Wiki Selling TSLA Options - Be the House

[juanmedina]

Sorry just a quick follow up, but is there even enough premium for expirations like that? The -c350 was trading at 0.06 just a moment ago.

I got $0.60 and $0.50 for the $335's

 

[scubastevo80]

Per @samppa 's suggestion above. I wasn't able to trade this morning when I would like to have done this. But on the recent dip I just STO JUN2024 $363.33 put and set a GTC for the JUN2024 $366.67...

Let's see how this goes. Will be a long road down to $340 at this rate.

And here I am selling/closing some Jun24 $133.33's for $200 to diversify into some other names. I haven't traded TSLA options in the last two weeks and am moving more firmly into the volatility camp as I expect interest rate increases to derail some of the global demand for products, including $50k plus TSLA's. This is more of a personal decision around the % of my portfolio I want tied to TSLA at its current valuation and less about my long-term view of the company. TSLA has outperformed other companies I'm following in the last 6-12 months meaningfully, and I'm ready to start to rotate. If we have a hard landing, given TSLA's beta I think the stock gets hit hard. If the stock pulls back below $250 I'd be willing to pivot back. I'm not a Tesla-millionaire and I'm also of an age where I can't afford to "lose" money, so this decision makes sense for my family.

I continue to follow all of your trades and hope anyone who lost early this year makes it up over the next few months.

 

[Max Plaid]

I know, I know, said I wouldn't sell any calls against my LEAPS, but with $TSLA looking so bullish lately I couldn't resist putting in an optimistic $8.1 limit order on some -c310's... of course it triggered on the HoD and I'm all happy with that, the underlying LEAPS are in profit and will cover if necessary, but of course I will look to roll - $TSLA is a bit of an anomaly right now and I fear a retest of the June lows incoming

@Yoona reiterated a very valid point, rolling ITM calls up a strike is in essence the same as receiving premium:

if sp is rising, roll BW up (ie 280 to 290) for even credit; there is no cash income next week but there is $10 gain via share appreciation if 290 is called away; make sure new strike is below current sp; works only if not relying on weekly cash income

 

[intelligator]

Looks "to me" that from mid-day (second chart) to end of day (first chart), 320 took a haircut, 290 , 300 grew legs. You can see this reflected in the $0.08 figure contrast to mid-day $0.15... fewer calls traded, more puts. This may amount to more work for MMs to hedge the 310 and under strikes, making it a better opportunity to re-write a few strikes lower than today's unfilled BPS order.

 

[Discoducky]

I'm of the opiniom that if you rely on options premium as income, you need to have enough reserve to be able to go at least 3 months without any option income. preferably 6 months.

I've done 7 months this year on very little options income compared to 2019 to 2021. I planned for 2 years of drought max. I was raised by my grandparents who lived through the depression so I'm at the end of the bell curve most likely...

 

[SebastienBonny]

I know, I know, said I wouldn't sell any calls against my LEAPS, but with $TSLA looking so bullish lately I couldn't resist putting in an optimistic $8.1 limit order on some -c310's... of course it triggered on the HoD and I'm all happy with that, the underlying LEAPS are in profit and will cover if necessary, but of course I will look to roll - $TSLA is a bit of an anomaly right now and I fear a retest of the June lows incoming

@Yoona reiterated a very valid point, rolling ITM calls up a strike is in essence the same as receiving premium:

Well, some things to take into consideration when rolling to a higher strike for no or few premium in stead of rolling to the same strike for more premium:

• I consider premium as realized gain, while rolling to a higher strike isn't => only when the contract actually gets exercised, you gain the stock appreciation premium
• When the stock tanks you risk losing that premium, because SP could go below your strike => in that case I would consider rolling again to your original strike

Example:
Sold 300 CC for week 1
Stock goes to 320 by the end of week 1
Roll 300 CC to 305 CC for a bit of premium for week 2
Stock goes down by the end of week 2
Roll back to 300 CC for week 3, best before stock goes below 305, because only then you will get your 5 dollar "premium" (stock appreciation by rolling 300 CC to 305 CC) as intrinsic value + extrinsic value at that time. If you wait until 300, that 5 dollar intrinsic is gone (which will make the total premium less attractive if I'm right).

Correct me if I'm wrong, but in that specific case it looks like the thing to do.
As long as the stock stays well above your strike, you could consider keep rolling it to a higher (when stock keeps moving higher) or the same strike (when stock is stable).

As a conclusion: there are so many possibilities depending on so many factors. I think you have to just look at the situation week by week if you're doing weeklies, but every opinion is welcome to take all the possibilities into consideration.

 

[Max Plaid]

Well, some things to take into consideration when rolling to a higher strike for no or few premium in stead of rolling to the same strike for more premium:

• I consider premium as realized gain, while rolling to a higher strike isn't => only when the contract actually gets exercised, you gain the stock appreciation premium
• When the stock tanks you risk losing that premium, because SP could go below your strike => in that case I would consider rolling again to your original strike

Example:
Sold 300 CC for week 1
Stock goes to 320 by the end of week 1
Roll 300 CC to 305 CC for a bit of premium for week 2
Stock goes down by the end of week 2
Roll back to 300 CC for week 3, best before stock goes below 305, because only then you will get your 5 dollar "premium" (stock appreciation by rolling 300 CC to 305 CC) as intrinsic value + extrinsic value at that time. If you wait until 300, that 5 dollar intrinsic is gone (which will make the total premium less attractive if I'm right).

Correct me if I'm wrong, but in that specific case it looks like the thing to do.
As long as the stock stays well above your strike, you could consider keep rolling it to a higher (when stock keeps moving higher) or the same strike (when stock is stable).

As a conclusion: there are so many possibilities depending on so many factors. I think you have to just look at the situation week by week if you're doing weeklies, but every opinion is welcome to take all the possibilities into consideration.

Yes, you wrote everything I had in my head, but couldn't be bothered to type

Indeed the risk is that the SP then drops below the new strike, but then you still have your shares to sell lower strikes again... as long as that strike is above the initial cost-basis you're good. Of course the counter is to allow them to exercise and then sell puts, which might be more profitable/safer with a falling SP

Who knows, I don't have any strong methodology TBH, still mostly gut-feeling and following a few indicators and TA's, works OK most of the time

 

[saniflash]

So much chatter about BPS's and living off of options income so a few unstructured thoughts:

• BPS's exploded in my face, and almost fatally so, somewhere in 2018. I sold strikes that I thought "the stock price would never reach". I highly recommend against them because they have more characteristics of a bet (or a latent, highly-leveraged long position that you likely will not be able to maintain for longer periods of time, should you get assigned on the short leg) than they are "selling insurance" (which is the case with cash-backed puts).
• There is absolutely no guarantee that we'll be able to live off of the income from selling options. Eventually, IV will subside to levels where it will be much harder to do so. Cf. AAPL option price evolution. At which point in time the IV will subside sustainably and for the long-term, is unclear. But I personally do not expect that I'll be able to live off of options income in 10 years from now (at least not from covered calls).

 

[Max Plaid]

Just a heads-up on this YT channel which I started watching regularly. The guy goes through a load of indicators and trends, which I find very useful. As always, it's not gospel, just more data-points to consider:

Edited for a load of typos (again...)

 

[OrthoSurg]

What I find really interesting this time compared to June is that many TA traders are calling for a revisiting of the June lows with SPY breaching through support at 390 all this while TSLA is looking about to breakout through 309 resistance. That would be interesting to see TSLA breaking above 309 while SPY is making lower highs and lower lows. That’s would be refreshing to see TSLA disconnected from macros, for once.

 

[SebastienBonny]

So much chatter about BPS's and living off of options income so a few unstructured thoughts:

• BPS's exploded in my face, and almost fatally so, somewhere in 2018. I sold strikes that I thought "the stock price would never reach". I highly recommend against them because they have more characteristics of a bet (or a latent, highly-leveraged long position that you likely will not be able to maintain for longer periods of time, should you get assigned on the short leg) than they are "selling insurance" (which is the case with cash-backed puts).
• There is absolutely no guarantee that we'll be able to live off of the income from selling options. Eventually, IV will subside to levels where it will be much harder to do so. Cf. AAPL option price evolution. At which point in time the IV will subside sustainably and for the long-term, is unclear. But I personally do not expect that I'll be able to live off of options income in 10 years from now (at least not from covered calls).

Absolutely agree about BPS.

Living off option selling income is uncertain for the future, I would say enjoy while it lasts. Accumulating premium at this rate for a few years will build up your cash position as well. Within a few years, you could be able to accept option premium way lower than they are today, because you're able to sell more contracts. I also think premiums will rise when the stock price goes higher. If TSLA trades at 500 next year, premiums will likely be better.

 

[corduroy]

My plan when I "retire" is to invest into enough of 10%+ monthly dividend ETFs, like a JEPI or QYLD, to cover our living expenses. Roughly $100,000 for every $1,000 per month income is needed. Then trade options for more income and fun. I expect the options income will exceed the dividends, but would not count on it.

 

[jeewee3000]

So much chatter about BPS's and living off of options income so a few unstructured thoughts:

• BPS's exploded in my face, and almost fatally so, somewhere in 2018. I sold strikes that I thought "the stock price would never reach". I highly recommend against them because they have more characteristics of a bet (or a latent, highly-leveraged long position that you likely will not be able to maintain for longer periods of time, should you get assigned on the short leg) than they are "selling insurance" (which is the case with cash-backed puts).
• There is absolutely no guarantee that we'll be able to live off of the income from selling options. Eventually, IV will subside to levels where it will be much harder to do so. Cf. AAPL option price evolution. At which point in time the IV will subside sustainably and for the long-term, is unclear. But I personally do not expect that I'll be able to live off of options income in 10 years from now (at least not from covered calls).

Good post. This thread has indeed gone through a BPS phase and we collectively learned the risks. I don't think BPS is completely off the table though. In my case I find that:
- if you treat them like CSP margin wise (so for a -300p/+250p BPS you keep $30k margin around);
- and you only sell them on heavy dips;
then the risk is acceptable. You only run into trouble when you have ITM BPSes AND no more margin to manage them.

But yes, I too prefer making less income off CSP's. A lot less stressful. (But BPSes can help leverage/"snipe" certain oversold dips.)

My plan when I "retire" is to invest into enough of 10%+ monthly dividend ETFs, like a JEPI or QYLD, to cover our living expenses. Roughly $100,000 for every $1,000 per month income is needed. Then trade options for more income and fun. I expect the options income will exceed the dividends, but would not count on it.

Just checked out QYLD, solid! Will take note for possible future investment when I want to de-risk.

But as long as TSLA is around and in healthy state, you could just sell ATM CSP's one year out to get around 20% premium from that cash. Worst case you have shares or you roll the CSP's further out.

This yearly yield will probably drop when TSLA is not in growth mode anymore, but it will stay above 10% for many years to come.

 

[EnzoXYZ]

Good post. This thread has indeed gone through a BPS phase and we collectively learned the risks. I don't think BPS is completely off the table though. In my case I find that:
- if you treat them like CSP margin wise (so for a -300p/+250p BPS you keep $30k margin around);
- and you only sell them on heavy dips;
then the risk is acceptable. You only run into trouble when you have ITM BPSes AND no more margin to manage them.

But yes, I too prefer making less income off CSP's. A lot less stressful. (But BPSes can help leverage/"snipe" certain oversold dips.)



Just checked out QYLD, solid! Will take note for possible future investment when I want to de-risk.

But as long as TSLA is around and in healthy state, you could just sell ATM CSP's one year out to get around 20% premium from that cash. Worst case you have shares or you roll the CSP's further out.

This yearly yield will probably drop when TSLA is not in growth mode anymore, but it will stay above 10% for many years to come.

I too checked out QYLD a year back but the ~12% dividends lacked compared to most TSLA sell option strategies. The benefit is you park your money and collect your 1% dividend monthly. I really though about it as I was toying around with early retirement last past year. $500K-1M in QYLD you can realistically not work if you aren't a big spender. Post split, it does look a little better but the share price of QYLD dropped significantly since then (From 20s now to 16). Basically you lost about ~20% of your capital. The other big issue was then selling $500K-$1M of Tesla shares. HECK NO I couldn't get myself to do that. Then What if I margin 500K+ and split the difference (12-3% interest) and take 9%. This would be too risky if QYLD or TSLA drops significantly and the wife is no fan of margin. So back to square one.

I think the key to live off selling options is that you really need a huge cushion of TSLA (or other growth stocks) already and can live off that in a worse case scenario. This is especially true if we are right on TSLA seeing maybe another 5-10x in the next 10 years.

I continue to do BPS weekly and add CCs to generate income. For the last 2 years of selling options I find BSP as the most dangerous when you use margins. I get into 'trouble' with CCs 3x more often than BPS as I'm more aggressive. I will take ITM CCs over ITM BPS all day long.

 

[Max Plaid]

What I find really interesting this time compared to June is that many TA traders are calling for a revisiting of the June lows with SPY breaching through support at 390 all this while TSLA is looking about to breakout through 309 resistance. That would be interesting to see TSLA breaking above 309 while SPY is making lower highs and lower lows. That’s would be refreshing to see TSLA disconnected from macros, for once.

Yes, Interesting that many tech stocks: MSFT, META, GOOGL, etc., are at, or close to, June lows already, even March 2020 lows in some cases. They fell 10%, while TSLA rallied up 10%

Are the markets finally beginning to see the reality that we've known for years? Is it just options moving the stock price counter-intuitively? If we do get a crash will it drop with a 2x, 3x beta and catch-up with the rest? No idea!

 

[phantasms]

Anyone else picking up some lotto tickets to sell in the next couple days?

 

[BornToFly]

Anyone else picking up some lotto tickets to sell in the next couple days?

View attachment 855175

No, because the more money I spend the more the SP will do the opposite of what I want.

... wait., maybe I should buy some TSLA "lotto" Puts....

 

[OrthoSurg]

No, because the more money I spend the more the SP will do the opposite of what I want.

... wait., maybe I should buy some TSLA "lotto" Puts....

I think it would be a great move to make Tesla double

 

[Discoducky]

I'll be selling some 9/30 calls if the market spikes after FOMC. Thinking $330.

 

[UltradoomY]

I'll be selling some 9/30 calls if the market spikes after FOMC. Thinking $330.

I am day trading some calls / puts based on the trend for this year -
from Twitter -
ON EVERY SINGLE FOMC RATE HIKE SO FAR THIS YEAR MARKETS HAVE DUMPED AT 2:00 PM EST WHEN THE RATE HIKE CAME OUT AND RALLIED AT 2:30 EST WEHEN POWELL SPOKE

So.... definitely not advice.