Advanced TSLA Options Trading

[FrankSG]

One metric one can go with, for the ranking, is the amount of money one could've made through your blog posts on Tesla. Compared to what one would've made through knowledge from other TSLA sources, I think you are the best
Yes, it's that hardcore, high quality research. That's what is missing with every other source I came across.
Anyhow, did you take a job somewhere? Moving back to US?

Hahaha, thank you

I've only traveled to the US once, I was born in Europe.

Definitely staying in Singapore. The only reason I did the MBA was to make it easier to get a visa here (it's not easy, and education is part of what they look at).

No job, because I want to spend most of my time on other parts of my life. I'm in the process of setting up a family office here, so that I can stay in Singapore as an investor.

 

[EV forever]

Welcome back, @FrankSG
Glad to hear you have finished with the MBA -that was fast! I am happy to have you back posting more often now

I read through your latest blog post - very intriguing. So far I have done very well with naked calls especially from Oct 2019, but in recent months have concluded that these may not be the best strategy going forward as the 4-10X increases in SP we saw in 2020 was probably once a lifetime opportunity. While I do expect TSLA to do well over the next decade, it may not again be this crazy returns. With that in mind, the call spread strategy may be a good alternative.

One question I always struggle with is regarding exit strategy. With the ITM LEAPS holding till the last week is a fine strategy. But with call spreads, is there a good time to exit? Especially if the stock goes into a spike and the spread is at 70-80% of max profit? Any insights on this?

 

[bxr140]

I am curious if anyone here has some more information or thoughts on Leo KoGuan's options strategy?

Its much less a clever strategy and more like a YOLO with a big bankroll. When you put everything into leverage on a stonk and the stonk goes up, you're going profit bigly.

All I can make of the information I have seen is the following:

1. Buy ITM or DITM LEAPS Call options
2. Convert portion of the profit of the trade to shares
3. GOTO 1

The further ITM you go the more dominant ∆ becomes over all the other greeks...so the further ITM you go the more the contract becomes a leverage play. A 50% ITM LEAP, for instance, is less than 10% extrinsic value and ~.9 ∆, and that maths out to effectively a little under 2:1 leverage.

If all you're trying to do is use options to provide that leverage, then its a fine strategy for a beginner. As long as you're not stupid enough to over-leverage your account, your position value is simply going to move up and down a little less than 2x the stock price (or even more if its not so DITM--an ATM LEAP is about 4:1).

Of course, reality is such that there are more efficient strategies with respect to risk/reward for those willing to properly trade The Greeks...but "efficient" and "proper" are pretty incompatible with "YOLO".

 

[FrankSG]

Welcome back, @FrankSG
Glad to hear you have finished with the MBA -that was fast! I am happy to have you back posting more often now

I read through your latest blog post - very intriguing. So far I have done very well with naked calls especially from Oct 2019, but in recent months have concluded that these may not be the best strategy going forward as the 4-10X increases in SP we saw in 2020 was probably once a lifetime opportunity. While I do expect TSLA to do well over the next decade, it may not again be this crazy returns. With that in mind, the call spread strategy may be a good alternative.

One question I always struggle with is regarding exit strategy. With the ITM LEAPS holding till the last week is a fine strategy. But with call spreads, is there a good time to exit? Especially if the stock goes into a spike and the spread is at 70-80% of max profit? Any insights on this?

Thank you!

I don't think I'll be posting much though. Tesla/investing/money isn't very high priority in my life right now, so I won't be allocating that much time to it. I'll just keep up with the main stuff (Tesla Daily Podcast) and consider leveraging up/down when stock is low/high.

I share your sentiment on naked calls. I haven't been a fan of them ever since after S&P inclusion, and I only started a small position in Jun'23 $400s when stock was $650 in late August, because I thought there was almost no risk, so relatively low upside didn't matter as much.

Regarding exit strategy, this is my first time trading spreads, but I actually have the opposite opinion as you. I prefer to not hold ITM calls until close to expiration. Reason being that most of the time I don't think I can accurately predict short-term market movements, so the less time till expiration, the less certain I am of what the stock will do, and so I rather de-risk and convert to shares at a good price ahead of time. Naked calls will be worth more over time only if the stock moves in the right direction, and worth less if it stays even (time decay) or goes in the wrong direction.

(ITM) Spreads, on the other hand, will not only become worth more if the stock moves in the right direction but also if it stays even. Only if the stock moves in the wrong direction enough will ITM spreads lose value over time. So there is a lot of incentive to hold onto them until closer to expiration, even if I'm unconfident in accurately predicting the stock's movement.

Again, this is my first time trading spreads, but I'll probably have to pay close attention in the last 6 months and hope I do a good job of timing it. I'm definitely unlikely to sell the Jan'24 spreads at any point in 2022, because there'll be too much time value left on the shorted $2,475 call.

 

[Knightshade]

One consideration FWIW, in the US at least...

If I hold a naked call for >1 year and sell it, that profit is taxed at the much lower LT rate.... while if I do a spread- the premium is always going to be taxed as short term gains-- and so will the spread difference profit if both ends are ITM at expiration and I deliver the owed shares by exercising the long call

Different story if you're doing this in a non-taxable account of course....

 

[FrankSG]

One consideration FWIW, in the US at least...

If I hold a naked call for >1 year and sell it, that profit is taxed at the much lower LT rate.... while if I do a spread- the premium is always going to be taxed as short term gains-- and so will the spread difference profit if both ends are ITM at expiration and I deliver the owed shares by exercising the long call

Different story if you're doing this in a non-taxable account of course....

No capital gains tax in Singapore. Unless it's from real estate speculation.

 

[Knightshade]

No capital gains tax in Singapore. Unless it's from real estate speculation.

Meaning you don't pay less tax on long term gains, or you don't pay tax on cap gains at all??

(In the US the rate is much lower if you hold it a year or more).

If I paid no gains at all on cap gains of either kind I'd be retired right now on options income

 

[FrankSG]

Meaning you don't pay less tax on long term gains, or you don't pay tax on cap gains at all??

(In the US the rate is much lower if you hold it a year or more).

If I paid no gains at all on cap gains of either kind I'd be retired right now on options income

The latter. No cap gains tax at all, unless you are speculating on real estate.