Welcome to Tesla Motors Club
Discuss Tesla's Model S, Model 3, Model X, Model Y, Cybertruck, Roadster and More.
Register

Wiki Selling TSLA Options - Be the House

This site may earn commission on affiliate links.
It seems like you're working the monthlies primarily (or exclusively) rather than the weekly game that many (including me) are doing. Can you describe your system / trading rules / philosophy? I'd like to learn more about how you're doing things.

I've recently figured out how to bring some additional money into how I'm doing things. I am using it to lower risk / effort / energy / emotions around the different positions. I've always liked the idea of trading on monthlies, or at least multiple week positions, over weeklies as a mechanism for lowering my effort level and need/desire to keep an eye on things day to day; if you've been working in this space already, I'd sure like whatever kick start you can provide!


Actually, I prefer to work with weeklies or biweeklies. All these longer-term CC resulted from rolling deep ITM CC out to the point needed to get them ~ATM. Now I have a lot of gardening to do — rolling whenever SP approaches my strikes. Have to hope for pullback(s) over the next 6 months in order to bring these things forward and avoid assignment below market SP. Appreciate your suggesting I might be doing something clever, but it’s more like desperation. It leaves me wondering how much folks made by sticking to 15% OTM on weeklies and getting mostly expirations, but I was unwilling to accept the paltry premiums. The question is which nets out the most over the quarters. I did grab a few big premiums when IV was high, but it seems IV was high because SP was about to recover (which is mostly good, of course).
 
Last edited:
Actually, I prefer to work with weeklies or biweeklies. All these longer-term CC resulted from rolling deep ITM CC out to the point needed to get them ~ATM. Now I have a lot of gardening to do — rolling whenever SP approaches my strikes. Have to hope for pullback(s) over the next 6 months in order to bring these things forward and avoid assignment below market SP. Appreciate your suggesting I might be doing something clever, but it’s more like desperation. It leaves me wondering how much folks made by sticking to 15% OTM on weeklies and getting mostly expirations, but I was unwilling to accept the paltry premiums. The question is which nets out the most over the quarters. I did grab a few big premiums when IV was high, but it seems IV was high because SP was about to recover (which is mostly good, of course).
These are some similar questions to what I've been asking myself.

I'm also asking myself questions about whether I can achieve desirable income outcomes with less effort - maybe using 2-4 week options instead of weekly. For those to work the individual positions need to generate larger credits, and do so from further OTM. I haven't thought deeply about this yet, but this is one vector / dimension in which I am always looking to optimize - fewer trades / less energy into entering trades / not following the share price so closely throughout the trading day. Stuff like that (always with less stress / stomach acid :D).

One way to achieve these things is to have more money at work. 4% of $1M or 2% of $2M is the same $40k; 2% is a lot easier earnings level to achieve though.
 
These are some similar questions to what I've been asking myself.

I'm also asking myself questions about whether I can achieve desirable income outcomes with less effort - maybe using 2-4 week options instead of weekly. For those to work the individual positions need to generate larger credits, and do so from further OTM. I haven't thought deeply about this yet, but this is one vector / dimension in which I am always looking to optimize - fewer trades / less energy into entering trades / not following the share price so closely throughout the trading day. Stuff like that (always with less stress / stomach acid :D).

One way to achieve these things is to have more money at work. 4% of $1M or 2% of $2M is the same $40k; 2% is a lot easier earnings level to achieve though.


Once we get back to $350-$400, I’ll be curious about 30%-50% OTM 1-year buy-writes as an element of the overall.
 
Once we get back to $350-$400, I’ll be curious about 30%-50% OTM 1-year buy-writes as an element of the overall.
Buy-write, or just regular covered call?

Seems like if that's a thing for you (starting a buy-write at that higher share price), then starting the buy-write today at these lower share prices, maybe with a write of something near but not ITM (maybe buy shares 302; sell 315 cc for example).

If shares drift upwards then you drift the strike upwards with them, collecting credits along the way. If the shares go up and get out of control then you just take your max gain (a mix of share price gains plus the credits). And if they go down then you have a better buy price than waiting for $350-400.


But I also don't think about those really far OTM / distant strikes for option sales. I own some June '24 200 strike calls - though have $45(ish) time value, today, in them. That's further out than I would sell but at $45 extrinsic credit per call I would be collecting a lot of money up front. I'd need to math that out but that might be enough, in one trade, to be effectively done with the income trading for months.
 
Buy-write, or just regular covered call?

Seems like if that's a thing for you (starting a buy-write at that higher share price), then starting the buy-write today at these lower share prices, maybe with a write of something near but not ITM (maybe buy shares 302; sell 315 cc for example).

If shares drift upwards then you drift the strike upwards with them, collecting credits along the way. If the shares go up and get out of control then you just take your max gain (a mix of share price gains plus the credits). And if they go down then you have a better buy price than waiting for $350-400.


But I also don't think about those really far OTM / distant strikes for option sales. I own some June '24 200 strike calls - though have $45(ish) time value, today, in them. That's further out than I would sell but at $45 extrinsic credit per call I would be collecting a lot of money up front. I'd need to math that out but that might be enough, in one trade, to be effectively done with the income trading for months.


I say “buy-write” because I try to maintain different approaches to price and DTE for HODL and trading shares (latter includes b-w). The original idea was to maintain an x% to x+10% allocation to TSLA core/HODL with minimal selling, while being transactional and playing TSLA volatility with additional funds/shares. Not sure how well I’ve done with this, although it will be fine once we get back to $360 (I’ve analyzed it less since $1080 while frantically treading water!).
 
Once we get back to $350-$400, I’ll be curious about 30%-50% OTM 1-year buy-writes as an element of the overall.
I looked at this when we were around ATH.

(not buy-writes, but 1 year cc's)

Selling cc's this far out means the theta decay is pretty low for the first few months. Depending on IV you could be losing/winning without the SP moving much. In other words, there are many things outside your control.

The main argument for call like this is that they are a decent hedge against pullbacks in SP. When everybody cries TSLA is down 30% you could just close your cc's out for peanuts and your portfolio will have "lost less".

But then again, I think there are better methods for hedging. (Selling ATM for example, instead of 30-50% OTM)
 
Looks like the -290cc for Sep 16 will get filled. To replace shares and snag credit, I sold Sep 16 -305CSP for $6.25 just before the dip below 304.
i decided not to fight my 9/16 -c280 BW (cost basis 279) and just let it go; rolling generates less income than starting anew ATM

need to keep reminding myself not to fall in love with the temp shares

bye-bye to the shares but i'll see you again next week!

in the meantime, 9/16 -p295 is doing well (some regret for not selling more of them this morning)

looking forward, methinks this bounce up is only temporary (happy to be wrong):
  1. stay with weeklies and keep on monitoring SPY (be ready for quick exit)
  2. don't be fooled by green days, resist following the crowd, do your own research on what works for you
  3. keep contracts small while macros are driving TSLA (don't go "all in" while the bears rule)
  4. keep cash on hand (assume Russian madman goes nuke)
  5. daily reminder: don't trade unless i really understand the risks; capital is more important than income
 
I looked at this when we were around ATH.

(not buy-writes, but 1 year cc's)

Selling cc's this far out means the theta decay is pretty low for the first few months. Depending on IV you could be losing/winning without the SP moving much. In other words, there are many things outside your control.

The main argument for call like this is that they are a decent hedge against pullbacks in SP. When everybody cries TSLA is down 30% you could just close your cc's out for peanuts and your portfolio will have "lost less".

But then again, I think there are better methods for hedging. (Selling ATM for example, instead of 30-50% OTM)
I wouldn't be looking so much at these cc's as hedges, though the idea is also an interesting one.

My own thinking is that somewhere in the 3 month window (maybe as high as 6 months) is the start of the knee in the time decay slope, where time decay starts picking up in a noticeable way. I don't personally see going further out in time than that with cc, but if I want the shares anyway, then there might be something interesting here.


Working out an example - if I'm looking for a 5% credit on the capital in use for a 1 quarter option, I can buy 100 shares at $300 (rounding for easier math). 5% credit is $15. The December 355 strike call is selling for about 15.30 right now.

Buy the shares, collect the $1500 per contract. If the shares go up like many of us expect then I have another $55 on the table that I can earn - if shares are up enough by that date then I'll end up earning more like $70 per share on $300 (25%!!!). If shares aren't up over 355 then I'll have the credit and $300 cost shares.

Or go ITM with the call sale to reduce risk in exchange for reducing upside. The 270 strike December call is selling for $55 or $25 extrinsic / time value. Collect $5500 up front ($55k if I'm doing 10 of these using $300k). If shares are above 270 at expiration and close it all out then give back $30/share at that point, keeping the original $25 ($25k on $300k for 10 of these). $25 on $300 at risk is close to 10%. In the worst case shares are down below 270 at expiration, leaving me with $300 cost shares and $5500 (close to 20% of the original purchase price).


I'm kind of liking the looks of that ITM choice :D. IV, for what its worth, is mid 50s out in that timeframe.


EDIT: Adding on to my example above, I've just discovered an important difference between a buy-write and a cash secured put. For me at least they fit into exactly the same slot in my trading strategy, including the logic for opening the position.

This ah-hah moment is that with a cash secured put I receive a net credit up front. A 270 strike CSP for December would get me an $18.30 credit and a commitment to maintain $27k on hand to back a purchase should that become necessary.

Meanwhile the buy write using the 270 strike call will carry a net debit of $250 ($34 intrinsic, $20 extrinsic value). In this case I have $25k per contract deducted from my account, and I have to wait for expiration / close to see an increase in cash on hand as a result of my brilliance (or at least this trade :D).

These longer dated strategies will make the difference between cash flow and earnings more readily visible and top of mind.
 
Last edited:
You probably aren't far off @Yoona , calling possible short lived bounce. What exactly are you looking for when monitoring SPY and how quick is quick? While TSLA interest and gamma is positioning to the call side, we can't forget about last week's max pain pegging this week at 266 or so. Just for fun, I've added SPY... it's showing less enthusiasm sticking it out until end of week.

EDIT: pegging this week max pain

TSLA-TotalGamma-12Sep2022.png
SPY-TotalGamma-12Sep2022.png
 
Last edited:
You probably aren't far off @Yoona , calling possible short lived bounce. What exactly are you looking for when monitoring SPY and how quick is quick? While TSLA interest and gamma is positioning to the call side, we can't forget about last week's max pain pegging this week at 266 or so. Just for fun, I've added SPY... it's showing less enthusiasm sticking it out until end of week.

EDIT: pegging this week max pain

View attachment 851854 View attachment 851859
the reason i use SPY to help "predict" TSLA future action is because one nearly follows the other (white=SPY):

1663031104372.png


also, i see that there are 100x more SPY analysts than TSLA, and majority of those that i follow on Twitter/YouTube/Facebook predict SPY to bounce and then fall lower (and if all of them turn out to be wrong, that's ok)

for ex, this guy had been calling it correct for a few months now; his misses are few and far between:


"if SPY is predicted to fall next week, then perhaps i should avoid TSLA CSP and don't go all-in on buy-writes"; SPY is adding noise in my head and that's ok

this is from my limited research, NOT ADVICE!!!
 
I instantly went from moron to genius with all those covered calls. :)
Likewise. Was starting to sweat had gone a little overboard selling this week.

Had a plan that I half executed on yesterday. Sold 30CC at 21.30 for June 24 750 strike in my retirement account. My plan is to buy at least the same amount of calls at June 23 as low as I can get the strike at pretty much the same price. Was looking at mid 400s but obviously with what just happened low 400s are in play, maybe even high 300s. Maybe I will take the dates out to September. A very rare example of good market timing that I lucked into.

My belief is that setbacks like this for the markets that affect TSLA are gifts for people with the best information whom I know populate these boards. We are looking at 2022 3Q, 4Q, 2023 1Q and so on all record deliveries and record profits for TSLA, a company best positioned to take advantage of an accelerating S curve and also a permanent secular shift. If the economy doesn’t tank everything to the point where Tesla demand really does fall (they would be the last standing) then we have great opportunities before us.
 
For Friday, I now have 285CC on buy/writes, and CSP at 295 and 300. I feel like I'm looking good for any SP between 280 and 305 for Friday, with good premiums on one or more of those for a roll or conversion to new CCs. I really like having Puts at higher strikes than my CCs when the CCs on the buy/writes start to go farther ITM.
 
THANK YOU, cpi 💞

this morning's drop gave me another BW roll with good credit - almost double yesterday's

(milking it dry, squeezing blood from turnip, etc)
You got me to look at rolling my 285CC Buy/Write today instead of waiting until Thursday or Friday. Premium is pretty good so I took it in case the SP recovers.