Question about these deep ITM BPS. Given these are at max loss would it not make sense to roll these to something OTM?
Question applies even if you thought there was no risk of getting assigned.
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
Question applies even if you thought there was no risk of getting assigned.
OTM has comparatively little value and uses a lot of margin. For me the purpose of these DITM BPS is to add cash to the account that I can use to buy additional shares. This is essentially a form of 'free' margin and leverage. OK when things are going up, less so on the way down.
I just need to keep enough extrinsic value to minimize the risk of assignment. If they get down in extrinsic I will STO slightly safer BPS and BTC the originals. In a portfolio margin account these use very little margin so are a cheap way to add leverage. You just need to monitor the minimum safe share price for the account and be ready to deleverage when required.
When highly leverage my account can move up to 3x the share price % change. It's OK for TSLA down to $150 but I should be deleveraged long before it got there. Note I also use some cheap weekly P+ to manage and stabilize margin.
I was assuming this particular one 360/400 was opened when The 360 leg was OTM or maybe both legs were OTM. I think you are saying that’s not the case and these were intentionally opened when both legs were ITM and the primary reason is to take advantage of the extrinsic and very little to no impact to margin. I think I get it now.
scubastevo80
Member
How would you roll deep ITM (e.g. 300/25) to something OTM (like 180/150) without taking more risk or it costing a ton? After having to close one rolled BPS at close to max loss and another getting early assigned for max loss, I'd be looking to exit BPS quick if things go south.
JSML
Member
24 x June 2023 p 383 assigned overnight. Just going to sell most of the shares (keeping some) and close out the other leg of the put spread today.
This is the third put assignment within the last 2 weeks. My wife's account also had 3 put assignments within the last 10 days. I just close them all early. Don't really mind it even at a loss.
I don't monitor the extrinsic value of each spread so this happens. I am going to stay away from opening put spreads in the future and focus on buying calls, selling CCs and small amount of naked puts. Seems much simpler to manage and roll if needed.
bkp_duke
Well-Known Member
Assigned Jan 23 - 350P overnight as part of a BPS.
Will sell the shares and close the 325P on the other side at market open.
Will sell the shares and close the 325P on the other side at market open.
bkp_duke
Well-Known Member
All these overnight assignments - is this a sign of shorts closing their positions, or am I reading the tea leaves wrong?
corduroy
Active Member
Just one data point but the only time I tried selling ITM puts because I was bullish was one of my biggest early losses.
Regarding early put assignment is it possible that it starts with ditm puts that get assigned early causing a cascade effect on people's put spreads? As they're short puts get assigned they're forced in turn to exercise their long puts and this effect ripples through open put positions?
Got 3 Jun '23 -383.33 put to me overnight. These had .60 left as of close yesterday. Have 250 protective long puts that were paired. It's in margin account. One less spread to be concerned with.
So hard not to be excited by the news that Elon was selling — that is, it’s not just that investors hate him or TSLA but there was some other reason for the punishment the last few days. And a nice bump up in early trading even against the macros. (Edit: haha that didn’t last)
But then I remember that the CPI could totally screw us again tomorrow. Sigh.
But then I remember that the CPI could totally screw us again tomorrow. Sigh.
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You are trying to avoid put assignment so this is not necessarily a roll. Just close out these positions and reset. Based on the posts today it looks like more and more people are getting assigned.
Fred, I'm trying my best to inform without sounding defensive but the way this is progressing it ought to break down at some point. Technical analysis is not a single animal. There are literally hundreds of indicators and a normal person only incorporates maybe 10 maximum into their chart. This leads to thousands of different setups and outcomes, which is why only 10% of traders make money. So, while I don't want to say I don't care what the "TA purists" have been telling you, I don't. This is not because I'm arrogant, but because it is meaningless. See, if the people you're talking to belong to the 10% who can consistently make money, they you should probably listen to them. Whereas if they are among the 90% that can't, then you're probably getting bad info.Technical analysis is not influenced by events. Otherwise it would be fundamental analysis. For Tesla's TA the only thing that matters is the chart, not events like earnings, Elon selling, recalls, sales numbers, Hertz deal, etc. Technical analysis is leading, events follow. At least, that's what I've been told by TA purists.
I have sinned: talking about TA in the options thread
So to get back on track: yesterday I did the following.
On the put side:
- @188 I sold 5 -p180 11/11 for $1.70, thinking that we will probably not go down that low this week and if we do I can likely roll out one week for a nice premium.
- @188 I rolled my 5 -p215 from 11/11 to 11/18 for $0.90. Didn't want those to get assigned.
On the call side:
- @190 I closed 10 -c235 11/11 for $0.10. Freeing up 1000 shares to be able to sell new covered calls at a higher level, but that didn't mature yet.
- @194 I rolled 10 -c215 from 11/11 to 11/18 for $1.50. I liked the premium and didn't expect us to go much higher.
I have now deployed 80% of the cash and 33% of the shares in my trading account.
As for me, I've found certain indicators and setups that work for me and help me get through this bear market without much harm done to my account. Even with a portfolio made up of 100% TSLA shares, I'm only down 16% while the stock itself being down 55% YTD.
So let's get this straight: I don't day trade much and I don't understand why there's such animosity toward day trading and TA. Money is money. You know what would help when TSLA is down? More money. If day trading can earn you that money, why hate? But more importantly, I'm not trying to sell you folks anything. If me sharing what work for me isn't appreciated, I'll stop posting.
That's me trying not to sound defensive.
Now my opinion on TA & news:
1. News, whether anticipated or not, does affect TA.
2. The smaller the timeframe, the less influential news becomes. Ordinary people in my group make a killing everyday day-trading and scalping their favorite stocks using just a few indicators, honed by years of experience. They don't care about news when all they use is the 5m and 15m charts. Again, not selling a darn thing. Just stating that I see good TA at work 8 hours everyday.
3. However, just because news affects TA, doesn't mean that it's a good practice to incorporate news into TA as there's no proven system for doing so. Humans often trick themselves into thinking they know how a rate decision or a certain CPI print can change SPX. This is the exact issue with vision & lidar. Does LIDAR provide more data to FSD? Yes. Is it an effective solution to incorporate LIDAR and vision? Elon thinks no.
4. TA gives you probability, much like the march of 9s but with TA you'll get nowhere near the march of 9s. Trust me, trading is much harder than driving with your eyes open. Probabilities help you manage risks and minimize losses. Buffett once said the first rule about investing is don't lose money. If you can manage your risks, favorable setups with high probability of winning will grow your account over time. I don't claim TA is correct all the time. Anyone who does is a fool. It is correct for me the majority of the time - that's what counts. When unexpected developments like Elon's selling happen, my losses are minimal.
5. Good chartists don't get married to the chart. When the chart changes based on news, so do we.
6. I'm not a "purist." The combination of tools I use is unique to me. They're more than just the chart.
I didn't mean to attack you. I'm also a TA believer. If I see a flag or a shoulder-head-shoulder forming I'm on the edge of my seat.
What I wanted to say is that TA purists believe that when the charts predict a certain movement, the event to make it happen will present itself. Example: your prediction that we could go below 190 was based on TA. Elon's selling was the event that made it happen.
My apologies for misconstruing your intention, Fred. You brought up an interesting point of contention. The chart is not just lines and candles - there are humans behind every movement and with human comes emotion. Even when we take HFT into consideration, some human created the computer and instilled into it their own rationale and emotion via algorithms. To me, TA is a tool to gauge human emotion. So, while I may not know what the exact trigger was going to be, I know that there are reasons why the mid and long term charts look scary. When the backdrop is so scary, people will turn skittish and price will remain under pressure. Remaining under pressure long enough, sooner or later something is going to break, again because a scary backdrop tends to produce bad news over time. That's my take on charts foretelling news. I didn't expect Elon to sell and I didn't expect price to break 198.5, but if I did, I would never say see, I knew he would sell. Instead, I would say the chart looked like something bad was going to happen.
If you really think about it, we lost over 16% in 3 days while SPY gained like 2,3%?. Elon only sold 19.5M shares. If you recall back in late April, Eon was selling 25M shares and we only lost 16,17% while SPY lost 5% in the same span of time. So with relative performance and TSLA's beta in consideration, we lost much more on a smaller sale this time. Negative sentiment showing up on the chart manifested itself in real time as people were much inclined to buy the dip this time.
Last week I didn't expect price to break 198.5 because of reasons provided on Friday IIRC. However, on Sunday after looking at the chart again, I felt like the selling didn't slow to a degree that would normally produce a bottom for wave 2 so I said if 198.5 breaks, I'll still expect the weekly 200 EMA to hold. I still didn't expect it to break, but it became a more of a possibility at that point.
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SpeedyEddy
Active Member
Depends on what strategy the PUT buyer originally had. If it indeed were a shorter that has bought naked puts, he can now close with the (IMO very) cheap Stock. If it where a more cautious person that initially held the stock en payed not so much premium long ago, now the intrest is more attractive to switch over to bonds or so. Especially after Elon sold, the spread will not become very much bigger and there is a lot of capital involved in holding on to the position of a DITM put.
Just wanted to remind everybody of this observation. Absolutely not trying to brag. While this signal has worked out 100% of the time since I've started tracking it, I tend to not make a big deal out of it due to my timid nature. However, if you're overleveraged and see me saying things like this, please be aware that the risk is very real.
In all 4 of these instances: late February 2021, early June 2022, August 26th 2022 and November 4th, 2022, TSLA proceeded to lose 15%+ in a matter of days.
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EVNow
Well-Known Member
Small theta left ?
I only see assignments when the gap between strike and current price is large.
I've always read it as a sign of low liquidity / that the buyer doesn't want the instrument on their books.
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