Lottery ticket options

[ggr]

This thread is for people to discuss their "lottery ticket" option trades. I don 't believe in gambling, and haven't bought a real lottery ticket in the last 40 years. So what I mean by this is dropping a relatively little bit of money to buy/sell options knowing that you might lose everything, or you might win big if your logic is perfect (haha). This is trading, not investing. Mostly I invest.

I just bought some of tomorrow's $215 calls for $0.92. I also put in a close for half of them at $1.95, which if it executes will pretty much cover the cost of the trade. If TSLA hits $216.95, which is only a bit over 2% up from where it is, my risk should go away. My theory here is that deliveries will be a beat, and there's a possibility that we'll hear about it some time tomorrow, before these expire. Or there will be plenty of nice juicy rumors. If TSLA closes at $220 tomorrow afternoon, I'll have made (0.93+5.00)/2 = $2.96, for 3x payback. I'll report back tomorrow.

I am also holding some July 15 calls ($200 strike for $5) that I bought at recent lows. They were already up 150% so I sold 1/3rd (roughly) to again cover my investment in them. I won't trade July 8 options because it's a short trading week, the institutions pretty much sit on their hands, and the market movements tend to be completely irrational with low volume.

Let me of course disclaim: this should not be considered to be advice. It's a learning opportunity for all of us.

 

[mhan00]

I think that the words you wrote are English, but I just don't understand them at all.

 

[ggr]

I think that the words you wrote are English, but I just don't understand them at all.

Not surprising really, they're actually Strine. (Australian, for English speakers.)

 

[austinEV]

I think there was never any chance of delivery numbers on July 1. (also the crash incident spoiled your fun, sorry).

The one time I made money on "dailies" was when it was a really boring trading day and it dropped a buck for no reason. I got some ITM dailies and set a sell price for a modest profit and they fired when the price reverted to the recent mean. That sort of thing ONLY works with "dailies" where the cost of the trade was very low (low time value, low bid-ask spreads).

 

[Cattledog]

I have some July 8 220s and July 8 222.50s anticipating a moderate to strong beat on both production and deliveries. Probably my best case scenario (1%-2% chance) has Tesla weathering the crash news tomorrow to end in the low 210s (where it is), they announce the beat on Saturday so the market has a chance to froth about it over the weekend, and then they jump up as much as 10% over the next couple days of trading. If there was some follow-on announcement or even extra info released with the delivery numbers (such as 'we've hit 500,000 Model 3 reservations') maybe more is in play.

With guidance at 17,000 deliveries, I think a moderate beat will be over 18,000, good beat over 18,700 (10%), and great beat over 20,000 deliveries. My wags is 18,000-18,500.

I'll likely know my fate before trading starts Tuesday. This is all house money, started with a $10K option account January 2015, has been as high as $160K. Have taken out $30K and it has $90K right now. I have been going with momentum plays and either get 5 baggers or flame out. I DO NOT RECOMMEND THIS TO ANYONE. I was willing to lose $10K to see if I could market time. I have benefited from a rising market. Most money made with NVDA options, moderate with TSLA, shirt and pants lost on SPWR (this is the solar electric century, it's just that no one knows it yet).

 

[dakh]

Kinda similar here, got Sept 220 and 230's when we hit 200 after SCTY announcement (but before Brexit). My strategy was if it drops more after Brexit get even more but I decided to wait for a couple days to see if it keeps dropping. It didn't so I missed my chance.

The idea is that between $200 price and delivery number, GF opening and earnings report there's some good upside probability. I'm ready to sell chunks on substantial upswing.

So far I'm a bit in the green on those on the actual bad news (Brexit vote yes), I am cautiously optimistic

 

[Cattledog]

I bought some July 8 217.5s at open today, taking advantage of a 50% price dip on the open due to the media coverage of the unfortunate accident in Florida. So now looking for good delivery/production numbers any time from now (not really expecting them today) through Tuesday. I expect them tomorrow or 4th of July. Looking for fireworks!

 

[ggr]

This thread is for people to discuss their "lottery ticket" option trades. I don 't believe in gambling, and haven't bought a real lottery ticket in the last 40 years. So what I mean by this is dropping a relatively little bit of money to buy/sell options knowing that you might lose everything, or you might win big if your logic is perfect (haha). This is trading, not investing. Mostly I invest.

I just bought some of tomorrow's $215 calls for $0.92. I also put in a close for half of them at $1.95, which if it executes will pretty much cover the cost of the trade. If TSLA hits $216.95, which is only a bit over 2% up from where it is, my risk should go away. My theory here is that deliveries will be a beat, and there's a possibility that we'll hear about it some time tomorrow, before these expire. Or there will be plenty of nice juicy rumors. If TSLA closes at $220 tomorrow afternoon, I'll have made (0.93+5.00)/2 = $2.96, for 3x payback. I'll report back tomorrow.

I am also holding some July 15 calls ($200 strike for $5) that I bought at recent lows. They were already up 150% so I sold 1/3rd (roughly) to again cover my investment in them. I won't trade July 8 options because it's a short trading week, the institutions pretty much sit on their hands, and the market movements tend to be completely irrational with low volume.

Let me of course disclaim: this should not be considered to be advice. It's a learning opportunity for all of us.

So, the outcome. When the autopilot fatality happened, I really thought I'd lost the lottery. But then at 12:06 PDT, my protective order executed, while I was at lunch. I completely missed the runup to $218, but now I owned half as many calls, effectively for free. When I came back to my computer, of course the price had dropped back to around/below $215, so with half an hour of trading to go, I put in another close order at $0.95, hoping that it might trigger. It did, at 12:32. But I didn't sell everything, only 40% of the original holding. So I made about a 40% profit from the original investment, and now that the market has closed, the other 10% will get exercised and turn into stock. No matter what happens over the weekend with the delivery numbers, I will probably sell that stock again on Tuesday. At this instant, that adds another 15% to my profit on the series of trades, but of course that could change over the weekend. A big downward move could wipe out all that profit, since I now have downside again.

Why did I allow some to convert? Now there's some short call writer out there who will have to hand over shares, and if he doesn't have them he'll have to buy them...

The lessons I learned from this were:
1) I got unlucky with timing, but lucky anyway in the end.
2) I'd forgotten how stressful it is as expiry time approaches. I knew there were reasons I don't normally do this.

 

[dakh]

Did anyone try to bargain with Fidelity to relax their limit rules on options? I lost money on not being able to set limits that are 100%+ out from current value. No way I'm sitting there and monitoring what's going on, like the case described above where $218 peak wasn't acted on.

 

[Cattledog]

Tesla Q2 2016 Vehicle Production and Deliveries
...and you lose some...

 

[dakh]

Yep, my tickets expire in September so still a bit of a chance but short play definitely didn't work out. I was contemplating bailing on Friday to pocket about 50% but decided to hold on.

 

[ggr]

So, the outcome. When the autopilot fatality happened, I really thought I'd lost the lottery. But then at 12:06 PDT, my protective order executed, while I was at lunch. I completely missed the runup to $218, but now I owned half as many calls, effectively for free. When I came back to my computer, of course the price had dropped back to around/below $215, so with half an hour of trading to go, I put in another close order at $0.95, hoping that it might trigger. It did, at 12:32. But I didn't sell everything, only 40% of the original holding. So I made about a 40% profit from the original investment, and now that the market has closed, the other 10% will get exercised and turn into stock. No matter what happens over the weekend with the delivery numbers, I will probably sell that stock again on Tuesday. At this instant, that adds another 15% to my profit on the series of trades, but of course that could change over the weekend. A big downward move could wipe out all that profit, since I now have downside again.

Why did I allow some to convert? Now there's some short call writer out there who will have to hand over shares, and if he doesn't have them he'll have to buy them...

The lessons I learned from this were:
1) I got unlucky with timing, but lucky anyway in the end.
2) I'd forgotten how stressful it is as expiry time approaches. I knew there were reasons I don't normally do this.

To close out my own particular story, here's the overall outcome. This morning I was up early, expecting the delivery numbers to have caused a huge drop, and was pleasantly surprised that the damage was limited. So, I waited and waited (and went to the service center to pick up the Roadster from its annual service) and sold the shares at a slight loss at $214.13, since I didn't want all that capital tied up. I converted some of the accumulated profits into '18 LEAPs at $200 strike.

Profit: $284.01 for every $928.00 invested, just a touch over 30%. Quite pleased with myself, considering the fatality and the delivery miss. I won't try it again until I see similar conditions, with the market apparently undervaluing what we were all (incorrectly as it turned out) convinced was happening with deliveries.

I'd still like to hear more such stories from others.

 

[dakh]

Still 25% in the green on my tickets, decided to hold on to them since the price action suggests another $200 sale event isn't happening.

 

[Cattledog]

Frankly I have been shocked the price held up so well the last two days. I was able to exit my July 8 calss without much carnage, albeit at a lower spot than if I had been prescient on Friday.

Those who invest and sell today
live to invest another day...