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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
Yes, they now have a DP script for TOS and soon will be adding one for TradingView.
"This script analyzes the previous 30 days of trading activity and draws Dark Pool levels on your chart. The thick deep blue zone was the largest dark pool found and the light blue was the second largest."
This is how it looks in my TOS:
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Re real-time, it's updated daily @ 8:00 am EST Pre-market.
I'm curious how you use DP levels, do you treat them as support/resistance like GEX levels, or other ways too?
I am wondering how people would handle a spread that rapidly goes ITM, like overnight the stock jumps past both your strikes or even past the mid-point. Seems that even if you are following ultra safe rules and Yoona's back tested probabilities, once in a while this may happen to you. Do you buy it out and take a huge loss, or keep rolling forever hoping the spread will go back OTM? My girlfriend is screaming at me about getting back into spreads since the large BPS losses last year and I need a good answer or strategy! "I learned a lot and this time is different" doesn't seem to be working.
I've taken a huge loss and forced myself to be diligent the next several months that followed to earn it back. Not pleasant, at all. The last occurrence, I sold shares with very low cost basis to take advantage of the loss to offset capital gains. But that is losing twice... I gave away the money to buy back by trading shares.
Dumb, I admit. Contrast to, in the past I'd rolled far and out, I still have put spreads from past December/January and also CSP that will be at risk of assignment if we dip below 180. During that spiraling drop, I had to liquidate non-tsla to cover margin. Yeah, it is real and it happens. Be ultra careful, people !!!!!
While it hasn't stopped me from opening spreads, I am now more apt to take my profit daily, reopen the next day ,move the bar up / down , look to close same day profit or stop loss.
Not meant to help, just sharing my experiences.
roll is your friend and buys you time…time for another move in the stock, in the opposite direction to occur.. which normally does. Over reaction only creates immediate loss, granted quantified and limited but then requires equal and opposite action to make up for it. Each man, or woman - who knows, must decide.
TSLA Rolling - does it work?
I have 100+ stats, and this is my 2nd most important one.
Since 2021, if your OTM weekly put/call is breached, there's a high probability of recovery if you roll instead of taking the loss. You don't need to roll for strike improvement, but you will be OTM faster if you do.
This is best explained using an example. Refer to the above Oct 7, 2022.
Friday Sep 30, 2022 Close = 265.25. Around 3pm, you decide you want to sell 12% OTM 7DTE for next week Oct 7. The bet is 233.42 put, 297.08 call. This could be a CC, Short Strangle, CSP, IC, whatever. (Sorry, this study isn't for Short Straddle or Iron Butterfly).
One week later, on Oct 7, stock closed at 223.07. Your call is safe, but your put is ITM. What to do?
Summary for puts: In the last 155 weeks starting 2021,
Summary for calls: In the last 155 weeks starting 2021,
What is the #1 key lesson i learned from this exercise? PULLBACK. Stocks will, at some point, reverse and test TA. No one goes up or down forever in a straight line. For puts, it could be a 35-week wait before reversal comes. For calls, there is a risk of max loss (but 1/155 is tiny).
Note that this study involves only 12% OTM, 15% OTM, and my IC prediction. If you are aggressive ATM or too close to the sun, results may vary and your rolling may suck. Send me a list and I'll check.
NOT ADVICE. Nope. I am not your financial advisor. I am a newbie trader!
I have 100+ stats, and this is my 2nd most important one.
Since 2021, if your OTM weekly put/call is breached, there's a high probability of recovery if you roll instead of taking the loss. You don't need to roll for strike improvement, but you will be OTM faster if you do.
This is best explained using an example. Refer to the above Oct 7, 2022.
Friday Sep 30, 2022 Close = 265.25. Around 3pm, you decide you want to sell 12% OTM 7DTE for next week Oct 7. The bet is 233.42 put, 297.08 call. This could be a CC, Short Strangle, CSP, IC, whatever. (Sorry, this study isn't for Short Straddle or Iron Butterfly).
One week later, on Oct 7, stock closed at 223.07. Your call is safe, but your put is ITM. What to do?
- you can take the loss, if you want
- you can roll the put using the same strike (-p233.42) to next week; if you do that, you would be rolling for 35 weeks straight before it goes OTM (Jun 9, 2023 Fri Close 244.40). This is the best scenario because weekly ITM/ATM credits are huge, but you need a strong stomach because of the bottomless pit.
- you can roll the put on a 5-strike improvement (-p233.43 change to -p228.43) to next week; if you do that, you would be rolling for 3 weeks straight (instead of 35 weeks!) before it goes OTM (Oct 28, 2022 Fri Close 228.52).
- you can roll the put on a 10-strike improvement (-p233.43 change to -p223.43) to next week; if you do that, you would be rolling for 3 weeks straight (instead of 35 weeks!) before it goes OTM (Oct 28, 2022 Fri Close 228.52).
Summary for puts: In the last 155 weeks starting 2021,
- if your 7DTE put bet is 12% OTM, it will be breached only 10 times (6.45%). Of those 10, they are all rescued simply by rolling. This means max loss probability is 0/155.
- if your 7DTE put bet is 15% OTM, it will be breached only 5 times (3.23%). Of those 5, they are all rescued simply by rolling. This means max loss probability is 0/155.
- if your 7DTE put bet is my IC prediction, it will be breached only 4 times (2.58%). Of those 4, they are all rescued simply by rolling. This means max loss probability is 0/155.
- whether you decide on 0- or 5- or 10-strike improvement, they are all rescued at some point in time.
Summary for calls: In the last 155 weeks starting 2021,
- if your 7DTE call bet is 12% OTM, it will be breached only 10 times (6.45%). Of those 10, 9 are rescued simply by rolling. This means max loss probability is 1/155.
- if your 7DTE call bet is 15% OTM, it will be breached only 4 times (2.58%). Of those 4, 3 are rescued simply by rolling. This means max loss probability is 1/155.
- if your 7DTE call bet is my IC prediction, it will be breached only 5 times (3.23%). Of those 5, 4 are rescued simply by rolling. This means max loss probability is 1/155 if 0-strike improvement. Max loss probability is 0/155 if 5-strike improvement.
- calls are riskier than puts (there is possibility of max loss whether you bet 12% or 15% or my IC prediction)
What is the #1 key lesson i learned from this exercise? PULLBACK. Stocks will, at some point, reverse and test TA. No one goes up or down forever in a straight line. For puts, it could be a 35-week wait before reversal comes. For calls, there is a risk of max loss (but 1/155 is tiny).
Note that this study involves only 12% OTM, 15% OTM, and my IC prediction. If you are aggressive ATM or too close to the sun, results may vary and your rolling may suck. Send me a list and I'll check.
NOT ADVICE. Nope. I am not your financial advisor. I am a newbie trader!
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thenewguy1979
"The" Dog
Thanks Yoona.
My plays are more on the 5% OTM. My spread are 5-10. This allow a 1:4 win max loss ratio and much much lesser margin requirements. Plan to change the spread to 15-20.
I guess my ITM % would be quite high but the thought process was to aligned with the hive (team) TA on weekly min and max not blindly on just the %. So the bias would be more on call or put depending on the SP that week.
Would be great to see differences between 5, 8, 10 vs 12 and 15.
As you can see Im just a small dog with not a lot of margin to play with.
You mentioned this is your 2nd most important stat. Please share the #1. Thanks again for the education
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Great analyis and non-advice @Yoona. I agree it's best to roll, at least initially. I would personally try to roll for a couple of weeks and try to improve strike as much as possible without a debit roll. Beyond that I'd start to strongly consider closing it out depending the overall account excess margin situation and outlook.
I don't completely agree with the idea that you can keep rolling a spread to eventually close it out and avoid max loss. Taking your example, if rolling for 0 strike improvement, the short Put would only have a couple of cents of extrinsic value left by the time the share price bottomed out at the end of '23. At that point it's highly likely that the short Put would get exercised, leaving you with some 100 multiple of TSLA shares, the long Put and potentially a negative cash balance. I know this is a possibility because it happened to me several times in that period. This is a messy situation and while it is possible to reassemble a spread, doing it with a near dated strike that won't get exercised will start to get costly. At this point the original spread is no longer intact and depending on the cost of other options it can be very tempting to just close it out.
thanks for pointing this out; i thought about it and sorry(!!!) to disagree
the study is about early BTC instead of rolling; this means actual money lost if refusing to roll because ITM
early assignment isn't financial loss, it's unrealized loss and temporary setback
- if this was a CSP or Short Strangle, "i would get my money back" after 35 weeks when the stock reversed. No income but capital preserved
- if this was an IC, STC the long is cash in, and then it becomes the CSP above. If i reassemble the spread, then it's a different story (ie brand-new BTC/STO and no longer part of the 35 weeks)
daily reminder not to fly too close to the sun; it only takes 1 bad week to wipe out many weeks of gain
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Fair point and sorry to drag this out and potentially distract from your excellent post. However a lot of people trading spreads or IC would not have enough cash in their accounts to cover the share purchase if the short Puts in their spreads get exercised. If this was the case it would mean carrying shares on margin and payng interest or in a non-margin account having to sell the shares and end up with the max loss.thanks for pointing this out; i thought about it and sorry(!!!) to disagree
the study is about early BTC instead of rolling; this means actual money lost if refusing to roll because ITM
early assignment isn't financial loss, it's unrealized loss and temporary setback
perhaps the 35 weeks is a bad example as it was extreme: 1-6 weeks seems to be the average since 2021 for reversal going up if 12% OTM
- if this was a CSP or Short Strangle, "i would get my money back" after 35 weeks when the stock reversed. No income but capital preserved
- if this was an IC, STC the long is cash in, and then it becomes the CSP above. If i reassemble the spread, then it's a different story (ie brand-new BTC/STO and no longer part of the 35 weeks)
I suppose this goes to the overall risk management in trading spreads and how much of their account value people should be trading in them. Having enough cash backing to treat a BPS as a CSP if required is a nice ideal but more prudent than I expect many people would be in practice.
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I guess it depends. Imagine selling bull put spreads back in July - Oct 2022, the share price was between 270-300, reasonably range-bound, selling -p250/+p220's would seem a good bet. But then 29th September the dump to $100 began, almost, but not quite in a straight line down. Anyone tryng to roll a spread through that would have triggered multiple total-loss events
This is why I prefer calendar spreads as they behave like CSP, sure you pay more up-front for the long leg, but over 20-30 weeks the cost averages out quite low. TBH even when I have hit my cash target, I'm still going to keep some loing shitputs, just to cover off that pesky swan that flies in from time to time
The biggest weekly spike, Jan 27th 2023, guess who sold -c130's the previous week... then rolled them to February to wait for the "pull back"
At least I had some straddled puts to ease some of the losses...
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Beautiful analysis Yoona
As I like my trades hot and juicy, I do tend to get trapped ITM from time to time, which is OK if there's no betting of agricultural facilities taken place, however I'm sometimes caught over-exposed, which is usually when I trade on conviction, and these are usually the ones that go bad!
But generally speaking, how do I recover from such situations? I prefer these three mechanisms, as an example, last week I had 20x -p260 which I closed out for a small profit, if I had held and decided to roll, these are the three positions I would consider, depending on my outlook for the following week, given the closing price $7.46, let's say $15k, for 12/29:
- same strike = 16x -p260 @$9.4
- srtike improvement = 20x -p257.50 @$7.6
- straddle with calls = 15x -252.50 @$10
All of the above can be combined, also longer rolls bring more strikes into play, flipping to calls or puts in the case where we expect more move down or up (so in this case 19x -c247.50 @$8)
You can be very creative with selling options, but you do need to have the resources to do it, that's where the betting the farm bit comes into play, OK to do that if you're happy to allow the shares to be called away or the puts to assign, otherwise, be sure to leave wiggle-room
I hate the weekend.
So much ideas, so much time, but nothing to play.
So much ideas, so much time, but nothing to play.
Awesome post Yoona, thank you
Another point to consider is that although technically the data shows “max loss” on the call side due to the Jan. 2023 post earnings run, $TSLA did come back down to ~$152 on April 27. It would have been a painful 3 months but even in that extreme scenario one could have recovered all or nearly all of the ”loss” by buying back into TSLA in late April. Curious if there is a way to account for this in your analysis, but of course there was no guarantee that it would have retraced to that extent. Thanks again you are a blessing to this forum5,8,10: this is Short Straddle / Iron Butterfly territory now
all Call max losses are in 2023
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