Wiki Selling TSLA Options - Be the House

[Max Plaid]

I am at the same point in my life; in capital preservation and trying to produce enough growth to be somewhat above my income needs. Tesla at $630 would have a $2T and I don't think that impossible if the other businesses and FSD start to work out but it will take time.

I bought a few 2026 Leaps recently and they are down 50% and I thought I got them at a good time , getting back that 50% back from selling calls seems really difficult. Leaps need to be bought in an uptrend and I don't think Tesla is there although we are closer to the bottom than not. Right now I am 95% in cash waiting for a market black swan event that might never happen or for a good indicator that is time to get back into Tesla. I am also planning to not go all in on Tesla like I was for many years because I need some diversification to preserve my capital.

I still have my day-job, but I could very easily replicate my daily rate with my current capital, for the rest of my life, but with a wife and three kids a little more is necessary, even doubling my day-job income would actually be pretty low-risk trades, but likely would not be enough to grow the capital, so I'm looking for 4x, which is roughly 1% weekly return, which again isn't high-stakes, tbh

I have a cash amount and/or portfolio value that will trigger my resignation letter, but it's +50% form here - likely 12 - 18 months to achieve that if the SP stays flat

As regards recuperating premium on LEAPS - my Dec 2025 +c200's are around 65% down, it's a bit of a convoluted story about why I paid $122 for them last year, but I had my reasons at the time, most of which were based on the reasonable concept that the CT production would be good for the stock, HA!

So anyway, now I'm assuming I need to trade back that $122, and I already took quite a bit against them, so let's say they still owe me $90, that's $1 per week until expiry, but will roll them to June 2026 giving another 30x expiries as well, and probably keep rolling them if the extra isn't too much -> right now it's $7 per contract, which is a good deal IMO

Doesn't matter for my broker that the SP is below the strike, I can still write with them, I just need to pony-up the spread margin/cash

But for me, $1 weeklies are "safe", will rarely go ITM, I didn't test it, but my gut-feeling is 95% of the time they'll expire, and the other 5% of the time you'll be able to roll them, so no I don't stress about them too much, it's annoying though

 

[sunhelm]

I am intrigued by what you do, although my initial problem is how to identify the "1σ and 16Δ", where do I see that on the options chain? Delta is shown as an integer, how do I interpret that?

Definitely not as smart as Yoona but I've been closely following her posts and trying to educate myself. I also happen to have thinkorswim (TOS) platform so this data can be customized in the share quote and option chain.

As far as 1σ, (1 standard deviation), this value is derived from getting the standard deviation of the underlying, in this case NVDA from the quote screen (TOS defaults the period length to 14, I guess this is 14 days sample?). This value right now is 67. So 1 std dev is +/- from the mean but I think Yoona bases the "mean" from 1dte closing price (3/7/24) of 926 to set her IC play. Thus 1 std dev from 926 gives you range from 859 (926-67) to 993 (926+67). I think the rationale for considering the 1 std is that in a normal distribution, there is about 68% confidence that SP will fall within this range.

Delta values are from the option chain and I think the multiplier 16 refers to the range of strike prices for the short legs, so for 3/15/24 expiry, -0.08 delta on the put side is -770P and +0.08 on the call side is -1060C.

Anyways that's how I'm understanding it and writing this so that anyone can correct my mistake (as you know, folks tend to respond more when you're wrong than otherwise, right?). Hope Yoona can chime in.

edit: corrected my years to 2024

 

[thenewguy1979]

As futile as this may be, look at what happened last time when it broke below the AVWAP lower band, anchored from the SP 500 inclusion.
View attachment 1026139
This time if it reaches and 235, gets rejected, re-tests the current AVWAP lower band around 170-180 and fails, it's going to get very ugly. Think low 100s again. So, while I'm not saying that will happen, if I see something like that developing, it might be the most important warning I will have given. Get your affairs in order starting from now would be smart. Be grateful if that doesn't happen again but if it does, a few accounts will be wiped out again.

warning heeded. Not going bet the farm just the doggy house. Joking

From now to Q1 and afterward going to be some uncertainty. Hedge and stay safe.

And unless you have some good plan stay away from AI. Big bubble IMO. But what do I know, just giving some advice from the crack in the doggy behind.

 

[Yoona]

Definitely not as smart as Yoona but I've been closely following her posts and trying to educate myself. I also happen to have thinkorswim (TOS) platform so this data can be customized in the share quote and option chain.

As far as 1σ, (1 standard deviation), this value is derived from getting the standard deviation of the underlying, in this case NVDA from the quote screen (TOS defaults the period length to 14, I guess this is 14 days sample?). This value right now is 67. So 1 std dev is +/- from the mean but I think Yoona bases the "mean" from 1dte closing price (3/7/24) of 926 to set her IC play. Thus 1 std dev from 926 gives you range from 859 (926-67) to 993 (926+67). I think the rationale for considering the 1 std is that in a normal distribution, there is about 68% confidence that SP will fall within this range.

Delta values are from the option chain and I think the multiplier 16 refers to the range of strike prices for the short legs, so for 3/15/24 expiry, -0.08 delta on the put side is -770P and +0.08 on the call side is -1060C.

Anyways that's how I'm understanding it and writing this so that anyone can correct my mistake (as you know, folks tend to respond more when you're wrong than otherwise, right?). Hope Yoona can chime in.

edit: corrected my years to 2024

bam. bingo. bullseye. you got it right.

repeating what you said, nvda thursday AH 1σ has expected move +67 (859-993). Actual lo/hi=865-974. So it's friday movement was expected.

and yes, delta always refers to the short.

in hindsight, i should have seen the nvda friday crash coming, it was there on my face... on Thur 8:55pm i posted the vanna; vanna has nothing to do with market participants (you, me, institutions, nancy pelosi, etc). Vanna is dealer positioning - massive red cluster meant they really wanted to drive down the stock 0dte, if they can. And they did. MM got what they wanted. Vanna is MM wishlist if they can get away with it.

I am intrigued by what you do, although my initial problem is how to identify the "1σ and 16Δ", where do I see that on the options chain? Delta is shown as an integer, how do I interpret that?

And what would be a ROIC on say $1m cash (no margin use)?

if your chain doesn't have delta, it's time to move to another broker, NOT KIDDING

according to 16Δ, tsla expected move 3/15 is approx 162.50-187.50 (of course this will change once market opens, yada yada)

there are 5 ways to figure out the expected move, as shown in #1-5 of an old screenshot, but just looking at 16 delta on the chain is good enough; if you don't have delta, just add the mid-price of the ATM put and ATM call to approx it.

what was the actual 2/2 Close? 187.91
what was the week's Low? 182
what was the week's High? 196.36

everything inside the 1/26 16Δ prediction.

sometimes, sp will close outside 16Δ and that's ok, because 16Δ is 68% chance of happening. 32% chance it will go out.

why is 16Δ important? because options=statistics, it's all about probabilities. That's why we have Probability of OTM%, Probability of ITM%, Probability of Touch%, etc, as you can see from this old screenshot:

again, if you don't have these in your chain, time to change brokers; it's a super helper in managing stress (i panic below 90%) and those are the only stats i look at when i want to check my positions

to answer your question, my ROIC is very tiny ~1.1% weekly but i am super happy with it; why is it tiny? again, we have to ask our friend Kirk and he will tell us his #1 rule:

no matter how sure you are about your trade, don't bet the farm because if the market reverses on you, you will need your capital to rescue you. That's your backup plan. If you already used up all your capital on your sure trade, you have no money left to fix the problem.

time for a snack... but first, some tea

 

[bmd00]

Yes, on January 12th, I called the bottom at 217.
a. I wanted a lower low on the daily RSI, to set up a hidden bullish divergence that would go back to Nov 9th.
b. That lower low on the RSI would have put it in the oversold territory or close to it.

How was that different from today?
While I had repeatedly said the stock was as likely to go to 170 as it was to go to 300, my path to 170 looked a little like this, which would have been more consistent with the 2 legs down prior.
View attachment 1026115
Therefore, I was not looking for a bullish divergence on a higher timeframes, but instead relied on a 2 month running hidden bullish setup. To be fair, the previous hidden bullish setup worked out so well which helped me call the spike to 265.
View attachment 1026116
So this time around, I was willing to give it the benefit of the doubt, even after it's broken the 235 pivot. Now I used the previous 210 low as the anchor. Turned out I overstayed my welcome and paid for it. That was when I got really pissed off because TSLA was the only ticker that crashed on my screen while the entire market skyrocketed up.
View attachment 1026117

This time around, the bullish divergence setup I'm seeing is much more cohesive, running from weekly down to the smaller timeframes. To take things further, back in January we were seeing only wave A in action. Now wave C has shown itself and my 4.618x extension support is hanging just right below us at 171 so I'm willing to bet for at least a bounce to 185 from here.

But be on your toes as things can change very quickly.

Your analysis is great and always worth reading. I will just add that I've never seen the SP bottom after hugging up against a support level like it has done at 175 for 3 days. Although there's always a time for firsts. I think we will see a push lower followed by a clear signal of support before any bounce. This clear signal has always been a rather sudden and abrupt bottom with SP turning around rather quickly. I've always watched for SP to open lower and close at or near its day high, although hesitation in the morning, as we saw on 3/7, is usually a warning sign. While the first hour on Jan 16th looked like a bottom, the clear hesitation to close at or near its day high was also a warning sign.

 

[Jim Holder]

• Respect 1σ and 16Δ. The implied move is there for a reason. Majority of market participants are positioned there. The option chain tells you the expected move next week or tomorrow. Why insist on crossing the line based on "feelings"?

Thank you for summarizing these very rational and important guidelines again. Can never hear them enough, eventually they sink into the conscious.

On the above point in your post:

1) Is the implied move the same figures as shown on the probability analysis chart (below) and are you saying in addition to hiding behind large OI walls it's safer (as "safe" can be") to set -C strikes above $190 and/or -P below $160 for 3/15 as an example?

2) Also a bit off this direct topic, any idea why the probability width widens in both directions going into the future, showing as low as $149 on April 5th?

Ty

 

[Jim Holder]

As futile as this may be, look at what happened last time when it broke below the AVWAP lower band, anchored from the SP 500 inclusion.
View attachment 1026139
This time if it reaches and 235, gets rejected, re-tests the current AVWAP lower band around 170-180 and fails, it's going to get very ugly. Think low 100s again. So, while I'm not saying that will happen, if I see something like that developing, it might be the most important warning I will have given. Get your affairs in order starting from now would be smart. Be grateful if that doesn't happen again but if it does, a few accounts will be wiped out again.

Thank you. I'd sure like a bounce to $235 from here, I'm sure we all would. It'll help make up for the troubles/uncertainty of the past 8 weeks. Let's hope the timing isn't off again on any breakout while the rest of Tech is finishing their ATH sizzle and begin coming home. It will also allow to close -P and open new -C in case TSLA rotates from $220-$235 back down to channel bottom, even as a normal re-test. Done right on our end this move can be profitable instead of painful.

 

[elasalle]

Anyone got moved to Charles Schwab? Do you get to keep ThinkOrSwim? Hope they don't muck around with it.
if they do what are the alternatives ..?

 

[Jim Holder]

It's a super helper in managing stress (i panic below 90%) and those are the only stats i look at when i want to check my positions

Wow! Watching OTM/ITM % vs. $$ gained/lost is TOUGH for me to do but I see how it can help keep emotions in check keeping the eye on success vs. gains/losses. Not sure I have the fortitude to do this. Kudos to you.

When I see gains over $500-$1,000 on a 10x (avg. 85% OTM) -C position at MMD after STO at morning push I just close it to snatch the $$ and re-position later if SP gets back up. True sometimes the SP keep going lower after I BTC, like the past 14 days, and I leave $$ on the table, but shifting to monitoring %OTM/ITM may yield more on the long run. Maybe it's not for scalping. Will try it out.

Thank you for everything you share here.

 

[Jim Holder]

Anyone got moved to Charles Schwab? Do you get to keep ThinkOrSwim? Hope they don't muck around with it.
if they do what are the alternatives ..?

I'm due to be migrated on May 10 and was told by Schwab that TOS stays and the new login info will be provided in advance. I'm glad they're keeping TOS (I tried IBKR and far prefer TOS. I couldn't stand IBKR's interface, app, and customer service (terrible!)). I'm only sad TD's mobile app is going away and will be replaced by Schwab mobile app which is very weak. The upside is the TOS mobile app remains, which is what I'll be using going forward.

 

[thenewguy1979]

The dog flunked math both in highschool and in college. Any discussion that start diving into anything resembling maths will easily get him confused. Only thing he know is delta. Always aiming at 10 or below when doing spread or IC.

With that his ass still got burn once a while. Luckily he have been receiving lots of supports from many here. Thank you Team for sticking with the dumb dog and his sense of humor.

 

[Jim Holder]

TSLA at familiar support, with some leeway down to $154 if needed?

(Credit: JakeWu)

 

[Yoona]

Thank you for summarizing these very rational and important guidelines again. Can never hear them enough, eventually they sink into the conscious.

On the above point in your post:

1) Is the implied move the same figures as shown on the probability analysis chart (below) and are you saying in addition to hiding behind large OI walls it's safer (as "safe" can be") to set -C strikes above $190 and/or -P below $160 for 3/15 as an example?

2) Also a bit off this direct topic, any idea why the probability width widens in both directions going into the future, showing as low as $149 on April 5th?

Ty

View attachment 1026266

1) based on the current IV, that's the estimated 3/15 close (aka expected move), which is 1σ or 16Δ; if you click on the "prob range" above and choose 2σ, that is mostly where i STO (94% ish)

that 1σ range is the potential move AWAY from sp (fri Close): meaning, the market is not expecting sp to move away too far (only 68%ish) because we are close to 0dte

2) IV increases the higher the dte is, so the market is expecting sp to move away with a greater magnitude, that's why the parabola curve goes wider; this makes sense - one can't really predict sp one month from now and that is why the range is larger

the higher the IV, the wider the 1σ:

• TSLA has a low IV, which is why 16Δ is only ~7% OTM (TSLA 16Δ is 162.53-187.74)
• NVDA has higher IV, which is why 16Δ is ~10% OTM (NVDA 16Δ is 780-960)

what does it mean? once TSLA resurrects from the dead, IV will increase. If IV increases, 16Δ will grow (because Δ is derived from IV). If 16Δ grows, %OTM grows. If %OTM grows, all CC too close to the sun will be steamrolled. (Your 10%OTM CC suddenly is now 4%OTM)

16Δ does not tell us direction, it does not tell us where sp will go, but it tells us what is the market perception of the stock (ie TSLA low IV means no one cares about the stock right now)

 

[mongo]

Anyone got moved to Charles Schwab? Do you get to keep ThinkOrSwim? Hope they don't muck around with it.
if they do what are the alternatives ..?

Yes and yes.

 

[Right_Said_Fred]

In hindsight I probably shouldn’t have teased you all with my new strategy, as I won’t be able to share it publicly if it does work out live. That would likely kill it.

I felt the need to say that option selling with its risks - which we witnessed last week - isn’t the only game in town. But mystery isn’t much of a solution. Well, it probably won’t work anyway when exposed to the real world and to the elements.

Talking about those elements: I’m a fan of TA and last week’s stock move has created a huge TA pattern for TSLA: the bearish flag. Flags are my favourite, as I find them to be very reliable. They are often exactly in the middle of a big move, meaning 50% is still to come. In this case we made a move from 265 late December to 175 late January, followed by the flag which formed between 175 and 205. Now that we’ve broken down out of this flag pattern the TA goal becomes 115 (265 - 175 = 90. Deduct 90 from 205 and you get 115). It should take us about 1 to 1,5 month to get there.

No guarantees in TA, and this one could be a dud too, but it’s something to keep in mind for risk management.

 

[Jim Holder]

Now that we’ve broken down out of this flag pattern the TA goal becomes $115 (265 - 175 = 90. Deduct 90 from $205 and you get $115). It should take us about 1 to 1.5 month to get there.

 

[2Pearls]

In hindsight I probably shouldn’t have teased you all with my new strategy, as I won’t be able to share it publicly if it does work out live. That would likely kill it.

I felt the need to say that option selling with its risks - which we witnessed last week - isn’t the only game. But mystery isn’t much of a solution. Well, it probably won’t work anyway when exposed to the real world and to the elements.

Talking about those elements: I’m a fan of TA and last week’s stock move has created a huge TA pattern for TSLA: the bearish flag. Flags are my favourite, as I find them to be very reliable. They are often exactly in the middle of a big move, meaning 50% is still to come. In this case we made a move from 265 late December to 175 late January, followed by the flag which formed between 175 and 205. Now that we’ve broken down out of this flag pattern the TA goal becomes 115 (265 - 175 = 90. Deduct 90 from 205 and you get 115). It should take us about 1 to 1,5 month to get there.

No guarantees in TA, and this one could be a dud too, but it’s something to keep in mind for risk management.

Not quite understanding your math. You stated “They are often exactly in the middle of a big move, meaning 50% is still to come.”. With the math you presented, where is the 50% still to come? I saw you deducted 90 from 205 to get to 115, but no division of the 50%? I clearly missed how you did this...could you please explain. Thanks.

 

[Right_Said_Fred]

Not quite understanding your math. You stated “They are often exactly in the middle of a big move, meaning 50% is still to come.”. With the math you presented, where is the 50% still to come? I saw you deducted 90 from 205 to get to 115, but no division of the 50%? I clearly missed how you did this...could you please explain. Thanks.

Sorry for the confusing post. What I meant to say is that the drop from 265 to the bottom of the flag (175) was 50% of the move and that the move from the top of the flag (205) to the target of 115 is the other 50%.

This chart explains it better:

 

[OrthoSurg]

I still have my day-job, but I could very easily replicate my daily rate with my current capital, for the rest of my life, but with a wife and three kids a little more is necessary, even doubling my day-job income would actually be pretty low-risk trades, but likely would not be enough to grow the capital, so I'm looking for 4x, which is roughly 1% weekly return, which again isn't high-stakes, tbh

I have a cash amount and/or portfolio value that will trigger my resignation letter, but it's +50% form here - likely 12 - 18 months to achieve that if the SP stays flat

As regards recuperating premium on LEAPS - my Dec 2025 +c200's are around 65% down, it's a bit of a convoluted story about why I paid $122 for them last year, but I had my reasons at the time, most of which were based on the reasonable concept that the CT production would be good for the stock, HA!

So anyway, now I'm assuming I need to trade back that $122, and I already took quite a bit against them, so let's say they still owe me $90, that's $1 per week until expiry, but will roll them to June 2026 giving another 30x expiries as well, and probably keep rolling them if the extra isn't too much -> right now it's $7 per contract, which is a good deal IMO

Doesn't matter for my broker that the SP is below the strike, I can still write with them, I just need to pony-up the spread margin/cash

But for me, $1 weeklies are "safe", will rarely go ITM, I didn't test it, but my gut-feeling is 95% of the time they'll expire, and the other 5% of the time you'll be able to roll them, so no I don't stress about them too much, it's annoying though

The day I will retire is the day @Yoona is going to start to take my money to trade with it. I already made my resignation letter and praying for that moment every night.

 

[Max Plaid]

So up to $235 or down to $115, or both!

A dump to the low 100's would be great for myself given that I have 100x July +p150's, despite my misgivings about the state of TSLA in the short term, I'd be looking to sell off those puts and backup the truck for some shares

All that being said, I'm also toying with the idea of selling my current 2200 TSLA and buying 29x Jun +c200's, an odd number it seems, but rounds-up my +c200's to 100x, which I like, and would add around $225k cash to my account, which would be comforting in these troubled times

I ran the numbers and those LEAPS plus the retained cash, track pretty much the same as the shares on the way up, slightly better on the way down

And yes, I know I already have a pile of +c200's that I would like to offload, but that's just the $122 cost basis talking, at <$50 I think they're good value, IV seems particularly low for the moment