trading

[mongo]

Closed these positions right at $2 each ($1.96 and $2). Nets out at just over 67%. That's 0.6% in 8 days. Though I can't necessarily replicate the speed of these in the future, I think I like the fast resolution of these weekly or very close contracts, even if the amount per contract is small (about $400 profit in this case).


My rationale for this trade being that today is earnings day and now I'm out of all my option positions for earnings today. This is primarily me being really conservative and never having traded options over earnings - I'd prefer to sit this out, and see how the stock responds tomorrow. I expect I'll be selling new options tomorrow or Friday

I'll certainly be paying more attention to earnings, and the market reaction to them, today than I normally do.

Earnings is next Wednesday, the 29th...
Tesla Announces Date for First Quarter 2020 Financial Results and Webcast | Tesla, Inc.

PALO ALTO, Calif., April 15, 2020 (GLOBE NEWSWIRE) -- Tesla will post its financial results for the first quarter of 2020 after market close on Wednesday, April 29, 2020. At that time, Tesla will issue a brief advisory containing a link to the Q1 2020 update, which will be available on Tesla’s Investor Relations website. Tesla management will hold a live question and answer webcast that day at 3:30 p.m. Pacific Time (6:30 p.m. Eastern Time) to discuss the Company’s financial and business results and outlook.

 

[adiggs]

Earnings is next Wednesday, the 29th...
Tesla Announces Date for First Quarter 2020 Financial Results and Webcast | Tesla, Inc.

Thank you - time has become so weird for me due to WFH (one of my first world problems), I was thinking that today was the 29th. Sigh.

Now I'll need to decide if I stay out for a week, or sell another batch of options - either the May monthly, or the weekly for next week.


Thanks for pointing that out

 

[juanmedina]

Are you guys planning on holding call options through earnings specially for May 15th calls? or will the supposedly drop in IV kill us?

 

[adiggs]

Are you guys planning on holding call options through earnings specially for May 15th calls? or will the supposedly drop in IV kill us?

I'm only selling calls, so a drop in IV would be helpful to me

However, this is my first earnings call while selling options, and I plan to be out and watch from the sidelines. That might well be my pattern in the future as well - I've seen some pretty radical moves, in either direction, and I don't want to try and figure out what it'll be ahead of time.

 

[adiggs]

Thank you - time has become so weird for me due to WFH (one of my first world problems), I was thinking that today was the 29th. Sigh.

Now I'll need to decide if I stay out for a week, or sell another batch of options - either the May monthly, or the weekly for next week.


Thanks for pointing that out

Turns out that my mistake on earnings announcement timing might make me some money. I'm finding unexpected joy in the weekly options while I wait for earnings.

Sold May 1 500 strike puts for $4.50 (nearly 1% for 1 week!)
Sold May 1 1000 strike calls for $5.50

 

[juanmedina]

I'm only selling calls, so a drop in IV would be helpful to me

However, this is my first earnings call while selling options, and I plan to be out and watch from the sidelines. That might well be my pattern in the future as well - I've seen some pretty radical moves, in either direction, and I don't want to try and figure out what it'll be ahead of time.

I been reading your posts and I been reading books about options and they all seem to suggest that the way to go is to sell options vs buying. I just wonder if that applies to Tesla since it is so volatile lol.

 

[EV forever]

Are you guys planning on holding call options through earnings specially for May 15th calls? or will the supposedly drop in IV kill us?

I am planning on holding calls through earnings report. Haven’t decided yet if May 15 is good it June 19 is better. A while back @Fact Checking had done a calculation showing that with TSLA if earnings are good it takes atleast 5 trading days to get to peak. If it is bad news, crash in SP happens almost immediately next 1-2 days. Can’t find that post anymore.

Since I am expecting good news on earnings, need to plan on holding the calls for a week after. If I buy May 15 calls, with time decay and lower volatility, may not get the best return. June 19 are more expensive but give more time for closing.

 

[EV forever]

I been reading your posts and I been reading books about options and they all seem to suggest that the way to go is to sell options vs buying. I just wonder if that applies to Tesla since it is so volatile lol.

I have been doing the same. My plan is to start selling options only after the earnings report. It’s too volatile to hold sold options through earnings. Also, when I do sell, it will be with higher probability than 70%. Yes, that means lower returns but also lower risk.

 

[juanmedina]

I am planning on holding calls through earnings report. Haven’t decided yet if May 15 is good it June 19 is better. A while back @Fact Checking had done a calculation showing that with TSLA if earnings are good it takes atleast 5 trading days to get to peak. If it is bad news, crash in SP happens almost immediately next 1-2 days. Can’t find that post anymore.

Since I am expecting good news on earnings, need to plan on holding the calls for a week after. If I buy May 15 calls, with time decay and lower volatility, may not get the best return. June 19 are more expensive but give more time for closing.

I am already down 50% but I only used a little money from some profits. If we crash hopefully I can get some LEAPs a few hundreds OTM at a decent premium because I don't think I am going to mess with short term options again.

 

[adiggs]

I been reading your posts and I been reading books about options and they all seem to suggest that the way to go is to sell options vs buying. I just wonder if that applies to Tesla since it is so volatile lol.

For me at least, it's especially true for Tesla. The volatility is so high, I just sold the 500 strike put ($220 below the current share price) and collected nearly 1% premium for 7 trading days. One way I think about that - I wouldn't buy that option at that price under any circumstances - the only reason I think that somebody should buy it is you know something that isn't yet public, or you're expecting a significant move this week and plan to be out either way on Friday or Monday. For somebody buying that option, you an be right and see the shares move $200 down over the next week, and still lose 100% of your premium if you hold to expiration.

That being said, some others have posted some recent TSLA IV charts which suggest that Historical Volatility and IV are similar, or HV is higher. The edge from selling options comes from very large numbers of trades, and the historical observation that IV consistently overstates HV or realized volatility. That overstatement is our edge when selling options.


Also important to read the thread from the beginning - my strategy is useful to me and is trying to accomplish my objectives (a dividend strategy if you will, that makes use of my perceived information edge in Tesla and TSLA). It might not be the best for you.

Primarily - I'm selling options that would be naked, except I have the cash on hand to buy the shares if the puts are exercised, and I have the fully paid shares on hand to deliver if my calls are exercised. I can still lose money.

 

[adiggs]

I been reading your posts and I been reading books about options and they all seem to suggest that the way to go is to sell options vs buying. I just wonder if that applies to Tesla since it is so volatile lol.

Also worth noting, I've tried my hand at buying options. That was a disaster. And the killer thing - I was right about direction and timing (almost). I was off by 1 week on options I bought that were 15 months out (the week after expiration, the options would have been $50 and $150 ITM, instead of worthless as they actually were).

So now I sell options, not nearly that far out, and I let time decay work for me.

 

[mongo]

Are you guys planning on holding call options through earnings specially for May 15th calls? or will the supposedly drop in IV kill us?

The potential of the market to push TSLA down to Max Pain tomorrow (700) was a bigger factor to me than the future IV drop.

 

[Eugene Ash]

I been reading your posts and I been reading books about options and they all seem to suggest that the way to go is to sell options vs buying. I just wonder if that applies to Tesla since it is so volatile lol.

Regarding your experience with short-term options: take a look at figure 1-3, page 13, Options as strategic investment, 5th edition. There is no time premium, so no room for error. You have to be right both on direction, time and strike price band. These are unforgiving, but can yield spectacular results at the risk of losing principal.

Again, run your approach by your goals. When it comes to my current approach it is to 1) learn fast (still new to options). 2) Run ideas from this forum by my mental apparatus and see why they would, or would not work. This way I made some play money on not advice of @anthonyj , @UnknownSoldier and most lucratively @TrendTrader007, off the action to buy ITM 350 call leap at what turned out to be the bottom.

As for mistakes:
I only lost $400 when I experimented with a spy put far otm, with little time premium left, just because that was all i nad funds for, and it was cheap. 400 lesson on time decay with wrong direction and strike price.

3) come up with my own idea and test it. (N.B. I have an MBA equivalent and was good both with micro and macroeconomics). Unless you understand these, you at the mercy of trends, so you likely to be off on timing and strike price.

So my first bet with the proceeds from not-advice from this forum is the purchase of what used to be otm 715 may 1 call at 49. This is a bet on a good reaction of the market to the quarterly call. I anticipate a 20% move, but set a sell limit price well below that. Goes well - excellent returns for a weekly tie up of capital. Goes bad, I lose a portion of earlier winnings.

In either case no risk to core hodlings.

 

[juanmedina]

Regarding your experience with short-term options: take a look at figure 1-3, page 13, Options as strategic investment, 5th edition. There is no time premium, so no room for error. You have to be right both on direction, time and strike price band. These are unforgiving, but can yield spectacular results at the risk of losing principal.

Again, run your approach by your goals. When it comes to my current approach it is to 1) learn fast (still new to options). 2) Run ideas from this forum by my mental apparatus and see why they would, or would not work. This way I made some play money on not advice of @anthonyj , @UnknownSoldier and most lucratively @TrendTrader007, off the action to buy ITM 350 call leap at what turned out to be the bottom.

As for mistakes:
I only lost $400 when I experimented with a spy put far otm, with little time premium left, just because that was all i nad funds for, and it was cheap. 400 lesson on time decay with wrong direction and strike price.

3) come up with my own idea and test it. (N.B. I have an MBA equivalent and was good both with micro and macroeconomics). Unless you understand these, you at the mercy of trends, so you likely to be off on timing and strike price.

So my first bet with the proceeds from not-advice from this forum is the purchase of what used to be otm 715 may 1 call at 49. This is a bet on a good reaction of the market to the quarterly call. I anticipate a 20% move, but set a sell limit price well below that. Goes well - excellent returns for a weekly tie up of capital. Goes bad, I lose a portion of earlier winnings.

In either case no risk to core hodlings.

do you buy that $350 call when the SP dropped to $350? I imagine you are still holding that call... I wonder how easy is to hold an option like that?

So far I lost about $5000 thankfully covered but some earlier winnings but when I do the math of options vs just holding shares I am doing not doing that much better for all the headache and the time I am spending learning and watching options.

 

[Eugene Ash]

do you buy that $350 call when the SP dropped to $350? I imagine you are still holding that call... I wonder how easy is to hold an option like that?

So far I lost about $5000 thankfully covered but some earlier winnings but when I do the math of options vs just holding shares I am doing not doing that much better for all the headache and the time I am spending learning and watching options.

The SP was about 362 when i bought the call. Holding is not hard, since I want the shares, but have no capital left to excercise.
An option trader would say that there is a lot of time value left in it, but it is in my taxable account, so if i sell, the gains would be taxed. I am not done accumulating shares.

As for owning shares, you are correct, now the premiums make it difficult to justify buying calls. And lucrative to write them conservatively.

At that point in time my breakeven SP on the call was about $504 and vs owning the stock point was ~612. So an informed TSLA investor would have concluded that the SP would exceed that point within next couple of years the LEAP affords.

I really appreciated help on this forum, especially figuring out favorably priced calls, I remember @Fact Checking was providing

 

[juanmedina]

The SP was about 362 when i bought the call. Holding is not hard, since I want the shares, but have no capital left to excercise.
An option trader would say that there is a lot of time value left in it, but it is in my taxable account, so if i sell, the gains would be taxed. I am not done accumulating shares.

As for owning shares, you are correct, now the premiums make it difficult to justify buying calls. And lucrative to write them conservatively.

At that point in time my breakeven SP on the call was about $504 and vs owning the stock point was ~612. So an informed TSLA investor would have concluded that the SP would exceed that point within next couple of years the LEAP affords.

I really appreciated help on this forum, especially figuring out favorably priced calls, I remember @Fact Checking was providing

Awesome. If we get down that low again I will do the same.

Yeah we have great members in the forum @FrankSG has a great blog and good posts and tips in this thread. And @KarenRei was also great about answering my questions.

 

[juanmedina]

The SP was about 362 when i bought the call. Holding is not hard, since I want the shares, but have no capital left to excercise.
An option trader would say that there is a lot of time value left in it, but it is in my taxable account, so if i sell, the gains would be taxed. I am not done accumulating shares.

As for owning shares, you are correct, now the premiums make it difficult to justify buying calls. And lucrative to write them conservatively.

At that point in time my breakeven SP on the call was about $504 and vs owning the stock point was ~612. So an informed TSLA investor would have concluded that the SP would exceed that point within next couple of years the LEAP affords.

I really appreciated help on this forum, especially figuring out favorably priced calls, I remember @Fact Checking was providing

I just realize I made a mistake on one of my questions. I meant to ask, "I wonder how easy is to SELL and option like that?" How liquid is a DITM Tesla option?

 

[EVNow]

I just realize I made a mistake on one of my questions. I meant to ask, "I wonder how easy is to SELL and option like that?" How liquid is a DITM Tesla option?

Very liquid - if you don't insist on mid-price and willing to take something close to bid. Esp, if you have small number of options.

 

[Sudre]

I spent the last 4+ weeks practicing with Spreads. I am going to hold one PUT debt spread and 3 CALL debit spreads thru earnings. (I am hoping for positive surprise but have the PUT as backup). IV does not appear to effect spreads since you are dealing with the price between two options. I have become pretty good at recouping the cost of Spreads when they do not go in my favor. Not using any serious money for this. This is a test to see how they work on earnings.

My method works pretty good when the SP is moving up and down a lot throughout the week. Since TSLA moves up and down daily, much less weekly, it has been working rather well but requires continuous monitoring.

 

[BenPrice]

Diamond hands...