Wiki Selling TSLA Options - Be the House

[MrMoo]

I STRONGLY recommend getting a Portfolio Margin account to sell naked options on stocks, instead of selling spreads. I have done both and naked options are both safer and easier on the brain, despite the name and the lack of a safety net, which, lets be honest, sometimes just gives you a false sense of security and pushes you to take outsized risks. Otherwise, stick with selling covered and add some spread buying. I dont recommend gambling with spread, but if you feel the urge to sell them so close to the money to capture large return, you might have an underlying need for adrenaline, and instead of denying its existence, you might satisfy that hunger by buying a few spreads here and there. keep it interesting but with much lower risks.

This is what I do. I never liked the idea of spreads because it isn't within my own risk profile but what I really disliked about them was that you pay for "protection" if the price moves against you but you still feel like *sugar* in the aftermath.

I sell very safe far OTM naked calls, the premium is still a fraction of what you would get selling the spreads but I very rarely get caught out and if I do i have the option to roll them further out to some even more insane strike at break even premium. Because they are naked I'm going really safe. Like NVDA 1800 monthlies after a run up. Having said that I haven't been doing it as much over the last few months because NVDA has been scary to sell naked against and TSLA premiums have been poor and the stocks been falling so there isn't much risk reward ratio (I don't want to make $100 and sell 100 naked contracts...)

 

[BornToFly]

I STRONGLY recommend getting a Portfolio Margin account to sell naked options on stocks, instead of selling spreads. I have done both and naked options are both safer and easier on the brain, despite the name and the lack of a safety net, which, lets be honest, sometimes just gives you a false sense of security and pushes you to take outsized risks. Otherwise, stick with selling covered and add some spread buying. I dont recommend gambling with spread, but if you feel the urge to sell them so close to the money to capture large return, you might have an underlying need for adrenaline, and instead of denying its existence, you might satisfy that hunger by buying a few spreads here and there. keep it interesting but with much lower risks.

How do you manage the risk on naked options? Like Calls? Are you prepared to buy shares to hedge? Or Just roll before ITM?

 

[Jim Holder]

How do you manage the risk on naked options? Like Calls? Are you prepared to buy shares to hedge? Or Just roll before ITM?

I believe I've read @dl003 does a DL special which includes faaaaaaaaaar OTM/DTE + large qty's, counting on a retracement back down to the mean at some point to BTC.

 

[Yoona]

does anyone here subscribe to Unusual Whales? if yes, are the greeks updated in real-time? TIA!

they want you to ask questions in Discord, but you can't ask unless you have a subscription

 

[dl003]

How do you manage the risk on naked options? Like Calls? Are you prepared to buy shares to hedge? Or Just roll before ITM?

Basically, you just roll them out until they are OTM. The same rules apply, most importantly dont go all out and dont be greedy. What naked options do is put you in a potentially "max loss" situation from the get go so you are forced to think about the worst case scenario the moment you enter a trade. If you short a call, that can potentially turn into a common short while a short put can turn into a common long. You can always roll these for net credit or strike improvement, unlike spreads, provided you are not dealing with the meme stocks.

 

[thenewguy1979]

Basically, you just roll them out until they are OTM. The same rules apply, most importantly dont go all out and dont be greedy. What naked options do is put you in a potentially "max loss" situation from the get go so you are forced to think about the worst case scenario the moment you enter a trade. If you short a call, that can potentially turn into a common short while a short put can turn into a common long. You can always roll these for net credit or strike improvement, unlike spreads, provided you are not dealing with the meme stocks.

its a mental thing. Max loss scared the crap out of most people hence we would be 100x more careful. Spread does give a false sense of security and you can lose a ton before you noticed it. Greed covered the eyes.

Dog been blind by Greed sometimes and that sometimes come close to wiping him clean of furs.

Thanks dl003 for the heartfelt feedbacks. Many can benefit from this.

 

[OrthoSurg]

I am looking at my Jan2025 LEAPS with a strike of 110 and wonder how the SP is going to play out in the next few months. Are we most likely going to resume the previous bear trend from Jan2023 or continue the October2023 Bear trend until we retest Dec2022 lows?

 

[lrm3red]

How do you manage the risk on naked options? Like Calls? Are you prepared to buy shares to hedge? Or Just roll before ITM?

So personally what I've done is just to help me reduce my capital requirements I will sell a CSP with a low, like 5-10 delta +p, essentially making it a spread, sometimes that ends up working out in my favor because as the SP drops, the value of the +p will go up as well, and once I'm comfortable, I will typically just sell the purchased leg of the spread and just turn the spread into a pure CSP, for the most part this has worked out during this last cycle. I still have a -p160/+p130 jun 2026 spread open, I'm hoping that if the SP drops to where I'm comfortable, I will close out the +p130 leg in profit, and keep the -160p CSP, the only down side is you're a limited in your max profit if you continue to hold the long leg, but I'm ok with that option, to protect from downside capital protection.

 

[Max Plaid]

Mine does (naked anyway)

If it was me I'd buy some September +c240's @$8 right now, which are quite close to the money and any kind of rally in the SP will bring profits or provide a very safe roll - TSLA around 200 and they 2x, 235 gives 4x

I buy on the assumption they'll expire worthless, which is why I call them "burner calls", any profits are a bonus

 

[SpeedyEddy]

I STRONGLY recommend getting a Portfolio Margin account to sell naked options on stocks, instead of selling spreads. I have done both and naked options are both safer and easier on the brain, despite the name and the lack of a safety net, which, lets be honest, sometimes just gives you a false sense of security and pushes you to take outsized risks. Otherwise, stick with selling covered and add some spread buying. I dont recommend gambling with spread, but if you feel the urge to sell them so close to the money to capture large return, you might have an underlying need for adrenaline, and instead of denying its existence, you might satisfy that hunger by buying a few spreads here and there. keep it interesting but with much lower risks.

I almost only do these (as you can tell from all of my postings) But have learned to cut losses early (if rather close to the money) and move them up/down not to soon and aggressively.
For day trading which is a totally different play, I do naked DITM 0-7 (and preferably 0-3) DTE on high volatile stocks, which is only possible if you do not have other distractions and cut losses immediately plus turn the trade in the opposite direction after clear tops/bottoms. AND stop when you have a nice profit for the day.

 

[Jim Holder]

https://twitter.com/x/status/1767429216021430495

 

[Jim Holder]

February CPI inflation rate rises to 3.2%, above expectations of 3.1%.

Core CPI inflation fell to 3.8%, anbove expectations of 3.7%.

 

[UncaNed]

To help confirm the bottom is in for TSLA we need to see a 5-up or break above the Feb high ($205.67)

View attachment 1026854

Fat lot of good that does us (waiting until we reach $205.67 again) if we wanted to buy in at @dl003 's $171.7 firm bottom. Or, at this point, even now at the $179 dip.

What to do??

(Edited for clarity)

 

[Jim Holder]

290.0 Puts @ 3/15/2024 was the most dominant contract yesterday
The contract has received $45.79M in premiums

 

[UncaNed]

How do you manage the risk on naked options? Like Calls? Are you prepared to buy shares to hedge? Or Just roll before ITM?

I think perhaps the latest expirations are safer than fewer days till expiration. More time to hapopen to get back in the money.

 

[juanmedina]

I STRONGLY recommend getting a Portfolio Margin account to sell naked options on stocks, instead of selling spreads. I have done both and naked options are both safer and easier on the brain, despite the name and the lack of a safety net, which, lets be honest, sometimes just gives you a false sense of security and pushes you to take outsized risks. Otherwise, stick with selling covered and add some spread buying. I dont recommend gambling with spread, but if you feel the urge to sell them so close to the money to capture large return, you might have an underlying need for adrenaline, and instead of denying its existence, you might satisfy that hunger by buying a few spreads here and there. keep it interesting but with much lower risks.

I didn't lose any money with spreads in 2022 but naked puts killed me. If is not cash secured you are asking for trouble if someone over extend themselves like you said. I remember in 2022 I decided to get Portfolio Margin to try to keep all my positions through the down turn. At $200 I was fine and then E-trade started to change my margin requirement IIRC and I also started buying **** puts to increase my margin until all the sudden we got to $100 and I eventually got margin called. If I had regular margin and not bought any puts I would probably would have gotten a margin call way earlier and I would have saved most of my account. Playing with money that I don't have is not my kind of thing any more even if potentially can be profitable but I am not diligent enough to keep myself from getting burn again so I rather not have that temptation.

 

[CHGolferJim]

It hasn't been easy. I've been on the verge of tears and panic for 3 days. When I factor in the TSLA shares I had to sell that I had acquired for a Buy-Write at SP 242, the loss is in the 7 figures, and my account is not that large anymore. I might have to come out of retirement and/or sell my much smaller plane that I love, and the thought of flying commercial makes me want to puke....

O.T. but relevant. I never understood PTSD before, but after our son's suicide in 2019, my brain is not the same. I can't handle the frustrations of hospital work/patient management anymore, or frustrations in general. That is part of the reason I retired - I was getting panic attacks in the operating room before the case would start (even if it was an easy surgery). It is crazy to be aware of it but unable to control it. I was lucky that I had made so much money in TSLA by that point. It is unfortunate that I discovered this thread and lost 66% of it now. NO MORE SPREADS for me.

Really feel for you, so many difficult events to balance in your life and work; strongly advise you to take a more calming and cautious approach with your options strategy a la Yoona. Best wishes, we appreciate you here.

 

[UncaNed]

Speaking of risk management...

Many posts here mention not betting the farm all at once, but instead making lots of smaller, frequent smaller plays, or keeping some random amount of free cash on hand...

Edit- extropolate using only smaller bets far enough, and you're making NO bets. Thinking out loud here..., so what's the optimal strategy? I mean, for those of us who aren't Yoona or dl003.

Sounds reasonable I suppose, but I've never seen this seriously addressed here.

Say for example you're the best option trader in the world, and you win 24 times out of 25. If you bet everything every time, you'll do amazingly well, until that one in 25 event cleans you out entirely and you lose everything and have to restart from scratch.

Or only play with say, 1/3 or 1/2 of your total account value each time or something?

Isn't the optimal strategy some sort of long-established established game theory?

 

[MrMoo]

I didn't lose any money with spreads in 2022 but naked puts killed me. If is not cash secured you are asking for trouble if someone over extend themselves like you said. I remember in 2022 I decided to get Portfolio Margin to try to keep all my positions through the down turn. At $200 I was fine and then E-trade started to change my margin requirement IIRC and I also started buying **** puts to increase my margin until all the sudden we got to $100 and I eventually got margin called. If I had regular margin and not bought any puts I would probably would have gotten a margin call way earlier and I would have saved most of my account. Playing with money that I don't have is not my kind of thing any more even if potentially can be profitable but I am not diligent enough to keep myself from getting burn again so I rather not have that temptation.

I'm not sure what options you sold but I can only assume it was TSLA. Naked puts on TSLA or any stock that has a large concentration in your portfolio is never a good idea because your portfolio value is dropping as the stock drops.

Conversely if you are selling naked calls, one would hope you at least have money in the stock too. (So some of the calls are covered).

 

[stealthyc]

I think perhaps the latest expirations are safer than fewer days till expiration. More time to hapopen to get back in the money.

It very much depends. Having no extrinsic remaining makes rolling cheaper and more effective from my experience. But it also depends how near the money you are.

The primary issue with risk management for most people (including myself) in my opinion is a strong aversion to taking losses. You can have all the hope you want, but sometimes things move against you hard and fast and your best bet is to get out and reevaluate. There are different methodologies for trading; some people like to make directional ITM bets, some like to make small far OTM bets with high chance of success, etc. But regardless of strategy it doesn't do much good to let things get out of hand when thing move against you dramatically. Even if you roll far away to "safety" you have become much more illiquid and sometimes "safe" is not safe enough as many people with naked TSLA puts found out as they saw their extremely DITM short puts start to get regularly exercised and their margin collapse. What is worse... cutting losses and losing 100-200% premium gained or having paper losses of 2000-4000% premium gained for an indeterminate period of time that may take months or years to resolve? The emotional resolve required to take losses is very hard, but if you prepare yourself ahead of time and just have a plan you execute it's a lot easier. And I can confidently say that every time i've taken losses in such a manner it has felt really painful right before doing so, but such a relief afterward, because there is no more anxiety and uncertainty at that point. You can unemotionally reconsider your options, watch for good entries, make level headed decisions.

The flip side is that if you are in a volatile stock and you react *too* fast you end up taking losses too often. And there is where the difficulty lies. I think you are much more likely to end up in that situation though if you are betting too close to the money. Short DTE, far OTM bets while low premium have some advantages, in that their theta decays so fast that movement against you can be partially or completely offset. Conversely the absolute risk to premium ratio is very high, but that just reinforces the need to not let things get out of hand.

I guess perhaps I'm just rambling now, but a few themes keep coming back to me personally which are

1. Don't be greedy
2. Don't overleverage
3. Have a plan and don't get emotional
4. Take early wins
5. Take early losses too