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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
I think your statements are too definitive. There’s always the possibility of news and events obliterating support/resistance levels.
i used the 5-min chart
you can see the range on the previous post's screenshot (right side): 182.59 and 193.86
it's always the long directional move with momentum/force (in yesterday's case, a reverse MMD from opening); the line was drawn after the climb cooled and started to reverse down
algos tried to break below 0.5 but the green OB candle appeared (left of 1st arrow), which means too many buyers so sp wants to go up
the Prev Day High line is automated, so it's gone now on today's new screenshot but you can still see the 2nd arrow sitting on the 5-min mid-BB; red OB meant too many sellers but mid-BB came to the rescue so the buy was at that point
3 Outside Bar Trading Strategies -
We introduce 3 high probability outside bar trading strategies for trend-following, reversal and breakout trading purposes.
tradeciety.com
another visual confirmation i use to show res/supp is "EMA Cloud"; this guy explained it beautifully:
The EMA Cloud: The Next Generation Of Indicators?
This article covers the relatively new indicator: The EMA cloud by Ripster. We discusses how to use EMA clouds with stock trading examples.
Would it be better if I gave it an only 90% chance of happening?
Hmmm - thanks for sharing. I don't doubt that this has worked well for you, but I'm not sure that my trading style would alert me the same way. Which makes me think that there must be a platform that tracks options flow quantitatively. I'm aware of Cheddar Flow, for instance, but its utility based on alerts that the company tweets out has seemed marginal at best to me. Would be interesting to backtest data from such a platform against your own and determine if there is an edge to be gained.
I've always found it difficult to utilize options flow data since there is a bear and bull side to every trade (if someone is selling a boatload of calls, that means someone is also buying a boatload of calls - how do we interpret this as a bullish or bearish event?). I suppose where the trade occurs within the bid-ask spread can tell us something, but again, I'm almost certain I've seen many of these option flow alerts on Twitter that turn out to be ultimately meaningless - but I haven't looked at this rigorously enough to feel 100% confident in that assertion.
Cheddar Flow has historical data. If I signed up for the platform, would you be willing to coordinate and help me backtest their data against your own? If nothing else, I can at least check it against the four dates that you've already mentioned.
I dont use those services because they dont work as well as being able to see the supplies demand balance shifted in real time in the form of inflated / deflated IV. I have flow bots in my Discord but the thing is its very common to see large call / put sweeps entering the flow. Thats how TSLA options trade everyday. Its mostly noises. Only the biggest bets worth paying attention to can be observed in premium. Im guessing you can use them for day trading?
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very nice, i like posts like this that make me think
How closely (and frequently) do you have to watch for this in order for it to be effective, and has it been a signal more frequently than the four times you've mentioned already? Could you, for instance, sort of check in at the beginning of the day, note where IV and options values are at in relation to stock price action, and then check in at the end of the day and compare the two? Maybe in conjunction with options volume?
Most of the time I can feel something is off within the first hour. From there you will want to keep a close look for longer than normal. If nothing stands out then maybe you just need to check back once every hour. Naturally IVs are higher in the morning so that should be baked in as you check back on it throughout the day. Theta also. The good thing is if a large bet is placed , the premium spike / crush will jump out ar you. Doesnt take a math phd to see it. The key is selling calls at a high volume so that significant changes in their premium can be quickly observed. Most people I think have sold options valued at 1-5% of their account. I usually run at ~ 20-25%. All naked, no spreads. Hard to believe but its hit rate is 100%. Im counting both calls / puts inflow and outflow. The only variable is timing. Most of the time the stock runs in the direction of the flow the next day. In rare instances where the speed of change is severe enough you may have 15 minutes.
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corduroy
Active Member
Thanks for this tip on that ripster indicator! I'll give it a try.i used the 5-min chart
you can see the range on the previous post's screenshot (right side): 182.59 and 193.86
it's always the long directional move with momentum/force (in yesterday's case, a reverse MMD from opening); the line was drawn after the climb cooled and started to reverse down
algos tried to break below 0.5 but the green OB candle appeared (left of 1st arrow), which means too many buyers so sp wants to go up
the Prev Day High line is automated, so it's gone now on today's new screenshot but you can still see the 2nd arrow sitting on the 5-min mid-BB; red OB meant too many sellers but mid-BB came to the rescue so the buy was at that point
View attachment 873879
3 Outside Bar Trading Strategies -
We introduce 3 high probability outside bar trading strategies for trend-following, reversal and breakout trading purposes.
another visual confirmation i use to show res/supp is "EMA Cloud"; this guy explained it beautifully:
The EMA Cloud: The Next Generation Of Indicators?
This article covers the relatively new indicator: The EMA cloud by Ripster. We discusses how to use EMA clouds with stock trading examples.www.chartlearning.com
I have also been using the God Number Channel V2 indicator on Tradingview for the last few weeks to see reversals. It uses fibs to overlay color coded reveral zones on the chart. Looks like this:
Zhelko Dimic
Careful bull
I am afraid you will find that it's not only theta you need to worry about.
Every put you sell, nets you cash in your account. Someone, in this case most likely MM's, have bought that put from you in their role of making markets, and if there is no willing third-party buyer, they're keeping it on books. And they're lending you this cash, interest free. Yet, that money too, similar to options has time-value, i.e. extrinsic value. In the past, with interest rates ~0% this wasn't a concern, but we're in a different world now. Interest value of that cash must be lower than leftover extrinsic value for the option, for MM to have interest to keep position open, and for option to stay unassigned.
With interest rates going up, I feel we'll find out that MM's are much more eager to recoup their cash, theta be damned...
The interest rate is priced into the price of an option via the greek rho
AquaY
Member
Early execution when Extrinsic value is above zero is almost always retail.
It would be illogical for a MM to do it.
In order for them to get their cash they need to deliever stock.
The fact that exercising puts gets you cash is why puts get ecxercised more often early than calls but it is most likely retail if the Extrinsic is still positive
Really appreciating your analysis here. What duration do you typically sell CCs at - a week out vs a month out? Just curious how long you give your strategies to play out...
This is specifically aiming at this coming week exp when we dont know exactly when and where wave 1 is going to top out.
My overall strategy is to sell a lot of calls on the way down and scale them back at the end of wave 5 down and more at the end of wave 2 up. I dont fully scale them back at the end of wave 5 because I cant say for sure if the bounce after the bottom will be a dead cat or a real bull rally. Once it has put in a higher low, I can safely say ok this is wave 2 which means we are going higher. The time it takes for wave 1 & 2 to complete is about a month so the final scale back will cost less than the initial due to theta even though TSLA will have ended up higher.
I have short calls at different exp, ranging from 2-3 months to 6-12 months out. These are naked so I’m not limited by the number of shares in my account. Weeklies are great because they lose value very quickly if timed right. Monthlies & leaps are great because you can be wrong at the entry and still hold them till profitable unless you are extremely wrong at entry. They are dangerous in the hand of an inexperience trader.
Simple rules: sell aggressively in a downtrend, playing mostly 3-12 month exp calls. Do it early at the start of wave 3 down. The start of wave 1 down / the end of wave 5 up is good to initiate position but you have to be really sure that you are calling the top correctly. I was staying put the whole September as I wasnt sure 315 was the top. I also didnt do anything at 280-290 because I wasnt sure we were going down or just chopping around before P&D pushes us higher. However, as soon as P&D came in soft and we gapped below 265, I immediately had 207 as the minimum target. I then sold a crap ton of 1/25 610C. So much so that they helped to absorb 65% of the decline.
Once in wave 5 down, dont chase anymore.
Wave 1 up is good for some replenishment to be closed at the end of wave 2.
At the end of wave 2, decide what to close and what to keep. For example: I have tons of 12/22 280s, 1/23 340s, 2/23 350s, 6/23 500s, and 1/25 610s. I will probably leave the 280s and 340s because they all exp before Q4 ER. Will probably scale back on or close the 350s. 500s I will leave alone or scale back a bit. 610s will keep as we will go through many more cycles of up and down in 2023 which will give me greater opportunities to close them. Decide based on delta & theta & IVs (will they lose value overtime quicker than gain value due to underlying movement and increasing demand for calls?) and fundamentals & technicals (is it possible for them to reach this level by this date?).
During wave 3 up, play weeklies only and be a bit more aggressive with short puts.
At the end of wave 3 up, reestablish positions in longer dated calls. For example maybe 1/24 600s but dont go ham. These are as much IV plays as they are delta & theta plays.
Wave 4 up is not guaranteed. Wave 4 and 5 up only occur in a bona fide bull rally. What looks like a wave 4 up at first can actually a wave 1 down and vice versa. I’d sit out or open and close positions quickly based on my read of the chart & the fundamentals at that point.
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sold an ITM BPS -200p/165p 15 mins after the open this morning. I'm gambling on CPI positive-sentiment persisting.
Gutsy. What’s the plan if we hang out in the 180-190s for longer? I would be afraid there wouldn’t be week by week level rolls available, only increasing strike or paying to roll even/down or rolling out farther in time and waiting to catch up.
The aggressive call buying on Friday is slowly reversing today. Market ran up so aggressively last Friday that it didn't leave much room for a gap up / gap and trap today. Instead, everything just opened red. However, we still saw TSLA trying to fill the opening gap but only got so far as 194. The overall market still wants to go up and TSLA still wants 200 but it will be a bit of back and forth before we see that level. Judging by the structure, I'd say the top of wave 1 remains @ 207-215. To break out, though, we're going to need Elon to announce he's done selling, me think. I wouldn't be surprise to see calls building up again EOD today for another try tomorrow morning.
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I find it super helpful to see what others are thinking in terms of what wave we are in. You've put into much more of an equation than I've done intuitively and I appreciate that greatly. I've kept TA/EWT at an arms length and tried to intuit what is happening, but I feel like I'm coming to the same conclusions (macros aside, which I keep track of).
I realize some may find this to be subjective, but I think we could agree that this becomes objective as things play out overtime.
If we can share what wave we think we are in, then we can share what we think might be the best strategy.
For instance, I totally think we are in wave 1 up and that seems to be objective to me, but might be subjective to others.
My strategy for wave 1 up to sell weekly CCs when we have a good green day knowing we'll top out around 20% from the start of wave 1 up over 5 to 10 trading days. Of course, the big bad macro is always at play, and I keep track of that mess as well. But the macro has been a debbie downer so I feel like selling CCs is a low risk.
Another big takeaway from your analysis is 'staying out of the wave 3 push up'. And this is super helpful as I've intuited this, but I can see that this is something much more predictable.
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