Wiki Selling TSLA Options - Be the House

[SebastienBonny]

When I let hingsight bias in, I find myself stupid for not buying OTM weekly calls like there is no tomorrow. However MauroBianchi, Chicken Genius Singapore and a lot of other people who called the 60%+ drop convinced me that it was also going to 60-80 range. I am just happy I didn’t sell all my shares to buy puts. Instead I bought LEAPS when the SP was $110. With hindsight bias at work. I should have sold at the top to buy back at the bottom but with all the FUD around and the bulls turning bears I am just happy I didn’t sell during capitulation while my broker was calling me every day for more money. This year I learned that next time we are near ATH and there is a change of trend from uptrend to congestion zone then start of a down trend I will take profit and sell. That’s what I learned this year. I am no more a HODLer. This will have turned me into a trend trader.

I think safe to say those TA guys telling us we would go that low didn’t take other stuff into there analysis (Tax selling, margin calls, long term options expiring,…).
TA has a sense, but only when there is no big news… You see there is no resistance in that case.
Also, a lot of people didn’t want to lose their Tesla stock at that time, certainly not at the levels we were at. Seeing Tesla rising like hell brought some serious FOMO time.

 

[strago13]

My biggest disappointment is in myself and my inability to switch gears properly. I can talk about how I have businesses and family to manage, but you either play this game right or you HODL and not waste your time.

I saw and even commented on the great risk to the upside based on the ridiculous and obviously manipulated trashing of the SP which proved again the power of WS over retail, but instead of stopping the CCs, sitting out, or even more importantly taking a decent position with short term calls and taking in the profit, I only increased the percentages on the strikes I sold.

My one saving grace was some 150 calls I had loaded up on which I basically ended up selling to use the profit to close out a bunch of CCs. I also aggressively rolled some CCs early on hard ending up with strikes of 375 to 425 with dates of Jun 23 to Jan 24. I am happy to let the shares go at those prices, but I am confident that they will not be a problem for me either way.

But honestly guys and gals, we should have been buying calls not selling. No matter how much we strategize and study percentages about where the free money is for selling options, and the percentage moves that have never happened you cannot escape having to time the market. The market timing here was screaming to either sit out or go long hard on TSLA. I felt it in my bones, but I didn’t simply load up on calls that went up from 300 to 1000 percent yesterday.

Have two long term accounts, one margin (basically zero margin in that account) one not, that I took losses in to save shares from 2015. Ridiculous and sad on my part.

My complaint here is not about my returns yesterday, I made great money as I have large long positions. Not as much as I lost on the way down of course, deleveraging and selling as I did to save my trading account. But this last week was an opportunity to make everything back plus with eye popping returns, but no matter how many times TSLA allows this gift to come my way can’t seem to close the deal. I should really spend my time somewhere else and perhaps acknowledge I have a gambling problem and I am not a good gambler, my so called ‘risk management’ be damned.

I hope everyone managed the best they could, and I certainly hope at least a few of us here were good enough at this to make some major coin! Overall, we should have done great, as we are all bulls with long positions, and TSLA rocketed.

100% agree with this sentiment....

With that being said, dont beat yourself up to much. On the way down, I knew this was an irrational dip, was not very far away from losing everything (would have happened at SP < $100). I had to sell some 170 JUN 2025 CC just to keep the account alive. I have been able to roll those to 220 now, but that still isnt ideal for obvious reasons. Of course, the cost to roll those higher is now insane with this latest move upwards....ceste le vie.

I knew that this would reverse and this would reverse violently. My partner and I wanted to take advantage of that, but we missed the boat because we were afraid that we would get margin called by being too aggressive. Timing the market is near impossible. I have felt almost like a deer in the headlights these past few days.

 

[CHGolferJim]

This has happened to me many times, I buy a tranche of shares for a buy-write and after a few weeks I want to HODL. easier when SP

 

[kcveins]

I decided to sit out earnings week due to the uncertainty... but still not sure if I'm ready to dip my toes back in selling CC next week.

 

[kabin]

As they say, earnings trades are good for staying engaged or hedging. In general, I've found selling option premium is less successful with high volatility stocks. Also tends to be a loser when betting on momentum stock counter trend rallies.

 

[Max Plaid]

OK, I have some work to do with some ITM CC's... 13x -c150's roll nicely to a -180 ATM straddle, but the 22x -c130's, not so obvious, maybe a December ATM straddle, which would also cut the number of contracts down to 15x, loads of extrinsic on both the puts and calls...

 

[OrthoSurg]

So many LEAPS with 20/1/2023 expired worthless then 1 week later they would have been ITM. This was a great pull from the market makers

 

[whalez]

OK, I have some work to do with some ITM CC's... 13x -c150's roll nicely to a -180 ATM straddle, but the 22x -c130's, not so obvious, maybe a December ATM straddle, which would also cut the number of contracts down to 15x, loads of extrinsic on both the puts and calls...

Hi,

Could you explain a bit more about rolling the 13x -c150s to a -180 ATM straddle please? Having some trouble figuring out exactly how that works. Thanks.

 

[Jim Holder]

Very interesting find regarding dealer positioning (suggesting staying long for now) worth a look (see at 0:05:30):

 

[SebastienBonny]

Frankfurt above 185 USD now.

Another thing I forgot to note and very important to keep in mind: rolling a CC once you get at or above your cost base is (unrealised until you let them take the shares!) profit as well.
Even if you don't get a lot of credit, the strike improvement will probably be a much higher gain. Say you got shares @200 cost base and you roll it 4 weeks to 240 and let them take those shares at that point, you'll have a 1000 weekly gain from that point. That's very hard (impossible?) to reach selling a weekly. Once you get in cost base territory, this thing gives you so much more options. In this case, 4000 would even be what I'm looking to gain for 20 weeks (20 * 2/share).

So at this point some of us are taken by surprise by the sudden steep rise, but a higher SP doesn't have to mean you will end up at a huge loss in the end.
Of course holding 130CC now (if that's below your cost base) isn't giving you a lot of options but roll 2 years.

 

[Max Plaid]

Frankfurt above 185 USD now.

Another thing I forgot to note and very important to keep in mind: rolling a CC once you get at or above your cost base is (unrealised until you let them take the shares!) profit as well.
Even if you don't get a lot of credit, the strike improvement will probably be a much higher gain. Say you got shares @200 cost base and you roll it 4 weeks to 240 and let them take those shares at that point, you'll have a 1000 weekly gain from that point. That's very hard (impossible?) to reach selling a weekly. Once you get in cost base territory, this thing gives you so much more options. In this case, 4000 would even be what I'm looking to gain for 20 weeks (20 * 2/share).

So at this point some of us are taken by surprise by the sudden steep rise, but a higher SP doesn't have to mean you will end up at a huge loss in the end.
Of course holding 130CC now (if that's below your cost base) isn't giving you a lot of options but roll 2 years.

Not quite true, I have 2/24 -c130, $49 at Friday close - and yes, rolling them as calls isn't obvious, but these can be flipped to other constructions:

3/17 -p220
4/21 -200 straddle
7/21 -p275 with 1/2 the number of contracts

-> these are just examples I pulled out to illustrate that you can be quite creative with rolls... you could also mix it up, put some in a straddle, throw others out to later in the year, etc.

 

[SebastienBonny]

Not quite true, I have 2/24 -c130, $49 at Friday close - and yes, rolling them as calls isn't obvious, but these can be flipped to other constructions:

3/17 -p220
4/21 -200 straddle
7/21 -p275 with 1/2 the number of contracts

-> these are just examples I pulled out to illustrate that you can be quite creative with rolls... you could also mix it up, put some in a straddle, throw others out to later in the year, etc.

True, but that is when you have the option to convert to puts (requires margin) .

 

[Max Plaid]

Hi,

Could you explain a bit more about rolling the 13x -c150s to a -180 ATM straddle please? Having some trouble figuring out exactly how that works. Thanks.

I already have $16.1 premiums for the sell of the -c150's, assuming I'm prepared to let that go, just to get out of the bad position, then that leaves $13 to be funded by rolling, which you'll never get on calls alone without either going way out or increasing the contracts, both of which increase risk and/or exposure

However, as of Friday close, -c180 was paying $8 and -p180 $10 -> sell one of each and you pocket $18 premium, easily covering the $13, and in fact allowing a reduction on the number of contracts, so I can go from 13x -c150 to 10x -180 straddle, reduced exposure as only one side of the trade can go ITM, the other will expire

Yes, this introduces a new risk element in case there's a large downside move, but you're at least working from an ATM position again, with less contracts and lots of premium to play with...

 

[Max Plaid]

True, but that is when you have the option to convert to puts (requires margin) .

Ah, yes, indeed... I don't use margin - there lies madness, but I try to keep a healthy amount of cash in my account

 

[scubastevo80]

Called out of our $140s in the parent's account, and I had to roll my $150s out a week to $152.5 in my main account. I can only hope for a reversion this week otherwise I'll be sitting out until prices come back down. My macro view is the whole market has gotten a bit ahead of itself via a bear market rally.

 

[dc_h]

Right.

Here is the funny thing - when going down, because of percentages, starting at 200 the drop looks smaller. When the SP goes up from 100, the raise looks steeper.

The fact is - the drop and raise might be equally steep if you look at the chart angle.

View attachment 900747

I'm going to save this chart and use for a jack o'lantern's smile this year.

 

[gabeincal]

Called out of our $140s in the parent's account, and I had to roll my $150s out a week to $152.5 in my main account. I can only hope for a reversion this week otherwise I'll be sitting out until prices come back down. My macro view is the whole market has gotten a bit ahead of itself via a bear market rally.

I'm with you @scubastevo80. Waiting for this rally to either solidify and get into short puts again, or a dead cat bounce over the next couple weeks and be able to recover my 135s should they not assign early... GLTA

 

[dc_h]

I'm with you @scubastevo80. Waiting for this rally to either solidify and get into short puts again, or a dead cat bounce over the next couple weeks and be able to recover my 135s should they not assign early... GLTA

If we have another one of those Fibonacci pullbacks on a run from 108.10 low to 177.90 (69.8 rise) a 38.2% pullback would be 26.66 to 153.34. That would be extremely convenient for me if we could close there on Friday afternoon and then load up for another 65% run up to 292.70. Who knew it could be so simple

 

[dl003]

If we have another one of those Fibonacci pullbacks on a run from 108.10 low to 177.90 (69.8 rise) a 38.2% pullback would be 26.66 to 153.34. That would be extremely convenient for me if we could close there on Friday afternoon and then load up for another 65% run up to 292.70. Who knew it could be so simple

You don't want that.
The low was 102 and the high 181
You don't want a 38.2% retracement as that would make this runup corrective in structure. For a sustainable new bull market in TSLA, we need to see at least a 50% retracement to 140 before going back up again. A shallow retracement, while may feel good in the short term, is very concerning long term.

 

[adiggs]

So many LEAPS with 20/1/2023 expired worthless then 1 week later they would have been ITM. This was a great pull from the market makers

This is why any leaps I buy, I get out of with 3-6 months (or more) before expiration. I've had that happen a few years ago - 500 strike cc were about $10 ITM at expiration - share price was 650 the next week.

Whatever you're gonna get, figure you've got it before the really serious time decay kicks in.

EDIT to add: ... and whatever manipulations they will be subject to when you're near expiration.