Tesla Short calls

 30 oct

as most of my online friends know i own deep in the money leaps and sell short calls near dated for premium.. the intent is that the short call premium is the money maker. price appreciation via the leaps is gravy.

as weve all seen , TSLA has taken off the last 2 weeks and would have blown thru the top range of any short calls i would have had or rolled to. regardless, what to do now. last week i had the Oct29 905 short calls , a 6 lot, with stock around 1050 ... way above my short calls.

so at the current premiums i could only roll up and out a week to the 910s and it not be a debit.. whether its 905 or 910 doesnt matter much as far away the stock is so i decided to roll to Nov05 905s to get max credit. on down days the premium improves in my favor, on up days i would get less premium to roll. i checked every day last week and the premium was between 4 and $8.50 credit.. at one point i believe wednesday i entered an order at $8.35 credit and was at midpoint right before closing with no fill.

i expected a pullback in morning so i increased the premium to $8.50 GTC order since i would not be behind computer in morning. i didnt mess with the order and yesterday im with a customer and i get the confirmation emails that 5 of the 6 lots filled at $8.50. i logged in 15 min later and the midpoint was about $4.50. cant explain what happened but i will take it. score one for the little man. i closed the 6th lot at $4.85 in the afternoon.

now the point of all this is that even with the stock nearly 200 points out of the money near 1100 i was able to roll my 6lot position for between $4.85 - $8.50 for $3000+ for a week. the ideal time to roll is on big down days, if stock drops 50 points and the IV increases i might be able to roll from 905 to 925 and still get small credit but until that happens the question is (and the answer may not be the same for all based on your short call strike and what else you have going on) is the $3000 for a week worth it to stay as is?.. as in roll 905 to 905 to 905 maybe the occasional roll up 5points

if the stock keeps going higher and higher that $3000 credit to roll will do down and down so at some point you might decide youre commiting xyz dollars and only getting $750 to roll so you reset the positions. 

but im also still expecting a gap fill at some time, sooner than later would be helpful so for the moment a 905ish short call is ideal for a gap fill to the 900-910 area.

so to answer my own question. that $3000 credit and some short put sales/credit put spreads added in there is enough per week

Tesla Reset 21 oct

 

21 oct

ok meow.. the least desirable action to happen if you use the buy deep in the money Leap and sell near dated upside calls for premium strategy.. also called the poor mans covered call... is for the stock to just take off thru your short call. and i dont mean just 10-20 bucks in the case of tesla.. like 75+ . 

Note how last week the stock was under 800 with delivery numbers fresh. i made the decision to roll from 765 to yesterdays 765 for huge premium with the expectation that would be a sell the news action from earnings. got that wrong obviously or maybe early but have to deal with expirations here and now so a 100 point sell off next week doesnt help.

the guideline i use is first see if i can roll the short calls up and out. the 765s to go to next weeks 770s would be a debit and roll flat to 765s again was midpoint about $2,75 credit when i looked.. remember its an 11 lot so about $3000 credit for the roll. if stock pulls back that week to week roll from 765 to 765 credit would improve, if you get a big selloff its an ideal time to roll up and out as premiums spike you may be able to roll for 10-25 points.. 

also keep in mind i have Jan2022 Leaps although profitable via stock appreciation are also decaying at a tiny increasing rate going forward cutting into that $3000 credit. so the decision is do i stick it out rolling week to week for assuming $3000 per (which is not chump change compared to my actual take home from my full time job) or can i make adjustments to "get back in the game" and get back to selling juicier premium.

I call this "doing a reset" . i seem to have to do it 2-3 times a year and im thinking does not come naturally to newbies who will likely just take a huge loss and move on. so here it is

Short version is to "buy to close" the 765 weekly short calls but instead of using up my cash cushion i instead "sell to close" enough Leaps to pay for the "loss" on the calls.. ie take the loss on the calls, take profits on the Leaps.. which Leaps is up to you but mine are Jan2022 -Jan2024 opex.. i mentioned that the Jan2022 leaps earlier. one way or another in the coming months i would have had to take some kind of closing action on those anyway so i picked those Leaps to take profits in .. your broker might be different but etrade "cancels" 3 leg trades where i try to close all 11 calls, sell 5 Leaps but with 2 different opexes .. so have to break them down into 3 separate trades.. 

close 4short calls, close 2 Leaps Jan2022 at 650strike, close 4 calls and close 2 Leaps Mar2022 650strike, and close 3 short calls and close Jan2022 700strike ... it doesnt have to be precise, you are losing some with the wider bid/asks , some end up slight credit, some slight loss. im just trying to avoid a huge cash outlay so a couple thousand "net loss" and all 3 transactions is same same for me.

so i closed 11 short calls but only sold 5 leaps therefore i have 6 leaps uncovered (no upside calls again) so with stock in 880s sold:

6 Oct29 905 short calls at $10.25 per -- 

just the quick math you can see i took in $6000+ after all that reset vs $3000ish on a roll 

Now im back in the game with short call near the money. account balance unchanged, cash balance essentially unchanged and able to sell puts etc

All this is unrelated to the buy write i had going as same time but intent was to let that expire/get called away for the "guaranteed" profit.

as i have conversations online with people about buy leaps/sell calls strategy the number 1 response or question or concern is what happens if stock takes off.. first off the short call level is up to you, i sell a bit closer to at the money than most people it feels like and there are those that sell a 2-3 delta for $100 bucks. there is a middle ground somewhere thats your comfort level.. whether thats a delta level or a dollar level.. start with 20 or so delta.. get a feel for how the stock moves, sometimes go higher delta or lower.. that move thru the short call type action does not happen often or out of the blue. tends to be from an event. .earnings, an announcement, deliveries etc . point being is if stock takes off there is no need to panic or lose sleep, you just made less than before. reset like i did if you have multiple leaps or close out the entire position and start over. get back to a position where you are bringing in premium

Change to Tesla Position

 

15 sep

friends, this is a bit longer than multiple tweets so... 

Started the day with long 15 leaps ranging from Jan 2022 out to Jun2023, from 650 strike up to 750 strike. to go with those are 13lot short calls 780 Oct 08 strike, one 765 Oct08 and one weekly 755. 

Although im comfortable with my long thesis my account balance after adding leap 15 is low enough i cant do much else right now outside of some spreads... Put selling is my top go to trade and i prefer to do the put selling on something im already long. ie Tesla. , point being not enough cash in account to do that.

A smaller part of todays thought process is that if market does turn lower (what that really means for me is Tesla since im super overweight on that stock) , that i dont have anything to put to work. big down days are ideal to add a Leap, do a risk reversal (sell put, buy call) , or just outright Put sales.. i could put a couple weeks together of added short call premium but that doesnt help me now.

An additional item to consider is taxes.. of those 15 Leaps, three of them were purchased in april about when stock was 702 according to my notes. they are the Jan2022 710 strikes.. you might see where im going... me along with many expected tesla to continue an upward move all year and thus come opex time (jan2022) those Leaps are in the money and profitable.. such as stock is at 900-1000. what you are fighting all year is time decay against you just like the time decay works for you on the short calls. so you need that leap to gain in value just enough to offset the time decay.. long story short , at some point im going to have to do something with my Jan2022 Leaps. converting into stock has never been something ive wanted so take that off the table. if i had that much cash to begin with i would just be doing stock buy writes. As of today those Jan 710 leaps still have $6000 of time decay left (against me). Although since purchase my short call premium has been in excess of the Leap time decay im working against my own leap the closer to Jan opex approaches

so it was either best case take profits in Jan or roll out another year or two, maybe have to throw some more cash into it for a roll. Bottom line the Leap is a mark to market loss right now. i can use those losses against my gains for taxes. ive had another pretty good year with tesla so need something to help offset some gains.

so combine all that together... the lack of flexibility to do any other significant trades (short put selling / adding a Leap on a huge down move, etc) and being able to get a tax benefit. Heres what i did:

-the weekly 755 i sold yesterday i bought back today for about $50 loss (that frees up one uncovered Leap)

-the Oct08 765 short call, bought that back at about 30% gain from entry (frees up another leap)

So that leaves the 13lot 780 short calls intact Oct08 opex

-then i sold 2 of the jan2022 710 calls at about $10100 ish each

I did buy writes recently, both were profitable at eventual exit.. so for remainder of week bought 100 shares common and sold 740 short call against at $15ish.. net net if stock is above 740 friday the stock is called away essentially at 755ish for near $400 for sitting on hands. 

having that cash on hand if needed on a down move i can buy Leaps for 2023 or do short put selling. doing buy writes is obviously simpler especially if youre not worried about having shares called away and is easier to manage but the money maker is having multiple short calls paying me. 

seems like we are overdue for a pullback, either market or tesla specific so i need to be more flexible but still have exposure. next month or two will be doing something similar to the remainder of my Jan2022 leaps.

$TSLA roll down and UP he said??

 

9july -- ok friends, too much to tweet so put it on here. been months but here we go, put on your helmet.

some of my twitter friends have noted that i had previously Jul30 710 short calls that i also rolled to the 700s for credit. today i rolled those 700 short calls to the Jul23 672.50s... move up to an earlier opex is a first for me. heres the thought process...

i have 11 Jan2022/2023 Leaps on tesla at various strikes, most are out of the money, having purchased when stock was higher. Selling short dated calls against those for premium is easy if you stay at the same strike price as those Leaps. No additional buying power needed, if you sell a short call at a lower strike then some buying power is needed.

few months ago the stock was under 600 so at that level in order to sell short dated calls against my leaps i needed alot of buying power or i needed to stay as close to the strikes of the Leaps...say 700 for discussion.. so selling 600s short calls could be done but could not do 1 for 1 against the leaps... could not sell all 11. only 5-6. when stock recovered closer to 700 i could sell 1-2 more. then it dawned on me.. .instead of selling weekly short calls with the remaining slots , to go out further in time and higher strike. so go 5-6 weeks out and sell 700s or so. thus being back to near same strike as long leap and not needing more buying power.. 5-6 weeks were needed to get decent premium. weekly premium for 700 strikes was $1-2 per... not really worth the effort.

in hindsight my rush to accumulate the leaps caused me to use up the buying power that could have been used to sell Puts or for short calls if stock drops like ive described.. should have not bought that 11th Leap.. regardless here we are and stock has recovered to 650+ and im looking at my short call positioning. with 30min to go before opex today i had

   6 Jul 650 short calls and 5 Jul 30 700 short calls (21 DTE)

got me thinking that i wish i had all eleven short calls for next week to get the maximum decay, then roll to Jul23, then roll to Jun30... i was not getting any participation of those 5 short calls for next week or Jul23 week.. i was losing out on decay and a roll for credit for 2 weeks. yes the 700s would decay as well. i was only at the Jul30 opex because 2 months ago i didnt have buying power, not really by choice.. 

i could have rolled the jul30 700s to next weeks 650s to match my 6lot but that would have again taken up more buying power that right now id rather have for flexibility. so i looked at 2 weeks out the Jul23 week (includes earnings) and adjusted the strikes on etrade until i came up with a slight credit... that was the Jul23 672.50 strike (so move up a week and down 27.50 points) for .25 credit. meaning that if stock is under 672 at opex i capture all the premium ( $19ish i believe it was)... but i capture it a week earlier than if i would not have rolled down.. this allows me now to sell another new 5lot batch for the Jul30s after the Jul23s come off the board.. bottom line i gained another weeks worth of opportunity to put on a 5lot of short calls.. would be kick ass if at that time the stock was in a position where i would want to resell those same 700 strike calls. 

make sense? 

LEAPS / Lenny Dykstra / $TSLA - how it started

 

14march

been awhile but wanted to post some thoughts about how it all started. ive received a few new followers on twitter with some questions to my trading method with TSLA. i have to admit that although i follow less than 100 people on twitter it might be just 1 or 2 that buy Leaps / sell calls / diagonal spreads like i do

so heres how it started. remember Lenny Dykstra, ex MLB player.. he did a short stretch with Jim Cramers website in the mid 2000's and had a column. he had a unique method, pick a stock that was unfairly sold off, buy ten deep in the money calls a few months out(near 90delta), thus controlling 1000shares, and selling after a $1 move . getting you a $1000 profit. not looking for home runs , just constant and repetitive singles. 

buying Leaps at that time was almost unheard of in the pre-twitter world. if the stock continued to move down he would buy another block of ten Leaps and average down. the downside to this method is number one you need to be able to have the cash for a ten lot purchase. which i did not, which makes it really stock specific. regardless i became intrigued with the buy a deep in the money leap to participate in a bullish move, both from a cash available standpoint and leverage. as in you could buy 2-4 Leaps for same price as 100 shares of stock

Now Lenny crashed and burned with some legal problems and a quick read of his twitter stream it seems like he is not active in the market

So that brings us to TSLA. at roughly 700 a share now, again my bank account is not big enough to swing around 100-1000 size share trades and be somewhat diversified, so again im participating using Jan2022 Leaps, currently have 5 again at various strikes. 

Im not a full time trader and still work like alot of other slaves so besides stock appreciation i ALSO want to generate premium from my positions. if i had the stock id be selling covered calls. cant do that unless you have 100 share increments. but if you have Leaps you can sell shorter dated calls against those leaps just like covered calls. your broker considers it a spread trade so no additional margin or buying power is needed. buying leaps and selling shorter dated calls is also called "poor mans covered calls" , indeed, thats exactly what im trying to do.

but i want to ramble on about something ive seen a couple of TSLA mega bulls say and do recently about exercising their Leaps into stock come opex time and use me an example. so a popular thought by the megateslabull is to never sell stock, pay no taxes, use margin to buy more Leaps.

refer back to what i said earlier, i use Leaps for the leverage vs buying stock. simple example if you were just starting a TSLA position today:

stock near 700 ($70000 for 100 shares), the Jan2023 500strike call is going for about $343 ($34300) per contract.. so simple math for the same $70000 for stock you could buy two 500strike calls. and now you could sell two short calls against your position vs just one if you bought the shares. lets say the April2021 800 call for $25ish ($2500) . obviously bringing in $5000 in premium credit vs just $2500 as a covered call. and you have 20months to keep selling premium. now remember this example for later

so the megateslabull come opex time will convert the Leap previously bought months /years prior to stock. now use my situation as an example. blind squirrel sometimes finds a nut happened to me and i bought a jan2022 300 strike call at $143 last year. currently worth $415 ($41500). there is some time value in there but right here right now at least a triple. FOR THE SAKE OF THIS EXAMPLE LETS PRETEND 415 IS THE CLOSING PRICE AND EXPIRES NEXT WEEK. 

i have 2 options for expiration. i can close the position in some fashion (close/roll) and have $27200 in capital gains and $41500 cash added to account OR do what megateslabull is doing and exercising the call and converting to stock. that means in my case i would have to pay the strike price or $300 ($30000) and now i own 100 shares with a cost basis of the $30000 plus the premium of the Leap at purchase time, $143, $14300 = $443 cost basis on shares worth near 700.  converting the Leap to stock is not taxable and my account value does not change. is this necessarily the best move for ME though? i still have a "position" of 100 shares like i did the Leap which controlled 100 shares, i can still only sell a one lot short call against, my cash balance is $30000 lower in account, but i save the capital gains on $27200 which just for easy math lets say $5000 for long term cap gains tax. Summary - $30000 less cash, only 100share position allowing a one lot short call sale going forward, but not pay $5000 in long term cap gain tax

here is the other option that i believe might make more sense for ME .. again for pretend that option expires next week... so instead of converting to stock, i take profits on the 300Leap so $41500 cash hits my account and using that $30000 i would have needed to convert the Leap to stock i instead BUY 2 of the Jan2023 500 strike call at $343 each (so about $69000ish) . now i have control of 200 shares via Leaps again vs 100 shares of stock and can sell two lot of short calls against. remember those April 800 calls x2 brings in near $5000. that pays the long term cap gains tax.

remember my strategy is not to accumulate shares, but to maximize the few dollars i do control for both stock price appreciation AND premium via shorter dated call selling. you could argue that accumulating LEAPS should be more of the priority because it allows you to sell more shorter dated calls against. My thinking might be different if i had multiple millions in the account im sure.

Im running Leaps on TSLA, LEN Lennar, NFLX Netflix , AAPL Apple and the thought goes thru my head often if i should be squirreling away cash in order to convert come 2022 and 2023 opex but my math always comes back to rolling into more Leaps. altering the grand strategy just to not pay taxes limits my ability to bring in more premium. i started keeping a more detailed journal the last 2 years and the biggest part of my gains are coming from the premium im bringing in on various positions. i will never be that furu that buys that 2dollar call times 100 and now its worth 50 and then take a screenshot of how much im up and on the side talk about starting a service. cant figure why someone would want the bullshit of a service if they are killing it in the market. or are they?

just some things to consider. your situation might be different leading you to take the other side of what im doing. free country

todays $TSLA adjustment

 

25 jan

couple quick sentences about what i did today. too much to tweet.. .ok put your helmet on..

previously had 5 long 2022 calls: 300strike, 400strike (x2), 600strike (x2) that ive been selling short term upside calls against. the strategy is working well. my brokerage account is a clean +125% year over year and admittedly most is due to tesla.. but ill take the win where i can.

so the least good thing to happen is for stock to blow thru my short calls. although my long calls are gaining more than my short calls are losing compared to straight up selling new short calls out of the money im not making as much as i could be. 

ive rolled a couple times and had this weeks 690 short calls (x4) and a 707.50 short call (x1). what that positions me for is a decent pullback either tesla specific or a markets in turmoil week or two. ive been rolling and managing to bring in some income for couple weeks. but now with the stock so far past these strikes the rolls of up and out 10-15 strikes are not there. pricing these out would have had to roll flat or go out more than a week. flat would bring in a couple bucks but again im not looking for $1-$2 ($100-$200) per roll

so thats the trigger for me to adjust the entire position in order to be able to again sell out of the money calls. in order to do that i need to close out all 5 short calls... thats a huge cash outlay..$80000+ , in order to pay for that i sell enough of my long calls (ie take profits on long calls to offset the "losses" of the short calls) to pay for the $80000 ... i want to hold the 300strike long call for a potential conversion to stock come 2022. so selling the two 400 strike calls exceeded the 80k needed. 

etrade kept rejecting the order to close 4 690calls, 1 707 call, and 2 400 calls, a 3 leg trade.. order entered but after a couple minutes it was cancelled. email auto note said essentially need to close 2 short calls and 1 long call per order to make it work... bid ask on the "cancelled" order bounced between $20-$70 credit ($2000-$7000) .. so lets just say i exited with a credit on all this.

yes a paper loss on the short calls, but paper gains on the long calls. account balance unchanged. 

so now im back to just having the 3 long calls for 2022. the stock was taking off again, maybe the biden government vehicle to EV goal , maybe part the enthusiasm along with Gamestop trading... so with earnings on wednesday i wanted to get the short calls on the board, probably leaving some on the table. but the first strike at the time i looked that had $20+ in premium was the 960s. so sold 3 short 960s for Jan29 opex... 29delta. stock closed near 880, so i have essentially 100points of upside potential for this week.

i try to get $20 per in premium on earnings weeks, could have closed for 50% win during the day but was in and out all day and couldnt really keep up with the happs , just ride these out for the week.