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Wiki Selling TSLA Options - Be the House

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I’ve got 3Feb CC to monitor and roll (3x$125 and 10x$160). After monitoring SP and CC values closely the past week, and seeing not a huge difference in roll credit/debit from ”watch and see”, I may wait until Friday to execute in case the SP settles after FOMC today. Might cost a little bit if SP continues up, but it still seems possible the $160s could expire.
I have 2x165 and 5x170 for 2/3. The extrinsic is about .50 and just over 1.00 respective. I am thinking mine need to roll tonight now.

EDIT: QUESTION - If I roll to a strike 2/10 in the money today, does that "tag" the shares as short term when called away? Example, roll 2/3 -c170 to 2/10 -c180 while the price is $182.45...
 
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I have 2x165 and 5x170 for 2/3. The extrinsic is about .50 and just over 1.00 respective. I am thinking mine need to roll tonight now.

EDIT: QUESTION - If I roll to a strike 2/10 in the money today, does that "tag" the shares as short term when called away? Example, roll 2/3 -c170 to 2/10 -c180 while the price is $182.45...
Sorry, know nothing about taxation since I do everything in a Roth.
Need to think about my extrinsic, not used to being so far ITM and the possibility of early call.
 
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so far it's played out as planned. TSLA can now be seen with a super noticeable bearish divergence on the daily timeframe. All the ingredients for that correction are here.
Sorry but I thought you were calling for a double top at 181? Now that we broke through that resistance aren’t we looking at 196-197 as next major resistance. 184/185 seems like there is some resistance but by the looks of it we will gap up tomorrow.

The big boys who were buying the 200 weekly calls obviously had a plan. I’m not saying don’t plan for the correction but take it day by day. Markets are maybe getting ahead of themselves but I feel like TSLA has room to run.
 
so far it's played out as planned. TSLA can now be seen with a super noticeable bearish divergence on the daily timeframe. All the ingredients for that correction are here.
184$ in after hours and a lot of people betting for it ending Friday above 200$…

Sure I agree that we very well might end up with a correction, but if you factor in the steep drop from 200 to 100 in a month I’m not so sure that it will be the case. We have seen crazy run-ups before in Tesla.
 
Another way to think about it is your gains will be taxed and penalized but you will get no deductions for your losses. So you’ll have to do a lot better than break-even to actually make any money.
Wouldn't the lack of deductions for losses be offset by not having to pay taxes on my gains, if the calls I sold are exercised? The plan is to be conservative and not let any calls be exercised, but if that happens I can just immediately turn around and buy shares again without any tax considerations.
 
Wouldn't the lack of deductions for losses be offset by not having to pay taxes on my gains, if the calls I sold are exercised? The plan is to be conservative and not let any calls be exercised, but if that happens I can just immediately turn around and buy shares again without any tax considerations.

If that happens, you’ll be buying them back at a loss. Hypothetical example:

Say you’re selling 10 calls and in a month you make $1000 from each of them. Cash out $10k that month, after tax and penalty, maybe you have $6k net profit.

Next month, you have 10 calls you thought were safe but a Form 4 dropped that Elon started buying back his shares. The stock gaps up overnight and you’re already ITM by Tuesday morning. You have a choice to:

1. Roll flat for minimal credit and hope the stock comes back down

2. Roll out a month or more (i.e., forego any income during that period) to raise your strike $10-20 and maybe still lose your shares at the exp date

3. Hold til Friday afternoon and hope it comes back down, risking getting deeper ITM until you get so deep your shares get exercised

4. Buy them back at, oh say, a $1000 loss each

If you choose to buy them back, now you’re down $10k in your Roth and only up $6k in your checking account.

In a taxable account, the loss would offset the gain and you would owe $0 tax or penalty. With the Roth you’re down $4k and can’t even subtract that from your income as a capital loss.
 
Be sure and research this carefully - from what I've read about ROTH accounts, early withdrawals can generate both the 10% penalty IN ADDITION to turning that withdrawal into a taxable event. I could easily be wrong about that - thus the due diligence.
Yes, you can withdraw the principle without any taxes or penalties, but any early withdrawals of gains are taxed at income tax rates and have a 10% penalty.
 
What if you have 600% gains on your shares? Wouldn't that significantly change this dynamic?

I don't think so because you have that 600% gain whether you sell calls or not. I'm only talking about the risk/reward of selling calls for income with a ~40% handicap.

That's why I suggested taking your contributions out of the Roth and buying shares in a taxable to sell calls against. If you're up 600% on 4000 shares, presumably you have enough in contributions to withdraw 600-700 shares. You could leave all the gains in the Roth to appreciate tax free.

You will be giving up the Roth tax benefit on any further share appreciation on those 600-700 shares but I think that's the trade-off. It seems to me that expecting to consistently have a >62.5% success rate on trades to overcome tax/penalty and also not lose your shares at some point is trying to have your cake and eat it, too.
 
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