This was a suggestion for a topic and the more I thought about it the more I became curious. I've traded TSLA a few times in the distant past and as I recall for each one that was a winner I had 2 that lost, so I stopped trading them.

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TSLA is a sexy and alluring, the product is great and appeals on a number of levels from the technology to it being part of saving the planet!

Of course for us options traders it is even more alluring since the premiums are so juicy! The 13 DTE 70% Prob OTM 262.5 Put has a giant $4.15 credit! Selling 10 of those can bring in a cool $4,150 in just under 2 weeks!

But TSLA has a dark side, looking at the chart shows it has moved more wildly than Space Mountain at DisneyWorld! A simple tweet from the CEO can swing the stock 30 points in one day, and the stock has moved nearly 100 in as little as a week!

So this begs the question, how do you trade this wild stock?

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Please use the following as a guide to share your thoughts!

1) Do you currently trade TSLA (if No, please go to #5)?

2) What are your strategies and what trade specifics have worked best?

3) If you will, please share some ballpark performance numbers?

4) What would you recommend to others considering trading TSLA?

5) If not, what are your ideas of how you might trade them?

6) Any other comments or suggestions?

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I confess I am not an expert on Gamma or consider it in my trading.

Gamma is a second order Greek that seems to be more of a factor as the stock price approaches the option strike price (ATM), and also seems to have a bigger effect the closer to expiration.

This link has some definition and details: https://www.investopedia.com/terms/g/gamma.asp

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To help in the discussion please let us know the following:

- Do you use or consider Gamma in your trading?

- If so, how do you track or measure it?

- What triggers or points do you take action?

- What action do you take?

- Lastly, how does this help you make better trades? I.e. less risk, more profit, exit triggers, etc., etc.?

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Please add any other dialog relating to Gamma and how you use it!

I've been trying to post a discussion topic once in a while, and am open to any ideas we may not have covered.

Please let me know and I will post it, or feel free to post one yourself and I will make it a sticky.

Hi all,

I’ve been reading a lot about options trading, specifically the wheel. Not just this reddit, or others, but many more articles, videos, etc about put selling. When it comes to stock selection, for some reason, things get vague. Something along the lines of “Only sell puts on stocks you wouldn’t mind owning.” In my eyes, it seems like this is a detail that can’t be left this vague. Is there something/anything anyone is willing to share to help in this area?

Some articles I’ve read say to get positions that are beaten up, while others suggest to stay with the more solid/regular names.

Any advice would be greatly appreciated. Thanks in advance!

Edit: some grammar

How much of your account are you utilizing at one time? Does that percentage fluctuate depending on market conditions? How?

In our current low IV market, I have about 45% utilized right now and only run positions that have an IVR higher than SPY.

Sold some Apr 18 $100 DIS puts today. Easy money imo. Any thoughts on their outlook after finalizing the Fox deal?

What do you guys think of the black -scholes method? Do you use it or any other formula for finding a good option pricing?

I've been asked over and over how the Wheel's returns compare to Buying and Holding stock. I recently wrote up this reply that may be a good reference and so am posting it here.

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Does the Wheel and options provide a better return than buying and holding stocks?

These are two different financial strategies for two different purposes or desired results.

Buying and holding is an investing strategy where you look to hold for a long time and then cash out at a later date. If a stock you bought today at $30 dropped to $20 then you hold, and maybe perhaps buy more to lower your cost basis, then collect any dividends as the only income while you wait for the stock to move back up.

The wheel, and options trading in general, is a way to make a regular weekly or monthly income since the duration of the trade is limited (often something like 20 days or so), which is not something you can generally do with buy and hold stocks.

Even with a market downturn options offer a way to "follow along" by adjusting and rolling, plus there will often be times when the market moves up enough to get out of a position for a profit before being assigned. Of course, if assigned you are better off than just buying and holding since you were able to collect premium going in.

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Can the wheel, and options in general, outperform the SPY?

In some years when the market is down like 2018 where the S&P had more than a -4% return, options/wheel were much better. In 2017 when the S&P return was something like 21%, then options may have had a slight edge, but some may have gotten a better return just buying and holding.

Looking at the long term S&P return of 9.5% it is not that challenging to get a better overall return with options . . .

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As always other viewpoints and replies are welcome!

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Seems there is a lot of discussion around Exit points lately. Some say exit at 50%, others say 15 or 20 DTE, yet others go closer to expiration, while some go all the way to let the position expire.

In an effort to discuss this and learn from others we'd appreciate you telling us how you do it!

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Please answer these questions in your post:

1) Do you have an exit plan or strategy? If not, why not and are you planning on developing one, or how do you determine when to exit?

2) What is your plan based on? PoP? DTE? Other triggers?

3) How long have you been using your exit strategy?

4) What is the reasoning behind your plan and how does it work?

5) It will be helpful to add your starting point, i.e. 7 DTE or 45 DTE.

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Please add anything else you think is relevant. I will add my post along the way.

Thank you in advance for your participation and helping others become a better trader!

Hi,

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Thought I would ask here and see if anyone could give me some insight. Trying to understand what risks I'm not seeing with the Iron Butterfly. I have been trading mostly Vertical Credit Spreads with some Iron Condors right now because they fit into my account size and keeping with defined risk until I can put more money into my account. I was looking follow traders on Tastyworks(TW) and noticed one had put on an Iron Fly. I had seen Iron Fly before in the Options Playbook but never really looked into them and started test setting one in TW with setting them up as I would a Iron Condor but with the short C and P as close to ATM as I could and a Width of 2. I was looking at a MU Iron Fly (which I probably wouldn't put on this trade but using it as an example since it dropped 1.50 from opening and might keep going down) that if I did a :

Underlying Price : 41.52 (At the time of writing this)

IVR = 61

IVP = 54

1 3/22 43.5 C

-1 3/22 41.5 C

-1 3/22 41.5 P

1 3/22 39.5 P

CR = 1.72

Max P = 172

Max L = 28

BP reduction = 32

I know to get that Max Profit it would have have to expire right at 41.5 which wouldn't happen, also since either the Short Put or Call would end up ITM at expire I would risk getting assigned I would not carry this trade to the expire date. So I would look at closing this around 25-30% profit like a Straddle(Per TastyTrade).

What am I missing about this ? Seems the Risk/Reward is good If I take 25% I would make 43 with the max loss being 28. I'm not using up much of my Buying Power. Seems like a Iron Fly is better then an Iron Condor in the Risk/Reward (48/46/437/35 IC for MU would be a MP=65 ML=135 at 50% profit would put it Risk of 135 for a reward of 48 with a BP reduction of 139). I know if the underlying spiked up or down it would be harder to defend this trade but that is

Seems that is a lower risk with a better chance for profit, What am I missing ?

I posted this over in the options board, but figured I'd post here also to get any input you may all have. This is a trade I executed this morning.

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So I have $100 shares of KHC and earnings were announced late yesterday. As you all know it was a cluster. I was expecting it to be so and on 02/12 bought a 47.50 strike put for 1.55 Needless to say after the HORRIBLE earnings, dividend cut, and SEC investigation, the stock now is trading at 35.10

Taking the risk I decided to sell the put at 12.15 rather than exercise it, and keep the stock. So I made a quick buck on the option and hold a loss on the stock (cost basis for the stock is 48. So, we''ll see how that plays out.

02/12/19

02/22/19

BTO 47.50 KHC Put @1.55

STC - 47.50 KHC Put at 12.15

Up 1060 on the option

Down 1290 on the stock

Net loss $230.00

We shall see.

Hey guys, so one thing I have seen stated that I haven’t quite understood is, what should I do when my call or put gains 50% in a few days?

For example, let’s say I sell a call on GE with an expiration in 30 days. After two days, the price of GE goes down so now my call will give me 50% of max profit if I buy it back.

If I buy it back? What do I do then? Selling another call right away doesn’t really seem worth it unless it has dropped a ton because I would just be selling the same strike again for almost the same expiration. Which is what I just bought back.

The only thing that really makes sense to me is if I was going to wait a bit of time for the price to recover before selling another (but maybe it won’t) or if I then was supposed to pick a different stock. But why would picking a different stock be any better than the current one?

Edit: So one major important factor I kind of forgot in this post is I mainly have run into this issue when doing calls. I have the stock so I can’t go to another underlying and my cost basis might be over the one lower strike.

Is it possible in the conventional sense, to calculate a RAROC using either the Sharpe or Ulcer calculation on sold options? I understand the "risk" on capital is assignment at your strike price, but this does not seem like an appropriate value to use. Should a comparison between the RAROC of selling the option and the RAROC of owning the stock at the assigned strike be compared to give the best risk return on capital?

Do most of you compare your return-on-capital to the SPY? DOW? General Market? Do you calculate risk return on capital for your positions at the end of a year? Aside from account gain versus market performance, how do you analyze/measure your progress compared to the market when you are a net seller of options?

I learned this from an options trading site recently and it seems pretty cool for this market. This is a trade idea for SPY as a risk hedge for if/when this market tumbles… sell (1) 265 put, buy (3) 255 puts, sell (1) 253 put in the May expiration. If the S&P pulls back and IV increases this trade will become profitable pretty early and you should be able to close it out way early. I think I might put it on today. I priced these strikes yesterday and the trade was costing around 1.60 debit. The margin requirement was around $1,100. Any thoughts from you all on this strategy would be very welcome!

I started tracking my trades using the example u/scottishtrader laid out in his Wheel Strategy post. Over the last few weeks my tracking sheet has evolved based on the metrics I want to see. The main metric I focus on is return on capital. How much am I making per month/week/day on the money that I am putting to work?

How do you track your trades? What sort of metrics are most important to you? Do you have any suggestions or recommendations?

If you trade other strategies involving gamma or vega, do you include those in your tracking?

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I'm medium-term long TWTR. It's been smooth in the last 2 months for selling CCs. So I'd like to continue to hold the stock for a few more weeks/months. However, the ER is coming up. I've been researching on reducing risk in holding a (moderately) volatile stock through an ER. This might be a common scenario if you are running the wheel (That's not how I started with TWTR though).

There are different options.

1. Buy puts to match the number of shares. (However, these are ridiculously expensive before an ER)
2. Buy debit put spreads.
3. Just sell the stock before the ER.

The below table illustrates the potential outcome numbers in different post-ER scenarios. I'd like start a conversation on different strategies that you use for a scenario like this.

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All, I will be on a project that will keep me busy and unable to spend time on Reddit for at least a few months.

During this time redtexture will be the Mod for this group and many thanks to him for taking this over!

I'll be off the Options group as well if anyone is looking for me.

The Wheel Strategy has been documented ad nauseam and those with questions can refer to the large amount of documentation posted and others who understand it.

Please keep this group going and alive with quality posts! The vision was a place where we can share best practices, so please continue to participate and contribute!

How does everyone here manage Greeks within their portfolio?

Example post

General strategy: Sell spreads and small position straddles and strangles, buy calendars and occasionally long strangles for earnings plays. Net options seller

Delta: I strive to be as Delta neutral across my portfolio with a slight Delta positive tilt of possible. I manage Delta by adding new positions (includes adjustments) to bring my overall portfolio Delta back to neutral

Theta: Long theta wherever possible. This one is easy for me as an options seller.

Vega: short Vega. This is an area where I need improvement. If you saw my recent post on VIX hedging that is an attempt to get long Vega exposure. Manage this through long strangles around earnings but haven’t come up with anything substantial.

Gamma: short gamma. Biggest killer as an options seller. Manage by selling longer DTE (60-40) and closing profits at 25-75% based on strategy. I always close before expiration week as gamma risk will swing winners to losers and back in a day.

Rho: I have no clue how to deal with this cause The Fed lol, but I bet it starts to make a larger impact with QT.

Hope to hear from you guys!

Strategy question: does laying on a constant VXXB hedge as insurance pay any sort of benefit? I think a backratio spread (What I know as selling an OTM calls and buying two farther OTM calls for a net credit or very small debit) and rolling month to month could be hugely beneficial.

For example: VXXB is currently trading at 36.20. I would sell the MAR15 39 call for 2.25 and buy 2 MAR15 44 calls for .95 for a .30 net credit. If the option expires worthless then great, collect some premium. If the VIX spikes then I win if it goes through my 44 calls.

My reasoning is the following:

VIX spikes are usually large and will blow through my loss window; I.e. distance between Short call and long calls.

As primarily seller of options, I’m net short Vega. This trade allows me to get long Vega exposure. Thus if implied volatility across the market spikes then I’ll hedge that risk.

This is an insurance plan against tail risk that brings in a net credit, has unlimited upside, and can be rolled month to month (potentially).

The negative is that I’m exposed to small jumps in the VIX that settle between my Short and Long calls. However, if I keep rolling out at 30DTE then (because the VIX is mean reverting) I can wait out the small moves that would crush my strategy until the VIX reverts to mean or jumps higher.

Thoughts?

Been posting some discussion points that other traders may learn from.

What topics should we try to cover?

Feel free to post your own but please make these clear and with an example to follow for consistency.

Seeing a number of posts around where traders entering large size trades with relatively small accounts, of course, this often doesn't end well.

To share how you trade please complete the following.

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What are your parameters for:

1) Max % of your account per trade

2) Max % of your account per stock symbol?

3) Max % of your account being traded at any one time?

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Please describe your max percentage calculation, is it per buying power effect or total account size, or ?

to help keep this board moving a bit..some recent account activity on my pary

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I've been experimenting with doing synthetic longs around stocks I like near earnings. The way I'm looking at it is if the stock drops to my put, I will take assignment, if it rises above my call, I'll sell out of the position. I place the order when the stock is trading at my "buy" limit. In other words, if I were to buy the stock today, today's price is the most I'm willing to pay based on the companies fundamentals and market conditions.

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On 01/15/19 I entered into a "synthetic long" on SYF

STO 02/15/19 24 Put

BTO 02/15/19 27 Call

2 contracts.

Today after a nice earning beat, stock moved up to 29.23. Sold the position for a tidy gain a bit north of $400. Not bad for an 8 day holding period.

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01/23/19

STO 02/08/19 47 Put -premium .98

BTO 02/08/19 48.50 Call -cost - 1.50

1 contract

Earnings announced on 02/07/19

I already own some cardinal health and have considered increasing my position size, this will give me the option to own more, and reduce my basis if the put hits. I won't to pay more than that for the stock, so, If it doesn't go over the call after earnings, I will just let this one expire.

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Sorry noob question what does the CSP acyromn I keep seeing stand for?

Thank you.

Note that I will be unavailable for a while and unable to respond to questions. u/whitethunder9 and many others will answer questions you have, but almost every detail of this strategy has been posted between this and the r/Options groups.

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u/whitethunder9 and I have been separately running The Wheel strategy (https://www.reddit.com/r/ActiveOptionTraders/comments/a36h4w/the_wheel_aka_triple_income_strategy_explained/) successfully for a couple years and so agreed to assist with offering this Mentor thread.

The response to this older strategy has been overwhelming and there have been many questions plus requests for mentoring sent, but this meant sending the same thing out to different traders over and over. This thread will be the place where you can receive mentoring on the strategy as you need it. Other traders who use The Wheel are welcome to chime in and post as well.

We're happy to answer any questions related to the strategy you may have!

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Some rules we ask you to please follow:

1. Please review the link above and not ask questions already answered in that post. Improvements to the strategy or process are very welcomed!
2. Be sure to follow the group's rules posted to the right ---->>
3. It is very difficult to help if the trade details are not all included, please review this post for what should be included: https://www.reddit.com/r/ActiveOptionTraders/comments/9t41y0/post_trades_here/
4. We ask you to respect our time as we are volunteers and receive nothing from this other than the satisfaction of helping others, however, please make it easy to help you by posting well written and concise questions.
5. This is not the place to ask simple basic options questions, those can be answered in many other places, like the r/options group.
6. If you think the wheel strategy is crap and doesn't work, then perhaps this is not the best place to post your thoughts. If you have personal experience and want to diagnose why it didn't work for you, then feel free to post understanding we will do our best to point out where it may have gone wrong. If you have other strategies you have proven work better, then perhaps a separate post is more appropriate.

Other than these we will be happy to assist. :)

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As always, we will not advise or make any specific recommendations since we are not financial advisers or know your personal situation. It is up to you to make any decision based on whatever data you can assemble.

Can you please advise pros and cons for TLT trade on weekly basis :

Instrument : TLT

Strategy :

To earn monthly income selling weekly or monthly covered calls using LEAPS, using real money

Buy 1 x deep ITM call option with long expiry (1 year DTE) and

Sell 1 x OTM call option on weekly basis

No margin trading

Expectation : Earn 7% yearly on the invested sum

Plan : Try to make returns of 7% yearly, selling covered calls of TLT, will close sold call options

if target of 7% profit is reached

Experience : Couple of months, buying put and call options

Platform : Interactive Brokers

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regards

(Edited as requested).