Wiki Selling TSLA Options - Be the House

[dl003]

I want to add that upon further reflection I think I was wrong selling more covered calls as the share price rose. This can be dangerous.

I believe the proper behavior would have been that once TSLA broke $167 (important support) I should have liquidated the -C at a loss instead of chasing, and then wait to reposition. This is because once TSLA gets going it can get really manic and zoom up even more, trapping me in my position.

Better to go flat and reset and wait for the run to lose steam and find its new apex, only then assess whether/when/where to STO new short calls.

Now, because of my tunnel vision of averaging up during the run, I have to hope for a retrace on Monday to escape them without much loss, and hope is not a wise or healthy trading strategy!

In my favor of a chance to escape my mistake is the gap left below at around $162, though dunno if it’ll have much magnetic power in a bull run.

More in favor is @dl003 ’s point earlier that before TSLA breaks $171 it should pull back to test $165 once (and to BTC short calls—including any 5/12 $180 and $182.5—on that retest).

For those trading options for years, am I right about not writing short calls on a day like this past Friday, or writing/averaging up as SP runs and approaches resistance during a run is a valid strategy? Would love to hear your thoughts

When you say “like this past Friday”, you need to be very specific. How do you describe it in terms of:

volume
beta
momentum
position relative to R/S
etc…

Also, what do you mean by selling calls? Are we talking about ITM/ATM/OTM. Are we talking weekly/monthly/ LEAPS?

not all 5% up days are the same. Some carry higher odds of spilling over than others. Sometimes the odd is too high for opening any new short call at all. Sometimes its constructive for opening some but not others. Sometimes its golden for betting on an immediate reversal.

For me, its a good day to open OTM calls.

Overall market volume was low, unconvincing.
TSLA butting up against a strong resistance
CPI on Wednesday means consolidation is due soon

Its not a good day to sell ATM calls as normally TSLA follows a 3 day pump schedule.
1st day outperformance vs beta
2nd day flagging on increasing call volume
3rd day blow off before retracing
Momentum had not run out on a high enough timeframe by EOD Friday.

Selling ATM calls betting for immediate reversal didnt have a good r:r.

 

[Jim Holder]

When you say “like this past Friday”, you need to be very specific. How do you describe it in terms of:

volume
beta
momentum
position relative to R/S
etc…

Also, what do you mean by selling calls? Are we talking about ITM/ATM/OTM. Are we talking weekly/monthly/ LEAPS?

not all 5% up days are the same. Some carry higher odds of spilling over than others. Sometimes the odd is too high for opening any new short call at all. Sometimes its constructive for opening some but not others. Sometimes its golden for betting on an immediate reversal.

For me, its a good day to open OTM calls.

Overall market volume was low, unconvincing.
TSLA butting up against a strong resistance
CPI on Wednesday means consolidation is due soon

Its not a good day to sell ATM calls as normally TSLA follows a 3 day pump schedule.
1st day outperformance vs beta
2nd day flagging on increasing call volume
3rd day blow off before retracing
Momentum had not run out on a high enough timeframe by EOD Friday.

Selling ATM calls betting for immediate reversal didnt have a good r:r.

Good points!

I was referring to 5/12 -C180 and -C182.50 and 6/21/24 300 (LEAP for 0.22 delta and planned to close on dip to 165).

Do you think we get a dip to $165-$162 Tuesday or Wednesday this week (especially given CPI and 162 gap left)?

 

[dl003]

Good points!

I was referring to 5/12 -C180 and -C182.50 and 6/21/24 300 (LEAP for 0.22 delta and planned to close on dip to 165).

Do you think we get a dip to $165-$162 Tuesday or Wednesday this week (especially given CPI and 162 gap left)?

I do.

 

[Jim Holder]

I do.

Yay!

Good time to close the 5/12 $180 and $182.50 then too (similar gains to waiting for Friday and less risk).

I think you also said at that $165 retest to sell CSP’s aggressively since likely nicely up from there.

 

[dl003]

im not a big fan of csp. id rather do naked puts on margin (30% of my account value)

 

[CHGolferJim]

Good points!

I was referring to 5/12 -C180 and -C182.50 and 6/21/24 300 (LEAP for 0.22 delta and planned to close on dip to 165).

Do you think we get a dip to $165-$162 Tuesday or Wednesday this week (especially given CPI and 162 gap left)?

OTOH, I’m currently holding sold CC:

• 12May$185
• 19May$180
• 16Jun$180

and looking to potentially roll the 12May within several days (Fri close = +73%). The roll candidate 26May$185 showed an increased credit at close Fri vs. Thu of $1.76 vs. $1.07. Personally, I don’t expect the May CC are threatened, but I usually roll at 80%-90% gain rather than wait for expiration, if the roll candidate is attractive. Not sure about the Junes, but that was a roll down and in from a 5-month roll up and out in Feb when SP ran up.

 

[Jim Holder]

im not a big fan of csp. id rather do naked puts on margin (30% of my account value)

Isn’t selling CSP or naked puts on margin the same thing since either way we’re on the hook for the $$ if it exercises. Or by naked puts you mean simply that one doesn’t need to add cash to account to open them so they are “easier” to put on. Forgive me if this is a stupid question.

 

[dl003]

Isn’t selling CSP or naked puts on margin the same thing since either way we’re on the hook for the $$ if it exercises. Or by naked puts you mean simply that one doesn’t need to add cash to account to open them so they are “easier” to put on. Forgive me if this is a stupid question.

Its not a stupid question.
For 5/12
A -160P yields $1
A -160/165 CSP yields $1
Which one is safer? The one $10 OTM or the one $5 but comes with a $5 protection?
At what price will the -160P start losing more than the -160/165? The answer is $155.

Do I think the stock can break 155 next week? Nearly impossible. So, the -160P is safer.

its just an example of how my train of thought runs.

Some people approach it from the perspective of anything is possible and so protection against the unthinkable is good. I approach it from a probability point of view so I pick the strike that yield the highest r:r.

 

[Jim Holder]

Its not a stupid question.
For 5/12
A -160P yields $1
A -160/165 CSP yields $1
Which one is safer? The one $10 OTM or the one $5 but comes with a $5 protection?
At what price will the -160P start losing more than the -160/165? The answer is $155.

Do I think the stock can break 155 next week? Nearly impossible. So, the -160P is safer.

its just an example of how my train of thought runs.

Thank you. Why do you indicate the CSP as 160/165? It can be 160 just like the put (on my platform TOS it appears the same). From my understanding CSP just means there’s cash in the account to cover in case it goes ITM, whether it’s a naked put or CSP is just accounting under the hood.

What DTE are you planning to write the -P160’s for?

 

[dl003]

Thank you. Why do you indicate the CSP as 160/165? It can be 160 just like the put (on my platform TOS it appears the same). From my understanding CSP just means there’s cash in the account to cover in case it goes ITM, whether it’s a naked put or CSP is just accounting under the hood.

What DTE are you planning to write the -P160’s for?

oh its my bad. Pls disregard the whole thing. I read CSP as BPS. CSP is ok. Im against BPS.

 

[Jim Holder]

oh its my bad. Pls disregard the whole thing. I read CSP as BPS. CSP is ok. Im against BPS.

All good

What DTE are you planning to write the -P160’s for?

 

[dl003]

All good

What DTE are you planning to write the -P160’s for?

I already sold 5/12 -165P on Friday. If we open slightly red on Monday I will roll them up to 170. When TSLA goes to 172 I will roll them down to 160. In other words, using a short put as baseline, Ill be trading it up and down using a series of put spreads as TSLA progresses along and hopefully follows my roadmap.

 

[Vova]

Closed above the 170 level. Let's see what that's worth.

My position is gaining momentum. Still, June is far away but today's move give me more opportunities.

Position stays the same:
1 Call June 170
-2 Call June 185
1 Call may 200
-2 Call may 220
1 Call may 240

USD 88 invested.

Maybe good to emphasize again, my position is not for the "quick gain". Rather boring even . But imho it gives people who are less experienced in options a good opportunity to get familiar with option pricing with low risk (not loosing much money if things go wrong).

Also good to understand that I do not use TA or FA to take position.

BTW, nice discussion between @dl003 and @Jim Holder today

 

[EVNow]

I believe the proper behavior would have been that once TSLA broke $167 (important support) I should have liquidated the -C at a loss instead of chasing, and then wait to reposition. This is because once TSLA gets going it can get really manic and zoom up even more, trapping me in my position.

Thats an interesting question. I don't think the answer is simple.

Just like with stocks, you can put stop loss orders. But this will probably cost you quite a bit since option prices change a lot. You will rarely sell the option at the highest price of the day (or next couple of days, for that matter).

If SP starts running up you could buy calls as a hedge (using the premium you got by selling options). When you feel the SP run up has finished, you can reposition the call using the money from the long Call. But as always, how do you know the SP run up has finished ... ?

 

[Jim Holder]

If SP starts running up you could buy calls as a hedge (using the premium you got by selling options). When you feel the SP run up has finished, you can reposition the call using the money from the long Call. But as always, how do you know the SP run up has finished ... ?

Buying calls with the short calls premium as a hedge sounds like a great tool in case of need. Thanks for sharing it!

Re how do we know when the SP run has finished, it’s definitely a good question. This is where I’m working on becoming independently adept at reading the TA and momentum (RSI, Stoch, vol, etc) so I can tease out the telltale signs.

For confirmation in a confusing tape, it’s also helpful to reach out to others (like we do here) to get another opinion.

If I recall correctly, you have done some excellent trades in the past few months yourself and I remember you also have the iron conviction to let short calls expire even when the SP is close to the money(!). One day I hope to be good enough like you and the others here and be able to read the tape and not put on dangerous positions at the wrong time, or panic trade into or out of positions.

 

[saniflash]

Buying calls with the short calls premium as a hedge sounds like a great tool in case of need. Thanks for sharing it!

The problem with this strategy tends to be that, if the stock runs up hard, IV increases substantially, making those higher-strike calls much more expensive.

 

[Jim Holder]

Not gonna happen. Will pull back before 171.5. If we make a $10 green candle on some news then I'll redo the chart but right now there's no point considering that possibility.
Just up. I don't know the slope yet.

Yikes, $174-$175 in PM. Looks like I’ll need a Plan B if this keeps up

(Short squeeze?)

TSLA Jun 21st '24 300 Short Call (30) | OptionStrat

View my options strategy on OptionStrat

optionstrat.com

TSLA May 12th 180 Short Call (30) | OptionStrat

View my options strategy on OptionStrat

optionstrat.com

TSLA May 12th 182.50 Short Call (60) | OptionStrat

View my options strategy on OptionStrat

optionstrat.com

 

[Max Plaid]

Well, those 90x -c150's I'm holding looking like toast right now, always the same when I get a strong conviction on something and "bet the farm", does the opposite... still have to admit that I don't really see what's driving this up right now and I'm concerned that if I were to bail-out of the positions, the stock would reverse...

Should listen to my own advice sometimes...

What are my options from here...

a) let the whole lot exercise and sell puts
b) roll at the same strike, see if the stock pulls-back
c) roll out to July same strike for +$10 or -c165 free-roll
d) flip to 30x July -p230
e) flip to 45x July -c165 & 15x -p230 inverse strangle (or variations thereof)
f) buy the whole lot back and swallow the $100k loss

Having put these on paper, I'd say option "e" is the most appealing, gives both upside and downside protection, and frees-up 4500 shares for rolling and enough cash for short term puts

 

[juanmedina]

Pre ER we were at $180. I would think that it will be hard to break it since we really don't have any great news since but who knows. I am thinking about selling $182.5 at open.

 

[CHGolferJim]

Well, those 90x -c150's I'm holding looking like toast right now, always the same when I get a strong conviction on something and "bet the farm", does the opposite... still have to admit that I don't really see what's driving this up right now and I'm concerned that if I were to bail-out of the positions, the stock would reverse...

Should listen to my own advice sometimes...

What are my options from here...

a) let the whole lot exercise and sell puts
b) roll at the same strike, see if the stock pulls-back
c) roll out to July same strike for +$10 or -c165 free-roll
d) flip to 30x July -p230
e) flip to 45x July -c165 & 15x -p230 inverse strangle (or variations thereof)
f) buy the whole lot back and swallow the $100k loss

Having put these on paper, I'd say option "e" is the most appealing, gives both upside and downside protection, and frees-up 4500 shares for rolling and enough cash for short term puts

You could take a cautious first step while readying more complicated tactics in response to early week news, i.e.., do “b” today and watch what Max-Pain does Tues and Wed and the inflation reports. Remember a roll of one week and $5 would be worth $45k ($5 x 9000) less any debit cost of the roll. Or you could try to guess what news is coming this week and move in anticipation. Still seems unlikely we’ll reach $180 by Fri, but who knows? I have 12May$180, so . Will probably roll up and out if we are still $175+ later today or tomorrow. Keep in mind the low correlation imho of pre-market.