A Tesla Bearish Option Spread and an Update on $UVXY

I was a bit reckless with my option trades today, and surprisingly, I didn't get burned.  I may actually make some money on it. It will probably come back to haunt me.


I sold a call spread on Tesla ($TSLA) with a one day expiration.  The stock came out with earnings last night, and although the stock initially went up, it faded quickly and was down by 10 am or so, when I put this on. 


The stock had dropped from $280 last night down to $260, so I sold a put spread:


Sold the $262.50 for $2.24 for expiration tomorrow.
Bought the $272.50 for $0.55 for the same date. 


If the stock stays below I get the entire spread.  Short duration, but there was still a fair amount of implied volatility, so a decent return. 


Stock dropped to $256 by the close, so I could have taken it off for a solid win, but will hold for a bit tomorrow.  If it stays near that price I will let it expire worthless. 


An update on $UVXY.  If you haven't tried this strategy, one thing that can happen when you sell a call or put is that they can be exercised early.  That happened to me today, the $19 call I sold was bought back, locking in my losses.  Bad. However, $UVXY continued going up, so the exercise stopped me from taking larger losses.  Good!


The $21 call trade I sold isn't looking great either.  The stock closed near $22, and the option expires tomorrow.  I need a solid fade to make any money, and I'm not confident about it. 


That's the risk of doing this.  A few bad trades can really blow up your account.

Closing a Put Spread on $TSLA, opening a short position on $NUGT

I closed out the put spread I sold on $TSLA (Tesla) today.  I had sold a put spread yesterday with a Friday expiration, which is a bullish bet, and the stock jumped from $276 to $283 and it looked like it might pull back.  I had a pretty risky position if it turned against me in such a short time frame, so I closed it out for a debit of $1.1, making close to a $200 profit overnight. 


I'm pretty happy with it, I would prefer to let a winner ride, but seems like the right move to take it off. 


I also closed out a put spread from a week ago that I hadn't posted, so I won't bring that up.  I prefer to only report on trades that I have been upfront with, not claiming a winner just after the fact.


How Option Spreads Work


For those that don't do a lot of trading in options, or spreads, just a comment on what I am doing.  If I sell a put spread, that is actually a bullish bet.  I am selling a higher strike put for more money, and buying a lower price put for less.  It creates a net credit, and if the stock price stays above the higher strike, I keep the entire credit. 


If I sell a call spread, it works that opposite and is a bearish bet.  See below for a real life example.


Selling a Call Spread on $NUGT


Today I sold a call spread in $NUGT, the Direxion 3 times leveraged Gold Miners ETF.


Sell $13 March 17 strike for $1.16
Bought $17 March 17 strike for $0.35


If $NUGT ends up below $13, I keep the 81 cents.  These are regular options, so everything is times 100, then times of the number of options.  Usually I don't say how many that is, but today it was 5, so I have chance to earn $408, while risking more.  The risk is mitigated by the fact that the stock price was $12 when I put this on.  Unfortunately, it went up during the day and closed at $12.46.  Not a good entry.


Because $NUGT is a 3x ETF, I have the chance to see some decay from rebalancing.  Maybe not too much in just a month. 


Enjoy your trading.

Weekly Put Spread on $TSLA

I sold a put spread on $TSLA today, stock has been a monster, and I think it has a chance to continue to run.  I can't see fighting this trend at this point.  Stock has a ridiculous valuation, but never short a stock based on valuation. 


As I did with $YELP, I used the weekly calls, for a lot of risk and a quick payoff.  I can't recommend this as a good strategy, but it can work. 


Actual trade was short the 275 put and bought the 260 put for just short of a credit of $3 per option on the 2/17/17 when the stock price of around $277.  Closed above $280, so already in the green.


I was surprised, I had originally looked at the 270 strike but would have only sold for $1.35.  Not enough payoff for the risk on this high flyer.  I could have stretched to a longer date, but decided to just cut the cushion.  Either it runs like crazy or it reverses hard, and no amount of cushion will help.


Risky play, but I accept that. 


Only trade I made today, others I have on are still working, including $YELP losing a bit more.


By the way, if you haven't caught Sean McLaughin's options podcast, I recommend it.  You can find the link on his twitter account, @chicagosean