Wiki Selling TSLA Options - Be the House

[JSML]

STO Nov 25 calls 192.5, 197.5, 202.5
STO Dec 2 puts 167.5, Jan 19, 2023. puts 156.67

Last week: closed -p183.33 early for 66% profit. Calls expired worthless at 207.5, 212,5, 217.5, 222.5.

Sticking to one week to expiration on selling calls until the SP recovers. If SP should take off next week, at least I can roll them with less extrinsic value left.

I like the straddle strategy from Max Plaid but I can't do it in scale because my sold call to sold put ratio is about 18 to 1 due to the Tesla shares I hold already. I might try it out on a small scale. Being a hodler has been painful the last 3 months. SP was 300 just a few months ago.

 

[BornToFly]

I didn't sell new calls for next week yet. I'm hoping the market rallies next week. Obviously, I lost premium if it ends up going down. Will try for some ATM calls, and have plenty of shares available for additional calls to roll those up if I have to.

I'm ok on Margin until SP 130. I'm actually getting nervous we could go below that, and I might sell more shares next week if the SP is dropping. If I had sold at premarket this morning, I would have been golden with a stop loss buy order to get them back when the SP finally recovers. My biggest fear is selling half my shares and then watching the SP climb immediately after.

 

[Yoona]

another way is to "repair the stock": getting paid to get rid of unneeded shares so that i can quickly go back to all-cash

i will probably do that tomorrow if sp doesn't rise

for ex, i bought shares @187.21 for temp B/W but the sp dropped to 183.17

if sp keeps dropping (for ex 170), i would rather lose the temp shares now (on breakeven or slight profit) than STO pure CC (11/25 -c187.5 @4.25) with the risk of holding the bag week after week after week on declining prems

for every 100 shares that i bought, i will sell CC plus Bull Call Spread on 1:2 ratio

• 11/25 +c182.50 x1, debit 6.65
• 11/25 -c185 x2, credit 5.30x2=10.60
• net credit 3.95

if sp at expiry >=185, all underwater shares @187.21 are gone

• sell 200 shares @185
• buy 100 shares @182.50 (and it gained 2.50, total 185)
• sell the original 100 shares @185 (i know, loss of 2.21/share)
• result is 395 credit minus 221 loss from original shares = 174 income AND i got rid of the underwater shares that would be a disaster to keep at 170 (cost basis 187.21) - what if sp lingers at 170ish for weeks?
• i got paid to lose the shares
• of course, i could have just waited for sp to rise into 187.21, but there is no guarantee of that; the 174 income is guaranteed
• if sp goes to 190 next week, (190-187.21)x100=279 opportunity income "lost" by not HODLing but no regrets in managing risk

if sp at expiry <185, everything expires and i have 395 income; keep repeating every week until all underwater shares are gone

done, and i am officially liking it

if at expiry sp < 180, cost basis is lowered slightly from 187.21 to 186.17 due to the credit

if at expiry sp >=180 and <185, cost basis lowered from 187.21 to at most 181.27(!) due to the credit and +c's appreciation
if at expiry sp >= 185, garbage shares officially lost and credit received

if at expiry, sp > 187.21 initial cost basis, the strategy is still better off than just HODL due to the +c gain and credit, even if the original shares were sold at a loss

Fix Broken Trades With the Repair Strategy

The repair strategy is built around an existing losing stock position and is constructed by purchasing one call option and selling two call options.

www.investopedia.com

"The repair strategy is a great way to reduce your break-even point without taking on any additional risk by committing additional capital. In fact, the position can be established for "free" in many cases."

 

[intelligator]

Thanks for the example! I took the ration spread path, same 1:2, effectively a CC + BCS for about $2. Although my cost basis is much higher, downside protection is worth the while. And if the don't expire and shares are called away, I position to get my account better situated.

 

[transpondster]

done, and i am officially liking it

if at expiry sp < 180, cost basis is lowered slightly from 187.21 to 186.17 due to the credit

View attachment 876151

if at expiry sp >=180 and <185, cost basis lowered from 187.21 to at most 181.27(!) due to the credit and +c's appreciation
if at expiry sp >= 185, garbage shares officially lost and credit received

View attachment 876152

if at expiry, sp > 187.21 initial cost basis, the strategy is still better off than just HODL due to the +c gain and credit, even if the original shares were sold at a loss

View attachment 876153

Fix Broken Trades With the Repair Strategy

The repair strategy is built around an existing losing stock position and is constructed by purchasing one call option and selling two call options.

www.investopedia.com

"The repair strategy is a great way to reduce your break-even point without taking on any additional risk by committing additional capital. In fact, the position can be established for "free" in many cases."

basically this is better than simply selling CC if only stock remains in [180; 190-(CC190 premium - CC185 premium)], otherwise it's worse than selling CC190. Would be nice to time it to CC wall though when these times come back

 

[JSML]

My back of the napkin calculation on how low the shares price can go, absent force majeure events, is $ 160.

Trailing 12 months EPS: $ 3.61 (This does not include Q4)

Conservative growth estimate 30%. (Tesla is still guiding 50%. Wall Street estimates are just below 40%)

Forward 12 months EPS and P/E ratio. $ 4.69. P/E 34. (SP 160)

Forward 2 years EPS and P/E ratio. $ 6.10. P/E 26. (SP 160)

The growth estimates and PE ratios feel about right to me on where the market is valuing Tesla with a recession ahead. Currently, a low of $ 160 spring of next year is my bear base case. Q4, inflation and forward guidance will have an effect on the SP, particularly inflation and the guidance.

 

[kcveins]

Frank Peelen has his new blog post up.
He discussed Jan 2025 options

Tesla Investor Blog

An in-depth blog about investing in TSLA. Here you will find investment theses, financial models, earnings forecasts, options strategies, and more.

teslainvestor.blogspot.com

 

[CrunchyJello]

I'm exploring a Buy/Write strategy, and
would like to identify the weaknesses (if any) in my pie-in-the-sky variation:
TSLA DTE=24,
Buy: 100 @ $180,
Sell 180c @ 12.80,
Sell 160p @ 5.05 (x2)
Total credit: $2290

The 3 columns in the red box looks at the possibilities:
1) Call ITM (everything called; exit trade with all premiums),
2) OTM All (Price finishes between strikes; 100 shares + premium profit), and
3) Put ITM (Price breaches put strike, 200 shares assigned + premium profit)

This is what I envision (although I'm weak on the Greeks & is likely blinding me!):
(1) would be ideal,
(2) would be great; adjust & repeat in the next cycle, and
(3) Lots of shares at a decent cost basis and ready for covered calls

Questions:
What is the biggest risk in this proposal?
What have I overlooked or overassumed?

 

[vikings123]

I'm exploring a Buy/Write strategy, and
would like to identify the weaknesses (if any) in my pie-in-the-sky variation:
TSLA DTE=24,
Buy: 100 @ $180,
Sell 180c @ 12.80,
Sell 160p @ 5.05 (x2)
Total credit: $2290

View attachment 876665

The 3 columns in the red box looks at the possibilities:
1) Call ITM (everything called; exit trade with all premiums),
2) OTM All (Price finishes between strikes; 100 shares + premium profit), and
3) Put ITM (Price breaches put strike, 200 shares assigned + premium profit)

This is what I envision (although I'm weak on the Greeks & is likely blinding me!):
(1) would be ideal,
(2) would be great; adjust & repeat in the next cycle, and
(3) Lots of shares at a decent cost basis and ready for covered calls

Questions:
What is the biggest risk in this proposal?
What have I overlooked or overassumed?

Looks good to me. In the case where 3 is the outcome you will have 300 shares at an average price of 159. So have an exit plan if TSLA drops below that number.

For example:

would you continue to sell CCs if stop drops to 140 or below?
Would you exit the position and take a loss?
Are you happy to own those shares for a long time?
Are these cash secured?

 

[BornToFly]

I'm exploring a Buy/Write strategy, and
would like to identify the weaknesses (if any) in my pie-in-the-sky variation:
TSLA DTE=24,
Buy: 100 @ $180,
Sell 180c @ 12.80,
Sell 160p @ 5.05 (x2)
Total credit: $2290

View attachment 876665

The 3 columns in the red box looks at the possibilities:
1) Call ITM (everything called; exit trade with all premiums),
2) OTM All (Price finishes between strikes; 100 shares + premium profit), and
3) Put ITM (Price breaches put strike, 200 shares assigned + premium profit)

This is what I envision (although I'm weak on the Greeks & is likely blinding me!):
(1) would be ideal,
(2) would be great; adjust & repeat in the next cycle, and
(3) Lots of shares at a decent cost basis and ready for covered calls

Questions:
What is the biggest risk in this proposal?
What have I overlooked or overassumed?

If you have the cash to buy 300 shares, it's a nice way to make money without risk.

Edit: Better reply above about trying to sell CC at SP 140 on all those shares, etc.

 

[BornToFly]

I'm worried the SP will go below 130 before the market recovers (at which point I get a Margin call and have to sell shares WAY to cheap and probably near the bottom). I was debating selling 10,000 shares this morning at the open, but don't want the capital gains taxed if I don't have to. I'm thinking of selling 100CC @175 to pay for 100 Puts with 175 strike for Friday. If the SP drops, I sell the shares for 175 but have a gap to rebuy the shares at 175 when the SP recoveres (I don't want the SP to take off without me). If the SP climbs, I will have to manage ITM CCs, but at least I don't have a tax bill on $1.7Million. Thoughts?

 

[BornToFly]

I'm worried the SP will go below 130 before the market recovers (at which point I get a Margin call and have to sell shares WAY to cheap and probably near the bottom). I was debating selling 10,000 shares this morning at the open, but don't want the capital gains taxed if I don't have to. I'm thinking of selling 100CC @175 to pay for 100 Puts with 175 strike for Friday. If the SP drops, I sell the shares for 175 but have a gap to rebuy the shares at 175 when the SP recoveres (I don't want the SP to take off without me). If the SP climbs, I will have to manage ITM CCs, but at least I don't have a tax bill on $1.7Million. Thoughts?

I guess the problem happens if the SP is above 175 this Friday and I need to roll the CCs up. What do I do next week if the SP starts dropping, because at that point I can't sell more CCs to pay for new Puts....

 

[BornToFly]

I guess the problem happens if the SP is above 175 this Friday and I need to roll the CCs up. What do I do next week if the SP starts dropping, because at that point I can't sell more CCs to pay for new Puts....

Maybe it is better to do 2 weeks out, and start rolling the CC up next week if the SP is climbing, and either keeps the Puts, or sell them for less than I paid to help roll up the CC.

 

[SebastienBonny]

Maybe it is better to do 2 weeks out, and start rolling the CC up next week if the SP is climbing, and either keeps the Puts, or sell them for less than I paid to help roll up the CC.

Yes, not quite in the same situation as you, but thinking about going to next weeks expiry as well.
We do have an event on 12/1, but I'm not sure this will move the stock price in the way we want it to at this moment.

 

[CrunchyJello]

Looks good to me. In the case where 3 is the outcome you will have 300 shares at an average price of 159. So have an exit plan if TSLA drops below that number.
For example:
would you continue to sell CCs if stop drops to 140 or below?
Would you exit the position and take a loss?
Are you happy to own those shares for a long time?
Are these cash secured?

On assigned, I will look for 2 very aggressive covered calls (...perhaps even ITM?).
All is cash secured; if the strategy offers a consistent way of averaging down,
I will repeat the process next cycle - always 100 shares - 1 CC - 2 CSP.
I have no intentions to exit; happy to own TSLA (@125-175) for the long haul; the strategy needs good management in that range to avoid any bagholding, but I think its possible. If needed, I will fund this account with another $25k which should be enough fluff for the eventual bottoming out bumps.

Thanks for your confirmation / insights!

 

[BornToFly]

I ended up doing half (50 contracts) for two weeks out. Of course Fidelity order wouldn't go through on Active Trader Pro so I had to log into the website, and by the time I did the SP had dropped, so I had to do 175 calls and 172.5 Puts to not pay a debit.

I hate this market.

Edit: Maybe my 50 contracts was enough of a sacrifice to the Gods to get the SP to 200 in 2 weeks.... (My CC are already down almost $5k)

 

[OrthoSurg]

Since I BTC my CCs last week on Monday I have been waiting for a bounce to sell CCs again and we didn’t have one yet in 5 days. All this while SPY is in a bull trend. This is beyond depressing.

 

[BornToFly]

I can't believe my order went through at the bottom of the day. My timing couldn't be worse.

 

[phantasms]

Can someone please explain to me, like I'm five, the benefits of doing a buy-write vs simply selling a put ATM.

Thank you!

 

[juanmedina]

I'm worried the SP will go below 130 before the market recovers (at which point I get a Margin call and have to sell shares WAY to cheap and probably near the bottom). I was debating selling 10,000 shares this morning at the open, but don't want the capital gains taxed if I don't have to. I'm thinking of selling 100CC @175 to pay for 100 Puts with 175 strike for Friday. If the SP drops, I sell the shares for 175 but have a gap to rebuy the shares at 175 when the SP recoveres (I don't want the SP to take off without me). If the SP climbs, I will have to manage ITM CCs, but at least I don't have a tax bill on $1.7Million. Thoughts?

How did you come up with $130? Anything is possible but to me it seem unlikely. P&D will give us a lot of clarity on which way this ship is going to go and it is around the corner. I think I am going spend every little money I can make on buying protection weekly at least until we know how Q4 is going to go. If we get good results and a decent bump I will try to clear out as many as of my margin positions as possible before the end of Q1. Hopefully in mid December we get some buying in preparation of the Q4 results.