Wiki Selling TSLA Options - Be the House

[dl003]

time sensitive: I'm sensing large put inflow into TSLA. The confirmation will be a break below 167. I'm rolling my short puts out to 2/10 150P now.

This was enough to produce a 6 point drop in about an hour. Now the flow has flipped, not just in TSLA but the entire market. Calls are being loaded, pushing the market higher today. However, I don't expect to see 200 this Friday. I'm looking at SPY and it is missing another leg down. SPY 410 and TSLA 200 just doesn't sound right. Maybe double top @ 181. Be careful because these things won't last. I suspect market will rise tomorrow post rate decision as algos are programmed to buy on 25 bps raise but then Powell is going to throw cold water on it and down we go.

Keep in mind that market is pricing in 98% odd of a 25 bps raise tomorrow. So upside surprises are limited to a/ no raise or b/ a rate cut.

 

[WattsHappening]

Options volume (where contracts > 500) as of a 11:55a , call to put ratio about 2:1

Like a few of us here, I'm undecided what to do with 2/3 -c165 and -c170 , they can be rolled up 10 for a small debit to next week or out further. I typically like to stay < 5DTE , this time things can move quick up or down. Any thoughts beyond 2/10 ?

View attachment 901704

I expect the SP is going to pretty volatile throughout this week. Fed tomorrow, followed by big tech earnings, particularly on Thurs.

I'm sitting on 2/3 -c155s (rolled from previous week). These are getting away from; roll options are getting less and less attractive. I'm going to wait to see if Darth Powell brings the market down tomorrow and see if rolling out for even debit/credit makes sense.

 

[SebastienBonny]

Technicals​

Indicators Table

Beta (5 Year)	On Balance Volume	RSI (14-Day)
2.09	--	63.78

Averages Table

10-Day Average Volume	201,814,444
90-Day Average Volume	119,808,704
20-Day Moving Average	$131.69
50-Day Moving Average	$150.71
200-Day Moving Average	$232.16
Historical Volatility (10 Day)	67.91%

Previous analysis slide

1. Trend Analysis​

   TSLA appears to be rallying within a longer-term bearish trend, driving its MACD above the signal line. However, shares remain below a declining 200-day moving average, signifying that the dominant trend remains lower. Comparative Relative Strength analysis shows that this issue is outperforming the S&P 500.
   As of 12:25 PM ET Tuesday, 01/31/2023

2. Momentum​

   Momentum for TSLA is strongly bullish. The 14-period Slow Stochastic oscillator is above 80, the level which many analysts call overbought. This means that investors have been actively purchasing shares and driving the price higher.
   As of 12:25 PM ET Tuesday, 01/31/2023

3. Volume​

   The last 10-days have seen significant volume in TSLA, with average daily volume above the average for the last year. Today's volume is no exception; with 119,539,023 shares having been traded already. The On Balance Volume indicator (OBV) is bullish. The slope of the indicator is positive and suggests that buyers are presently more active than sellers.
   As of 12:25 PM ET Tuesday, 01/31/2023

4. Volatility​

   Bollinger Bands® use standard deviation of the closing price around a moving average to measure volatility. The Bollinger Bands® are presently wider than usual, as a result of greater than normal volatility that accompanied the recent price move. Events such as this may precede a pause or reversal in the near term trend.
   As of 12:25 PM ET Tuesday, 01/31/2023

As volume remains high, can we conclude that the higher volume had nothing or only a bit to do with the lower Tesla SP?

 

[CHGolferJim]

Quite a high amount of calls at 200 this Friday, so someone’s betting for a spectacular rise.View attachment 901692

Or at least a good rise to sell the calls before Friday; although it looks like that opportunity has passed.

 

[EVNow]

At least someone is optimistic
(Disclaimer: Trade could be a hedge or STC after a few cents gain…):

https://twitter.com/x/status/1620202098330845184

Or, could be a simple Spread.

 

[traxila]

On Friday I rolled 1/27 -170C to 2/17 192.5.

I feel like this is very far away still.

I just rolled them all to JAN 24 425 strike for a small credit. If they get called at 425, I am OK! This account is out of commission for me for now, but what you gonna do?

Still have a couple more accounts to deal with for good.

Is it me or does TSLA still feel like a powder keg here?

 

[Max Plaid]

$SNAP crap earnings again, like who cares? $18b company with a product nobody uses, totally irrelevant...

 

[vikings123]

Or at least a good rise to sell the calls before Friday; although it looks like that opportunity has passed.

I think the opportunity is still present. If fed signals end of rate hikes(even if they do a 50 now) this bull market can continue. Or JPow will continue to try to talk tough but markets will not believe him which is what seems to be happening now.

IMO if TSLA can break 181 tomorrow I don’t see why we cannot hit 200 by Friday. I have 185s and 190s CCs open and will close them if TSLA breaks 181.

 

[OrthoSurg]

This was enough to produce a 6 point drop in about an hour. Now the flow has flipped, not just in TSLA but the entire market. Calls are being loaded, pushing the market higher today. However, I don't expect to see 200 this Friday. I'm looking at SPY and it is missing another leg down. SPY 410 and TSLA 200 just doesn't sound right. Maybe double top @ 181. Be careful because these things won't last. I suspect market will rise tomorrow post rate decision as algos are programmed to buy on 25 bps raise but then Powell is going to throw cold water on it and down we go.

Keep in mind that market is pricing in 98% odd of a 25 bps raise tomorrow. So upside surprises are limited to a/ no raise or b/ a rate cut.

I am still waiting patiently before rolling my CCs back in. I am waiting for a hammer Doji, breach of support and massive puts amount flowing in. In the meanwhile I am riding the wave.

Really miss @Yoona Twitter posts, I have to start navigating Twitter myself and see what Mauro and Danshap have in their sleeves. Hope she’s all right!

Averaging that with what Pierre Roberge and Cory are seeing in the trends and waiting for @dl003 to confirm there is some trend going on before shorting TSLA for the first time in my life.

All this while trying to spend less than 10 minutes online to have time for everything else!

 

[Jim Holder]

I am still waiting patiently before rolling my CCs back in. I am waiting for a hammer Doji, breach of support and massive puts amount flowing in. In the meanwhile I am riding the wave.

Really miss @Yoona Twitter posts, I have to start navigating Twitter myself and see what Mauro and Danshap have in their sleeves. Hope she’s all right!

Averaging that with what Pierre Roberge and Cory are seeing in the trends and waiting for @dl003 to confirm there is some trend going on before shorting TSLA for the first time in my life.

All this while trying to spend less than 10 minutes online to have time for everything else!

You’ve certainly found the best set of people who track TSLA, good for you! I follow them all too. I also use Tradytics for option flow. Between all of them there’s a lot of helpful data which is a whole lot better than my holding my finger in the air to detect stock direction ;-)

 

[Jim Holder]

This was enough to produce a 6 point drop in about an hour. Now the flow has flipped, not just in TSLA but the entire market. Calls are being loaded, pushing the market higher today. However, I don't expect to see 200 this Friday. I'm looking at SPY and it is missing another leg down. SPY 410 and TSLA 200 just doesn't sound right. Maybe double top @ 181. Be careful because these things won't last. I suspect market will rise tomorrow post rate decision as algos are programmed to buy on 25 bps raise but then Powell is going to throw cold water on it and down we go.

Keep in mind that market is pricing in 98% odd of a 25 bps raise tomorrow. So upside surprises are limited to a/ no raise or b/ a rate cut.

Thank you for keeping us updated.

For down do you still see 140s as “max” downside?

 

[Krugerrand]

Did you by any chance hear about my 180 resistance?
While it is true that TSLA can climb a lot more as it did in the past, it needs to do one thing first: retrace at least 50% of the initial spike up. If you go back, it happened every single time. I invite you to go over this post.


The reason for this is deeply rooted in human psychology. It's not manipulation or random occurrences. Wave 1 up from the bottom can be impulsive because it is fear driven:

a. Short sellers fear getting blown up
b. Bottom catchers fear missing out

Smart investors do not want to buy any stock that has just run up 80% in 4 weeks, regardless how low the starting point was. Why? Is it because they don't think TSLA is worth $180? No. They don't buy it here because they don't want to compete against short sellers and bottom catchers in chasing it at this price point. If anything, they want these people to buy every share they're forced to buy before taking their own profit on the stock. When the stock or the economy has some piece of bad news, as bad news tends to happen in a shaky global economy, reality is going to set in and people is going to flip "Tesla is still the same company as it was before the ER and a lot of the initial runup was just short covering", it will retrace deeply as 80% profit in a month is no joke. The stock should retrace at least 50% before deep pocket buyers say ok the price is attractive again. That's wave 2. The retracement is simply a test of strength of the rally.

Wave 3 happens only after the stock has been tested at the bottom of wave 2 and that's when the real fun begins. That's the irrational spike you're probably thinking of. Those were wave 3, not wave 1. We are currently in wave 1. Actually we could already be in wave 2. The question is not if, but when it will retrace deeply.

Thanks for this response. I did see your original post. I don’t think we ‘tested’ anything at this point and this all sounds like a personal narrative as well. Granted, a lot of people need to tell a story to make sense of the world or whatever. My suggestion is that they don’t, but that’s another topic and forum.

You may very well end up being right about what happens, but I (personally) wouldn’t bet on it. Having been away from the forum for a number of weeks, I’ve had the opportunity to read these threads in hindsight. Absolutely nobody got it right. A couple of people got a piece of it right - most of them were not forum members but linked to by forum members.

I hope that most (because there are a few I’m not supportive of) find a way to be successful, you as well.

 

[ReddyLeaf]

snip………..it will retrace deeply as 80% profit in a month is no joke. The stock should retrace at least 50% before deep pocket buyers say ok the price is attractive again. That's wave 2. The retracement is simply a test of strength of the rally.

Wave 3 happens only after the stock has been tested at the bottom of wave 2 and that's when the real fun begins. That's the irrational spike you're probably thinking of. Those were wave 3, not wave 1. We are currently in wave 1. Actually we could already be in wave 2. The question is not if, but when it will retrace deeply.

So just to clarify, do you mean we should expect a pullback from 180 down to about $140-$145? The impulsive run was from about $101 to $180, so half of that is $40, and 180-40=140. Is that correct? That fits perfectly with filling the $144-$160 gap from 1/25.

 

[intelligator]

Checking yesterday to today, the c170 (23k OI) and c175 (22k OI) increased some, c180 (34k OI) added about 75%. The put side increased from 170 down, more so on the 160 and 150 strike where gamma is less but Open Interest is 24k and 21k, respective. Right where we are, +/- 5 seems probable leading up to the rate news. Thereafter, we'll all be busy managing either side.

 

[OrthoSurg]

You’ve certainly found the best set of people who track TSLA, good for you! I follow them all too. I also use Tradytics for option flow. Between all of them there’s a lot of helpful data which is a whole lot better than my holding my finger in the air to detect stock direction ;-)

My greatest capacity is to be smart enough to identify the smartest people in the room and try to learn from them. My second greatest quality is to try to learn from my mistakes. I try not to be rigid and I try to learn new things and have an open mind. Technical analysis is one very interesting beast to tame and control.

I just don’t have the patience to stay in front of screen all day and day trade, that doesn’t make me happy. Medium term and long term trading doesn’t more fit what I like.

 

[myt-e-s-l-a]

As volume remains high, can we conclude that the higher volume had nothing or only a bit to do with the lower Tesla SP?

The higher volume was also as a result of the high volume of TSLA options. MM have to hedge each buy/put option with sell/buy of TSLA stocks.

The Wall Street Journal reported that Tesla (TSLA) stock options volume surged to 13% of all trades. Prices seem to be skewed to the call side, implying investors think the stock is undervalued. This has pushed up premium prices to very high levels. That makes selling out-of-the-money calls worth looking at for income-oriented investors.

 

[GrmMastrDoobie]

The risk is that the stock runs over your CCs on a rally and you either lose your shares or buy back at a loss. Look back at 2021 posts - a lot of us were planning to make steady income doing this and it doesn’t always work out. Also, I would definitely not do it in a Roth and pay taxes and penalties you don’t have to.

Wouldn't it be better to do this in a Roth, if the calls I sold were exercised? Then I wouldn't have to pay capital gains tax. The other big difference is I don't have 4,000 shares in a taxable account, so I can't really play the selling calls game in any other account other than my Roth. I would rather pay some taxes now if it enabled me to retire ten years early. Seems like a no brainer to me.

 

[MikeC]

Wouldn't it be better to do this in a Roth, if the calls I sold were exercised? Then I wouldn't have to pay capital gains tax. The other big difference is I don't have 4,000 shares in a taxable account, so I can't really play the selling calls game in any other account other than my Roth. I would rather pay some taxes now if it enabled me to retire ten years early. Seems like a no brainer to me.

Quoting from your prior post:

"If I can pull this off and get some experience and confidence, I was hoping to be able to retire on selling calls without touching the principle. This is all in a Roth so I would have to make enough to live on after paying income taxes and the 10% penalty. I still have about ten years before I can pull money out of my Roth without paying taxes."

I'm understanding that to mean you plan to pull your gains out of the Roth and pay the tax and the penalty on them? If so, since Roth money is already post-tax, you'd be getting taxed twice and paying a penalty on top of it. Gains are not ensured here (and losses are probably more likely if you are selling against shares that you aren't willing to let go, because most likely at some point you will have to buy back at a loss or lose your shares) so you'd have to do exceptionally well to compensate for the double tax plus penalty. We've all hoped to derive a dependable, steady income from doing this but I don't think very many have been successful - and that's without double tax + penalty.

I don't know your situation, but if you have enough in contributions to your Roth you can pull them out anytime and buy shares in a taxable account that you can then sell calls against that will be single taxed and no penalty. You will obviously lose the awesome tax advantage of share price appreciation in the Roth - but again, you'll probably lose those shares on a big run if you start selling calls down here anyway.

If you have a tax-deferred IRA, you could do a SEPP to access the money early.

 

[SebastienBonny]

Huge spike here... News?

 

[dl003]

Thank you for keeping us updated.

For down do you still see 140s as “max” downside?

It's the minimum, not the maximum.