$TSLA $1500 and margin?

 

27 dec

ok have to say a few words about what ive read over this last month. there are 3-4 people i follow just for their incites into TSLA. sales, balance sheet analysis, etc... the shit im not really too interested digging into but will gladly read if its dumbed down and easily readable being the good lurker i am. there are also a couple i follow for amusement but in a way like you watch a house on fire. you hope no one got hurt but you just cant look away.

first off, my method is i currently have 5 Jan2022 deep in the money calls and i sell short term calls against for premium. my personal goal is to make at least $2500 a week from just those TSLA calls. its not alot but to me its really good for just waiting. essentially like covered calls, roll out from week to week, sometimes 2 weeks to get more premium. on a side note ive discovered that it seems like par for the course if youve made good coin on TSLA you have to tweet out screen captures of how much or your percentage of profits routinely. very annoying. but since it bears on this explanation ive had my best year ever trading and i owe it all to selling out of the money calls on TSLA.

so thats me, thats what i do, and thats the risk reward im managing. as far as one TSLA guru who will remain nameless because i dont want to be blocked so i can keep watching this unfold... this guru is developing quite a reputation and following for buying way out of the money calls such as Jan 2022 1500s etc and using margin to do so and not selling those calls , instead converting to stock to save from paying taxes. you know who i mean if you follow him. developing a reputation as in twitter followers, interviews, etc

first thing and most importantly for all us "normal" traders / investors... why we cant do what he does because he clearly has a huge bankroll from the get go and can absorb a margin call. if i could straight up afford 500 shares of TSLA post split and that was 25% or so of my portfolio id just buy the common. thats why most of us mess with options... side note again.. i chuckle sometimes when i read the TSLA stream and i see someone tweet that they added 10 shares on the dip. which is big in dollar terms for some but the shear dollar movement in the stock required to see a decent gain is huge. that capital could be used selling credit spreads, etc 

regardless im going to say im pretty normal compared to other traders in account size but come option expiration in 1-2 years i dont see me having 300K unused in my account by then to convert to stock. i would argue taking profits near expiration and having the long term capital gain taxes apply and using the capital to buy at least 2 possibly 3 further out leaps.. example i have a Jan2022 300 strike leap i bought right after stock split.. so nearly 350points in the money(etrade says its up 176%) .. so come Jan2022 i would close that out for whatever profits, be subject to long term capital gains, lets say the stock is at $1000 by then.... and then with all that capital i might buy TWO or THREE Jan2024 /2025 calls. maybe have to throw in some cash to make it happen. the point of my Leaps is not to accumulate stock, its to have a base to sell short term premium against. so instead of converting for 100 shares at a cost of $30000 (the cost of the call) and being able to sell only one short call against, i would have two or three long calls to sell short calls against. best case for no added cash. yes taxes but im sure there are some losses i can use against.

ive watched part of his youtube interview. honestly fell asleep before it finished but got the jist. our guru is not afraid of margin calls. my read is that mr. guru is already a multimillionaire with plenty of cash on the sidelines.. ie he could take a margin call and not have to eat ramen noodles  for dinner. remember those noodles?? 10cents a pack in college?. ive been thru a margin call.. the best way to get out from under it is to close out the stock/options thats causing it... just take your loss and move on, take your kick in the crotch and move on.. problem is those margin calls come super fast.. think back to march of this year when the market sold off. Markets In Turmoil everynight on cnbc.. no shit there i was.. chart below is post split so in the circle the top was around 880 or so . im selling 5 delta short puts ... 5 DELTA is said.. a 4 delta is a 2 standard deviation move. each broker is different but i believe at etrade you needed 20% cash on hand to sell a put. but if youre on margin you have to keep having more collateral available if the stocks (your portfolio goes down), etrade emails out that TSLA requirement is now 40% or whatever...then later 75%, then 100%. i remember 3 emails in one day.. so i rolled out and down an week that bought me some time but not enough. got to the point where i would have to close out the rest of the account to be the collateral for the short puts... ended up just closing the puts, taking a $10000ish hit and living to fight another day. (and vowing to make it back off of TSLA in spades)

so point being in spite of being somewhat diversified i could not outlast the panic of the 2-3 week selloff. turns out if i could have held out to opex i could have closed the short puts for a profit.. (and the 5 delta pricing held up) i just got forced out. now having said all that, if you do what our guru is doing you are playing with fire. i also saw another youtube clip from someone else that he mortgaged his house to buy more stock.. so our guru despite having plenty of cash can very likely withstand a 300 point drop in the stock.. will still suck, will have to sell some of his positions or add more cash to the account. i think i caught a segment where he said he welcomed a margin call because then he could accumulate shares/leaps with a better cost basis. ill take the side of being opportunistic in adding positions, such as selling puts as a way to enter at lower cost basis

another note, ive had very short interactions via twitter with a couple of the high profile TSLA bulls similar to the guru, as in out of the money stock purchases in 2022 and 2023.. and im also to the point of making a generic statement that most of these guys have not even a basic understanding of options. specifically selling options for premium. for instance prior to the sp500 inclusion..during the run up hype. one mini guru was buying 800strike calls mid next year.. i asked if he was at least selling shorter dated calls against those 800's to bring in some premium and lower the cost basis as well. going off memory a near dated 800 was going for $500ish. his response was "selling calls is risky, i dont want to lose my shares" ... WTF? thats a newbie comment of not knowing what to do when your near term call is about to expire, or when to roll for credit. everyone is a genius when the stock is going up. but what if it stays range bound, as in between 600-700 for a year. now what are you going to do? can you make money in that environment?

im afraid that the stock appreciation has made experts out of people that in hindsight can be attributed to being that 1% that got it right. theres always a lotto winner somewhere. doesnt mean they were smarter than you. just like me buying a 300 strike call in Sep doesnt make me any smarter.

Forgo some of that upside potential. you cant go all-in every hand. at some point you will get burned. can you survive if some geopolitical event caused  TSLA to drop 300 points this week? and your broker all of a sudden to cover his ass required you to have as much cash on hand as you want to margin. if you say No then you have too much risk. 

Similar but not similar, when the stock was added to the spy and did that crazy move to 695 on the 69million block trade and then one second later down to 670s.. saw multiple tweets about how they held calls / puts into opex expecting the market to do one thing but now they have $35000 loss.. once you think you have it all figured out, the market will take it away from you to show youre not as smart as you thought. me included.

On the ground with the homebuilders

 

had to add some commentary about whats really happening on the ground with homebuilders. seeing nearly weekly reports about best interest rates ever, existing home sales drops, new home prices all time high, etc, the reports coming across my stream are conflicting as if they dont remember what they (cnbc) just posted the day before.... so heres the deal.. 

a few of my long time followers know i work in the homebuilding industry in south texas and "i know a guy that knows a guy" . these comments are not on a specific builder since the issues are industry wide. 

Sales - sales are best ever ive seen, even better than pre-financial crisis.. difference is the pace is better without the bullshit no income verification, 520 credit scores, no job type of loans that helped cause the financial crisis.. if you roll into a sales center with a 520 credit score thinking youre getting a home loan for $300,000, let me save you a trip. they dont need your business. i took a recent drive thru a couple subdivisions with new homes under construction that had 4-5 different homebuilders and price points. it was assholes and elbows, so much construction happening almost to the point of not being able to drive down the street. saw 95% "sold" signs for homes under construction. that means pipeline. that means they are closing those homes the same month the construction is finished. that means very minimal finished homes that are unsold

Pricing - the difference between a home  under construction vs finished is going to be the pricing. those 95% of homes that are sold... why would the homebuilders offer any discounts  for those? outside of the paltry 1% or so to use their lender or something similar. with the current pace of customers prices are getting raised across the board.. between a couple thousand or 5% straight up. or you can buy this one that will finish next month for sticker price or if you want to build one in the new section for 3rd quarter 2021 for 3% more. 3% doesnt seem like much but on a $400,000 sticker price that $12000. eventually the price will reach a tipping point but the market is not there yet.

Starts - new home starts and permits are always metrics shown on the business shows, the homebuilders see whats going on and its not a bad problem to have. that being not enough homes on the ground so new starts get increased.. ive seen reports /tweets from homebuilder management about wanting 10% or better growth next year.

Labor - despite what you hear on TV about the unemployment rate, there are significant labor shortages. homebuilding boils down to whats happening at the subdivision level. thats where 1-4 construction managers schedule the daily labor and material work to happen. those subdivisions have their own tipping point. a frame crew can only go so fast, the painter crew can go only so fast, the roofing installers can only go so fast. so the grand visions of just slam more new starts down the pipeline doesnt always work. the homes just get backed up. the labor base is at its tipping point now. again from that guy that knows a guy, good ways to track that are how many people are looking for work. in south texas its generally larger companies that do plumbing, electric, HVAC, etc , they have the contract for multiple subdivisions or certain series. the smaller trade partners (trades) such as painters, carpenters, cleaning crew, framers, etc are selected by the construction manager at the subdivision level and its literally a crew in a van. they have the appropriate insurance etc with corporate but there are no unions etc here. so point being, no one is looking for work.. they have as much as they can handle now. i even heard a really stupid comment from Melissa Lee on one of the Fast Money clips (which is not normal for her but if youre not in the industry you dont know)... she said labor is not a problem in construction with the high unemployment rate, as in there are plenty of people looking for work.. ok , well i guess. but do you know anyone that looks a TPS reports all day or works as a bartender that has lost their job and decides to now want to hang drywall? not happening . current significant shortages for labor are flooring installers.. tile and carpet. just not enough crews reporting in first thing with the flooring companies 

Material / Covid - 2020 has seen unprecedented disruptions in the supply chain. innocent events such as a plant in Pennsylvania shutting down from covid because 2 guys tested positive and that plant makes all the cabinets for the texas region, or the window manufacturer shutting down their lines because a guy was at a BBQ where someone had Covid and they supply nearly all the windows in the city for muliple builders or a near miss from a hurricane in Texas rips thru Louisiana where some lumber mills are resulting in really long pieces of lumber being backordered... those really long pieces you would need for rafters. no rafters means the home comes to a stop. the pendulum swings back and forth on whats short, currently shingles and garage door panels, last month dishwashers. i hear roof decking radiant barrier and hardi type siding products are getting tight also. so not just covid, think of all those homebuilders , both public and private, plus the renovation crowd increasing the orders to capitalize on the increased sales.

Stocks - i dont trade futures so i cant participate in lumber price movements and from my research the best play has always been just trade the homebuilders, not the ETFs. the builders tend to move in concert but of course some execution risk. ive been trading LEN Lennar for ages so i just stick to that one. TOL Toll brothers reports a few days prior to Lennar so its a good way to gage the tone of the sector based off what Toll says.

Bottom line - despite the inconsistent CNBC tweets that vary from "its the best ever" comments to "market cooling" , the homebuilders are building as fast as they practically can, customers snapping them up even before construction has started and paying full price most of the time, and per recent conference calls the homebuilder margins are best ever. thats a business i would be interested in trading with a bullish thesis. there will be some give and take as usual. having lived thru the financial crisis with the builders and watching them barely survive, the issues they are working thru now are good problems to have.  

$TSLA current positioning

 

21 nov 

my current positioning and thesis for TSLA. have been making good coin selling weekly short calls against my long 2022 calls. at some point with diagonal spreads the stock blows thru the short calls for whatever reason. i was lucky that i had closed out my short calls the day prior to the S&P inclusion announcement so i was able to sell new short calls after the 50point pop. the stock moved an additional 40 points or so since. 

i currently have the Dec04 465 short calls that i rolled up from the Nov monthly 455s. rolled for $4.05 credit. Yes the short calls are 25points in the money but have $12 ($1200) in extrinsic value (time value) that will decay up until opex. as in it decays in my favor

the breakout level / resistance level everyone was looking at was 462 area. that breakout is holding for the moment. 

just considering my short calls the ideal action would be for stock to drift back down to 465 area for me to capture all that premium and then be able to sell a higher short call for the following week. i previously tweeted that if stock pulled back to test that prior breakout area (previous resistance becomes support) then i would look at selling a short put at least below the 50day near 425 or best case at bottom of the gap near 412.

that got me thinking that maybe the retest is unnecessary for this situation since the S&P inclusion will artificially create buying. volume since announcement seems like the buying has started but not completed. so an artificial floor has been put in.. maybe that floor is the previous breakout, maybe higher. so my conclusion was any dips will be bought at least until the inclusion on 21dec.

ideal situation for me is to sell a strangle... sell a put and sell a call. i dont have naked call option writing access at etrade and really dont want it. likely has kept me from entering more risky trades. so the poor mans version is to have a long call first(my Jan2022 calls) and THEN sell the short call. broker treats that as a spread so no additional buying power/margin needed. Put selling is easy since its cash secured or within my buying power

All that together now means using the old breakout level as my line to shoot against i sold the Dec04 460 put for $11.25 credit ($1125).. see what i did there? kept the same opex as the short calls

scenarios at opex

1. stock above 465. the short put profits, i capture most of the $12 time value remaining in the short calls and resell higher strike calls for the following week

2.stock below 460. capture most of the premium on the short calls and resell following weeks calls. the short put will be rolled down and out to the next week if needed. if i have not taken profits previously

3. if stock sells of down to 465 area rapidly on one of those markets in turmoil days i will look at rolling the short calls up and out to gain a higher short strike. concurrently roll the short put down and out (keeping the same opex time as the short calls)

i can use the rationale that i can hold the short put up until i roll out the calls since either the Put or the Calls is profiting. this situation pays by not trading till near opex or per my mechanics of when the time value is less than $1.00. im not looking to thread the needle and hoping for the stock to close between 460-465 at opex. im using offsetting positions and profiting from the decay

so now just sit tight. have $500+ of daily decay in my favor

and what does old school Debra Winger from Urban Cowboy have to do with TSLA... not a damn thing.

$NFLX trade for monday, and a 1 x 2 call ratio

 

24oct

alright meow, put your helmet on for this one. the morning after earnings on the 21st with the stock down 30points i sold a Nov06 455 short Put for $5.00 credit. about 19 delta. 2 trading days have passed with friday being green and i noted a couple of the TA wizards on my stream noting the hammer and being short term bullish. it does seen that the sellers have shot their wad. i have been looking for an entry for a Jan2022 long call in order to get back into diagonal spreads. the short put is at $4.50ish now and the stock is near the bottom of the bollinger band and as you can see just from this small chart below that the stock with a few exceptions, does not stay at the extreme edge for long. on the bottom extreme anyway.

so here is what i will be looking at: 

first will look at buying a Jan2022 long call. id like at least a 70 delta so i will start at the Jan2022 430 call (70 delta meaning option moves about 70% as much as the stock). the 430 call is at $125ish ($12500)

then - im in the nov06 opex week on the put, so staying with that opex with the thesis that the stock starts to rebound and work towards filling the gap. i will look at a Nov06 495/515 call ratio (1x2), thats buy a 495, and sell two 515s for near zero . just the ratio spread profit range at opex is 495-535

will review after market opens on monday 

$LEN trades this week

 

21 oct

alright meow, you cant have it both ways. you cant stroke the housing stocks with headlines (just this week) that new housing permits are best in years and mortgage rates are at all time lows again and then have a 4% selloff on "stimulus worries"

posted previously the current levels im looking at. yesterday with stock near 84 i sold the Nov06 86.50 short call at $2.10. on monday as the stock approached 82 i sold the nov06 79.50 short puts at $2.05... referencing the levels , was looking to get at or below the low of 7oct at 79.72 for the Put sale.

of all the few stocks i follow , todays homebuilder selloff seemed the most odd, i dont buy the stimulus worries excuse but whatever. one of my alerts at <81 hit so added another short Put at Nov05 78.50 level this time to stay below the rising 50 day, also near same time reached 50% of max gain of the short call so closed that out after a one day hold. not much cash but paid for some lunches and fill the tank to the truck for the week. 

followed my levels again that i was looking at. resetting alert at 84 to look at reselling short call near 86ish again.

$TSLA trades for earnings

 

21 oct

-some of you have been following along with my recent selling short term / weekly calls on TSLA and making some good cash. to recap, have 5 jan2022 DITM long calls and selling 5 weekly calls against them. went into todays earnings with short weekly 430, 450 (x3) and 452.50 strikes. two of the450s were added today as they were trading near $10 in premium with stock near 430. 

an up move would be fine, flat would be fine, down a little fine, but down big as in more than the expected move would not be cool. so in order to get some cheap protection i looked at the level that many were looking at near the low at 351ish.. so i bought a 3 lot of weekly 350puts for .58per.. thought was in case a knee jerk selloff, possibly on a odd metric, or conference call off the cuff comment that would trigger the algos that these puts would do a 5x or so spike and can exit quickly in the morning and soften the blow of the selloff. plus .58 is cheap. dont want to pay alot for this asteroid insurance.

also the price action and my twitter stream wasnt outright bearish but lacked the over bullish hype as before. was more focused on the fundamentals of number of deliveries and EPS. a Mike Khouw hit on FM also mentioned significant selling of the weekly 450s for premium. (i already had one and a 452.50) . got the feeling that the big up move had already been priced in (a move less than the expected move) hence my tweet about a flat reaction. 

but to guard against a selloff even more with minutes to go i entered into a weekly 380/360 1x2 put ratio for .03debit. the ratio profit range at friday opex would be 340-380 .. if it drops below 350 then my 350puts from yesterday are gaining. i did not try to figure out a breakeven of the ratio AND the 3 puts if stock broke down AND the near max premium from the 5 short calls. a possible plus to a breakdown was a possible short put entry even lower.

that was the thought process. get a gain on the ratio and puts if a selloff happens but for cheap cheap.

now that earnings have hit, looks like good metrics across the board and stock was between 430-440 after hours. i will close out either just one of the short 360puts to regain my buying power and leave the 380/360 debit spread as a lotto or close the whole Put ratio likely for pennies in the morning. leave the 350puts as lottos since likely just worth pennies and see how all the short calls price out, best case mainstream Joe SixPack who is not trading after hours will buy in the morning and a couple analysts stroking each other to get the first and or the street high upgrade and get the stock to near 450 in order to get a better roll.. will see how the pricing looks tomorrow. would like to roll at or slightly above the 460 area as a minimum. will look at next weeks opex first. goal is to get at least $10 credit per contract for a roll out, if i can gain a strike or two that would be gravy.

will also look at :

-at least one short call 2 weeks out

-possibly one short call 45or so days out per some recent tweets ive mentioned about where the sweet spot is for premium decay

hope you guys made some coin too. it works till it doesnt

$NFLX trade for earnings

  

21 oct 

interesting if you read my entry from below.. get me thinking about something that i will share at the end. compare this chart to the one at the bottom and my commentary. over the course of a couple days the stock pulled back from 570ish to 525ish prior to earnings. monday of this week i entered a 520/500 put 1x2 ratio for slight credit with stock at 536. stock went down another 10points after and i ended up closing the ratio right before closing on tuesday. was still positive but not the point. i have a rule that my gut feeling over rules any strategy or trade i have and i got an odd feeling that the ratio was too tight (a 20point spread/40point wide profit range) as in it might go lower than 480

turns out i got the direction correct and could have exited at $5.00ish in the first 30min today and stock closed at 489ish today. no regrets , but instead after the selloff and in the 490s i sold a Nov06 short put at the 455 level at $5.00 credit. the strategy i had in the first note was to stay at or below the 460ish low from end of september. so im proud of myself for sticking to the levels.

secondly, rereading my post below gets me thinking.. the levels i was looking at for the put ratio ..the 500/475 would have been pretty good for the actual move. the spread is wider at 25points and 50point profit range. gets me thinking that maybe instead of waiting until the day of or day prior to the earnings AND THEN putting on the trade to instead in order to utilize the added time premium to put the trade on week or so earlier to get that wider profit range. wider profit range might keep me from getting shaken out. can always close it out and or adjust the strikes if its significantly different. something to think about

so now my only netflix position is 

Short Put Nov06 455 strike at $5.00 credit, was about 18delta, 16days to opex . target profit of 50%

10 oct 

earnings are still 10 days away, i will revise the strike levels to where the stock is trading the day prior but this is the idea. a couple of you that follow my trades have seen me do call ratio spreads. buying 1 call and selling 2 calls at a higher strike for near zero or slight credit. that being on top of existing long Jan2022 calls. the call ratios have a high probability of success. for netflix i have alerts set for the stock way lower and an on the lookout to get back long via Jan2022 long calls deep in the money. the 400 strike would be where i would look first. ive also been occasionally selling short puts on days where the stock sells off. the target level for a potential put sale would be at/below the 460ish level but granted thats a long way off and with earnings on oct 20 it limits which opexs i can choose from.

so the setup is, and i dont have any special insight, that the stock pulls back after earnings. sells off on great numbers, the child porn movie, subs growth.. whatever. , im hoping for a selloff so i can either go long via Leaps or via short put sales so a trade setup to profit on that selloff but also not outlay alot of money for the trade. under $1.00 ideal.

i mentioned the call ratio spreads.. this is a Put ratio spread... using after hours pricing on 10oct with stock at 540. the expected earnings move is about $55 (add the at the money 540 put and call together gets you the expected move). so a downside expected move is about 485. the trade is:

buy a Oct23 500 put at $10.75 and sell two Oct23 475 puts at about $5.25 each. whole thing cost under $1.00 debit. profit range at Oct23 opex is 500-450 with max of $2500 with a magical pin at 475. getting about 50-60% of the max profit has been a consistent exit for me. not a free trade. you are buying a 500/475 put spread and then selling an additional 475 put. so that additional put will require margin or be cash secured.

point of the trade is that if im going to get the pullback im hoping for in order to go long i might as well make some money on that selloff. off course stock could blow thru the bottom range or go up. the consensus online seems positive on the stock and future. 

etrade show earnings after hours on the 20th so best case i put this on the same day and revise the strikes to where the stock is at that time. the profits wont kick in right away even if a down move and might show a mark to market loss because the two short puts have to decay enough so be prepared to wait until opex friday to see the biggest gains. the bid/ask will be bouncing around as usual but will try to get for as close to zero or slight credit. no more than $1.00 debit though

will tweet if i enter

$ROKU level for short put sale

 

3 oct

very tradeable range for a few months now has held the breakout for 10days. i dont follow the daily news about the company as to why it has large moves. had a Roku desktop device from years ago myself that stopped working years ago..just threw it in the trash few days back.. anyway. the only level im comfortable with is the bottom of the previous range near 140/145 .. long way from where it is now, a pullback to the old top of the range and near the 50day might put that into play. will set alert for <180 , see what happens

downside to this name is that options are not that liquid, especially in the weekly ones.. just not much volume. its no TSLA or AAPL. some bid/asks are upwards of .40 wide 

$LEN level for short put sales

 

3 oct

homebuilders have been holding up well. Lennar seems to be holding the breakout from the recent range. i have a Jan2022 long call and now a Oct09 82 short call that i just rolled to for credit. been having good results selling short Puts on this name. now that stock is above 80 my level is a bit higher. near the 75 area. the bottom of the previous range. earnings were 2 weeks ago and they just raised the dividend. will be looking at 75 strikes 3 weeks out or so. lot size between 1-5 usually.. never said i was big time like the twitter furus .. will set alert for <80 to price things out.. a rapid selloff to under 80 will spike the Put premiums nicely

$FB level for short put sale

 

3 oct

really going to need a good selloff to get near to a level im interested in.. the 210 area . chart very similar to AAPL with that gap staring at you. took my losses on friday on some iron condors ive been defending for months seemed like so no current position. will enter alert for <233 .. 233 will indicate that the gap has been filled. premiums have never really been juicy for FB compared to some others

not expecting this to play out but never know. doesnt hurt to set an alert

$NFLX level for short put sale

 

3oct

stock had a big up day on thursday and equally big down day on friday. had alert set for <500 but didnt drop that low. levels im looking at for short put sale are the 460level and 435ish level. earnings are included in the Oct23 options so any sale will be using the monthly Oct strikes. will adjust my alert to <495 to get my head up. i have the Oct455 Put on my watchlist.. would like at least $5.00+ for it

for earnings depending on where the stock is just prior will be looking at the $430 level for short put sale. midpoint is near $5 now with stock at 503. likely increase closer to earnings.

on a personal note i am a netflix subscriber and dont care at all about the one video with the young girls everyone is all freaked out about. im not into young girls so i wont watch it but will not be cancelling the service either. you do what you want, i need to watch something while i ride my cardio bike. if some people cancelling the service makes for a tradeable move then i will react accordingly. the movie The Outpost just became available on netflix. the book is better

also if for some reason a short term earnings selloff takes it down to near 430 but the metrics are positive.. as in sells off on good news i will look at adding a Jan2022 or Jan2023 in the money call 

TSLA short calls, diagonal spreads, and ratio spreads

 

I've received a few messages and DMs asking specifics about my recent short call selling and diagonal spreads on TSLA so in the interest of being thorough and not repeating myself i will lay it out here

the below explanation will be using the after hours pricing on saturday 3oct

Short Calls -first im not selling short calls "naked", i have Jan2022 long calls (LEAPS) as the base... if youre unfamiliar refer to a standard covered call. where you buy 100 shares of the stock and then sell a short call against it. for instance, buying 100 shares of TSLA costs $41500 and then you could sell the Oct09 expiring 430strike call for $10.50 credit ($1050) .. not bad, nice $1000 bucks for one week if the stock stays under 430 at expiration you keep that $1000 and mentally subtract it from the cost basis of your stock.

Now instead of using that $41500 to buy the stock, buy LEAPs. which are just options expiring over a year from now.. lets look all the way to Jan2022 (the Jan2023 Leaps are available too). Look at the Jan2022 350 call. it is priced at about $170 ($17000) per contract. so if you had that $41000 available to invest you could buy Two of the Jan2022 350 calls. as we all know a standard option contract controls 100shares. so you would be controlling 200 shares. Now look at the "delta" of that option.. its at about 75. which means as the common stock moves up or down , these options will move up or down about 75% as much.. stock goes up $10 , option goes up about $7.50 

Now since you have 2 contracts you can sell those same Oct09 430 short calls against them. your broker considers it a spread and will not require additional margin, specifically a diagonal spread since the expiration dates are different.. are you seeing this ... buy the Jan 2022 long 350 calls at $17000 each (x2) and sell the Oct09 430 short call for $1050 credit (x2) . you are bringing in $2100 in credit with the long 2022 calls as "the base" like i like to say.

So i currently have 4 Jan2022 long calls on TSLA , a 300strike, two 350 strikes, a 400 strike . bought at separate times. the 300 strike when TSLA was selling off after the split. having four calls lets me SELL 4 short calls to bring in income.

thats the breakdown of WHAT im doing , the other questions ive received are what strikes to pick and which opex. couple factors i consider.. we have all seen how much TSLA can move up or down so the challenge is picking a strike that will not just get blown thru but then again also collecting enough premium to make it worthwhile. i mentioned "delta" before, delta is also a reference to the probability of the stock making it to that strike price...lets look at the Oct09 485. if you sold 2 of those to go with the Jan2022 long calls from above you would collect $2.00ish ($200 each), the delta is about 6. meaning only a 6% probability the stock makes it to 485 by friday opex... pretty safe if you dont want your stock called away if you had a standard covered call but is that $200 ($400) worthwhile to you personally based on your circumstances and based on the amount you have invested and also for one weeks worth of effort. a good generic level to sell short calls is about the 30 delta. a 16delta is about a one standard deviation move for reference

i am personally starting my selection process looking to collect $1000 per contract. nothing magical about it besides its easy math and $1000 per looks sweet on the confirmation. the premiums of the options increase or decrease based on the movement of the stock of course and also the volatility of the stock. i call it "juiced" . if the stock rips higher the calls increase in price so best case is to sell the short calls on positive days. you get better premium and for that $1000 goal i have i can chose a higher strike price.. maybe the 450 level vs the 430 level. 

if the pricing im looking to collect lines up with some technical analysis level then even better. like below there seems to be some resistance near 455/460area so if i can sell the short call at that level or higher AND make that goal premium that would be ideal. i am currently focusing on weekly options assuming i can be more nimble if a quick move takes place but last week did sell one of my four for the week after (2weeks out) to as an experiment

be mindful of when earnings are. they are upcoming for TSLA. the premiums of the options expiring immediately after earnings will be alot higher than normal because of the uncertainty of which way will the stock move so if the opex includes earnings i will wait until the day of / day before to sell since the IV (volatility) will increase going into the earnings event. if there is alot of hype about something that increases the IV as well. use the Battery Day as an example..the premiums got juiced running up to that event almost as much as an earnings date. weve all seen some stocks move up to 100points running into a hyped earnings date so by waiting till the last day i will base my short sale strike selection on the most current levels vs having sold the week prior when the previous weeks options expired.

Put Sales - lets switch to the other side. selling short Puts. based on your broker and the stock, figure you needing about 20% of the stock price on hand to sell a Put. thats the price of the stock at the strike price you want to sell. if trying to sell a short put this time i look at the chart first to get an idea of where to select my strikes. so looking at the same chart below. the best case for me and my style would be to be at or below the low near Sep8 around 330 ish. thats best case, 2nd best is at or below the low near 350. what gets my attention for Put selling is when a stock sells off. for TSLA that would be 5% or more. when a stock sells off quickly the IV spikes and the premium of the puts increases short term. you can sell a Put at anytime of course but what im trying to do is capture that short term premium juice AND a strike level that matches my amateur chart work. for me the chart levels come first for put sales. so friday TSLA sold off $30+, i have a defined level im looking at (350 level) , but the premium for the standard Oct350 Put was only in the $3-$4 range... not enough of a spike..so no trade. another selloff like that and it gets interesting and possibly puts the 330level in play. if i went out further in time that would include earnings. if the opex includes earnings the value of the Put might even increase as time goes by even if stock goes sideways or up since the IV increases also.to the point of increasing more than the time decay. i have a post-it note on my desktop at home that says "wait until a big down day to sell a put" 

dont overdue it selling puts. they are not free trades. i mentioned earlier to figure on having at least 20% of the stock price available to sell the put. during the selloff in march TSLA margin requirement was increased i believe to 70% at one point. meaning you now needed to have 70% of the cost of the stock available. i ended up taking a loss on TSLA short puts to not have to sell other positions to increase my available margin. my short strike never did get breached and if i would have had more buying power it would have expired with a profit. it takes events like that to learn your lesson and hone your strategy

Ratio Spreads - lets reverse course and switch back to calls. Ratio Spreads are probably my favorite trade. super high probability for profit. Ratio Spreads are also called Catch Up trades. It is buying one call, and selling two higher calls. TSLA pulled back 30 friday and you dont want to sell short calls for some reason or dont want to limit your upside near the short call. Again you have the Jan2022 350 long calls from above. with stock at 415 from closing... the Oct 415 call is at $25ish, the Oct 450call is at $12.50 ish. you could buy one 415 ($2500) and sell 2 of the 450s for ($2500total) bringing the total trade to near zero. you can move the strikes around to even bring in a credit or debit if you want. in the case of having the 2 long 2022 calls already, you could buy two Oct415 calls and sell four Oct450 calls for also near flat. each 1x2 per long Jan2022 contract. again this is not a free trade. the long 2022 call is the base so your broker treats the added 1x2 as two spreads... (a long 2022 350 call and short 450call and long 415 call short 450call) 

at Oct opex your profit range for the ratio is 415-485,with a max profit of $3500 at 450 if it pinned there. in reality i look for about 70% of max profit on the ratio to take profits and move to the next opex with new positions. note that this is just the ratio spread. the long Jan2022 call is gaining in value as stock increases. you gain on the Leap and gain on the ratio so you make more than just an outright long position with no added risk. my experience is that i undershoot the strikes i select and the stock blows thru the top range. at that point i adjust the ratio, close it and sell short calls or just exit all legs and start over. but its not a bad problem to have

so lets bring it back to me. currently have 4 Leaps and one next weeks short 435 call(at near 50% of max profit). so i have 3 short calls to sell or i could do my ratio trade on the remaining three. if i had to enter ratio spreads right hear right now with a gun to my head i would go with the Oct420/450 1x2 (3 lots) so buying 3 selling 6.. midpoint pricing after hours is $2.42 credit (thats per lot so $700+credit) . my profit range at opex in 2 weeks would be 420-480.. yes you can add the credit received to that range but i keep it simple. so in a nutshell , the ratio cant lose money (because i put it on for a credit) and legit makes a profit anywhere between 420-480 at opex. flip side if stock closes at 419 on opex the ratio expires and all i have to show for it is the original $2.42 credit received. and flip side #2 is that i could have sold 3 short calls at $1000 each times 2 weeks... lots of ways to play it

hope this helps

Tesla Put sale ? $TSLA

 

16 sep - as i type futures are down a percent. here my current TSLA position as tweeted:

mark lexus

@Mark_Lexus

·

6h

current $TSLA positions: have 2 Jan2022 leaps and have next weeks short calls at 430 and 480.. 430 still has $3500 of extrinsic value(time value) and the 480 has $2800. looking to let that time premium decay for a week or so. the move of the underlying is secondary really

having the Jan2022 Leaps as a base i sell short calls against to make diagonal spreads. also called poor mans covered calls. also now the ideal situation is if i can also sell a short put. essentially selling a strangle. im unable to sell a naked strangle so this a workaround. the Leaps being 2022 there will be selloffs and rips but with diagonal spreads im looking to capitalize on the decay of the out of the money short calls. in the above tweeted situation, if held to next weeks opex there is nearly $6000 in decay. of course i will roll those prior to expiration to the next week but making a point. stock is up 90points since i bought the first Leap also.

so while waiting a week for the short calls to decay more, id like to add a short put. chart ive posted previously is still valid at levels to look at. with stock at 441 after hours the Oct02 320 put near 9delta is going for $6.00+  . as a minimum im going to be under the 330ish level, super best case as close to or below the 273level. premium is $2ish there so would need the occasional down 10% day, CNBC Markets in Turmoil, type day to juice those options to make it worthwhile.

i have an alert set for for <410 on the stock and an alert for the Oct02 315 put at > $8.00 just to get my head on the screen. will only do a one lot on the Put since ive got other Puts going on other stocks. also my biggest takeaway from the big selloff in march was to keep enough buying power available (small enough position sizes) to withstand a rapid selloff and potential margin requirement increase which happened to TSLA during the selloff.

I ended up taking a loss on that put sale to be able to fight another day, in hindsight the short put strike level did not end of getting breached and would have been a profitable trade at opex so adjusting my strategy to account for that.

Boeing ratio closing $BA

 

16sep - been ages since ive blogged. currently have a Jan2022 Leap and this weeks 162.50/172.50 call 1x2 ratio spread.. max profit is $10 at a perfect pin of 172.50. stock hit 170ish today. im going to enter in an order to take profits partly since the stock can reverse just as quick despite being up today on bad news. stock has been in a rough channel for couple months. so im looking to close out the ratio spread and sell a short call couple weeks out likely at the 185ish level. with stock at 170ish the sell order should fill and i was looking at the Oct02 185s going for $4.00 + if memory serves. tweeted my ratio spread entry on 8sep for a penny. will try to exit at $5.00 even and sell the short call for $4.00+

mark lexus

@Mark_Lexus

·

Sep 8

$BA closed the sep25 195 short call at 1.70, 50% ish of max profit, also entered into Sep 162.50/172.50 call ratio spread for .01 debit... profit range at opex 162.50-182.50

$TSLA Put sale trade

22feb - on the 20th when the stock was down 40points during the day, 860-870 i believe i

Sold the Mar13 650 put at $5.35

ive had two previous profitable Put sale trades on TSLA, and a couple losers via call credit spreads. so Put sales will be my MO going forward on this name(do more of what works, less of what doesn't work). levels / events im looking at is that i start my search at the 5 delta level, crazy as that sounds since im usually in the 25-30 delta range for Put sales. also looking at days where stock is down 30+ at least in order for the premium of the Puts to pop, especially at the 5 delta level.

although selling Puts seems risky, im finding them easier to manage than credit spreads. example:

lets say a couple weeks ago i sold the Feb 28 800 Put (expires Friday). today going for about $6 and i wanted to exit this position to reduce risk. for the same premium i could roll out 2 weeks to the Mar13 650 Put... so i could roll down 150 points and for no cost. or even to the Mar13 700 Put for a $3 credit

so selling a Put is easy to manage via rolling if tested or taking some heat. my short Put takes up about $8000 of buying power/margin.

my exit targets are about 50% of max profit if it profits slowly, if i get a 30-40% of max profit win in 1-2 days i take profits since ive made the meat of the profit and can reenter on next down move.

im not looking to hit home runs and catch $50 point move to be the hero of my twitter stream, instead im looking for consistent high probability winners. many $100-$250 winners vs the $50 moves. like the Tastytrade crew says. trade small, trade often

interesting how high the stock has moved even after the secondary stock offering in the mid 700s, wonder what the lock up is

$BA 737Max return to service trade

22feb - at some point this will happen. the 737Max will be back in the air. ive made some good trades via Put sales and short calls and ratio spreads. im currently working some iron condors and have a DITM Jan2022 call. The stock seems like its itching for some good news and every positive Phil Lebeau piece on CNBC has been a tradeable event. as in a selloff gets a Put sale, a positive spike a short call 15bucks or so out of the money. Impressive how the stock continues to hold up despite the pounding of negative headlines. ie stock doesn't go down much on bad news. which got me entering the Jan2022 call months ago

so at some point the plane is coming back. i would assume the following headlines over the course of several weeks at some point this summer not necessarily in order. im thinking sooner than later since Phil Lebeau had a tweet that the CEO flew on the new Max a few days ago:

1. the FAA has cleared the 737Max to fly
2. pilot training/retraining has begun
3. airlines announce solid return to service dates / ability to book flights
4. modifications to the planes that having been completed and awaiting delivery have begun
5. deliveries of those modified completed planes has resumed
6. Phil Lebeau clip showing the very first "new and approved" 737max being delivered / accepted by airline XYZ, followed by the Fast Money crew discussing if anyone will actually fly this plane and how it should be renamed and maybe a twitter poll suggesting a new name
7. Announcement that the 737Max production line is getting staffed up again and a tentative date as to when production will resume.
8. Announcement that "new" orders have been received for the "new" 737Max
9. CNBC and the fake news media showing the legit first flight with passengers of the new Max, interviewing passengers before boarding and after landing with groundbreaking questions like "are you worried about the plane?" and "how was the flight?" . Grand slam will be a hot shot fake media "journalist" actually being on the plane and live streaming it. I nominate Greta
10. after 1-9, the fast money desk will announce that Boeing stock is underowned by mutual funds/hedge funds because of the previous uncertainty. ie good to go now

these are just off the top of my head, the FAA clearing to fly will be the biggest mover IMO. im sure some negative headlines will be thrown in. some lawsuits, who knew what, who said what.

so now how do i put on a trade (a cheap trade...which to me means $1.00 or so or less). August expiration is 180days away so i think that's enough time for the FAA to do their thing. im generally a premium seller so outside of selling Puts or risk reversals that doesn't leave many options. i don't want to sell an August Put just for the sake of this trade since not much of a time decay, just minimal movement as the stock moves. so here is what i came up with given the following thesis:

1. All or some of those headlines hit and the relief rally begins
2. that rally grinds higher as each headline pushes the stock higher
3. assumption that all this pushes the stock into the 375-400 range.

Trade that i put on was the Aug 370/385/410 call butterfly , note the top leg is 10bucks more away (broken wing). again wanting to be at $1.00 or less and wide bid/ask spreads, i adjusted that top call strike back and forth to see where it gets me closest to no cost. thought i had a slight credit but the fill was actually .22 debit which still works. profit range at AUG opex is between 370-400. with max profit being at 385pin. there might be mark to market gains as the stock bounces around. from experience ive learned to take profits sooner on butterflys vs rolling the dice to get that perfect pin. so max profit on a .22 cent investment is $15 ($1500) but i will have a target of exiting at 50% is $7.50 ($750). Losses begin if stock moves above 400.

unconfirmed reports that this was the pilot for the 737Max with CEO on it

$ROKU Mar20 iron condor

15feb - well didn't take long, ROKU blew right past the put short strike same day. seems like stock sold off on what looked like good news. I entered the following iron condor when stock was at 145

Mar20 120/130 170/180 for $3.60 credit , IV 60+

the stock moved less than the expected move from earnings so premium sellers were winners again. as posted on twitter I also sold a cash secured Put for Mar13 116strike for $4.65 credit, 26delta when stock went below 130.  116 area being the low from November . this stock does move around a bit and ive had some good wins so far. I will let this settle a couple days before making an adjustment to the iron condor, probably moving down the call spreads for additional credit.

$NVDA new iron condor

15feb - I don't follow this stock closely but its on my watch list. had a profitable iron condor couple months ago. profitable after one adjustment. entered iron condors for March. gap up from earnings.

entered the 260/270 320/330 March iron condor. $2.95 credit. when stock was at 293. deltas for short strikes were 20/21. 35 days to opex. IV about 35

exit targets: would like to get $1.00 per lot or close around 21days left till opex, so about a 2 week trade.

$NFLX MAR20 Iron Condor entry

28jan - earnings couple days ago and had a couple profitable premium selling trades. want to get into an iron condor while IV is still a bit higher than average. the Mar opex is 52days out so better premium received. goal is always to collect about a third the width of the strikes if possible. so today with stock near 350ish.

Sold the 305/315 credit put spread (18delta for 315 strike)
Sold the 380/390 credit call spread (25delta for 380 strike)
Total credit for this Iron condor is $3.42 per lot , IV was at 30ish

probably get some movement based on Disney earnings next week. the 305/315 strikes.. worked out to match the delta I was looking for AND being right under the 50day moving average.

Exit targets are between 25-50% of max profit and / or about 21 days left to opex. about 21 days is the optimum exit point since you have the meat of the time decay and IV crush vs trying to milk for every last cent.

MAR 6 $LULU iron condor entry

28jan - another LULU iron condor. been getting good trades with LULU so far. goal to enter a trade for iron condors is close to 45days to opex so went to MAR 6 opex. a 16ish delta is about a one standard deviation move so just used the deltas for strike selections.

Sold the 210/220 credit put spread (16delta at 220strike)
Sold the 255/265 credit call spread (21delta at 255strike)
total credit for this iron condor is $2.47

stock was near 238 with 38 days to go.

Target exits of between 25-50% of max profit and / or near 21 days left to opex.