Wiki Selling TSLA Options - Be the House

[EVNow]

I consulted my accountant and he thinks it will be fine. Guess we will find out if I get a nice note from the tax man!

At the end of your link: "These remarks are simply my interpretation, and won’t necessarily reflect the interpretation of the IRS or the Treasury. What’s more, other tax pros may have a different take on this question. Unfortunately, there’s no sign that official guidance on these issues will be forthcoming in the near future."

Also, the washed loss is added to the cost basis, so you get that back when you sell the calls later anyway.

A couple of years back I spent an enormous amount of time researching this. I'd be very surprised if options are not treated the same as stock. Fidelity showed all my stock trades close to options as wash and thats how my tax law firm files my returns.

Yes, the losses from one trade are tagged as cost to the next trade. But to actually realize losses that you can show in the returns you still need 60 days of noactivity.

YMMV.

 

[Yoona]

guys, need your help... i know @Papafox explains this to death, but i am too lazy to find it

looking at 12/23 maxpain: if a wall (see 160) has nearly identical OI, does MM normally prefer to close below or above it? ie, do they protect calls more than puts, or vice-versa?

ignore maxpain=165

TIA!

 

[BornToFly]

As someone who hates the idea of rolling I would suggest looking into the option of closing all your BPS and start selling CSPs something closer to the current share price. Is that an option?

Not really, because the spreads are like 300/330, and closing them doesn't give me any margin because they are at full loss.

If the SP drops even further, at what point, if any, would you run into a margin call?

I shouldn't because the BPSs will be fully cash backed.

 

[EVNow]

ooking at 12/23 maxpain: if a wall (see 160) has nearly identical OI, does MM normally prefer to close below or above it? ie, do they protect calls more than puts, or vice-versa?

At 160. Thats what MMs would like to close at.

One thing about MaxPain to keep in mind ... it changes as SP moves and options get closed and opened. I've found it useful to look at MaxPain close to expiry rather than one or two weeks away.

 

[MikeC]

Sold some 1/24 220c and 300c to close out some 1/20/23 225 puts and split roll others to 1/20 190p. I fully expect this to be a bottom and a recovery from here but that's what I thought every single time this year.

The margin requirements were just too tight and weighing on me too much and with all of Elon's sales increasing the float I think the chances of those 10% up days are a lot less now. I'm still not out of the woods but feeling better about having more balance in my portfolio.

 

[OrthoSurg]

The fact TSLA is green relative to the rest of the market means some buyers came in since they think Elon is done selling? Is there any good news I am not aware of, like Leo buying another 500M shares

 

[EVNow]

The fact TSLA is green relative to the rest of the market means some buyers came in since they think Elon is done selling?

Yes.

After yesterday's news, I expected SP to be up significantly today .... but since the market went down, this is what we get. When the market goes up, we should see a robust jump in SP.

ps : sold 170/175 spread. So, hope the robust jump is not tomorrow

 

[OrthoSurg]

Yes.

After yesterday's news, I expected SP to be up significantly today .... but since the market went down, this is what we get. When the market goes up, we should see a robust jump in SP.

ps : sold 170/175 spread. So, hope the robust jump is not tomorrow

Great, so this is our +7% recovered day if macros were good.

SPY breaking down the 1month consolidation wedge. Macros going again for a downtrend. We were red each day macro was green because of Elon selling and now we are headed with headwind macros again.

What is convincing you guys now to sell all your TSLA shares and buy 150puts? We must be close to a bottom because that is what I feel like doing

 

[SebastienBonny]

I’m waiting for tomorrow but probably we close this week around this SP and I’ll only lose premium by waiting one day to sell CC

 

[intelligator]

Considering writing 6x CC against the highest cost basis recently assigned , convert to far out calls. I'd like to book some credit for the effort and close if we dip further. Tomorrow ATM credit is lousy, thinking using next week expiry, maybe 160 or 157.5 or 155... break even at 162.82, $7.8 credit?

 

[adiggs]

Rolled 170/155 BPS expiring tomorrow to 170/150 expiring Jan 6, grabbing a nickel along the way. Previously rolled 175/160 to 175/155 also expiring Jan 6. In both cases I didn't like the odds on getting back into the 170s this Friday. I landed on the Jan 6 expiration as we'll have P&D by then and some level of resolution to the blizzard of FUD / bad news. I expect that resolution to be a positive catalyst to a pressed down share price.

I stayed away from 12/23 as I expect another week (and a bit more) of this current mess, and there's not a lot of price difference in a 1 week vs. 3 week roll.

I'm holding 160/145 BPS for tomorrow as well. I like my odds on these being OTM tomorrow, but will roll if needed. These are more likely to get a 1 week roll should that be necessary.


Thinking about some call sales - I've been getting Jan 273 and Feb 275 csp assigned the last few days - I'm thinking about selling aggressive cc against those rather than selling the shares and opening replacement DITM csp. The loss is about the same if I just sell the shares immediately, where a few aggressive cc's sounds like a good way to start earning back those losses (vs. a straight / immediate share sale).

I'd been thinking about closing those csp anyway before the assignments started.

 

[adiggs]

guys, need your help... i know @Papafox explains this to death, but i am too lazy to find it

looking at 12/23 maxpain: if a wall (see 160) has nearly identical OI, does MM normally prefer to close below or above it? ie, do they protect calls more than puts, or vice-versa?

ignore maxpain=165

TIA!

View attachment 885357

At 160. Thats what MMs would like to close at.

One thing about MaxPain to keep in mind ... it changes as SP moves and options get closed and opened. I've found it useful to look at MaxPain close to expiry rather than one or two weeks away.

Adding to @EVNow the number of contracts is the really big deal. At least for TSLA, while 12k contracts may seem like a lot it really isn't. You can get a feel for the absolute numbers much further down that page, where the actual payout for the mm at each different strike is listed. You'll see that the minimum payout is max pain - you will also see that the nearby strikes are not much different (one previous description of max pain, is the low spot on the highway across Death Valley).

On the weekly expirations you won't see meaningful volume until the week of expiration. I personally ignore max pain for a given weekly expiration until week of - the volume is just too low before hand, and goes up too much in that week. The monthly expirations are mostly like the weekly expirations for this purpose.

But the quarterly, and especially the January and June expirations - those get 2 years to build up open positions -- I don't take on short term positions on those expirations because there's just too many hidden currents in the ocean, at least for me to take a chance on.


I have no opinion on whether mm would prefer 159.99 or 160.01. In this particular instance my opinion is that its a minor preference either way - the contract count isn't high enough to matter.

 

[ReddyLeaf]

……looking at 12/23 maxpain: if a wall (see 160) has nearly identical OI, does MM normally prefer to close below or above it? ie, do they protect calls more than puts, or vice-versa?……

@Max Plaid has said that MM seem to defend call walls more than puts, so likely they are interested in keeping SP near 160 (to facilitate high volume options trading right at that level) for most of the week. Then, if OI is still the same, probably close right near $159.99. However, as @EVNow said, on the closing Friday, we won’t know what the actual OI is and can only see the active trading, and then only 20min delay. Furthermore, we don’t know which MM wants the SP to go up or down, and which whale is fighting which direction. Best to stay slightly OTM for us little fish.
Edit: Scooped by @adiggs

That said, my brokerage transfer is now complete and I finally have a proper roll function. Tried out several different types of trades, rolls, BTC, STO, puts, calls. Took a bit getting used to it since there are two accounts, one IRA with spreads and one taxable cash. Managed to trade without messing up, but took awhile to see all the pull down boxes and not make a mistake. I can definitely see stupid mistakes in my future.

Rolled down 1/20/23 -p/c185s into 12/30 -p/c160s and -p/c170s, thereby freeing up enough cash to buy another 100 shares and sell another CSP. The new shares were actually planned as B/W at 160, but then I realized that I had enough cash for another B/W or CSP, so took the 160 straddle, which I’m willing to let exercise either way.

I’m pretty excited about my current position, nearly reaching my share goal, and transitioning into generating premiums for future living expenses. Planning future weekly transfers out of the IRA and into the taxable account, which will cement my trades and confirm (or not) my ability to generate enough trading profits to retire. Unfortunately, this comes at a time when others are suffering terribly and the SP is at a 2-yr low, so I’m very humble, and fully expecting the unexpected. GLTA and remember to help others less fortunate.

 

[BornToFly]

QQQ below the 50 day now. If it closes there, we are probably going to be in a Bear market for a while. I can't imagine TSLA holding if the market drops 10-20% from here....

 

[ice]

Wow TSLA is like an albatross to my accounts at $158 but I need to buy my friend a fancy dinner for saving my margin account from total destruction. The lower mainland sales intel she gave me was ahead by a few days of even the social media/tmc....

12/9 -200c expired worthless 12/16 -185c 92% profit, 12/16 -210c 96% profit 1/20/2023 -175c is like 45% profit $171 sold batch ahead by $13, $172 sold batch ahead by $14, $180 sold batch ahead by $22. Honestly I wish i sold more stock.....my portfolio is still getting destroyed but at least I slowed down the burn with no margin....

I set a limit order to buy back some at $145 (probably buy write).

Replacing the 12/16 -185/-210 short calls with 12/23's on a 2:1 basis, don't feel like opening too many short calls....in case we reach a bottom.

will not BTC the -185/210c, will hold to expiry.
STO 12/23 -160c ($5.00 credit), SP around $157.81 on a green day.

Positions:
12/16 -185c ($5.45 credit)
12/16 -210c ($2.62 credit)
12/23 -160c ($5.00 credit)
1/20 -175c ($14.65 credit)

 

[Yoona]

https://twitter.com/x/status/1603455317177778240

Adding to @EVNow the number of contracts is the really big deal. At least for TSLA, while 12k contracts may seem like a lot it really isn't. You can get a feel for the absolute numbers much further down that page, where the actual payout for the mm at each different strike is listed. You'll see that the minimum payout is max pain - you will also see that the nearby strikes are not much different (one previous description of max pain, is the low spot on the highway across Death Valley).

On the weekly expirations you won't see meaningful volume until the week of expiration. I personally ignore max pain for a given weekly expiration until week of - the volume is just too low before hand, and goes up too much in that week. The monthly expirations are mostly like the weekly expirations for this purpose.

But the quarterly, and especially the January and June expirations - those get 2 years to build up open positions -- I don't take on short term positions on those expirations because there's just too many hidden currents in the ocean, at least for me to take a chance on.


I have no opinion on whether mm would prefer 159.99 or 160.01. In this particular instance my opinion is that its a minor preference either way - the contract count isn't high enough to matter.

thx, i've been browsing through a few of papafox's old screenshots and it does look like (to me) that on the week of expiration, if there is a neutral wall and the maxpain is next to it, MM will find the sweet spot to be the side where the maxpain is.

not scientific and not definitive and obviously case-to-case basis, just based on a few examples i saw:

• if neutral wall is 160 and maxpain is higher (165) and surrounding walls are p150/c170, MM will try a 165 close
• if neutral wall is 160 and maxpain is 160, MM will try a 160 close
• if neutral wall is 160 and maxpain is lower (150) but there is upward pressure on sp, fri close may be the last sp (>160)
• if neutral wall is 160 and maxpain is lower (150) and c170 is exceedingly tall, MM will prevent a >=170 close
• if neutral wall is 160 and sandwiched between equally tall p/c walls, and maxpain is lower (150), MM will try a 160 close

 

[JustMe]

Who knows, but these have been historically great times to convert shares to leaps and a number of people in this thread have done well with it.
Maybe it becomes a total loss... who knows but I am ok with this risk / reward position which is not my whole account but about 30% conversion.

Going to get fresh shares from $175 Puts I wrote last week anyway...

Any suggestions on LEAPs?

 

[UltradoomY]

Any suggestions on LEAPs?

YMMV and Not Advice - I went with the January 2025 (longest available) $200 strike calls for $44 each - so 3.5 leaps per 100 shares.

Round strikes like that have higher OI and easier to fill than other odd strikes.

Good Luck!

 

[kabin]

Are you sure about that ? From everything I've read, options and stock are treated the same.

Wash Sales and Options -

The wash sale rule can apply to trades involving stock options.

fairmark.com

Buying Call Options​

If you sell stock at a loss, you’ll have a wash sale (and won’t be able to deduct the loss) if you buy substantially identical stock within the 61-day wash sale period consisting of the day of the sale, the 30 days before the sale and the 30 days after the sale. You’ll also have a wash sale if, within the wash sale period, you enter into a contract or option to buy substantially identical stock.

Example: On March 31 you sell 100 shares of XYZ at a loss. On April 10 you buy a call option on XYZ stock. (A call option gives you the right to buy 100 shares.) The sale on March 31 is a wash sale.

It doesn’t matter whether the call option is in the money. This is an automatic rule. If you buy a call option in this period, you’ll have a wash sale. And that’s true even if you never exercise the option and acquire the stock.

Yes. Another dirty little secret many options brokers gloss over to maintain their financial darwinian options trading flock.

The e-mini SP500 and Q futures and their associated options are some of the best ways to avoid the PITA wash sale rule as well as receive the section 1256 favorable 60/40 tax consideration since they are based on future contracts not equities. The same is true for commodity futures and their associated options.

 

[Yoona]

TSLA is today's #2 in S&P 500 and #2 in Nasdaq 100

rare green in sea of red

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interrupted by 3 days of EM's selling, TSLA is once again today's #2 in Nasdaq 100 (#18 in S&P 500 still respectable)