Wiki Selling TSLA Options - Be the House

[SebastienBonny]

I have -c170 and -c175 to roll. The cost basis on these shares so low, I want to avoid them called away. Yes, I know not to sell calls if I don't intend to have shares called away. Who knew ? Any strategy to a far out roll that can be better managed at a later time? EDIT: There are so many influences weekly that can tip the price either direction, making it difficult to choose a "quiet week". Going to wait for any dips the next few days.

Do you want to milk them as long as you can or do you eventually want to keep them?

If you want to milk them just roll them week by week and let time value slide out before rolling to the next week (and watch out you don't lose all the extrinsic before rolling).
If you want to keep them I would roll them to 200+ and don't look at the date.

I had a 170CC on shares I didn't want to lose and right now I have them at 210 mid March.
Should we reach 200 I'll roll them to 220, probably end of March.
On a big turnback I can close and reopen at higher strike when we bounce back.
At some point you might consider the reached strike callable .

 

[CHGolferJim]

I have -c170 and -c175 to roll. The cost basis on these shares so low, I want to avoid them called away. Yes, I know not to sell calls if I don't intend to have shares called away. Who knew ? Any strategy to a far out roll that can be better managed at a later time? EDIT: There are so many influences weekly that can tip the price either direction, making it difficult to choose a "quiet week". Going to wait for any dips the next few days.

I would think if SP breaks $200, then we might have a little spurt, so am looking at $210+ for 1-3 weeks for buy-writes currently at $190. Rolls on lower strikes may require going out 3+ months, but then you have a pretty good chance of a pull-back for exit before expiration.

 

[dl003]

Just my stream of thoughts:

I've noticed a different kind of divergence: stock price & IV. This Monday we traded and closed higher than last Friday but somehow call IVs were lower, especially considering Monday tends to kick off the week with higher IVs. This may mean that bullish bets via options are drying up. The stock may still make another high to finish the ending diagonal pattern, but this divergence, in my opinion, affirms that should mark the top of wave 1.

My way of hedging against unexpected news, ie Hertz 2.0:

If you are stuck with ITM CCs, consider this strategy:

What we're looking at is a 200/210/220 call butterfly paired with a 160 short put. It can give you protection against a "melt-up" scenario in which macro news becomes rosy for the next month or 2. If TSLA close next week around 210, you'll profit $10 per contract. To pay for this, sell a 160 put. Should be ok according to my TA. If TSLA drops, your ITM CCs will get rescued. Win-win for little risks.

At this stage, one should be more afraid of "melt-ups" than some insane spike. Internals show that bullish bets are drying up so any spike should trigger massive profit taking. Melt-ups, on the other hand, are much more annoying to deal with. Now, if BRK files its 13D saying that it bought TSLA, buckle up. Nothing can protect you from something like that, but we do what we can with the tools we have.

 

[gabeincal]

Just my stream of thoughts:

I've noticed a different kind of divergence: stock price & IV. This Monday we traded and closed higher than last Friday but somehow call IVs were lower, especially considering Monday tends to kick off the week with higher IVs. This may mean that bullish bets via options are drying up. The stock may still make another high to finish the ending diagonal pattern, but this divergence, in my opinion, affirms that should mark the top of wave 1.

My way of hedging against unexpected news, ie Hertz 2.0:

If you are stuck with ITM CCs, consider this strategy:

View attachment 904391

What we're looking at is a 200/210/220 call butterfly paired with a 160 short put. It can give you protection against a "melt-up" scenario in which macro news becomes rosy for the next month or 2. If TSLA close next week around 210, you'll profit $10 per contract. To pay for this, sell a 160 put. Should be ok according to my TA. If TSLA drops, your ITM CCs will get rescued. Win-win for little risks.

At this stage, one should be more afraid of "melt-ups" than some insane spike. Internals show that bullish bets are drying up so any spike should trigger massive profit taking. Melt-ups, on the other hand, are much more annoying to deal with. Now, if BRK files its 13D saying that it bought TSLA, buckle up. Nothing can protect you from something like that, but we do what we can with the tools we have.

Very thorough explanation based on unknowns, thank you. I doubt BRK is interested in TSLA but one can never know.

I'm holding on to my Feb 17 -135c's and thinking even if a dip starts to develop between now and then, I'll let 'em take the shares, and sell ATM or slightly ITM puts a month out (to be able to use my losses with wash sale) to recover some $ and look for a hopeful future that starts with a 2xx soon. Then follow the stock up with ATM puts as I used to do in 2021 and make a killing. One can only plan though...

 

[gabeincal]

The bear market in SPY is likely to continue as the "higher for longer" interest rate policy increases the chance of a deeper and longer recession, which could be pushed even to 2024, given the resilient labor market.

The current bear market really has been based on hopes for a soft-landing based on market narrative. However, the rally has been led by beaten down stocks in cyclical sectors such as discretionary and communication services, which possibly reflects retail-speculation and short-covering.

SPY: Bulls Got 'Hustled' By The Fed

 

[CHGolferJim]

I would think if SP breaks $200, then we might have a little spurt, so am looking at $210+ for 1-3 weeks for buy-writes currently at $190. Rolls on lower strikes may require going out 3+ months, but then you have a pretty good chance of a pull-back for exit before expiration.

Just rolled a few contracts from 10Feb$190 to 17Feb$197.50 for $0.11 credit, the best I could do at the time for credit, but reasonably happy to boost the strike by $7.50. I think SP was about $193 at the time, so the credit/strike will gradually erode as SP rises.

 

[dl003]

Just rolled a few contracts from 10Feb$190 to 17Feb$197.50 for $0.11 credit, the best I could do at the time for credit, but reasonably happy to boost the strike by $7.50. I think SP was about $193 at the time, so the credit/strike will gradually erode as SP rises.

I did the same. Was / Is still a good roll.

191 is a huge level. If we can close the week above 191, the next month will be confirmed bullish for TSLA and I think the low between now and 3/31 will be in the 160-165 zone. That may not be the end of it, but that's very bullish before Q1 P&D.

If you wonder whether your roll is a good/safe roll, do this quick calculation: strike price / 0.6 - 67. The result will be the highest TSLA can go before correcting for your roll to be considered "safe." I know I've been harping on about the 50% retracement. However, to be "safe", give yourself only 38.1%. If the stock tops out at 200, it will pullback to 160-163 minimum. If it tops out at 220, will pull back to 175.

If you roll your CC to 197.5, the highest TSLA can go before correcting will be 260 before pulling back to 197.5. That's safe. As your CCs go ITM, don't just look at how far the stock can run, but also whether your CC will survive all the way to the bottom of the pullback. That's what matters. It keeps you from cutting losses prematurely. That's also the reason why, when I have ITM CCs, I'd spend about 0.5 - 1 to roll them out every week, improving the strike $2.5 - 5 further than I would have without spending that $0.5 - 1. Since the pullback will be at least 38.1% of the runup, every $2.5 - 5 strike improvement you give yourself can work itself out to $5 - 10 added to the top.

I know a few people stuck with 3/17 140C's. Now those are bad. Compared to them, 2/17 160C's are cakewalk.

 

[Max Plaid]

Earlier today I closed out 13x -c180 @$15 and "rolled" to 13x -195@$14.2 (that's a -p195/-c195 straddle, BTW), I say "rolled" as the 13x -p180's for this week are still open. First of all I would think they're relatively "safe", secondly I wouldn't mind some shares at that price for buy/write going forwards

But ideally I'm looking for a Friday close around 195, which looks likely from the options open interest right now - then I can reset my strategy from straddles to strangles

 

[Jim Holder]

I did the same. Was / Is still a good roll.

191 is a huge level. If we can close the week above 191, the next month will be confirmed bullish for TSLA and I think the low between now and 3/31 will be in the 160-165 zone. That may not be the end of it, but that's very bullish before Q1 P&D.

If you wonder whether your roll is a good/safe roll, do this quick calculation: strike price / 0.6 - 67. The result will be the highest TSLA can go before correcting for your roll to be considered "safe." I know I've been harping on about the 50% retracement. However, to be "safe", give yourself only 38.1%. If the stock tops out at 200, it will pullback to 160-163 minimum. If it tops out at 220, will pull back to 175.

If you roll your CC to 197.5, the highest TSLA can go before correcting will be 260 before pulling back to 197.5. That's safe. As your CCs go ITM, don't just look at how far the stock can run, but also whether your CC will survive all the way to the bottom of the pullback. That's what matters. It keeps you from cutting losses prematurely. That's also the reason why, when I have ITM CCs, I'd spend about 0.5 - 1 to roll them out every week, improving the strike $2.5 - 5 further than I would have without spending that $0.5 - 1. Since the pullback will be at least 38.1% of the runup, every $2.5 - 5 strike improvement you give yourself can work itself out to $5 - 10 added to the top.

I know a few people stuck with 3/17 140C's. Now those are bad. Compared to them, 2/17 160C's are cakewalk.

Thank you for the formula. I’m trying to understand how to apply it. I’m assuming it’s for bought calls not sold calls?

I currently have on STO 28x 2/17/23 250 -CC. It’s currently at 75% profit and I’m looking to ride it out to next Friday and close out for 99% or so.

250 /0.6 -67 = $349.66

What is the meaning of that number in relation to the transaction?

(Forgive me if I totally misunderstood what you were saying.)

PS: Is the 250 strike safe for next Friday in your opinion? I think a retracement in the next few days or early next week would be healthy for the stock.

 

[dl003]

Thank you for the formula. I’m trying to understand how to apply it. I’m assuming it’s for bought calls not sold calls?

I currently have on STO 28x 2/17/23 250 -CC. It’s currently at 75% profit and I’m looking to ride it out to next Friday and close out for 99% or so.

250 /0.6 -67 = $349.66

What is the meaning of that number in relation to the transaction?

(Forgive me if I totally misunderstood what you were saying.)

PS: Is the 250 strike safe for next Friday in your opinion? I think a retracement in the next few days or early next week would be healthy for the stock.

The low is 100. Say top of wave 1 is x.
We have (x - 100) as the size of wave 1. 38.1% retracement is going to take us back to x - (x - 100) * 0.381 but let's use 0.4 for simplicity.
We then have the 0.381 retracement target expressed as 0.6x + 40. Your strike price needs to be higher than this number. If your strike price is y, then we have
y > 0.6x + 40
solving for x, we have x < (y - 40) / 0.6 or y / 0.6 - 67
250 should be safe for next week although I'm not selling any calls now. Puts only as the chart tells me it's favoring the bulls still. Once we have another leg up I'll close these puts and reassess.

 

[intelligator]

I have -c170 and -c175 to roll. The cost basis on these shares so low, I want to avoid them called away. Yes, I know not to sell calls if I don't intend to have shares called away. Who knew ? Any strategy to a far out roll that can be better managed at a later time? EDIT: There are so many influences weekly that can tip the price either direction, making it difficult to choose a "quiet week". Going to wait for any dips the next few days.

Rolled -c170 to June -c210 for a credit , yeah , it's a bit out. It's just two contracts, experimenting with rollback at some point. Reading into @dl003 , I may roll 5 -c175 contracts to next week. Missed the opportunity at time @CHGolferJim had rolled to do anything at credit. If we are ITM and the .6 - 67 calc is 224 , what's the consensus on rolling out a week same strike for a credit ... 2/17 -c175 (adds 2.10 of extrinsic) ?

 

[UltradoomY]

The low is 100. Say top of wave 1 is x.
We have (x - 100) as the size of wave 1. 38.1% retracement is going to take us back to x - (x - 100) * 0.381 but let's use 0.4 for simplicity.
We then have the 0.381 retracement target expressed as 0.6x + 40. Your strike price needs to be higher than this number. If your strike price is y, then we have
y > 0.6x + 40
solving for x, we have x < (y - 40) / 0.6 or y / 0.6 - 67
250 should be safe for next week although I'm not selling any calls now. Puts only as the chart tells me it's favoring the bulls still. Once we have another leg up I'll close these puts and reassess.

Day trading $195's P's most of the day today - making at least a $1 a turn as I agree - Bulls are in charge until we see what the CPI is next week.

Will be out for the day before release, I like the $195's today as there is good money around ATM strikes.
Closed my left over $190 P's from my Friday 200/190 BPS for $5 each.

Using 50% of proceeds from Put sales for short term Near the money calls (thanks for selling them to me!) at the $210 strike - exp 03/03/2023 for $5 each

 

[dl003]

Day trading $195's P's most of the day today - making at least a $1 a turn as I agree - Bulls are in charge until we see what the CPI is next week.

Will be out for the day before release, I like the $195's today as there is good money around ATM strikes.
Closed my left over $190 P's from my Friday 200/190 BPS for $5 each.

Using 50% of proceeds from Put sales for short term Near the money calls (thanks for selling them to me!) at the $210 strike - exp 03/03/2023 for $5 each

In the past I've made the mistake of not following the trend. I thought that, as sellers, only levels ruled. However, everyone is built differently. As a naturally anxious person, selling against the trend didn't work out for me and I lost sleep even though my levels were correct most of the time. In fact, if I was an emotionless robot, I would be much wealthier than I am. Even though I picked the right levels, I didn't like the feeling of the trend going against me and ended up closing those calls early, sometimes at a loss. I'd much rather sell with the trend like an option buyer now. It suits me better. That's what I meant when I said if you're stuck with ITM calls, don't dig yourself a bigger hole, trying to recoup losses by selling more calls. If you're not in your best state of mind and are having downside bias, don't sell more calls and pray for a reversal. When the reversal happens, you'll know. Sure, I'm losing out on call premiums now but my ATM short puts are paying so much that it almost feels like a win.

 

[MrMoo]

Very thorough explanation based on unknowns, thank you. I doubt BRK is interested in TSLA but one can never know.

I'm holding on to my Feb 17 -135c's and thinking even if a dip starts to develop between now and then, I'll let 'em take the shares, and sell ATM or slightly ITM puts a month out (to be able to use my losses with wash sale) to recover some $ and look for a hopeful future that starts with a 2xx soon. Then follow the stock up with ATM puts as I used to do in 2021 and make a killing. One can only plan though...

I'm willing to bet against BRK buying any TSLA. Warren dislikes Elon, probably borderline disrespects or hates him. Unless someone else made the call to buy the stock BRK will never buy TSLA until his out.

When you guys start donating money to Gordon Johnson, let me know and then i'll reassess my thoughts on BRK buying TSLA with Warren at the helm.

 

[Jim Holder]

Well at least JP didn’t wreck our calls on TSLA. Seems like bull scenario still on at least for a few more days before we do a healthy retrace.

 

[JustMe]

Looking to me like a near term correction is at hand for TSLA, based on the hourly and daily charts. Could see sub-$180 by Friday if we break below EMA at $195.
$165 looks like a support level.

This expectation subject to being trumped by news , of course

 

[Max Plaid]

Looking to me like a near term correction is at hand for TSLA, based on the hourly and daily charts. Could see sub-$180 by Friday if we break below EMA at $195.
$165 looks like a support level.

This expectation subject to being trumped by news , of course

Not feeling' it myself, nothing but good news coming from Tesla right now, even macros want to rally, JPow talks tough, but seems to gave given up, etc.

>190<195 looks like the best win for the Hedgies this week, although keeping it <200 is the top priority -> and the last few weeks they failed to defend the big call-wall...

But who knows, stock movements are essentially random, so they say...

 

[UltradoomY]

Not feeling' it myself, nothing but good news coming from Tesla right now, even macros want to rally, JPow talks tough, but seems to gave given up, etc.

>190<195 looks like the best win for the Hedgies this week, although keeping it <200 is the top priority -> and the last few weeks they failed to defend the big call-wall...

But who knows, stock movements are essentially random, so they say...

Seems like Tesla is using the chinese water torture method of info this Quarter.

Just a steady drip, drip, drip, drip of info out to the masses.

Normally this period between Q4 results and the Q1 P&D report would be no news and ripe for manipulation.

 

[chrsk]

Looking to me like a near term correction is at hand for TSLA, based on the hourly and daily charts. Could see sub-$180 by Friday if we break below EMA at $195.
$165 looks like a support level.

This expectation subject to being trumped by news , of course

11 of the last 12 days is green(?), that there will be a correction at some point is a relatively safe bet. Question is just when

 

[JustMe]

Not feeling' it myself, nothing but good news coming from Tesla right now, even macros want to rally, JPow talks tough, but seems to gave given up, etc.

>190<195 looks like the best win for the Hedgies this week, although keeping it <200 is the top priority -> and the last few weeks they failed to defend the big call-wall...

But who knows, stock movements are essentially random, so they say...

I agree that Tesla is in good shape. But swing traders will take profits at some point and we were at $125 just 3 weeks ago. It will only take one bit of negative news or rumor excuse to trigger a sell off.