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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
EVNow
Well-Known Member
Wow - what a year. 57% down for the year - with zero margins. All because of "safe" puts I sold.
Hope to recover back in a year or two.
ps : To add insult to injury, I've to now pay taxes at the highest marginal rate
pps : I've to think more about this ... if I had sold the shares as soon as they got assigned, I'd atleast not have to pay taxes. They should really count the losses upon assignment of the shares and let us write that off against short term gains.
Hope to recover back in a year or two.
ps : To add insult to injury, I've to now pay taxes at the highest marginal rate
pps : I've to think more about this ... if I had sold the shares as soon as they got assigned, I'd atleast not have to pay taxes. They should really count the losses upon assignment of the shares and let us write that off against short term gains.
Allowed all my CCs coming due to expire across four accounts. All closed no rolling.
I am eternally optimistic that I will have higher sale points next week at higher strikes, even at the elevated prices I like to play in.
To temper my optimism I BTO P 100 20X for next week as a hedge. Hope I do not even have the chance to get a nickel for them.
I am eternally optimistic that I will have higher sale points next week at higher strikes, even at the elevated prices I like to play in.
To temper my optimism I BTO P 100 20X for next week as a hedge. Hope I do not even have the chance to get a nickel for them.
Like others, I’m happy to say goodbye to 2022 trading, even though I managed to closed out with a very good week. My straddles and tight strangles were actually centered very close to $120-$125. Closed the puts for pennies and rolled to 1/6 -p124s at $8.20. Against my better judgment, I also decided to hedge the risk of a bad P&D report by selling -c125s at $5.10 and -c131s at $3.30 (ya, I know, STUPID!). However, to balance out that mistake, with all the premiums collected, I bought another 50 shr at $121.21, lots of 1/6 +c130s, 2x Jan2025 +c100s, and sold an extra put. Still have plenty of free cash for emergency rolls, still expect a $10-$20 sustained bounce on Tuesday, and maybe $5-$10 on Wednesday. Unless the P&D is a blowout, will sell the +c130s early Wednesday, and hold everything else into Friday.
Lesson learned the past few months is that selling straddles or tight strangles allowed for higher premiums in the face of unbelievable downward SP action. My bias for keeping shares would never had allowed selling ATM CCs without the CSPs as protection. Yes, it required weekly, sometimes even daily, up/down adjustments and one must be willing to spend winning premiums to “save” the losing side, but it does seem to work very well. In 2022, I bought several hundred shares and added several CSPs, though my current p/c ratio is closer to 2:3 than my preferred 1:1. For 2023, my goal is to reduce risk slightly and sell CSPs at ATM-$5 and CCs at ATM+$10, thus premiums near $4 CSP and $3 CC. Allowing for one side to pay nothing, this should generate $1-$2/wk average premium, which is more than enough to meet my modest expenses.
GLTA and a happy and prosperous New Year.
Lesson learned the past few months is that selling straddles or tight strangles allowed for higher premiums in the face of unbelievable downward SP action. My bias for keeping shares would never had allowed selling ATM CCs without the CSPs as protection. Yes, it required weekly, sometimes even daily, up/down adjustments and one must be willing to spend winning premiums to “save” the losing side, but it does seem to work very well. In 2022, I bought several hundred shares and added several CSPs, though my current p/c ratio is closer to 2:3 than my preferred 1:1. For 2023, my goal is to reduce risk slightly and sell CSPs at ATM-$5 and CCs at ATM+$10, thus premiums near $4 CSP and $3 CC. Allowing for one side to pay nothing, this should generate $1-$2/wk average premium, which is more than enough to meet my modest expenses.
GLTA and a happy and prosperous New Year.
i rly need to study the dynamics of how managing straddles work from week to week such that in the end, the 2 legs are in the same strike again
- week 1: ATM -c/-p, i get that
- week 2: sp is up, roll the -c to week 3 and roll the -p to the same strike
- week 3: sp is down, roll the -p to week 4 and roll the -c to the same strike
also, if i need winning premiums to rescue a losing side, then that means there is really no "disposable income" every week since i need it next week to fix something (ie there is hardly any realized gain week to week) - won't i have a losing side every single week?
confused!
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EVNow
Well-Known Member
Roughly if premium > SP movement, you make money.
:max_bytes(150000):strip_icc()/Straddle-7993da3c0f9c4cc6aa008c96e6895385.jpg)
What Is a Straddle Options Strategy and How to Create It
Straddle refers to an options strategy in which an investor holds a position in both a call and put with the same strike price and expiration date.
thx, but i meant Short StraddlesRoughly if premium > SP movement, you make money.
What Is a Straddle Options Strategy and How to Create It
Straddle refers to an options strategy in which an investor holds a position in both a call and put with the same strike price and expiration date.www.investopedia.com
EVNow
Well-Known Member
Yes, if short straddle you make money if premium > SP movement. If long, you make money if SP movement > premium.
PS: For eg. For next week the -p/-c at 124 is 6.9+6.2=13.2. So, if the SP ends up within 124+/-13.2 (111-137), you make money selling the straddle.
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It’s late and I’m a bit intoxicated so this might not make sense, but…..
1. SP=125, Sell -p125/-c125, usually Thursday or Friday for next week. I typically sell BOTH CSP & CC at the same time, in afternoon when SP movement is muted so I don’t mis-time and sell CSPs at a higher SP than the CCs sell. I’m normally NOT looking to time, just harvest theta decay on both sides, but sometimes I get lucky.
2. If SP stays +/-$5 of strike I don’t really do anything, just wait & watch the prices slowly decay until expiration day. Sometimes you can even see the SP go up or down, yet BOTH option premiums decrease, as theta starts winning, obviously one more than the other.
3. If SP changes more than +/-$5, or the total premium is getting too lopsided (say one premium is 3-4x more than the other), then I will roll BOTH toward the SP. Example above, if SP goes to $135, then roll to -p135/-c135, or -p130/-c130 (if you think the SP will reverse and bounce back).
4. Upon SP getting too far away from strike, I’ve done two different methods: A) roll out a week and move strike of BOTH -c & -p towards SP, or B) keep same week, and move strike of BOTH -c & -p towards SP. Always, I’m moving strike towards SP. Method A typically gives additional premium on both sides, because you’re adding an extra week. Right now, we’re getting about $5-$6 ATM week #1, additional $3-$4 week #2, $2-$3 week #3, and $1-$2 for each addition week. Method B doesn’t give additional premium, and actually might decrease it initially, but increases the chances of both sides decaying in future days.
5. The key is to keep the strike in contact with the SP, so that both sides have some theta decay. That is, as long as the SP doesn’t move too far (more than the ATM premium left in the week). As long as the SP stays within 2x the ATM premium (about +/-$10 currently), you can easily stay in the same week. In the past 3 months ($300-<$115) it’s been VERY difficult to stay in contact, and I initially rolled out a week at a time, sometimes multiple times in a single week. Eventually, expiration was so far away that theta decay decreased too much, and I rolled back in, accepting losses on the put side, but seeing the CC premiums keep decreasing, day after day.
6). How far is “too far” away from SP? Not very analytical, but once one side decreased from $5 down to about $1, it doesn’t make sense to wait any longer for a reversal. In that case, the other side has probably increased from $5 to $8, or even $10. Remember, a 50% premium decay at $1 is $0.50 (not a huge gain on one side), while the other side might have “only” a 25% premium gain but is at $10 ($2.50 loss).
7) My bias is that the SP is undervalued and will continue to rise back to the $400 ATH. Therefore, I will try to keep my straddle strike just slightly above the SP, rising a bit each week. Next week I’m actually uncomfortable with my -c125s and -c131s. Hopefully, I don’t have to scramble too much to roll up.
Example: Sept 28th the SP dropped almost $50 in THREE DAYS (thank you master twit). Rolling down/out helped, collecting $5 premium on the CCs, but nothing like selling everything before the $hit hit the fan. Of course, everyone knows now in hindsight, but the SP lost another $50 in the next week or so, and another $50, ad nauseam. Unfortunately, selling straddles did not stop the $150 losses on the underlying shares, only selling CCs at $50 strikes would have, but nobody in their wildest dreams knew that there would be a $150 drop coming. During that time I was able to collect maybe $30-$40 in premiums on the CCs, and kept rolling the CSP/CC pairs down, losing on the puts. Still, lost $150 on the underlying stock, while “gaining” $30-$40 premium, is still a massive overall loss.
Since I didn’t know how long the SP would drop, I kept buying shares with the realized CC premiums and the released CSP cash ($30k reserved at $300 strike, but only $15k needed for $150 strike, so I could buy shares with the extra). I rage bought day after day, week after week. I started at p/c ratio of 1:1 in my accounts and nearly got to 1:2 last week. As the SP drops this works great for accumulating shares. Unfortunately, the reverse will likely be true as the SP goes up. I need to ADD cash to the CSPs as the strike moves up, while the CC premiums will go down. Worst case, I will lose a few CCs and return the ratio closer to 1:1. At this point, I have exceeded my share goal, but unfortunately my account dollar value is still down YTD by a massive amount. Unless the SP returns to the $300s, I’ll need to revise my share goal 2x.
As @EVNow said, short straddles work well when the SP stays within the range of ATM+/-premium(total -p and -c). They also work best when you accurately predict the Friday ending SP and use that strike. Example, this week I chose $120 and got about $10 (5+5), but closed early losing $2 on the CCs and $1 on the CSPs, netting about $7. Had I correctly chosen $123 and had diamond hands, I would have left less than $1. Coincidentally, this week I started at $120, then rolled down to $115 early, then had to roll back up a day later. Oops, probably lost a bit on timing and bid/ask slippage there, but didn’t really expect that bounce until Friday. This is what NOT knowing the future does to a person.
So, to summarize: I don’t know the future, tweets, sales, profits, or anybody’s reaction to any of it. I cannot predict future SP or options values. I don’t know if Tesla goes bankrupt or takes over the entire universe.
…………BUT……..….I do know one thing:
Next week’s options will have exactly ZERO time value at 16:00 Friday. Furthermore, if I sell both a CSP and a CC at the same strike near ATM, with about $5 time value each, I know with absolute certainty, that one of those contacts will be worthless on Friday. Mathematical guarantee; I can collect all the premium on one side. Now, of course, the key is to NOT lose too much on the other side, and then rolling into the next week thereby resetting the time value clock.
JSML
Member
Today, I bought more shares and Jan 2025 leaps at +c70 and +c80. I am now at 38% leverage using margin on the long side. I am also not hedging the long position going into P&D numbers. In addition with left over BPS and naked puts, I am at 55% margin. I believe we've hit at least a short term bottom and I am betting the stock will be up.
Point of no return for my account is share price at 45. If the share price breaks 110, I will probably make adjustment since my thesis will once again be wrong.
Wishing everyone luck going into production and delivery numbers.
No calls sold for next week. I will sell calls on Tuesday no matter if the price is up or down.
Point of no return for my account is share price at 45. If the share price breaks 110, I will probably make adjustment since my thesis will once again be wrong.
Wishing everyone luck going into production and delivery numbers.
No calls sold for next week. I will sell calls on Tuesday no matter if the price is up or down.
I'm not super-experienced at rolling straddles, I tend to close out the whole lot and look afresh at the next week's prospects, but I can see how it could work and might try a small 5x perpetual for fun, the other possibility, of course is to let the losing side exercise, if you have enough shares and/or cash, you can run that for a while probably
The main thing to remember is that you're not only taking premium from both sides of the trade, but also maximum extrinsic if you write ATM, so you get the Theta decay from both sides and SP can move the sum of the premiums up/down before you have a losing combo
Edit: what @ReddyLeaf said
Just to add that straddles are also a great recovery mechanism for assisting ITM rolls - let's say you wrote -c125's for next Friday and the SP looks like it will close $140, you'll probably get a free roll up to $130, but still ITM and risk the SP runs away from you, if you straddle some puts with the call roll then you'll be able to write a few strikes higher, maybe even ATM, then if you get a flat week, your out of the positions
Also good for playing IV crush before P&D/Earnings, etc., take the high IV from both sides, close ASAP afterwards
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While I'm in wash-sale timeout for January, I'm trying to find some funds I could trade in that are closely correlated to TSLA so I can catch any jumps from P&D, earnings or whatever. Anyone have suggestions?
Best I can find that are slightly correlated:
And then these leverage ETF funds, which could be good but look very risky:
TSLH. Innovator Hedged TSLA Strategy ETF
TSLL. Direxion Daily TSLA Bull 1.5X Shares ETF
Best I can find that are slightly correlated:
Fidelity Electric and Future Transportation ETF (FDRV)
KraneShares Electric Vehicles & Future Mobility ETF (KARS)The Future Fund Active ETF (FFND)
And then these leverage ETF funds, which could be good but look very risky:
TSLH. Innovator Hedged TSLA Strategy ETF
TSLL. Direxion Daily TSLA Bull 1.5X Shares ETF
corduroy
Active Member
Well, thankfully we are at the end of another (crazy) year, so I totaled up all the results from my trading spreadsheet. Putting aside the huge crash in my portfolio value because of TSLA, and trying to look on the bright side - overall the options trading did pretty well. Total cash return was down 25% from 2021, but I'll take it.
I completed 298 trades in 2022 with 5 losses. My trading strategy continues to evolve into smaller less risky trades, since starting in Dec 2020. This is reflected in the higher win %.
Here's where I made my trades.
In 2023 I'm assuming the SPY trading percentage will be closer to 80%, and 20% TSLA.
Best of luck to everyone for a better 2023!
I completed 298 trades in 2022 with 5 losses. My trading strategy continues to evolve into smaller less risky trades, since starting in Dec 2020. This is reflected in the higher win %.
| Year | Profit | Loss | Profit/Loss % |
| 2020 | 18 | 4 | 81.82% |
| 2021 | 278 | 26 | 91.45% |
| 2022 | 293 | 5 | 98.32% |
Here's where I made my trades.
| Ticker | Completed Trades | % |
| TSLA | 157 | 52.68% |
| SPY | 99 | 33.22% |
| NVDA | 52 | 17.45% |
| AMZN | 7 | 2.35% |
| GOOGL | 1 | 0.34% |
| NFLX | 1 | 0.34% |
| BBBY | 1 | 0.34% |
In 2023 I'm assuming the SPY trading percentage will be closer to 80%, and 20% TSLA.
Best of luck to everyone for a better 2023!
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Several Baron’s funds such as BPTIX are about 50% exposed to Tesla (including a bit to SpaceX), and of course ARKK which is ~9%.
The IRS guidance is not super helpful, but TSLL may be too close to TSLA, if the tax man cares to care.
BPTRX actually looks pretty good, but the prospectus says
The Fund is not for short-term traders who intend to purchase and then sell their Fund shares within a 90 day period. If the Adviser reasonably believes that a person is not a long-term investor, it will attempt to prohibit that person from making additional investments in the Fund.
Has anyone traded this for less than 90 days and had any issues?
corduroy
Active Member
Surprisingly enough, BPS.
Losses came twice on CCs, twice on BCS, and one time CSPs (closed yesterday for loss).
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