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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
OK, I'm back in action, got my access to broker back
Being severely limited in trading has given some space to think about digging myself out of these -c200's. Currently I have been playing The Wheel on Steroids, with 30x -pATM, then straddling the same 30x -ATM, then using the premiums to roll up to Dec -c300's -> profits still capped, but at a much better price
On reflection, I don't think this is the optimal approach and I'm going to try now rolling to -cATM weeklies, on some weeks those calls will then expire and I get contract freed-up, on other weeks I'll free-roll them up, will get well above 300 strike doing that. I can manage 4 or 5 contracts per week like that by selling 30x -pATM
To cover a TSLA correction/pull-back I'm going to buy 30x Dec +p250's, yeah; $60k of insurance, but you can make that back in 2-3 weeks already and can then be selling OTM calls on the freed-up LEAPS to recuperate the costs further
Of course if the SP shoots up to 400 next week then I'll be pissed...
Going to try it anyway. Interesting exercise this
Being severely limited in trading has given some space to think about digging myself out of these -c200's. Currently I have been playing The Wheel on Steroids, with 30x -pATM, then straddling the same 30x -ATM, then using the premiums to roll up to Dec -c300's -> profits still capped, but at a much better price
On reflection, I don't think this is the optimal approach and I'm going to try now rolling to -cATM weeklies, on some weeks those calls will then expire and I get contract freed-up, on other weeks I'll free-roll them up, will get well above 300 strike doing that. I can manage 4 or 5 contracts per week like that by selling 30x -pATM
To cover a TSLA correction/pull-back I'm going to buy 30x Dec +p250's, yeah; $60k of insurance, but you can make that back in 2-3 weeks already and can then be selling OTM calls on the freed-up LEAPS to recuperate the costs further
Of course if the SP shoots up to 400 next week then I'll be pissed...
Going to try it anyway. Interesting exercise this
Got me thinking about my own -c195s expiring this week. Probably bad decision making but that account has a pile of leaps as well so I've decided to just sell the cc and the stock that is backing them, rather than trying to resuscitate.
This will take me back to 50/50 cash and shares (actually Jan '25 leaps), and will keep the account in a leverage position for moves to the upside.
I still have a lot of cash committed to Jan '25 put spreads (-175/+150). The attempt to recover these from the disaster that was the start of the year is working great. When I rolled into these they were worth $17 ($25 wide spread); now they're just under $6, and that's low enough that I've begun considering buying them out. The start-of-the-year losses these positions represent will show a large realized gain when I close them out, with the net position being a large but manageable loss (~20% vs ~80% I was in at start of year).
Yeah, but I have 120x -c200's, that's a lot of money to be made if I can close them out or roll up ATM. I also thought to close out the calls and underlying LEAPS, but as they're written against Dec 2025 +c140's and +c200's (bought at SP ~170) , there's lots of time and now potential profits to persevere
The way I see it, every call rolled up to -c300 or better still, closed out, it's equivalent of $10k profit, if I can free up some contracts and then write weeklies against them above 300 then it's "money for nothing", if you see what I mean
So I'm being patient and dealing with a few contracts per week - will roll what's still open before expiry on July 21st to October, that will knock off 15x more, depending on the SP, then 15x more Oct to Dec roll when the time comes. I have 25x weekly expiries to deal with as many as I can this year
Consider that I had 150x -c200, if you can somehow roll those up to -c300 then that's $1.5m, so well worth the effort and almost zero risk as my profits are capped down to SP 215 anyway, so I may as well fix them
not-advice
This comment is mostly for others - I'm pretty sure you're clear on this.
The one thought I have in here, and I agree there's a lot of money to be made from here - way more than weekly income makes available - is that LEAP cc (poor man covered call, ..) don't behave the way share backed cc behave. Specifically the long dated call delta can easily be lower than the short cc delta, yielding a situation where the share price going up has a net negative effect on account value (i.e. the short call is losing money faster than the long / leap call is gaining money).
With share back cc, delta on the shares is always 1, so you're always achieving unrealized gains as the share price goes up.
It is this difference in behavior that finally had me stop relying on pmcc for income. I'll still sell cc against the leaps when they're winning and given that I want to continue owning them. More typically though I find myself increasingly attracted to the income accounts being treated as cash. Sometimes that cash congeals into the form of shares, and sometimes on a really big drop it gets some upside leverage in the form of leaps. Whatever form its in, its cash.
The account value won't move nearly as much in the next big move for TSLA that I consider inevitable, but my "inevitable" currently has a 2030 date sticker (between now and then). In either direction!
Welcome back! I like your thinking and will consider something similar for my dITM 2025 CCs. Have you considered splitting the difference instead, and buying half as many OTM protective puts and OTM calls? This is something that I’ve been considering, because often my short ICs go against me. I don’t have a well-formulated trading strategy yet, but maybe buy farther out, like p200s and c350s, for less premium. Certainly goes against the “be the house” philosophy. On second thought, perhaps better to buy spreads for less debit premium and some theta mitigation. Hmmm, for example, currently Dec2023 -p200/+p210s are $2.00 debit, and +c350/-c360s are $2.00 debit. So, $4.00 to gain $10.00 if the SP breaches 200 or 360. If you do 30x, that’s only $12,000 insurance. Does this provide the same piece of mind or protection? Interesting idea, that needs further consideration. On the other side of that idea, that same $12k, can potentially yield about $1k/week with a properly chosen IC, sold on Wednesdays and expired worthless on Fridays (yes, a big if). So, potentially $25k short weekly IC profit versus $10k for the long IC “protection.” This might be the reason @Yoona migrated to ICs. Definitely not advice, but something to think about.
On a personal update, Monday’s action helped my shorter term ICs and IBs, at the expense of those pesky -LEAPS. Currently, very happy with the results after closing or adjusting a few. All spreads are straddling the SP nicely (except 7/07). Maybe made a mistake on those: closed the 7/07 +p245/-p255 BPS side for $0.03, and then reopened at +p270/-p280 (oops, too early, should’ve waited). Well, at least now I’ve got $4.xx cr for the overall IC +p270/-p280/-c300/+c310. Also sold a single -c300 at $1.75 (way late, after dealing with the BPS, but really just a bit of gravy since these were put to me at $260 awhile back and I’ve probably earned $10 premiums since then
). Hoping for a Friday white knuckle close at $282.50.
GLTA
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The only think that concerns me is writing CSP's and having the SP dump hard for some reason, for which there could be a number of catalysts, the FED, margins, CT delay, Elon sell a pile of shares, etc. I don't see how writing spreads or condors helps that, I essentially need to maximise my weekly premium, with some kind or risk mitigation so I can close, or roll ATM more likely, as many -c200's as I can, selling ATM, or even slightly ITM CSP's seems the way to go with a rising SP and playing The Wheel on Steroids when it's range-boundWelcome back! I like your thinking and will consider something similar for my dITM 2025 CCs. Have you considered splitting the difference instead, and buying half as many OTM protective puts and OTM calls? This something that I’ve been considering, because often my short ICs go against me. I don’t have a well-formulated trading strategy yet, but maybe buy farther out, like p200s and c350s, for less premium. Certainly goes against the “be the house” philosophy. On second thought, perhaps better to buy spreads for less debit premium and some theta mitigation. Hmmm, for example, currently Dec2023 -p200/+p210s are $2.00 debit, and +c350/-c360s are $2.00 debit. So, $4.00 to gain $10.00 if the SP breaches 200 or 360. If you do 30x, that’s only $12,000 insurance. Does this provide the same piece of mind or protection? Interesting idea, that needs further consideration. On the other side of that idea, that same $12k, can potentially yield about $1k/week with a properly chosen IC, sold on Wednesdays and expired worthless on Fridays (yes, a big if). So, potentially $25k short weekly IC profit versus $10k for the long IC “protection.” This might be the reason @Yoona migrated to ICs. Definitely not advice, but something to think about.
On a personal update, Monday’s action helped my shorter term ICs and IBs, at the expense of those pesky -LEAPS. Currently, very happy with the results after closing or adjusting a few. All spreads are straddling the SP nicely (except 7/07). Maybe made a mistake on those, but closed the 7/07 +p245/-p255 BPS side for $0.03, and then reopened at +p270/-p280 (oops, too early, should’ve waited). Well, at least now I’ve got $4.xx cr for the overall IC +p270/-p280/-c300/+c310. Hoping for a white knuckle close at $282.50.
Right now I have 50x July 21st +p200's that I bought to give some kind of protection for selling -pATM's, as it was the 30x -p260's I had assigned 23rd June, partly because I was locked out of my account, but I decided to let them go anyway. But then I had 3000 TSLA I could sell -c260's against and the 50x +p200's allowed me to straddle another 30x -p260's with them, then you get double the premium with zero risk, the previously put shares covering the upside and the existing long puts the downside, this is a very good situation. Then if the calls exercise and you're back in cash, sell -pATM again without stress because you've still got those +p's protection, you can even sell 50x, allow 30x to assign and roll 20x, add 10x, but you need that safety-net of long puts (well I could actually cash-cover most of it, but don't want to be holding shares put at $280 if we drop back down below $200)
If the SP dumps then you can roll the weekly puts down, and again straddle calls against them, if the SP keeps dropping then you cash-in the +p's and buy back some of the -c200's with a discount, then you have more contracts free to write weekly -cATM or -cOTM
Even a rise in the SP, up to say, $350 isn't a problem if you have long-dated +p250's to catch you if it reverses, and remember, if in cash, then the first set of puts you let assign to sell calls on the way back down, while straddling with a new set of puts
Damn, this is all a bit verbose, hard to explain it, hope it makes some kind of sense...
But you can get very creative, but you do need the capital to back it - then that goes back to the "not over-committing" yourself, always have an escape-route
SebastienBonny
Member
Looking for some opinions about the following.
I now have a June 25 260 -p which I could roll higher and use the generated cash to roll 07/28 225 CC to 245 or 250 (same expiry month).
Why? Because my main goal with that contract is generate weekly (or monthly) income and at the current SP rolling 225 CC monthly is starting to not getting worth it anymore. When theta is about out of the 245 or 250 CC, I would then roll a month to the same strike, which will be about my monthly goal (600 - 800)/contract.
Then there's the big question: what if the SP tanks?
Say we get back to 250, that would be the time to roll back the CC contract to 225 to generate cash to lower the sold put to 260 again (best case).
If that's the case, rolling the 225 CC one month would generate about my monthly goal as well.
Is this making sense? Other option is to let the CC contract expire and sell puts from that point, BUT I don't want to commit (a lot of) extra cash selling puts...
Near term SP action: I think earnings may disappoint. Margins bottomed in Q2, so I really don't know the additional amount of sold cars will compensate for that. With that in the back of my mind, it could be a good thing to just sit and wait (there's still extrinsic in the 225 CC). But as we all know sitting on our hands is so difficult
I now have a June 25 260 -p which I could roll higher and use the generated cash to roll 07/28 225 CC to 245 or 250 (same expiry month).
Why? Because my main goal with that contract is generate weekly (or monthly) income and at the current SP rolling 225 CC monthly is starting to not getting worth it anymore. When theta is about out of the 245 or 250 CC, I would then roll a month to the same strike, which will be about my monthly goal (600 - 800)/contract.
Then there's the big question: what if the SP tanks?
Say we get back to 250, that would be the time to roll back the CC contract to 225 to generate cash to lower the sold put to 260 again (best case).
If that's the case, rolling the 225 CC one month would generate about my monthly goal as well.
Is this making sense? Other option is to let the CC contract expire and sell puts from that point, BUT I don't want to commit (a lot of) extra cash selling puts...
Near term SP action: I think earnings may disappoint. Margins bottomed in Q2, so I really don't know the additional amount of sold cars will compensate for that. With that in the back of my mind, it could be a good thing to just sit and wait (there's still extrinsic in the 225 CC). But as we all know sitting on our hands is so difficult
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"Not over-committing" or going all in one trade is a good advice here.
I was looking at how much it will cost me to move $215cc to December $300cc and it will cost around $3k or selling 3x ATM puts for next week... That's a lot of cash. I will do something similar plus rolling some contracts sideways to save a few contracts. Also, If earnings don't disappoint I might do a year out rolls on a few contracts.
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Yes, selling puts from here, after an ~80% run from $153 carries a risk, hence my desire to buy some December +p250's, which then converts a weekly short put from a straight CSP to a diagonal spread, allows for a bit of flexibility tooLooking for some opinions about the following.
I now have a June 25 260 -p which I could roll higher and use the generated cash to roll 07/28 225 CC to 245 or 250 (same expiry month).
Why? Because my main goal with that contract is generate weekly (or monthly) income and at the current SP rolling 225 CC monthly is starting to not getting worth it anymore. When theta is about out of the 245 or 250 CC, I would then roll a month to the same strike, which will be about my monthly goal (600 - 800)/contract.
Then there's the big question: what if the SP tanks?
Say we get back to 250, that would be the time to roll back the CC contract to 225 to generate cash to lower the sold put to 260 again (best case).
If that's the case, rolling the 225 CC one month would generate about my monthly goal as well.
Is this making sense? Other option is to let the CC contract expire and sell puts from that point, BUT I don't want to commit (a lot of) extra cash selling puts...
Near term SP action: I think earnings may disappoint. Margins bottomed in Q2, so I really don't know the additional amount of sold cars will compensate for that. With that in the back of my mind, it could be a good thing to just sit and wait (there's still extrinsic in the 225 CC). But as we all know sitting on our hands is so difficult
Call interest continues to flow towards the highest call OI strike @ 300; 290 and 280 are next nearest, 295 might be a reaction. Put side seems business as usual. 277.5-282.5 is an interesting strike range, may hold through Friday given pre-market ... let's see what we get during the first full session of the week.
SpeedyEddy
Active Member
I got the same issue with the same solution for my Nvidia -C 390, rolling them every week, because I am sure the will break eventually. In Tesla's case I would try, but if the run is persistent I would likely switch to OTM puts further in the future. It takes a bit of margin, so less room for other plans, but maybe the other plans are profitable enough to -later on- close the puts without any loss, other trades counted too.
The risk in case of Tesla really is positive news (FSD complete, CT early, new model, Highland, new Giga, plus earnings beat). But macro, I still see the same risks I've been repeating too much already; China real estate drama (meantime adding economic growth issues real trade wars over important stuff). Russia-Ukraine (Especially now ZNPP is mined and Putin is losing power maybe going erratic), inflation really kicking in everywhere. But all of it is drawn out so long, why wouldn't it be drawn out much longer? The chances for a burst are there and if you blow a balloon up long enough, the explosion will still come and particularly not become less impactful. The question is not if, but when, so having -C rolling generally would finally pay off if ATM/DITM, but can you handle the stress and hassle up that road?
Slightly different, I guess, as the -c200's are July expiry and some at October now and I'm not rolling weekly as that doesn't seem to offer much and is a LOT of hassle without a broker roll function - roughly speaking, every 10x weekly -pARM buys back 1x -c200, so as if now, the strategy is:
- Today: BTO 30x Jan 24 +p250 (safety-net)
- Weekly: STO 30x weekly -pATM -> BTC 3x -c200 & STO 3x -cATM
- Closer to July expiry: BTC ~95x July -c200 -> STO ~80x October -c200
- Continue weekly strategy
Of course all this is re-evaluated continuously and I'll change if I see something better...
InTheShadows
Active Member
Has anyone done much with selling covered straddles? What are the potential pitfalls to watch out for?
They're great when the SP is flat or in a channel, or even written at peak IV before an event to capture maximum premium before the crush, but if you get a big movement in either direction then the one side goes ITM fast. Of course if you're OK to have the shares put or called then that's no problem
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