Social Chat - Short Term TSLA Movements

[The Blue Owl]

I have been selling call spreads in TSLA for a while, essentially the same thing that you all are doing now. It's great when it works, but the time that it doesnt work and you dont close the short call, you are going to get hosed. I was targeting spreads for at least 10% upside to max downside risk and it worked for many trades and then you get the 1 or 2 that don't and its tough to stomach, especially when you are selling a lot of calls for low premium.

That's true, you don't want it to spike and not come back.

As a data point, I started selling covered weeklies (once I sold calls expiring two weeks out) in mid April. I got called away only once. Compared to when I started, after adding it all up, my net gain expressed in total shares + total cash is about 5%. As far as I am concerned, that is a smashing success.

I should add, though, that a large part of that gain can be explained by my first trade, when I sold calls before earnings. The premiums were very high due to insane volatility, and I got to keep most of it. If I take that out of the equation, my return on the strategy would be a bit over 1%.

 

[sleepyhead]

That's true, you don't want it to spike and not come back.

As a data point, I started selling covered weeklies (once I sold calls expiring two weeks out) in mid April. I got called away only once. Compared to when I started, after adding it all up, my net gain expressed in total shares + total cash is about 5%. As far as I am concerned, that is a smashing success.

I should add, though, that a large part of that gain can be explained by my first trade, when I sold calls before earnings. The premiums were very high due to insane volatility, and I got to keep most of it. If I take that out of the equation, my return on the strategy would be a bit over 1%.

It all depends on how many calls and what your risk tolerance is. The $210 calls I sold yesterday for $1.03 will yield me more than 2% in one day against my J16 $210 LEAPS. It all depends on how you deploy this strategy. Of course if TSLA finishes above $210, then I start rolling them forward.

 

[The Blue Owl]

It all depends on how many calls and what your risk tolerance is. The $210 calls I sold yesterday for $1.03 will yield me more than 2% in one day against my J16 $210 LEAPS. It all depends on how you deploy this strategy. Of course if TSLA finishes above $210, then I start rolling them forward.

I am going for a lower return per trade, while trying to win consistently. I am targeting a .5% gain per week on average. In theory, if I manage that for 50 weeks in a row, that's a 25% gain per year, uncompounded. So far, I'm ahead of that target.

 

[sleepyhead]

Wow, you really go tight with them. But who am I to judge, I learned about this technique from one of your posts, checked into it, and using it for the past three months. I tend to go much safer: sold 215 yesterday with expiration today. The premium is smaller, but I sell a lot of them... :smile:

This week is my eleventh of doing this. Works like a charm, pays much more than my day job!

Thank you, Sleepy!

I usually don't run them that tight. This week was different since we had shareholders meeting and I was waiting for a pop on Tuesday or Wednesday. It didn't happen, so I sold on Thursday. Normally I would sell a $215 or $220 that is 1-2 weeks out if TSLA is around $205. But when there is short notice, as in only one day, then I might get a lot more aggressive. But it depends on a lot of factors, such as recent stock movement, market sentiment, macro data, macro mood, etc.

And yes, you can make more money this way than at work. It doesn't really take a lot of shares or LEAPS to start earning nice income either. The problem is sticking to the strategy after it backfires on you once or twice. I have become pretty good at playing the "rolling game" though and it certainly is not for everyone.

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I am going for a lower return per trade, while trying to win consistently. I am targeting a .5% gain per week on average. In theory, if I manage that for 50 weeks in a row, that's a 25% gain per year, uncompounded. So far, I'm ahead of that target.

I thought you meant 5% total gain or 1% after taking out that one week. If you are averaging 1% per week then that is huge.

 

[pz1975]

I did the covered calls thing a few times before (1-2 months ago), but I am hesitant now because TSLA 'seems' to want to break out any day, like it is waiting for a major positive catalyst and will take off to 225 and beyond. I think 200 is a strong resistance point and have sold some naked 200 puts the last two weeks when it dipped to the 204/205 range. This is riskier because I don't have anything covering it but I just see the risk of a drop to 190 or lower as very low right now unless we get a negative catalyst of course or the market tanks. I wonder what will happen next week with the positive press coming out about the first UK/RHD cars being delivered. I kind of wish the stock was lower today to buy some ATM calls for next week, but will just wait and see.

 

[sleepyhead]

I did the covered calls thing a few times before (1-2 months ago), but I am hesitant now because TSLA 'seems' to want to break out any day, like it is waiting for a major positive catalyst and will take off to 225 and beyond. I think 200 is a strong resistance point and have sold some naked 200 puts the last two weeks when it dipped to the 204/205 range. This is riskier because I don't have anything covering it but I just see the risk of a drop to 190 or lower as very low right now unless we get a negative catalyst of course or the market tanks. I wonder what will happen next week with the positive press coming out about the first UK/RHD cars being delivered. I kind of wish the stock was lower today to buy some ATM calls for next week, but will just wait and see.

When is the official RHD date?

 

[The Blue Owl]

I thought you meant 5% total gain or 1% after taking out that one week. If you are averaging 1% per week then that is huge.

Yes, that's what I meant. It's been 5 weeks since my first trade (I was wrong when I said mid-April; the first trade was on April 28). I managed 5% overall, which is an average of 1% per week. That, in turn, is twice what I was targeting.

If I took that first trade out, I'd be behind.

 

[vgrinshpun]

I was thinking about selling several days or little over a week ahead of expiration, but for now decided against it as obviously more risky strategy, requiring good understanding of the potential of stock movements. Key is, as always, to do your own analysis and pick tactic which fits personal level of comfort the best.

 

[uselesslogin]

When is the official RHD date?

Tomorrow:
Twitter / TeslaMotors: Coming to the UK in seven days: ...

 

[sleepyhead]

Yes, that's what I meant. It's been 5 weeks since my first trade (I was wrong when I said mid-April; the first trade was on April 28). I managed 5% overall, which is an average of 1% per week. That, in turn, is twice what I was targeting.

If I took that first trade out, I'd be behind.

the casino always wins in the long run...

 

[The Blue Owl]

the casino always wins in the long run...

Well, in this case, aren't we the casino? Time is on the option seller's side.

 

[sleepyhead]

I was thinking about selling several days or little over a week ahead of expiration, but for now decided against it as obviously more risky strategy, requiring good understanding of the potential of stock movements. Key is, as always, to do your own analysis and pick tactic which fits personal level of comfort the best.

You can always sell a 1-2 week call option and then buy it back as soon as it loses x% of value; e.g. sell for $5 and buy back for $4 same day if you think that you can spot the daily peak. But I usually just sell and wait.

It does take a a lot of work with research to deploy these strategies, so it is not for everyone.

 

[vgrinshpun]

When is the official RHD date?

It is tomorrow, 3:00pm London time:

First RHD delivery in UK March 2014 - Elon Musk to delivery himself - Page 8

 

[sleepyhead]

Well, in this case, aren't we the casino? Time is on the option seller's side.

Exactly!

That is why I like selling weeklies instead of buying. Of course I buy weeklies too, but that is just my gambling nature making decisions (a lot more exciting and fun). Selling weeklies is my brain making decisions.

 

[The Blue Owl]

You can always sell a 1-2 week call option and then buy it back as soon as it loses x% of value; e.g. sell for $5 and buy back for $4 same day if you think that you can spot the daily peak. But I usually just sell and wait.

It does take a a lot of work with research to deploy these strategies, so it is not for everyone.

That's what I did today. I sold 210s at $5 and bought them back at $4.2. Then I sold 220 Jun13s at $1.1, and I'll sit on them for the next week.

 

[sleepyhead]

Tomorrow:
Twitter / TeslaMotors: Coming to the UK in seven days: ...

It is tomorrow, 3:00pm London time:

First RHD delivery in UK March 2014 - Elon Musk to delivery himself - Page 8

Thanks guys. I need TSLA to finish under $210 today and let it run Monday to sell new calls

 

[ckessel]

It all depends on how many calls and what your risk tolerance is. The $210 calls I sold yesterday for $1.03 will yield me more than 2% in one day against my J16 $210 LEAPS. It all depends on how you deploy this strategy. Of course if TSLA finishes above $210, then I start rolling them forward.

This might belong in the newb thread, but how do you roll forward? There's no "roll" feature I can see in my brokerage's tools, so what is the manual buy/sell equivalent?

 

[NuclearPowered]

It all depends on how many calls and what your risk tolerance is. The $210 calls I sold yesterday for $1.03 will yield me more than 2% in one day against my J16 $210 LEAPS. It all depends on how you deploy this strategy. Of course if TSLA finishes above $210, then I start rolling them forward.

How would you roll this trade forward? When I had short calls finish ITM I would simply buy them back just prior to close, taking the loss.

 

[sleepyhead]

This might belong in the newb thread, but how do you roll forward? There's no "roll" feature I can see in my brokerage's tools, so what is the manual buy/sell equivalent?

How would you roll this trade forward? When I had short calls finish ITM I would simply buy them back just prior to close, taking the loss.

I use a combo aka spread aka diagonal spread or calendar spread (depending on strike prices), to roll my options forward. It all depends on what your brokerage calls it.

You can always buy them back and sell new ones later if you think TSLA will go back up in the near future.

 

[kenliles]

This might belong in the newb thread, but how do you roll forward? There's no "roll" feature I can see in my brokerage's tools, so what is the manual buy/sell equivalent?

How would you roll this trade forward? When I had short calls finish ITM I would simply buy them back just prior to close, taking the loss.

Most brokerages will list it as a Spread trade- having 2 legs. Make the first leg the Buy-To-Close and the second Sell-To-Open; you can perform the trade with a Net Debit Limit- would not recommend market - know what the net max difference is you want to pay and set the limit - The legs will execute together to limit the net debit. The 2nd leg can have both a time roll out or a strike or both from the first.