JRP3
Hyperactive Member
Yes at some point the entire short thesis has to collapse entirely.
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OK. We're discussing the deep ITM LEAPs here. I have a different strategy for the other LEAPs (the OTM leaps I bought super cheap before the merger), which is a different matter.
The deep ITM LEAPs are providing leverage, with the time value I paid amounting to an effective interest rate of around 2%, paid in advance. The alternative which I considered was buying TSLA and potentially taking out a margin loan against it at 8%. I consider the time value to be interest, I consider it to be a good deal, I paid it, it's gone.
This was done because I didn't have the cash to buy the same amount of stock outright now but I probably will sometime later in the year or early next year; I expect another investment to cash out before January 2019, but I'm uncertain when.
The time value was minimal to start with (under 2 dollars per share) and is even lower now (under a dollar per share).
Because I think that risk is extraordinarily unlikely (seriously, what are the odds of TSLA going below $120?) and it is the risk I couldn't eliminate without losing the gain I was making.
I may execute early.
In the taxable account, which this is, I would have to pay taxes that year; executing them defers taxes indefinitely and converts the gains into long term capital gains. If they're very deep in the money this outweighs any gain from the minimal time value, and I certainly intend for them to be very deep in the money at that time.
I'm holding to *execution*. I intend to execute. I therefore wrote off the time value immediately. The taxes I'd pay on selling are far worse than the loss of time value.
There are an awful lot of different options strategies, aren't there?
P.S. I see that Jonathan Hewitt guessed my strategy immediately. You are a smart man, Mr. Hewitt.
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Not even the profit reports for Q1 of 2018? I'm suspicious that that'll blow the short thesis out of the water.
Or is that not near term for you?
I traditionally invest on a 10-year-plus time horizon so it sometimes seems near term to me...For a while.
T3slaTulips
Member
Hmmm. yeah it looks like the chart I was looking at goes by weeks when I start looking back multiple years. That one shows a 280.02. Looks like it was higher on 9/4/2014.
Dynastar
Member
At some point the current short thesis has to collapse, but any stock that has expectations of huge future growth priced into it is going to be a tempting target to short. All you need is a stumble by the company or people to turn sour on the future to make some $$$. Folks who shorted Amazon in December of 1999 did very well for themselves.
(For what it's worth I'm long Tesla.)
This make me remember having a discussion in an EV site (maybe Insideev, but not sure), one year ago, with someone that seemed to be part of a sort of some delusional and bashing Tesla group. At that time (when TSLA was at some 155) his quote was: "TSLA will be at 100 six months from now, and at 0 one year from now".
Well, you are actually at "one year from now", and I wonder what this guy is thinking now.
Hogfighter
Professional Lurker
Two thoughts:
1) Except for some previous SCTY shorts, all shorts are now under water. Most by quite a large amount.
2) With the massive run of the SP, access to capital (if desired) just got a whole lot easier for Tesla. This blows a massive hole in yet another bear argument.
1) Except for some previous SCTY shorts, all shorts are now under water. Most by quite a large amount.
2) With the massive run of the SP, access to capital (if desired) just got a whole lot easier for Tesla. This blows a massive hole in yet another bear argument.
We are all hoping for $8b of short money to come back into the valuation, but the flipside is, there are also a lot of people loaded up on margin that could accelerate the next downtrend should it come. Which is why I am staying out of margin but feeling like I am missing out the whole time, but just not willing to take that risk.
Thanks for reminding me:
@Curt Renz, you had suggested that we are looking at the natural progression of Elliot Wave pattern to help explain our current price action. But had mentioned that Mr. Prechter had pointed out that wave 4 crossed underneath the peak of Wave 1, thereby violating the wave rules. However (from his book, tenth ed, 2005, page 31):
"...In an impulse, wave 4 does not enter the price territory of (i.e., "overlap") wave 1. This rule holds for all non-leveraged "cash" markets. Futures markets, with their extreme leverage, can induce short term price extremes that would not occur in cash markets. Even so, overlapping is usually confined to daily and intraday price fluctuations and even this is rare."
Ok, even with the mentioned caveats, could the shorting and margins of TSLA in that time qualify as the leverage that Mr. Prechter is talking about? Thereby allowing for a violation of Wave 1 by Wave 4?
I will admit I haven't finished reading his book, but noticed this point in his book in regard to his comment earlier about Wave 4 violating Wave 1...
Thanks in advance!
@Curt Renz, you had suggested that we are looking at the natural progression of Elliot Wave pattern to help explain our current price action. But had mentioned that Mr. Prechter had pointed out that wave 4 crossed underneath the peak of Wave 1, thereby violating the wave rules. However (from his book, tenth ed, 2005, page 31):
"...In an impulse, wave 4 does not enter the price territory of (i.e., "overlap") wave 1. This rule holds for all non-leveraged "cash" markets. Futures markets, with their extreme leverage, can induce short term price extremes that would not occur in cash markets. Even so, overlapping is usually confined to daily and intraday price fluctuations and even this is rare."
Ok, even with the mentioned caveats, could the shorting and margins of TSLA in that time qualify as the leverage that Mr. Prechter is talking about? Thereby allowing for a violation of Wave 1 by Wave 4?
I will admit I haven't finished reading his book, but noticed this point in his book in regard to his comment earlier about Wave 4 violating Wave 1...
Thanks in advance!
MitchJi
Trying to learn kindness, patience & forgiveness
1. I think it's possible we'll have a dip. OTOH it's possible that we won't. If the M3 ramp goes smoothly the SP could shoot up from here. I've been thinking about (warning I'm not planning to actually do this, extremely risky) that I'm extremely confident that by the 2018 Q2 ER in August, that the M3 will have launched successfully. That's a maximum of seven ER's, two or three M3 reveals and two shareholder meetings. Worst case at least three of the eleven should trigger substantial SP bumps. I think that its probably possible to divide our portfolio into eleven equal amounts and throw that amount down on every ER, reveal and meeting and make a ton. The reason I am mentioning this is that if things go smoothly that strategy could be wildly profitable on three or four out of three or four events. It's not highly unlikely that Tesla will announce on February 22, that they are assembling cars from the parts for 300 that they previously ordered, stating that the only parts that were defective were the German pumps. I think that would be a huge positive demonstrating that most of the parts are in the bag. So I don't believe that continuing to sell calls is very safe. OTOH if it takes them until Q2 2918, it's very likely that we'll see some big dips on the way.
3. Due to the aforementioned possibilities of dips the only LEAPS that I believe are almost completely safe are the 2019's.
Yes indeed, plus ...
New shorts are continuing to jump in, under the assumption that they're selling in at the high. These new shorts absorb the available shares to short, and prevent the shorts from performing the kind of mischief we saw around the time of the 3Q delivery numbers release and 3Q ER. Without shorts having the muscle to manipulate, TSLA has less chance of taking a sizable dip. With additional good news, TSLA could head higher, and as we top the previous ATH, a robust short-covering-induced steep rally becomes a real possibility.
I would be cautious about short-to-mid-term plays with the stock price this high, but I'm bullish about TSLA shares and J19 ITM leaps. I would hate to have been sitting on the sidelines these past two weeks.
Jonathan Hewitt
Active Member
Yeah, I'm looking back in the past and seeing only one day in all of 2016 that had a similar move above the BB but the conditions don't really match what we are seeing today.
I'm trying to think of how this time may be different from the last times we approached the highs. The big one that sticks out to me right now is this hanging out at a single price for long periods of time. I'm also thinking at IB and Fidelity from what I've seen posted there are <1,000,000 shares available to short. I want to say last time we were up this high there were at least 3-4 million available at IB which has only 600,000 right now. Well for now I just sit tight I guess. We'll see.
Mike Smith
Active Member
Not even the profit reports for Q1 of 2018? I'm suspicious that that'll blow the short thesis out of the water.
Or is that not near term for you?
For a while.
It wouldn't affect the main short thesis, which is that TSLA shouldn't have a similar value to GM and F given how much larger those companies are.
Hopefully this holds. It is really rare. maybe once a year.
Wow, what a bullish close. I think it wants to see 291 before ER.
adiggs
Well-Known Member
If TSLA was a good short at $180, $200, ...; it's a screaming deal today at $280.60.
Two bad bits of worldly advice come to mind, and remind me why I don't short at all, ever:
- "courage of your convictions" (which is how you dig a deeper hole at the bottom of a deep hole)
- "the market can stay irrational longer than you can stay liquid" (how you can be right, and broke, all at the same time)
I'm comfortably and exclusively long. And nothing has changed for me today at $280 from when the stock was $180 in the investment thesis or time horizon.
Two bad bits of worldly advice come to mind, and remind me why I don't short at all, ever:
- "courage of your convictions" (which is how you dig a deeper hole at the bottom of a deep hole)
- "the market can stay irrational longer than you can stay liquid" (how you can be right, and broke, all at the same time)
I'm comfortably and exclusively long. And nothing has changed for me today at $280 from when the stock was $180 in the investment thesis or time horizon.
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