A cautionary warning

[ppl]

Been thinking about this for a while. I run the risk of perhaps irritating some but I assure you this is not directed toward anyone In particular. Prior results are not predictors of future, that is so true.

A rising market makes a lot of people look like experts. It almost really doesn't matter what you invest in, you can make money. Similarly investing in a stock that appreciates almost 500% makes it easy to make money no matter the strategy. Of course picking the stock was required but how much was luck versus skill. Of course my picking it was skill (ha ha). Following the moves of others strategy recommendations could also prove to be a disaster. Please be careful and do your due diligence

 

[sleepyhead]

I think that the bull market is just getting started. Yes, there will be corrections, pullbacks, etc. and I still think that we might be in the middle of a correction (5% down movement still possible on S&P 500). But there is also the possibility that the pullback is over and the rally will continue, so I am not being overly cautious.

Europe is just coming out of recession, China looks to have bounced back a little after a weaker first half of the year, and the US economy is supposed to accelerate in the second half. I don't see how the market doesn't go up over the next 6 to 12 months.

Everybody always talks about caution, but that is another way of telling someone that he needs to be good at market timing to make money and not to lose money; big DUH!!! What are you supposed to do to stay "cautious" buy puts every week? Stay 50% in cash? Both of these strategies are big losers, and you might miss out on a big bull rally.

The best advice I can give you is to buy TSLA today and hold it for 10 years. You are never going to time the market correctly, so buy and hold. If you are waiting for a pullback to buy TSLA, then sell a slightly OTM put on TSLA so that you can get it at your desired price. If it doesn't hit that price then rinse and repeat. Even if you never end up getting TSLA stock assigned, you will still make some money.

Final Note: Everyone on this board is feeling very cautious, and that is exactly why I am very bullish on TSLA in the near term.

 

[Jonathan Hewitt]

Sleepy, there is a third strategy for staying cautious without pulling money out or buying puts. #3: being mentally prepared for a drop (but portfolio set up for a rise). That's the strategy I have now

 

[mershaw2001]

Sleepyhead, i agree with you in the near term. On friday, volatility in the near term (front month, plus a little more) drained completely out of the OTM options, to the point where some contracts lost half value. My take is that usually, when everyone is looking for one thing to happen, the opposite happens. If prices of forward options get much lower, I'll be grabbing some. When everyone is cautious and short sellers have jumped back in is when the biggest payoffs are present for going long.

 

[DaveT]

Been thinking about this for a while. I run the risk of perhaps irritating some but I assure you this is not directed toward anyone In particular. Prior results are not predictors of future, that is so true.

A rising market makes a lot of people look like experts. It almost really doesn't matter what you invest in, you can make money. Similarly investing in a stock that appreciates almost 500% makes it easy to make money no matter the strategy. Of course picking the stock was required but how much was luck versus skill. Of course my picking it was skill (ha ha). Following the moves of others strategy recommendations could also prove to be a disaster. Please be careful and do your due diligence

I think the 500% stock price gain has thrown some people into this state of constant fear that TSLA will drop by 50% or something. I don't think this is realistic. Sure, it's gone up by 500% but I don't think that's the correct way to look at it. I think TSLA should have been at $80-90/share at the end of 2012 (see Seeking advice - Long term hold or pay off debt? - Page 3 for a further explanation, which I wrote when the stock was $120.). IMO, it's really only gone up 100% from where it should have been valued at the end of 2012. Yes, 100% is a lot but a lot has happened this year (two profitable quarters, demand greater than expected, etc). So, I think the 100% rise (from the $80-90/share it should have been at end of 2012) is reasonable, especially considering how big the eventual market size Tesla is competing for and how far behind the competition remains.

I'm comfortable with the current stock price and see risk as relatively low (compared to others who see elevated risk at these levels), since even if TSLA dips by 20-30% as long as TSLA continues to execute then the stock price will rebound sooner or later and will set new ATHs. The biggest risk factor is TSLA failing to execute. But so far, they've proven to be very excellent in the execution department. So while the risk remains and should be considered, I'm not overly concerned about it.

 

[Mario Kadastik]

The best advice I can give you is to buy TSLA today and hold it for 10 years. You are never going to time the market correctly, so buy and hold. If you are waiting for a pullback to buy TSLA, then sell a slightly OTM put on TSLA so that you can get it at your desired price. If it doesn't hit that price then rinse and repeat. Even if you never end up getting TSLA stock assigned, you will still make some money.

Yeah, that was my strategy from ~March 2012 onwards. Never managed to sell puts that ended ITM. Therefore I've made a ton of money off TSLA with selling puts, but would have made far more had I just bought the stock outright then Oh well of the 500% stock appreciation I've "only" gotten 250% and not invested a cent myself (unless you count the margin requirement). Right now am not so sure of the getting in so I keep selling the puts, now that there are weekly puts it's even nicer selling always +1, +2 weeks out OTM puts.