Interesting I'm at E*TRADE and my spreads have always shown up as separate positions, both with a non-margin and a normal margin account, where I have to calculate profit by hand and add both to the ticket myself. (I think their PRO tool will show them combined, but I don't think it changes how trades work.)
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
Interesting I'm at E*TRADE and my spreads have always shown up as separate positions, both with a non-margin and a normal margin account, where I have to calculate profit by hand and add both to the ticket myself. (I think their PRO tool will show them combined, but I don't think it changes how trades work.)
Yeah I always traded through Power E-Trade. For instance what would happen with what I consider a covered call because now it just looks like a naked call. Before if a covered call finished in the money it would sell the shares tied to that call automatically... I am not sure what would happen now. So it seems to me that I have to be on top of things a little more.
FTFYHeyyy - Nasdaq futures are up by two basis points!
Now where’s myNieman MarkusNeedless Markup catalog?
bkp_duke
Well-Known Member
Only slightly considering this, was more of a thought exercise, but would love feedback from the more experienced traders here.
Was considering "what if" for a Deep ITM BPS dated far far out and what the consequences might be.
The numbers are based upon what the put prices were as of Friday close. Obviously these will change come Monday.
June 21st, 2024 Spread:
- BTO 2100 Put @ $1,495.50 each
- STO 2200 Put @ $1,397.50 each
Net credit $9,800 per contract, max risk being $200 (according to inputting here: Credit Spread Calculator).
Am I missing something? Early assignment of one leg is obviously a risk. TSLA not rallying that high by the options expiration is obviously a risk, for max loss, but what else?
Seems you could lever up like crazy on something like this for very little margin. Would something like this ever fill?
Was reading this link:
"Not advice" appreciated.
Was considering "what if" for a Deep ITM BPS dated far far out and what the consequences might be.
The numbers are based upon what the put prices were as of Friday close. Obviously these will change come Monday.
June 21st, 2024 Spread:
- BTO 2100 Put @ $1,495.50 each
- STO 2200 Put @ $1,397.50 each
Net credit $9,800 per contract, max risk being $200 (according to inputting here: Credit Spread Calculator).
Am I missing something? Early assignment of one leg is obviously a risk. TSLA not rallying that high by the options expiration is obviously a risk, for max loss, but what else?
Seems you could lever up like crazy on something like this for very little margin. Would something like this ever fill?
Was reading this link:
"Not advice" appreciated.
I'm showing that you are pocketing $8,000 and risking $10,000-8,000=2,000 if it ends up ITM.
Given that we drop every spring, I would sell Calls expiring in June, and Puts expiring in January....
Edit: It's $7,000 premium and $3,000 risk with lower strikes like -1200/+1100 that are far less likely to end up ITM....
Edit 2: Numbers are better if you can get closer to the mid-point....
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pro:
- defined risk, max loss only 200 (after returning the 9800)
- margin only 10k
- best opened at high IV
- OI too low
- Volume zero
- 14.5% probability of profit too low
- 5.30 extrinsic too low; high risk of early assignment
- max profit 9800 is nice temporary loan to you, but it's 1:1 from your margin anyways
- 9800/106 weeks is only 92/wk; can put the 10k margin into better use
jeewee3000
Active Member
I also considered this when BPS was most "hot" around here. (summer 2021, then Hertz/Elon selling happened
)I wouldn't sell them that far OTM since the extra risk is not worth it compared to what you can get for "reasonable" strikes (1400/1300 or so, or even 1200/1100 as mentioned).
Since theta decay is faster in the final year, I'd sell them one year out. And not too risky.
For example: (last friday close numbers) a -1100p/+1000p expiring one year from now (JUN2023) would net you ~8k with only 10k margin.
Seems a great deal actually. The greatest downsides I see:
- low volume and large bid/ask spreads so real return would more likely be 60-70%, still great;
- since it's a spread and not a csp you can't close for high % profit before the expiration date, so your capital backing the spread is stuck for a year.
- risk of early assignment. But then your max loss isn't 10k, it's lower since you can just exercise the other put and you'll have lost the 10k MINUS the theta left on the early exercised option.
bkp_duke
Well-Known Member
I also considered this when BPS was most "hot" around here. (summer 2021, then Hertz/Elon selling happened
I wouldn't sell them that far OTM since the extra risk is not worth it compared to what you can get for "reasonable" strikes (1400/1300 or so, or even 1200/1100 as mentioned).
Since theta decay is faster in the final year, I'd sell them one year out. And not too risky.
For example: (last friday close numbers) a -1100p/+1000p expiring one year from now (JUN2023) would net you ~8k with only 10k margin.
Seems a great deal actually. The greatest downsides I see:
- low volume and large bid/ask spreads so real return would more likely be 60-70%, still great;
- since it's a spread and not a csp you can't close for high % profit before the expiration date, so your capital backing the spread is stuck for a year.
- risk of early assignment. But then your max loss isn't 10k, it's lower since you can just exercise the other put and you'll have lost the 10k MINUS the theta left on the early exercised option.
I forgot to include that I wasn't planning on holding these to expiration. It was more a play for the depressed share price, and as the SP recovered in the next 3-9 months, to offload them at a substantial gain.
jeewee3000
Active Member
Then a spread is not a good choice IMO. Both legs of the BPS move similarly as long as they're both ITM and your gains will be very slow compared to other methods.
bkp_duke
Well-Known Member
Yeah, thinking about this overnight, I came to the conclusion that LEAPS would still be the best play here.
jeewee3000
Active Member
I'm also quite heavily slanted towards LEAPS now. (not advice of course)
I'm around 20% shares, 50% LEAPS and 30% cash.
The LEAPS were mostly shares that were converted over several months of low SP. So most LEAPS were not bought at a good time (too early in the drop) but I averaged down. According to my calculations if we reach +$1000 by the fall/EoY I'll have done better than with shares.
Go Q3!
Knightshade
Well-Known Member
FWIW opened (again seemingly just a bit too early) -925/+1025 and -600/+500 ICs this morning for ~$2.55
Looks like one could've gotten almost $3 at the very bottom (so far) today.
Looks like one could've gotten almost $3 at the very bottom (so far) today.
TheTalkingMule
Distributed Energy Enthusiast
I'm in the same boat, just considerably more toward LEAPs and likely a bit worse strike-wise. This is such an obvious play that I have to believe it'll fuel quite a bit of momentum as we move forward. Nov/Jan/Mar calls should build and build as 3Q comes into focus.
Shorts and MMs will cover ahead of 3Q and the split. My thought and hope is that 2Q performance surprises and continued guidance kicks this off in July. Expectations are low and PE is already uber-compressed.
I'm also starting to think the worse things get(Russia, Fed, inflation), the bigger TSLA might rip. In a no-safe-harbor scenario, TSLA looks attractive anywhere <$1000 once short and long term guidance is reiterated at 2Q earnings. At some point soon we'll become the new AAPL pigybank tech stock. For everyone else obviously
Call IVs were crushing on the way down 725 -> 708
It then picked back up as we rebounded to 720
It is now crushing again.
This doesn't look like we will go down big, YET, but it is more likely we go down than up. If we go up, it will most likely be with SPY, which will hit strong resistance at 420. After a BS down day on Friday, this weak rebound does not inspire confidence.
It then picked back up as we rebounded to 720
It is now crushing again.
This doesn't look like we will go down big, YET, but it is more likely we go down than up. If we go up, it will most likely be with SPY, which will hit strong resistance at 420. After a BS down day on Friday, this weak rebound does not inspire confidence.
VIX is trending down, so less over all macro fears might also be impacting the individual IV.
~ 10% drop in TSLA prices last Fri ... one would think IV should have risen..
Does VIX affect options?
As the VIX is the most widely watched measure of broad market volatility, it has a substantial impact on option prices or premiums. A higher VIX means higher prices for options (i.e., more expensive option premiums) while a lower VIX means lower option prices or cheaper premiums.
+sold some $880 calls for $0.80 ... exercise is an option
++ Gone are the days MM thought Tesla was going to zero and IV was 110%
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Are these option high of the day prices BS? I had open orders to sell that strike for $2.40 before the open and the orders were not filled. I was able to sell a few for $2.10.
TheTalkingMule
Distributed Energy Enthusiast
Same SP action as last Monday, no? Pushdown at the open, recovery, more powerful pushdown, recovery.
This better not be the plan for the whole summer or TMC is gonna sell enough BPS to bankrupt these mothagrabbers!
This better not be the plan for the whole summer or TMC is gonna sell enough BPS to bankrupt these mothagrabbers!
At some point today I think we retest 700. I'm not making any trades until see what happens on the retest. I think we go down to at least 695 and perhaps 680. If we close below 700 EOD I think there is more downside for tomorrow. I'm going to sit tight for now.
-Not Cory
-Not Cory
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