Wiki Selling TSLA Options - Be the House

[BornToFly]

Darn it. This morning when it was looking like we were going to fly past 230, I bought to close some Jan 2024 206CC and sold to close some of my Jan 2024 200 strike protective puts. The higher the SP gets, the worse the closure for that pair gets. Of course the SP has dropped since then, and now it would be a considerable debit to re-open the same pair.

Based on Elon's Twitter page, it appears that the Twitter deal is all but done. He is calling himself "Chief Twit." I'm surprised the SP has been dropping in the face of this change.

He also just posted this:

https://twitter.com/x/status/1585341984679469056

 

[BornToFly]

Worried about what happens to TSLA when META reports earnings later.... This is getting more than a little annoying.

 

[BornToFly]

WTF just happened? Went from almost 226 to 223 in a nano-second.

(It took out a stop loss order I had on 3,000 shares at 223 that was going to expire at the close today, and I didn't think I had to worry about).

 

[saniflash]

WTF just happened? Went from almost 226 to 223 in a nano-second.

https://twitter.com/x/status/1585354528115003392

 

[traxila]

https://twitter.com/x/status/1585354528115003392

"Barbara McQuade, a former U.S. attorney in Detroit who prosecuted automotive companies and employees in fraud cases and is not involved in the current probe, said investigators likely would need to uncover evidence such as emails or other internal communications showing that Tesla and Musk made misleading statements about Autopilot’s capabilities on purpose."

Whole article is based on 'sources' and a rehash of what everyone already knows. Disclaimers include that nothing at all may happen, and if it did it would be a long time from now.

....

 

[CHGolferJim]

Been watching for an opportunity to roll several months old 042123-c$325 down and in to make a little off the recent decline, then ride it back up to $325 which is the cost basis of this interminable buy-write. Rolled this morning at the $230 peak to 50% 121622-c$250 and 50% 012023-c$250 for a $3.67 net credit per contract. Fully expect to roll these up and out in the next few weeks, but with shorter DTE there are more opportunities for good credits, as long as we don’t get several $50+/week jumps…….which seems almost impossible given macros.

 

[BornToFly]

I am pretty mad that the BS Reuters FUD article caused a HUGE red candle that took out the stop loss order that I thought was safe. Now I'm trying to get my shares back AH with a limit order at 223.

(I guess I should have closed that order, but with the stock near 226 with about 30 minutes left, I didn't think I needed to before market close).

 

[BornToFly]

I am pretty mad that the BS Reuters FUD article caused a HUGE red candle that took out the stop loss order that I thought was safe. Now I'm trying to get my shares back AH with a limit order at 223.

(I guess I should have closed that order, but with the stock near 226 with about 30 minutes left, I didn't think I needed to before market close).

The AH order just filled to repurchase the shares at 223. Hopefully we don't open at 215 tomorrow....

 

[OrthoSurg]

The AH order just filled to repurchase the shares at 223. Hopefully we don't open at 215 tomorrow....

You just invented “After-day trading”


I wonder how long my 235 CCs will last.
Cory was right today at least for today 231 acted as resistance.

 

[juanmedina]

You just invented “After-day trading”


I wonder how long my 235 CCs will last.
Cory was right today at least for today 231 acted as resistance.

Meta is doing it's best to help your 235's

 

[intelligator]

Another positive gamma exposure day, yay! On the call side, 225 and 230 interest increased, 220 lessened some, 235, 240 lit up some. Not sure we'd have enough momentum to hit either by Friday. put interest shifted to the right by 10. Pre-market is green, not so for META. Aside for the momentary dip at 18:00, after hours trading does not appear to have impacted TSLA much... it's been a steady climb past today's close.

 

[BornToFly]

Yikes. I used the margin calculator to see what happens if we go back down and I don't rebuy the 200X 200 strike Puts I sold this afternoon. I get into trouble below 195. Would be great if the SP could bust through 230 for me tomorrow so I can buy them back without losing my shirt.... Pretty please!

(Just in case the Fed crashes the market some more next week)

 

[phantasms]

Sorry for OT but is anyone else considering selling $100 META puts tomorrow? lol

 

[mb300sd]

What happens to options when a stock is delisted? Selling TWTR puts seems like free money.

 

[vikings123]

Sorry for OT but is anyone else considering selling $100 META puts tomorrow? lol

lol funny you asked I already did a short 110 put/155 call straddle . I guess I will be a proud owner of META shares and write weekly CCs. If there is a recovery tomorrow I plan to close out the short puts.

 

[MrMoo]

What happens to options when a stock is delisted? Selling TWTR puts seems like free money.

From that logic selling twitter naked calls is also free money. Especially long dated ones that expire in 2024 lol.

I'm not saying it's a bad idea. I just think the contracts may be priced appropriately.

 

[Oil4AsphaultOnly]

From that logic selling twitter naked calls is also free money. Especially long dated ones that expire in 2024 lol.

I'm not saying it's a bad idea. I just think the contracts may be priced appropriately.

Actually I want to know this too! And is it really free money? The put seller is obligated to buy shares of the stock at the strike price (regardless of whether it's ITM or OTM). The call seller is obligated to sell the shares of the stock at the strike price, but without any shares available to borrow, how can this obligation be met?

I think selling the call options would be a worse position than selling the put options.

But according to a quick google, once a delisting notice is sent, the market makers would only accept closing option trades. So the time to sell those naked calls/puts was this morning.

 

[MrMoo]

Actually I want to know this too! And is it really free money? The put seller is obligated to buy shares of the stock at the strike price (regardless of whether it's ITM or OTM). The call seller is obligated to sell the shares of the stock at the strike price, but without any shares available to borrow, how can this obligation be met?

I think selling the call options would be a worse position than selling the put options.

But according to a quick google, once a delisting notice is sent, the market makers would only accept closing option trades. So the time to sell those naked calls/puts was this morning.

Hmm if that is true and there is no liquidity on the contracts then that would make some sense. The market sorts itself out.

You may be able to sell some puts or calls to retail buyers but someone would have to be pretty stupid to buy a call on twitter. A put, maybe a gamble that the deal still falls through?

 

[ReddyLeaf]

One thing I learned with the 1:1 balanced short straddle is that as the SP drops and the -c/-p are rolled down, cash is released from the CSP, which I was then using to buy more shares. For example, rolling down $10 from 240 to 230 released $1000/contract (allowing me to buy ~4-5 shares if appropriately timed). I did this a couple times, rolling out weeks as well. Now, I’m overweight CCs vs CSPs and as the SP rises, I must inject cash back into the CSPs at $1000/contract for every $10 SP rise and straddle roll. If the SP rise is ONLY $10/wk it should be no problem staying ahead of the rise and rolling out. Unfortunately, a faster rise means I must let some CCs go and sell CSPs (likely at lower strikes than ATM).

I know this is simple and intuitive, but I just hadn’t thought through the mechanics of SP rise on straddles. Originally, they were ATM around $250, but the SP has dropped so much that, even with rolling down, they are slightly OTM high. If the SP rockets back above $250 this week, I won’t have enough cash to roll the CCs out and back CSPs at 250. Thus, I must roll out at lower strike CSPs, losing the ATM premiums as my CSPs fall off the wheel. This will convert the $230 straddles to something like $230/$250 strangles. Not a terrible problem, perhaps even a bit easier to roll (or expire the puts), but something that I had not really thought about as I kept buying stock with my free cash.

The past month I’ve really enjoyed having 10x more free cash in the accounts than normal, (even though the “total value” has dropped dramatically with SP). Now, as the SP rises (hopefully), I will enjoy the total value balance rising, while fretting about the lack of free cash and trying to roll the strikes higher. First world problems.

FYI, decided to try the short straddle method because I can’t seem to time the market, guess the direction correctly, or understand why the SP has dropped below $350-$400. Everything seems upside down or backwards. Hopefully this isn’t too much of a lousy method since the shares/funds are in retirement accounts and I will eventually need the money (maybe 5-10 years).

Just a follow on to my recent post. Stream of consciousness posting, so please forgive my rambling if it makes no sense.

Since we all hope/believe that $200 was the bottom, and Tesla continues growing at ~50%/yr, and the current PE ratio is approx fair value, it stands to reason that the SP should “eventually” rise on average ~40%-50%/yr or ~0.5%-1%/wk. When selling ATM straddles, this implies increasing the strike at $2/wk, or perhaps $5/wk (average worst case), just to keep up with a rising SP and avoid falling off the wheel.

From MaxPain, ATM options are currently paying ~$4-$5/wk. So, to keep up with a rising SP, when selling straddles one needs to add at least half of the premiums into raising the strike of the cash secured put (CSP). Sell one ATM c/p pair at $225, get $8 premium, and roll to the next week at $230 (example), adding $5 to the CSP, and (hopefully) keeping the $3 for emergencies or living expenses.

Of course, all of this assumes a perfect execution and prediction of the weekly closing SP, whereby both options decay to essentially zero. Yaa…….and there’s a bridge in Brooklyn that I will sell cheap.

Up to this point, I have been trading options to learn (and get paid to learn, thanks @adiggs ), in anticipation of eventually living off of the premiums, while still keeping shares for the future. Until now, everything has been locked safely in retirement accounts, with no needs until far far off into the future, and therefore all earned premiums have been rolled into buying more TSLA. However, the long-term planner that I am, is beginning to see that far off future, and it suggests that such large weekly premiums are NOT needed for a comfortable retirement in my low-cost area. Currently, an average premium of only $1/wk is actually sufficient to meet my modest needs, which further suggests that I am taking on too much risk. Well, that’s certainly a long-winded diatribe forcing me to look in the mirror and reflect more on my life.

Ok, that’s done. For something more on topic: I took today’s SP rise to $230 as a chance to roll my 11/11 -230p/c straddles to 11/18 for another ~$2 credit. I didn’t really need to, but was ecstatic to see the put side decay so much, that it just seemed like the right thing. With the extra premium, again I was able to buy enough TSLA to round out another lot in one account and sell another CC. So, once again, my overall positions are even more heavily weighted to calls than puts. Eventually, I will likely let a couple calls get exercised, perhaps even roll them down to cash-in on the b/w phenomenon that @Yoona and others have described. Still cogitating on this.

 

[OrthoSurg]

it stands to reason that the SP should “eventually” rise on average ~40%-50%/yr or ~0.5%-1%/wk.

I am not sure the stock market and Wall Street stands to reason unfortunately. The stock will skyrocket +100% in 3 weeks then go down 50% in 2 months then come up back 300% in 4 months maybe in 2 years. It’s not a continual stock price steady growth. At some point one leg of the straddle will become deep ITM and it will be hard to continue steady income on one side by rolling out.