I am getting scared of trading options, especially TSLA. I bought a debit spread OTM with 4 days left. I could not get a fill as a spread, so I did individual legs, the spread had a debit of $225 but somehow when I did the legs I had a debit of $575. I saw my long option making a lot of money while the shot option was losing even more. I was cursing the moment I decided to spread the blimey thing. (I should have gotten in with a call only) Eventually, I got out with a small loss($200). Already annoyed(but trying to mend the situation) I went long of one call, a few minutes later the market maker just killed the IV, to the tune of 40+%. Now I was holding an option with a $1000 loss. While TSLA moving my way! Both my optioned finished ITM. I lost $1200! Question; how the hell can TSLA trade at $1600 but the options cost 13k? Other question what the hell did I do wrong? I was right about the market, but it seems options have special ways of screwing me!
I am no expert... However your comment " I could not get a fill as a spread, ..." seems to have been providing you with important information that you chose to ignore! If you post the precise trades, perhaps more insight can be extracted. I'm guessing you chose a spread where each leg had adequate Open Interest? -- If not, that may be an issue as well.
1 Option is 100 shares. So, your sizing is a notional value of $160,000 x delta. Don't get caught with a naked short or you could loose your house. You want easy fills. Trade Near-OTM.
The TSLA spreads were so wide that you can drive a mack truck through. Granted, when I could not get a fill on the spread, I should have just abandoned the trade considering the bid/ask spread. The OI was no issue. The second trade I even bid close to the MM's bid, still, I got filled and the option immediately went against me, while TSLA was going up. With calls, that what one usually wants!
You forgot about a component called volatility? That is enough to turn a winning trade into a loss. I think I relayed my experience trading options spreads, trying to make a few hundred and risking thousands in the process? Lost thousands and never did that again. I would rather buy an option and risk a couple of hundred to make a couple of thousands. Much better reward to risk ratio. Options selling is probably, overrated. Not saying people cannot make monies with it but, you are taking far too much risk to make a small amount of monies?
I erroneously said credit spread, when in fact, I was trading a debit spread. Sorry for the confusion! And the Typo...
You gotsta track vol of your particular strike/tenor @ entry & throughout trade life cycle, attributing/decomposing by greeks PnL - (delta *dSpot)+((0.5gamma*Spot^2)+(theta*dTime)+(vega*dIV)=total PnL. Accuracy of entry signals (inputs) across across spot/time/vol drivers are then itemized by respective sensitivities/exposures to the said drivers, thereby explaining aggregate PnL. So perhaps your vertical skew vega component got affected as one leg's IV overwhelmed the other, even though you got direction correct. Really need to dig deep, else just constant blindspot source of perpetual annoyance/agitation due to inexplicable "leakage".. if that makes sense