would you increase margin requirement at SPY 381? But I digress. My account is 100% TSLA and right now i can sell about 5 moderately OTM calls for each 100s. Last month I was able to sell 10. Thats the short side of things.

On the long side, you can get various amount of margin based off of your excess liquidity: your account value - maintenance level. How much you get depends on the type of long position you are interested in: AAPL will cost you much less margin to buy than TSLA which costs less than GME. Long calls cost more than the underlying stock. We are talking equal in term of dollars.

The bottomline is you get a lot more.

But its beauty doesnt stop there. You can “buy” more margin in the form of super FOTM weeky calls / puts. Right now Im having to buy a few dozens of weekly 1200C in order to sell more calls. For 2 cent a piece they give me back $6k of margin. Weekly 300/400p serves the same purpose for when I want to sell a few more naked pút.

It also means that, in moderate numbers, short naked calls can give you more buying power. Only when you start selling heavy do they cost you margin. Thats where the cheap FOTM long calls come in.

Fidelity is very nitpicky.
 
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I know portfolio margin was discussed here before, but it's caught my attention this time.

I am reading that PM will never give less margin than a reg T and that you get credit for long calls - are those the main advantages for an account that is mostly TSLA common and LEAPS?

I got a PM account two weeks ago and my reason was only to increase my margin excess because when we got to $620 the other day it got really low. I can tell you that my excess margin more than double when we made the transition but it wasn't huge in my case. It went from something like $70k to $160k.
 
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I got a PM account two weeks ago and my reason was only to increase my margin excess because when we got to $620 the other day it got really low. I can tell you that my excess margin more than double when we made the transition but it wasn't huge in my case. It went from something like $70k to $160k.
What brokerage? Fidelity makes it sounds difficult with paperwork and an "interview...."
 
if i understand 3x OpEx correctly, 6/17 target is ~700 and 6/24 goes to MaxPain? what sayeth thou, experts?

1654434854047.png

1654434892712.png


The Week Before: Beginner Traders Heed Warning
It should come as no surprise that things aren’t the same in the week leading up to quadruple witching. For the last 15 years, the S&P 500 has had 59 witching events. Analysis of the chart shows that the index rallies around the 6th day before to the day before the witching. However, the trading during a witching day is more aggressive, and the market isn’t necessarily kind to beginners.


What to Watch For
Because of the increased volume, the chance of some abnormal price moves—and a statistical bias which may cause some day trading strategies not to work (which work during non-triple witching weeks/days)—some day traders recommend caution, and others recommend not trading at all. How an individual day trader chooses to handle triple witching will depend on their trading style, trading strategies, and level of trading experience. New traders will want to be more cautious in the days leading up to and on Triple Witching Friday.
 
What brokerage? Fidelity makes it sounds difficult with paperwork and an "interview...."

E-Trade. The paperwork wasn't that bad and the interview was some guy talking about a bunch that I didn't really understand. They don't really ask you questions they just tell you about how the PM account works, how they stress test your account, how they do margin calls, etc etc. The only thing I don't like so far is that for some reason with the PM account spreads or covered calls don't get grouped together they show up as independent positions. So for spreads I have to calculate my gains or losses by hand and to close the legs I have to add both legs to the ticket or do it independently instead of just a single click like on a regular brokerage account.

I plan on going back to a regular margin account when things look better and the market stabilizes. When the stock was in $780 my excess margin almost doubled again and I don't to get tempted to do trades that I can't really afford.
 
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Greetings to everyone in this thread.

First I would like to thank all of you for providing extremely valuable information and opinions.
After reading this thread I decided to start selling options. I'm almost a complete novice in this regard.
After reading this thread I understood that trading options is extremely dangerous and exposes an unexperienced person to high levels of financial risk.

Considering this I decided to start selling plain and simple weekly covered calls, which are 20% out of the money and try to roll them when they get in trouble.

I understand that many on this thread try to maximize their gains by selling options that are close to being in the money. Eventually I would like to do so as well.

Hence my question, is there a resource where one could get a weekly price movements on TSLA for the last 10 years, so it would be possible to see how historical data looks like and what type of covered call strategy would work best based on this data in terms of maximizing gains and minimizing risks?

Just as an example, that make me nervous, even with 20% weekly CC one could get to ITM situations in 2020, where the price of TSLA increase several time over. I understand that for many selling 20% OTM weekly CC is stress free situation, but for me it is not.

I would be extremely thankful to anyone who would provide links to a resource with historical data and provide any additional feedback in terms of what can go wrong with 20% OTM weekly CC or 15% OTM weekly CC and what would be a meaningful rolling strategy if they get in trouble.

Thank you in advance.
 
Considering this I decided to start selling plain and simple weekly covered calls, which are 20% out of the money and try to roll them when they get in trouble.
I think (!= know) this is a reasonable strategy. I personally sell CC's
  • with 5-0 DTE
  • that are anywhere 3% daily CAGR (= 15.9% total growth for the week if sold Mon at market open) to 5% daily CAGR (= 27.6% weekly equivalent) out of the money, depending on the expected events that very week. If I sell later in the day/week, I use the same daily CAGR's proportionally, i.e., if I STO on a Monday at 2.30pm, I will account for the 5 hours (5/6.5 hours = 77% of one trading day) less by calculating the strike price as
    • current stock price * [1.03....1.05]^(5days - 5/6.5 days)
  • Taking this result, I round up to sell only CC's whose strike is behind big call walls (e.g. I sell 755's instead of 750's) -- these are less liquid, so you pay a price for that. Especially if you sell more than 10 of these contracts into the market over a short time (minutes), you can see the price move away from you (ceteris paribus). However, I believe (again != know) that the probability ending ITM is lower for these due to MM's incentives to not pay out the big call walls.
  • ---> ONLY WHEN THE STOCK PRICE IS UP COMPARED TO THE PREVIOUS DAY'S CLOSING PRICE <---
  • only if I deem the risk/reward ratio reasonable (this is subjective). Empirically I find myself not selling contracts that do not generate at least $20 per contract.
This system should give me enough buffer to roll the CCs out should the stock move violently upwards (even if I might need to roll over and over a couple of weeks). I make sure to roll the short position when the underlying reaches the strike price to maximize the time value and thus the strike price improvement when rolling. In practice, if I have open CCs, I find myself monitoring the share price closely to make sure I can roll optimally.

During the time I've been doing this (~2 years), I've learned that the biggest risk comes from violent moves against me late in the week. Obviously, in this case, there's then less time for the situation overall to work itself out; however, also, if a big call wall was broken, MM's might actually start hedging leading to a gamma squeeze (this can also be explained mathematically since the delta increases more and more for OTM and ATM options the less time there is left to expiration, increasing the shares/options required to delta and gamma hedge those positions). Violent move against me early in the week -- not so much of a problem, usually. In this case I might give the situation time to work itself out; or I might roll, this is also subjective against the broader context of the market and the reason for the surge (how temporary do I think it will be?).

However,
Hence my question, is there a resource where one could get a weekly price movements on TSLA for the last 10 years, so it would be possible to see how historical data looks like and what type of covered call strategy would work best based on this data in terms of maximizing gains and minimizing risks?
I have not backtested this strategy intensely yet due to lack of time on my end.

I would be extremely thankful to anyone who would provide links to a resource with historical data and provide any additional feedback in terms of what can go wrong with 20% OTM weekly CC or 15% OTM weekly CC and what would be a meaningful rolling strategy if they get in trouble.

Attached find the daily OHLC for both regular trading hours (RTH) and extended hours since IPO. Note when backtesting that short weeks exist (Mon closed or, more frequently, Fri closed), as well as short trading days.

Once you have backtested your strategy, can you please share the results in this thread? Thanks.

Max
 

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if i understand 3x OpEx correctly, 6/17 target is ~700 and 6/24 goes to MaxPain? what sayeth thou, experts?

View attachment 812923
View attachment 812924

The Week Before: Beginner Traders Heed Warning
It should come as no surprise that things aren’t the same in the week leading up to quadruple witching. For the last 15 years, the S&P 500 has had 59 witching events. Analysis of the chart shows that the index rallies around the 6th day before to the day before the witching. However, the trading during a witching day is more aggressive, and the market isn’t necessarily kind to beginners.


What to Watch For
Because of the increased volume, the chance of some abnormal price moves—and a statistical bias which may cause some day trading strategies not to work (which work during non-triple witching weeks/days)—some day traders recommend caution, and others recommend not trading at all. How an individual day trader chooses to handle triple witching will depend on their trading style, trading strategies, and level of trading experience. New traders will want to be more cautious in the days leading up to and on Triple Witching Friday.

Interesting… the OI chart for 6/17 looks unremarkable at first glance. The OI for calls and puts at $700 is modest and no different from an average week. But the total OI is much higher than the previous week 1,190k vs 158k. There is huge OI for both calls and puts all the way up to $1,200. Statistics are also skewed 200k puts at $1-$3.

6-17
At $700: 2,000 call OI, 13,000 put OI
At $1,100: 28,000 call OI, 17,000 put OI

With so many contracts so far out of/in the money I don’t really know what to expect other than that the battle around max pain may be overwhelmed by action related to these other contracts.

I will tread lightly, following the warning to day traders. It’s a sobering thought that this day could be more volatile and less predictable than a typical TSLA trading day… 🤔
 
I would be extremely thankful to anyone who would provide links to a resource with historical data and provide any additional feedback in terms of what can go wrong with 20% OTM weekly CC or 15% OTM weekly CC and what would be a meaningful rolling strategy if they get in trouble.

Thank you in advance.
@saniflash has already provided you a link to the relevant historical data. You can also download this data from the historical data tab at the Yahoo finance TSLA page (Tesla, Inc. (TSLA) Stock Historical Prices & Data - Yahoo Finance).

Putting this data into spreadsheets will allow you to generate graphs like this:

TSLA 2Y MF.jpg


This is one I've generated using historical data from Yahoo along with IV data from IBKR TWS. This is a work in progress and I'm currently using the data to back-test a number of strategies (will post when complete). However already from this graph you can see that more recent trading has been within a range of +17%, -13.5% when comparing the Monday open to Friday closing price. The variation in M-F price also varies with IV and whether TSLA is in the midst of a run. This is information that I'm building into my trading strategies and back-tests. In particular I'd note the June-October period last year was very profitable for options trading as the low IV and price variation allowed MM's easier manipulation and for option sellers to more accurately predict the closing price. Since then things haven't been so easy.
 
I am trying to understand the effect, if any, of triple-witching OpEx on TSLA 2 weeks before the actual date since "For the last 15 years, the S&P 500 has had 59 witching events. Analysis of the chart shows that the index rallies around the 6th day before to the day before the witching."

Will TSLA also rally? The good news is that TSLA is 📈 32 out of the last 47 3w-opex.

The bad news is that nothing is normal nowadays 📉.

For ex,
  • 2022-03-04 Fri Close is 828.29 (2 weeks before 3w-OpEx)
  • 2022-03-18 Fri Close is 905.39 (3w-OpEx week)
  • 2-wk growth heading into 3w-opex is 8%
  • maybe -16% to +23% OTM 14 DTE is safe?
  • Covid month -40% OTM 14 DTE

1654451236093.png


(do not use data or interpretation for trading)
 
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