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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
I have had problems like this with TD Ameritrade when approaching margin limits. I finally figured out the problem had to do with having multiple pending limit orders on options spreads open at the same time. It looks like the software sometimes gets confused and thinks I’m trying to sell an unbacked put or call. When I’m not near margin limits this problem doesn’t happen.
My solution was to close all open orders and put the orders through one at a time. Strange that I figured this out when the trading desk couldn’t. It might be worth a try for anyone facing a similar issue in the future.
I really really really much did not enjoy this week.
Got assigned Tuesday on 11x -p380
Got assigned today on 5x -p350
Had to transfer 65k to my account and had to sell ATM CCs yesterday to cash in 100k in premium to avoid a margin call.
I had to take that decision between 2 workers I was seeing for work related injury and had to trade while dictating the 30 mins long reports and decide to pull the trigger to sell ATM call when I saw the stock price already -5% going below 130, I was literally shaking holding my phone while trying to make that emotional decision on the spot while it was full blown capitulation day. Then today has to roll them down to 125 between 2 surgeries to cover for the -1.77% drop which sends me again to margin call again.
This is not sustainable for me and the stress it causes is 10 times worst than doing a complex surgery. I was trained to handle complex situations in which I have control of what I do and take rational decisions based on knowledges I have acquired.
Trying to salvage my portfolio this week before the next counter trend rally is like taking emotional decisions based on unknown facts about emotional people following the herd effect of mass selling one of the best companies in the world destroying my whole portfolio with it if I don’t short or hedge against my positions constantly.
On January 3rd I deleverage significantly whatever the stock price might be. I don’t wanna be constantly looking at the ticker while I go back to work on the 4th.
Got assigned Tuesday on 11x -p380
Got assigned today on 5x -p350
Had to transfer 65k to my account and had to sell ATM CCs yesterday to cash in 100k in premium to avoid a margin call.
I had to take that decision between 2 workers I was seeing for work related injury and had to trade while dictating the 30 mins long reports and decide to pull the trigger to sell ATM call when I saw the stock price already -5% going below 130, I was literally shaking holding my phone while trying to make that emotional decision on the spot while it was full blown capitulation day. Then today has to roll them down to 125 between 2 surgeries to cover for the -1.77% drop which sends me again to margin call again.
This is not sustainable for me and the stress it causes is 10 times worst than doing a complex surgery. I was trained to handle complex situations in which I have control of what I do and take rational decisions based on knowledges I have acquired.
Trying to salvage my portfolio this week before the next counter trend rally is like taking emotional decisions based on unknown facts about emotional people following the herd effect of mass selling one of the best companies in the world destroying my whole portfolio with it if I don’t short or hedge against my positions constantly.
On January 3rd I deleverage significantly whatever the stock price might be. I don’t wanna be constantly looking at the ticker while I go back to work on the 4th.
I mostly use Fidelity via the web app (rather than mobile app or desktop app). When entering an option ticket, there are two ways of putting multiple options into a single ticket.
One is that there is a "strategy" line near the top of the ticket. I like to use the "Spread" choice, but there are others in a ... menu.
The other is that after the first leg on the ticket is an "add leg" link that creates another line in the ticket for another option.
When creating a new spread I'll use the Spread option. When rolling a spread, I enter into the ticket using the Roll option on one of the two legs, fill that in. Then add two more legs and manually enter the information for rolling the second leg.
Hope that helps.
Everybody’s risk management strategies are different but I’m seeing a lot of posts where people are forcing trades. Be careful what you do in the short term because you don’t want to put yourselves in a position where the account cannot recover.
Let’s look at what the stock has done in the past couple of weeks: -8%, -16% and -18% for a total drop of 35% from 190 to 122. Some of it was obviously Elon selling and a lot of it appears to be technicals. I’m not convinced that this is purely a function of reverse gamma squeeze. There has to be a big fund or investor liquidating his position. Either that or this is most well coordinated bear attacks in the history of mankind. What worries me is the lack of any bounce on the daily. Tax loss harvesting also makes sense. They say nothing goes straight down but man is TSLA trying to be prove them wrong.
How I’m positioned: Short term January ITM 150 puts to hedge for the downside for 1/3 my shares and short term January calls to capture any upside for a small portion of my portfolio. Still have cash but not going to deploy until next week. Maybe they want to take this to 100 before P&D.
Next week should be very interesting. New weekly China insurance numbers should be available on Tuesday during pre market hours. Tesla China analyst is saying 100K deliveries for December and he is 90% confident. I guess we don’t have to wait too long..need at least a 25k-30k weekly number. I personally don’t believe it.
Let’s look at what the stock has done in the past couple of weeks: -8%, -16% and -18% for a total drop of 35% from 190 to 122. Some of it was obviously Elon selling and a lot of it appears to be technicals. I’m not convinced that this is purely a function of reverse gamma squeeze. There has to be a big fund or investor liquidating his position. Either that or this is most well coordinated bear attacks in the history of mankind. What worries me is the lack of any bounce on the daily. Tax loss harvesting also makes sense. They say nothing goes straight down but man is TSLA trying to be prove them wrong.
How I’m positioned: Short term January ITM 150 puts to hedge for the downside for 1/3 my shares and short term January calls to capture any upside for a small portion of my portfolio. Still have cash but not going to deploy until next week. Maybe they want to take this to 100 before P&D.
Next week should be very interesting. New weekly China insurance numbers should be available on Tuesday during pre market hours. Tesla China analyst is saying 100K deliveries for December and he is 90% confident. I guess we don’t have to wait too long..need at least a 25k-30k weekly number. I personally don’t believe it.
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I'm sure some people don't have a choice. For example if you try to continue into 2023 wash sale rules could result in a 2022 tax bill that would be even worse then flushing the account.
To be clear, you paid money and bought both the Puts and Calls...?
I have such a hard time doing that for fear of throwing money away. Obviously, with the drops we've had, buying Puts would have been a great investment up to this point....
As in if you are rolling in December then the loss on the rolled position might carry over into the new position for next year? I was impacted by that last year and I’m not exactly sure if there is a standard treatment.
The other thing to be careful about with wash sales is trading the same position in your IRA and trading account. In that case the loss is disallowed permanently so that to me is a much bigger deal. Sometimes in haste we tend to ignore these things.
Yes. It’s how I managed risk. Been buying puts all the way down from 185 range but never really held on to them so I could have a made really good money on the hedge but still made decent money. The most recent hedge I have now is from buying the 150 Jan puts when TSLA broke 134/135. Will take this hedge off if we break 130. I prefer ITM puts because of the same reason we sell OTM calls or puts.
Honestly I think it might be too late to buy any puts. Let’s see if 121 holds, if not I might think about adding to my hedge.
I suspect that for most people the main problem is the shares they acquired via early assignments.
Why somewhat like Meta is not dumping like Tesla if tax loss harvesting is the reason for the sell off? They are actually 5% up for the month and 65% down for the year.
I assume Rivian, Lucid, Polestar and Proterra are just following Tesla because those are also 30%+ down for the month. Even Ford is down 20% for the month. While Chinese EV companies BYD, Nio and Xpeng are up for the month. Nothing makes sense IMO. I hope Tesla China info is accurate becuase that might give us a break at least the P&D release. This week was brutal.
Yeah this unfortunately is what caused the most pain. If there was one thing this board would have never found out it’s rolling. Not gloating or anything but the thing that eventually worked for me is stop losses, no rolling and learning to trade with Dan. I’m not out of the woods by any means but I feel like I weathered the big storm and pretty confident that clear skies are ahead.
Stop loss strategies are probably the most important tool for a trader and couple that with discipline and basic TA you have a winning combination.
Unless a big institution or investor is bailing out I believe shorts are going to get crushed again. The tide will turn but in the meantime, until we clear 130
In the short term for example, it’s prudent to play it safe. For example if you are selling shares to buy LEAPS just wait and see what happens after you sell your shares. Or buy half now and wait to see what happens.
I think a stock like META probably saw it’s tax loss harvesting already and currently being helped by news that TikTok will be banned.
In any case TSLA has its own mind, impossible to compare it to anything else both on the way up and on the way down.
Yep, 100k seems well out of reach.
Seems like a lot of things working against TSLA for now. Hopefully the SP is close to consolidating but I wouldn't be surprised if it ends up below 100.
JSML
Member
Tesla November China wholesale was 100K so it’s not out of the question. Anything less would be a month to month decrease. All depends on the export number and last 2 Dec weeks China local sales.
apologies for another rookie question... if there is a BPS that is currently at max loss, do you even bother buying them out? i am trying to understand how that works
for ex, you STO 300/400 for $2 credit
to BTC it now would cost $5 debit
assume you don't have capital to increase width and/or improve to lower strike so it is beyond rescue, do you
for ex, you STO 300/400 for $2 credit
to BTC it now would cost $5 debit
assume you don't have capital to increase width and/or improve to lower strike so it is beyond rescue, do you
- wait for the 400 assignment and deal with it when that happens
- do nothing - wait for MM to take the whole thing at expiration
- BTC the whole thing - under what circumstances would you do this? and why? this is my main question - why would one even bother to BTC it at $5? what is to be gained?
I'll try to help with an answer, however the example you've given is a bit of an odd one to work with. A 300/400 BPS is a $100 spread, so max loss is $100 and credit to open something like a Jan'25 300/400 is currently around $98.67 ($1.33 of time value, so not fully max loss). So a BTC would cost something like $99 allowing for the bid/ask spread.
My responses to your points:
1. The $400 P- is likely to get assigned depending on the expiry. The Jan'25 example I gave above is likely to have been assigned already based on recent experience. When this happens you will have 100 shares purchased in your account for $400 each and the remaining $300P+ in your account with whatever it's value is. To deal with this you either sell the shares then sell the P+ and harvest the time value if the share price doesn't move for each sale. If the share price is lower when the P+ is sold you can gain extra profit. If you have a high risk tolerance this could be attractive. The risk being if the share price shoots up after selling the shares, the P+ wil lose value, making for a bigger loss. The other option is to exercise the P+ and this will also sell the shares but effectively cost you the full spread value of $100 (time value lost).
2. This sounds very dangerous. Some brokers may choose to liquidate the P- close to expiry, leaving you with a P+ that is rapidly losing value and adding to your loss. In some cases you may not be able to exercise the P+, leaving it to expire worthless. Other brokers may choose to auto exercise both sides. You would want to be very sure of what action your broker is going to take before leaving it in their hands.
3. BTC the whole thing may be preferable as it leaves you in control of what happens and can allow you to harvest as much of the remaining time value as possible. When rolling a BPS you effectively BTC before STO the new position anyway.
I tend to view ITM BPS based on their monetary value (-ve but provides cash in your account), time value and maintenance margin impact. If it's deep ITM and near full loss it's effectively a lost cause anyway. So BTC and not have it weigh down your account, or move to other strikes and expiry less at risk of assignment and continue to use the cash it provides in your account for other purposes. Just understand that having ITM BPS in the account effectively adds leverage that can be damaging to the overall account balance on downward moves.
Paging sellers of ATM CCs, what are your plans to manage them if we have a Christmas rally?
Roll the ATM CCs 2-3 weeks out to next resistance at 138 then 155 then 168
Or if we break out above 130 and expect traders to go long and shorts covering in the near yearn to roll them as further out as possible to avoid then taking to much value and roll them back down once the downtrend resumes? The problem I have right now is not having enough buying power or margin to buy then back even if they are +30%. So I need them more efficient strategy to roll them efficiently, close them once my buying power comes back, lose the least amount of shares possible in the process.
Roll the ATM CCs 2-3 weeks out to next resistance at 138 then 155 then 168
Or if we break out above 130 and expect traders to go long and shorts covering in the near yearn to roll them as further out as possible to avoid then taking to much value and roll them back down once the downtrend resumes? The problem I have right now is not having enough buying power or margin to buy then back even if they are +30%. So I need them more efficient strategy to roll them efficiently, close them once my buying power comes back, lose the least amount of shares possible in the process.
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I have 1/6 $135 CCs. If the share price gets close to that, I might buy 10% of the CCs back and let the rest ride until a couple of days before expiration then roll them out 2 weeks to the highest strike that yields a credit. Then sell OTM CCs on the ones I bought back. I have the feeling that an xmas rally would be short lived, but I’ve been surprised many times. The point of buying back a few is to avoid having all shares trapped on deeply ITM CCs. OTM CCs can generate cash to gradually raise the strikes of the others.
If you have ATM CCs against all your shares, your buying power will be limited to the value of your shares minus the cost of closing the CCs. Thanks to theta, if the share price doesn’t change, your buying power will slowly increase as theta decays the value of those CCs. Raising the strike in a roll will lead to increased buying power over time as theta decays as long as the share price doesn’t drop too much.
** ps, I dreamed we were all on a conference call and I predicted TSLA would reach $200 by June. I obv need a mental break from this stock
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