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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
not-advice
The way I think about this the price of the leap, buy and then sell, drives the overall profitability. The numbers tend to be bigger to a lot bigger in these changes.
One example of a leap cc failiing - buy the leap when shares are 920ish, shares trade down to 720ish, and you're selling say 800 strike cc's (low premium; ask me how I know
). The share price reverses fast enough that the 800cc goes ITM and deeply enough ITM that you're stuck. You get to take assignment on the 800 strike cc while selling the leap purchased around 920 for a share price around 800. That probably translates into a roughly $80 loss on the leap to match up with the collection of credits from the cc's.Another source of loss is that leaps are also affected by IV. If you bought the leap at a relatively high IV and now its a relatively low IV, then you've also got a loss due to the change in IV.
When the leap is no longer a leap and is instead reasonably low DTE and its strike is too close to the money you can easily get into a situation where the low DTE short call delta is higher than the leap delta. That'll mean that each $ going against the short call creates a larger loss than the gain on the leap.
I mitigate all of that by using really long DTE calls that are also DITM. That currently means June '24 500 strike calls. I want these to behave as much like shares as possible, so I want these to be really high delta (.90+ is a number that I like) and max distance to expiration. When the Jan '25 leaps become available then I'll choose a new DITM strike and those will be any new leap purchased from there on.
I've tried short DTE long calls and closer to the money - I get great leverage but if the share price trades down from when I purchased the call, then I can easily find myself in a position with a high delta short call (approaching 1.0) and a low delta long call (2 or 3 months to expiration, share price near the leap strike; probably a .5 or .6 delta. In this situation I see no good choice other than taking the loss and ending the pain. Each $ move down will push the short call deeper ITM and increase the overall loss in the position faster than the leap is gaining value.
I've discovered that I get additional "leverage" by using shares as backing. I put that in quotes as it isn't really leverage - I don't use margin or spreads. The "leverage" comes from selling calls that are much closer to the money than I would otherwise use. A recent example - selling the 690 strike cc against shares I purchased at 703. That position started $13 ITM and opened for about $25. Held to expiration the max gain was $12 - max gain was every share price above $690.
By using shares as backing the net of the shares minus the short call strike is always improving as the share price goes up. The deeper ITM the position goes, the slower the net gain, but its always positive.
In this example (buy shares 700, sell 690 strike cc with $12 extrinsic value) I get equivalent leverage to selling 2x farther OTM cc's against 2 leaps (given that I sell further OTM cc's with a $6.50 credit). From practice doing both I like the aggressive cc using shares over further OTM using leaps.
This is how I think about it
Some TSLA data that can be used to back test and to pick safe strikes based on YTD historic data. Worst Fri to Fri close YTD is -14.4%. Worst Monday high to Fri low is -17.8%. Worst 2 week Fri to Fri close -23.3%. I don't make much money (also barely lose if at all) trading options compared to some on here, but I do make enough play money selling safe strikes. Not advice, past performance is not indicative of future results...
My options adventures this week included:
- rolling 10x TSLA -c700 to next week for +$11
- rolling 2x GOOGL -c2300 to next week for +$30
- letting 70x AAPL -c140 expire: there was +$0.50 to roll to same strike, but for $1m capital, that's a poor return, happy to dump those stupid AAPL shares for a small loss
- sold 10x TSLA -p700 for next week +$7.1
I shall keep rolling the GOOGL and TSLA while they give some return. I believe we have a BMRR right now and are yet to see the bottom in this market. Of course I have no idea at all, guessing like the rest of us...
- rolling 10x TSLA -c700 to next week for +$11
- rolling 2x GOOGL -c2300 to next week for +$30
- letting 70x AAPL -c140 expire: there was +$0.50 to roll to same strike, but for $1m capital, that's a poor return, happy to dump those stupid AAPL shares for a small loss
- sold 10x TSLA -p700 for next week +$7.1
I shall keep rolling the GOOGL and TSLA while they give some return. I believe we have a BMRR right now and are yet to see the bottom in this market. Of course I have no idea at all, guessing like the rest of us...
Boy, I'm liking this trade as a nice data point for a bottom.
CNBC: Options trader makes $160 million bet that the bottom is in for Pinterest.
www.cnbc.com
"[They sold] 80,000 contracts of the August 20-puts, collecting about $2.55 [per individual contract]. That's [more than] $20 million in premium, but it obligates this trader to cough up another $140 million to buy the 8 million shares of Pinterest if it's below $20 by August expiration," Zhang said.
CNBC: Options trader makes $160 million bet that the bottom is in for Pinterest.
Options trader makes $160 million bet that the bottom is in for Pinterest
A huge put sale in Pinterest stands to net one options trader more than $20 million, as long as the bottom is well and truly in for the stock.
"[They sold] 80,000 contracts of the August 20-puts, collecting about $2.55 [per individual contract]. That's [more than] $20 million in premium, but it obligates this trader to cough up another $140 million to buy the 8 million shares of Pinterest if it's below $20 by August expiration," Zhang said.
Knightshade
Well-Known Member
That should be fine, I mean it hasn't been below $20 since... *check notes*.... 9:55 AM this past Friday.
Almost tempting to copy that trade and sell Puts with $20 strike however I am not pinterested in owning that stock if I get assigned
Welp, here’s to another interesting week
Not sure where we’ll land, with Twitter deal situation, CPI report on Wednesday (7/13) and positioning for Q2 report (7/20). Next fed interest rate decision isn’t far behind (7/27).
Not sure where we’ll land, with Twitter deal situation, CPI report on Wednesday (7/13) and positioning for Q2 report (7/20). Next fed interest rate decision isn’t far behind (7/27).
On Friday I opened up a STO $750P for this Friday. I'd like to keep rolling this weekly, with the goal of keeping it as close to at the money as possible, and just wondered if anyone can suggest what my target roll price should be? I'm thinking $25, but figured others here know what a weeks worth of time value should be.
I don't know. SPI data comes out Wednesday. Market is down pre-market and will probably drag TSLA down if the NASDAQ doesn't turn around. I'm selling 900 strike BCS near the open for Friday, but will hold off on Puts until I see a drop.
As far as TWIT goes, my take is TSLA market enthusiasm AH Friday will have tempered over the weekend with information suggesting the situation will be protracted. It seems to really come down to whether Elon’s supportive financing is intact or will require further TSLA sales by him, as the deal seems likely to go through eventually at a lower price. Lawyer fees will be astronomical, but not that material vs. $30B+.
Meanwhile, the other factors come into play more this week (China ups and downs, etc.).
I was talking about an overall market bottom and I'm not pinterested in trading Pinterest.
Here's to hoping the market bottom is behind us!
If we shoot up to $780, I'll be opening up CCs for Friday expiry. My target would be >=$840
I think example was given, but my case is that I hold Jan 24 +c700 calls, which I bought when the SP was in the $870's. So writing against them now at strikes lower than $870 just doesn't work out
That being said, I quite fancy -c800's for next week 7/22, and damn the consequences!
No, but I expected more in the run-up to this split, given that GOOGL is a way better stock than AMZN... I have some +c2600's expiring this week which I got for free as part of a put/call straddle the last earnings, I was too scared to write against them as I was expecting the SP to moon at any moment, now I'm left with 5x calls expiring worthless - unless we get 10% this week...
chiller
Member
I've been doing this with 700P for a long time now. The highest price is when you are perfectly ATM on Friday before close, and at that point the IV for next week decides the premium. I have seen as high as 28, but also a bit lower.
Your next roll will probably bring in more cash since the 22nd of July is after earnings.
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