You originally sold the 200s because you were happy with the premium or to sell at 200. If the SP moves to your target more quickly than you expected, that doesn’t change those two possible outcomes at expiration, so there’s no reason you have to act (unless you decide you really want to be out of the shares and will accept slightly less than 200/share).
-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
You originally sold the 200s because you were happy with the premium or to sell at 200. If the SP moves to your target more quickly than you expected, that doesn’t change those two possible outcomes at expiration, so there’s no reason you have to act (unless you decide you really want to be out of the shares and will accept slightly less than 200/share).
That's an interesting idea - may of us here are used to being creative flipping TSLA puts to calls and vice-versa, but I never really considered to flip to another stock!
The issue is, by example: TSLA is trading now, 184 and you want to get out at 200, so you sell July -c200 for $10. July 2nd a record P&D of 450k is released and the stock pops to $220, after a week moving sideways, Elon tweets that he has no choice but to sell some shares, the stock tanks to $180 and stays there until September
So that's a lost opportunity... of course the plus side is that +$10 was made on the initial trade. Otherwise the only way out is to close out the calls and sell the shares. Can be that that's a profitable approach if close to expiry -> could be at the June P&D when the SP pops to $220, the c200's trade at $25, buying those back and selling the shares would still net +$5 over the SP at that moment and be net +$25 over the original target
If all that makes sense...
Last edited:
This. The l risk I see is whether TSLA touches $200 for 5min on a Tuesday and rejects (but I could manually sell the shares then), the -C200 that Friday may or may not go ITM.
It seems that this just needs to be factored into the cost/risk of selling covered calls on shares you want to/need to dispose, during a time when the stock’s price action is not behaving according to “normal” anticipated trends (like TSLA these days).
not-advice
This is yet another risk of selling a cc when your real goal is to sell the shares. You only get the strike price when that's the closing price on expiration day
I had something like this happen awhile back. Shares poked up to $250ish and I really wanted to sell at that price (this is pre-split). I sold 220 strike calls - fairly far ITM - and got about $5 or something worth of time value in addition to the intrinsic. Share price dropped and that huge cc finished OTM with a big profit. Shares kept going down and I never did sell them, even though I really did want that cash. "Lost" a lot more by waiting and trying to sell via cc, than just selling.
My own conclusion - intentionally selling shares via cc when I have actual intent and need to sell shares is a bad plan. Better plan - when I need to sell shares, then sell shares
There's an in-between which is very different. I have shares I don't -mind- selling, but I'm also not needing to sell them. These are good candidates for cc's.
I think the principle here is that cc sales are an income generation method, not a capital gains realization method (for the shares). Taking assignment on any particular batch of cc's will result in capital gains of course, but only use cc's when the intent / purpose is to generate an income, with the capital gain from selling shares as part of the fall back and risk management.
Don't sell cc's when you need to sell shares, and are trying to squeeze out a few extra $$. Take the cash, and maybe some of it gets used to sell puts to generate income!
Just opened an ITM BCS - Jun 16th -365c/385c
GAMBLING that this is a short-squeeze spike (especially since the previous ATH was $329 back in 2021!), but need to give it time to settle down.
Edit: Oops! NVDA trade!
Last edited:
I puzzled over this for some time before I realised it was an NVDA trade...
EVNow
Well-Known Member
Exactly my conclusion as well.My own conclusion - intentionally selling shares via cc when I have actual intent and need to sell shares is a bad plan. Better plan - when I need to sell shares, then sell shares
But in my case - I want to buy shares at a particular price. So, not selling cash covered puts. Instead I'm just selling call spreads for income. When (and if) the SP hits my target price, I'll buy the shares.
Just rolled tomorrow's 202.5 calls to 205 next week (and 202.5/212.5 spread to 205/215). Hope I won't regret not following my "rule" of not rolling till Friday.
I puzzled over this for some time before I realised it was an NVDA trade...
MY BAD! Yes, NVDA. collected $1100 for putting $2000 at risk.
jmho: selling cc that you are ok with exercising is ok but you need to know why you are ok with the strike.
Maybe you look at the chart and think once the strike has been reached, a steep correction is going to take place.
Maybe you are looking at the fundamentals and think TSLA is expensive at that strike.
Or maybe some other method.
If not, be aware of your own sentiment. If you are flying blind and “feel” like 200 is a good strike, I bet you anything in the world that you will think that no more when it spikes to 220 out of the blue, not to mention your entry needs to be optimal, which, lets be honest, will be less than likely if you are flying blind.
Maybe you look at the chart and think once the strike has been reached, a steep correction is going to take place.
Maybe you are looking at the fundamentals and think TSLA is expensive at that strike.
Or maybe some other method.
If not, be aware of your own sentiment. If you are flying blind and “feel” like 200 is a good strike, I bet you anything in the world that you will think that no more when it spikes to 220 out of the blue, not to mention your entry needs to be optimal, which, lets be honest, will be less than likely if you are flying blind.
How we all feeling about closing above 180, 181 level Friday? I want to get an early start to US Memorial Day
EVNow
Well-Known Member
Nope. One more example.
Jun 02 - 200 calls - $15 OTM - $0.64 . x4 = $2.56 total premium. - 0.10 delta
Jun 23 - 210 calls - $25 OTM - $2.60 - delta 0.20
So, to get a similar premium as a $15 OTM per week call, you have to sell $25 OTM calls 4 weeks out. Obviously a much bigger risk. Infact twice the risk (20% ITM chance vs 10% ITM chance).
ps : I've looked into this several times over the last 3 years. I always come back with the conclusion that weeklies are better.
My WAG is $181 is a near certainty, and $185 is quite possible, but it’s a guess……..How we all feeling about closing above 180, 181 level Friday? I want to get an early start to US Memorial Day
EVNow
Well-Known Member
Yes - last 3 days of action says 185 is the "target".
With all do respect, I think you don't understand the option greeks. Besides that, your calculation is confusing me but I will try to figure it out.
Correct me if I am wrong, but you compare 4x 02 June 200 calls short with 1x 23 June 210 call short because this gives the same premium? If that is the case, please do not forget gamma. A major greek besides delta.
Second, you link delta on probability (ITM chance). That is not what delta means. I know some days ago there was also the discussion whether delta means probability, in some extent I understand this. But in fact, delta does not show probability.
Just to quote my reaction EVNow was reacting on.
It is a fact that when volatility rises, long term option rise in premium. If volatility lowers, long term options loose premium.
This is called Vega, another option greek.
EVNow
Well-Known Member
Thats a poor statement - it is not only wrong, but shows that you come to illogical conclusion based on scant evidence.
You said this once. I asked you to search in this thread where I've provided references. Did you do that ? Quote those references and prove to all of us that why references are wrong. I go by proof and not speculation.
Duh. Thats what IV means - applies to both weeklies and monthlies. But that is not what we are talking about. We are talking about why we generally like weeklies rather than monthlies. Any other options 101 level stuff you want to tell us ?
sold a NVDA Oct 480C for 20, fine to roll or lose the shares and start a wheel there
used the proceeds to add a TSLA Dec25 390C to the collection
edit to clarify Tsla Dec 25 call
used the proceeds to add a TSLA Dec25 390C to the collection
edit to clarify Tsla Dec 25 call
Last edited:
I'm looking to close a lingering 10x 5/26 -c200s tomorrow for a buck or two, and will hold off on writing anything else until Tuesday. The smoke signals coming out of Congress/the White House indicate that a debt ceiling deal is looking increasingly likely to be struck over the weekend, so maybe we'll get a pop on the news on Tuesday morning.
OK, EVNow, that's your opinion.
I'll leave it here for today. In my reaction I gave facts about option greeks. It's your right to doubt the working of those greeks. It must been said that markets, as I do, have another opinion on greeks than you. One example is your definition on delta.
Similar threads
