The Tesla Wheel vs the Managed Wheel

 

18 Nov - updated after doing some thinking about this, im going to alter the "managed wheel" and actually manage it as if i was trading it vs waiting till opex day .. which in hindsight is not realistic if im going to claim that a managed wheel is superior. therefore, in addition to the Short Dec240 Put , will Sell 2x Dec260/270 credit call spreads at $1.45 credit per for $2.90 ($290) added credit. note the this account is still all cash with the Short Put sold. in accordance to the Tastytrade mechanics i will adjust positions near 21 DTE vs opex now.. a bit late for this month buy might as well start now since monthly opex just happenend. 

18 Nov

-The Wheel - coming into month with 100 shares and a Nov 242.50 covered call. stock closed at 235ish on opex day so the covered call would expire at full value. the new cost basis is $240.35 , being generous and using todays (Saturday) prices, will sell a DEC245 covered call at $7.60 credit. Summary thus far, started with $27,500 cash in order to be able to sell a cash secured put.. now hold 100 shares and $4235cash. based on closing stock price of $235.. the account is valued at $27735 for a mark to market gain of $235 since inception.

-The Managed Wheel - coming into month with Nov250 short Put. stock closed at 235ish, so adjustment would have been to roll from Nov250 to Dec240, looks like for about .50 debit. third month in a row to roll out the short put and as a result it will show a mark to mark loss of -$700ish . The Dec240 is valued at about $14.50 so to reach break even need it to decay at least that $700ish. best case stock is above 240 at opex and short put expires at full value. Summary thus far started with $27,500 cash in order to be able to sell a cash secured put. had a gain of $485 before latest Put sale 3 months ago. include the mark to market loss from rolling puts and i come up with a mark to market $300 loss while holding the Dec short put. for further actions i would sell credit call spreads higher than the short put (Jade Lizard), such as the Dec 260/270 for $1.45 credit if i actually had this position. note that this Managed Wheel is still all cash.

so this month The Wheel moves into the lead.. not huge but better than nothing.. but also since i started this in July, neither method has resulted in satisfactory gains IMO for 5months, but also not significant losses. given the wide swings in the stock price that in itself is notable

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21 Oct

Big selloff by TSLA after earnings closing on opex day at 212.

The Wheel - last month the trade was selling the Oct250 put, thus you were "put the stock" again. forced to buy the shares at 250. minus the $7.15 in premium from the Put sale for the net cost of $242.85. for simplicity will now sell a covered call using saturdays prices. looks like the $2.50 strikes are coming on the boards on monday so no actual quote for the $242.50 calls, will be generous and split the difference between 240/245.. so selling the NOV 242.50 covered call at $2.75 credit against the new shares.

The Managed Wheel - the stock dropped so much that adjusting the Oct250 short put for credit was not possible. so using todays weekend pricing. Rolling the Oct250 short put to the Nov250 short put for flat . if stock recovers above 250 at opex of course this Nov put will expire at full profit and that original $715 credit from the Oct put sale then gets booked as a profit. that would be best case. if i wanted to really manage this position if the stock popped a little i would look to sell some credit call spreads above 250 strike for added premium. but will keep it simple on here.note this "account" is still 100% cash plus the short put.

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15 Sep 

for SEP 

The Wheel - last month TSLA dropped so much that in order to get at least $1.00 in credit ($100) for a monthly covered call i dropped the strike price down below the true breakeven. you could say i screwed it up, maybe, but would an actual investor sell a covered call 30days out for 30 cents. not likely. regardless, TSLA made a huge comeback these last 30 days closing at 274.. thus the no action Wheel strategy would have the covered call assigned and be forced to sell the shares at 260. net with the paltry $1.00 covered call the credit is $26100. under Aug comments you see the cost basis was $26215. thus $26215 - todays credit of $26100 gives the wheel a loss or i guess cost basis of negative $115. for simplicity will use todays closing prices and sell a new Put for Oct to start this circus again

new short Put sale is the OCT 250 put at $7.15 credit (35DTE and 25 delta)

The Adjusted Wheel - coming into this opex the position was holding the SEP265 short put. remarkedly TSLA stock rallied huge this cycle to close at 274 this the short put will expire at max profit. max profit above and beyond needed from previous rolling to now have a credit. with the short put expired the position positive $485. so vs the standard wheel +600 difference. since it was a short put the account is all cash still and will enter in a new Put sale for OCT. same as above

new short Put sale is the OCT 250 put at $7.15 credit (35DTE and 25 delta)

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19Aug

For Aug:

The Wheel - the july275 put was exercised (Put the stock) at $27500 and an AUG 270 covered call was sold at $8.00 which expired at full value as TSLA stock closed at 215 or so on 18Aug. average price for shares including the credit from puts and covered calls thus far is $26215 ($262.15) - though not the published methodology im going to drop a few strikes and Sell the SEP260 call at $1.00 credit. proper wheel mechanics are to sell covered call at breakeven which is near 270 but that call is for crumbs. this is the shortcoming of the wheel IMO. when the stock keeps dropping and dropping.

Adjusted Wheel - previously rolled the July 275 put to Aug 265 for flat.. now with stock at 215 its so far out of the money a roll for credit is not possible from month to month so rolled the Aug265 put to the SEP 265 for flat.. net net the adjusted wheel is down $4500 mark to market(but still in all cash in account) .. but better than The Wheel's loss of near $5000 (stock at $215 and shares cost basis at $267)

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mark lexus

@Mark_Lexus

·

Jul 17

$TSLA entry #1 into the paper trade comparison of The Wheel vs a Managed Wheel Sell the JULY 275 put at $4.85 credit .stock at 290, delta 27 , 5 DTE The Wheel - above 275 at opex and Put expires max profit, below 275 gets Put the Stock Managed Wheel - adjust Put based on price

22July

above was the entry for "The Wheel".. the wheel implies a take it to expiration methodology with no adjustments despite in the last portion there may be hardly any decay. so i will emulate. outside of special events (earnings / deliveries) i will use monthly options for ease of tracking. i will let option go to expiration and use the after hours pricing to be consistent for the "managed wheel" and use the monday opening price for the next entry for the standard wheel. example.. if i was "put the stock" that would happen on a saturday, so the monday opening is when the wheel would dictate to sell a covered call.

Summary of the week:

-sold the July monthly 275 put shown above. stock closed at 260 on friday 21july.

-for the "managed wheel" that 275put would be at $15 near closing and my management of the position would be to roll the July 275 put to the Aug 265 put which was at $15.50.. for ease of tracking will just call it flat.. no debit no credit .. now the position is holding the Aug 265 short put , adding in the credit from the entry the account is down $1015 (the Put now needs to decay or move higher for at least $10.15 to get back to break even). beyond the scope of this simple simon exercise you could factor in how much buying power you have by continuing to hold a short put vs being Put the stock and could potentially enter into other trades with that buying power vs committing all your cash by being "put the stock"

- for the "standard wheel" you ended up being "put the stock" , you bought the shares at 275. your net price is 275 minus the $4.85 credit from Put entry... just call it 270 for easy math.. per the Wheel methodology you are now to sell a covered call at 270 or higher. i will review monday morning depending on where stock opens, right now the Aug270 is about $9.50 credit.. if stock gaps higher, then the covered call price will improve.. will update on monday

24July update- a few minutes after opening i noted the Aug270 call at $8.00 so will use that price for the paper trade

update - Gym Bro middle east intell and trade

 

21 oct - had another bullshit session with the same gym bro. again retired Special Forces and is independent contractor advising on security issues. no particular order, review the conversation below from 10 Oct first:

- asked again about the possible attacks on the homeland and thanksgiving. he referenced that the timing might be in conjunction with the expiration of the latest budget continuing resolution which expires early Dec. explaining that federal anti terror agencies and task forces will have no money to conduct operations. gave example that if government shutdown happens that FBI will not be able to use their accounts to fly anywhere or even fuel their vehicles since they are GSA accounts. i said this isnt the first shutdown weve had, isnt there some type of IOU system to keep those agencies functioning... said something about "they" are trying to transfer some funds from something to something else to fund some anti terror taskforce. he seems to be current on whats happening. even referencing something i just read on my twitter stream while sitting in the truck in the parking lot prior.

-mentioned the brief hubbub about Biden meeting Delta Force operators while in Israel and their faces were not blurred. i said im sure this guys knew press would be there.. meaning it wasnt a meeting in a secure room, for your eyes only shit. he agreed.. the point i was making is everyone was all moist about not blurring the faces but had no issue with Delta Force actually being on the ground in Israel.. ie "no boots on the ground" ... he said that "the FBI HRT is also there (Hostage Rescue)

-forget the country but said some of the "protesters" that were arrested confessed that they were paid to protest in support of the Palestinians .. paid by Iran .. europe i believe it was.. makes sense

-i switched subjects to an internet podcast show i catch often .. The Shawn Ryan Show... guy taught John Wick his skills and ex SEAL.. has alot of tier 1 operators on show, recently a retired Delta operator from black hawk down days.. i found the segment very moving and felt for him as he struggled to cope even now.. personally i was at Fort Bliss at the time and missed the initial deployment into somalia by about 6weeks for a small armored task force.. i believe 24th infantry division (3d infantry division) sent some units.. asked gym bro where he was during black hawk down .. said he was "in country" .. started getting into specifics about how the administration mid op called the guys to say that the somali enemy are now our allies, so therefore all the support guys like spectre gun ships, more SF guys were grounded and the actual relief columns from 10th mountain and more Delta guys came to near shooting it out with the base security that would not let them leave. now ive read multiple books that included black hawk down.. the actual book, a book from a SEAL Sniper that was on overwatch.. i forget the name (not chris kyle) and thats the first ive heard anything like that.. but it makes perfect sense given how U.S. foreign policy works. my gym bro loves to talk so i let him ramble on about how when he was training forces in central america he would get a call to stop training these guys since now they are the enemy, they will begin training the old enemy to defeat the new enemy that just learned tactics from his team... seems typical

-i made a wiseass comment that too bad we couldnt  have brought all that gear back from Afghanistan. would come in handy for ukraine.. said he expects another Blackwater private security company to stand up and much of their weapons sourcing will come from paying the taliban for the gear and weapons.

-tried again to get a stock suggestion from him, again noting he is not a trader but he brought one on his phone. again in the semiconductor space.. which i dont see the appeal if the regional conflict blows up.. stock is SNPS , never heard of... my 10minutes of twitter searching made it seam like they do the software for new chips.. options look illiquid and only monthly so dont see an entry for me. has had a good run though

if i drank id offer to get a beer with the guy and let him ramble on about some places hes been. Told me previously that while deployed to Bosnia during the ethnic fighting his guys would routinely have firefights with Russian Spectnaz teams.. hes a good dude, im just not able to put in the time to get the detailed responses since we are both about to get a workout in.. told him i expect some updates next time i see him

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10oct - couldnt think of a catchier title.. i had a conversation with a gym bro today. he is retired Special Forces and has done some "contract work" as well.. he currently is a consultant for Homeland Defense / FBI / and Intelligence agencies / businesses.. he basically talks to them about risks and compliances. ive always kept the conversations casual and general, not wanting to be super nosy but had a lengthier conversation today.. some topics in no particular order:

-main one first.. he said he expects some significant attacks on the U.S. homeland by Thanksgiving, essentially from Iran sponsored  sleeper cells that have utilized the open border in the south. targets would be a mass shooting of some type to create mass chaos and media coverage. i specifically asked if the targets would be larger like power grids, etc.. said no .. asked him is sources.. "do you have a FBI buddy feeding you this or he just running his mouth"... implied that he still has "sources" from where he served during his "contract work" .. i left it at that

-said his phone "has been ringing off the hook" this weekend with the israel / Palestinian war going on. said months ago they blew him off and said they had intel about an attack happening months ago. i saw that on twitter myself already so i dont know if he was just rephrasing the same reports i read or he/his group had proprietary intel

- said those same guys calling from Homeland / Assistant secretary to the something something in the FBI want him to come talk. said you guys still owe me payments for the last four sessions.. something about payments super slow with the government shutdown nearly happening.

-for israel he said you will see the propaganda machine from israel kick in now reference the hostages.. to shape the information that they are martyrs to the fighting. bringing on families / parents to talk about how their loved one would fight , blah blah... intent is to dull the media outrage (ie the western support) if hostages are killed in the bombings. 

-back to the coming attacks.. i said "by thanksgiving" sure is specific and not too far away.. he referenced some incidents recently that i never heard of..granted im not a news junkie.. i asked where would the targets be.. said look to the cities where the defund the police movements were popular... also said "just look whats happening in New york and Chicago"

-as far as Iran he said the key is if Syria will go along with anything, maybe ties to Hezbollah ? something something about Israel might attack Iran , which i dont agree with. i said i always heard that a limitation Israel had was a lack of / or a sufficient number of tanker refueling planes for the long flight and back unless some allies helped.. plus the obvious overflight of Syria/Jordan/Saudi Arabia/Iraq depending on their routes and i had thought that given previous Israeli air strikes on other arab countries (the strike on Iraq nuk site years ago) that iran as alot of their nuclear program underground. even the bunker buster type bombs might not be sufficient... didnt respond to that directly but said Iranian air defense is poor and they would rely on Syria for alot of it. seems like if thats the case then dont overfly syria, regardless.. i cant speak to Iranian air defense but id have to assume tactically to be on par with U.S. for planning purposes.. S-300/S-400 type stuff

- he acknowledged that Iran assisted with Hamas planning of the attacks. which shouldnt come as a big shock, flip it around.. the U.S. collaborates with its allies on regional issues.. same thing.. for discussion i asked what would the "regions" reaction be if Israel attacked Iran.. .i threw out some possibilities.. like Egypt/Jordan/Iraq/Lebanon/saudi arabia and others joining into an anti-israel coalition.. attacking tankers in the persian gulf again.. shia/sunni not withstanding... not a real response but said the timing of the Hamas attacks was to prevent the soon to be approved treaty/agreement between Israel / Saudi Arabia to more normalize relations and as part of that was a stipulation on Saudi Arabia that they could not assist any other arab neighbor against israel.. also the timing of the Hamas attack coincided with a somewhat paralyzed U.S. government with no speaker of the house. i didnt see the relevance.. regardless

-my preworkout was starting to kick in and wanted to wrap up the bullshit session so i transitioned to "knowing what you know and what you think will happen.. what would you be investing in or shorting" ... i couldnt follow his logic but the name he came up with was Marvel Tech (MRVL) because they had alot of military contracts for their semiconductors. i threw out NVDA , Intel, AMD ... he said he was impressed with MRVL with the amount of military work "when he visited them" to do security compliance checks.. dont know what exactly he would be looking at. 

-also said if anything to sell airlines. .not really a no brainer given the reactions after 9/11 but he said travel will be down after the "attacks" .. could have just asked Bobby Axelrod for same answer really.

-he specifically said he didnt think anything for over the December holidays because Biden this or that.. seems backwards to me

Summary: this guy has stacked some bodies in several countries and has worked with Homeland and Law Enforcement agencies .. still is. so i will give him the benefit of the doubt... the timing of any attacks is the magic bullet for all counter intel types. I am going to do some work on MRVL and likely do a small position.. thinking at least a 6month out LEAP with some covered calls / spreads against along the way to lower the cost basis. as far as airlines, they have been dog shit for a while but will look for an entry for possibly Put spreads.. not betting the house. just some exposure.. might profit from general market direction anyway without a mass casualty event.

$TSLA bearish trade idea 28 feb

 

28 feb

investor day happening on 28feb after market.. a trade idea the market reacts poorly.. 

stock is 207ish after hours on 27th.. the stock hit a low of about 187 on the 13th of Feb so will go with the assumption that stock works its way lower to test that level. Going to use a 1x2 Put Ratio Spread. buy 1 Put, sell 2 Puts lower.. will need buying power for that 2nd Put... 

MAR 200/185 1x2 Put spread for .50 debit - buy one 200, sell two 185s

profit range at MAR monthly opex is 200-160. Consider it like selling a 185 Put but buying a Put spread to profit on the move to 185 .. a perfect on the nuts pin at 185 at opex is $1500 profit per 1x2. the two 185's will need to decay away to see the profits so plan on holding to the last day or two. If the stock takes off, monitor this position because you may be able to close for a credit as the 185s decay quicker.. you can then reestablish this trade higher for a hedge or just move on.

if stock is under 185 at opex you will be "put the stock" at 185.. you will buy 100shares at 185.. but you should close this trade out regardless on opex day.

i will be reviewing this to put on myself before market close on 28th prior to investor day.. i like that $40 range for a hedge to downside (in addition to my weekly short calls). my intent is to enter ratio spreads for near zero or slight credit, so you can make the ratio wider.. say the 200/150 but it will cost more. close to zero is just my method. chose strikes youre comfortable with. if you use weekly options you will not be able to have an as wide spread (and be near zero cost) , which why i went to MAR monthly .. again since its March, you will need to wait till near opex to see those profits, will likely be mark to market loss till then. patience, let the hedge work for you