It's very risky placing a market order for lightly traded securities, like TSLA options. I strongly urge that you always place a limit price.
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Newbie Options Trading
- Thread starter Jonathan Hewitt
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- investing options TSLA tsla stock
I concur with both thoughts here. You'll usually do a lot better finding the point in the spread your order will execute (both buy and sell) than a market order which will often take the current bid-ask from the market maker. The difference between those scenarios will swamp the savings in commissions (especially on-line commissions which are minimal).
In addition, as Robert says, on occasion you can really get stung in a market order for these low volume trades (even beyond the spread in some cases). The only time I make market orders on Options is when I'm in a 'panic' hurry and it's a very high volume stock, like AAPL. Otherwise always Limit the order- you can always give a generous limit if you really want it to execute right away
Sage advice imo from both posts...
InTheShadows
Active Member
So everyone, I'm a definitely a newbie, and I'm not sure what to do now.
I have a very small holding of shares ~ ACB $150. I also have 1 call option contract Jan 2016 @ $200 strike price. It has already risen 30% from when I first had it and I'm not sure what to do from here. I'm thinking of selling it and locking in that 30% gain, and then turning around and buying a short-dated call just in case TSLA does go bonkers after the next earnings report. Any suggestions from the pros? I don't want to get too greedy and lose it all, but I also don't want to miss out on a huge gain from the earnings.
I have a very small holding of shares ~ ACB $150. I also have 1 call option contract Jan 2016 @ $200 strike price. It has already risen 30% from when I first had it and I'm not sure what to do from here. I'm thinking of selling it and locking in that 30% gain, and then turning around and buying a short-dated call just in case TSLA does go bonkers after the next earnings report. Any suggestions from the pros? I don't want to get too greedy and lose it all, but I also don't want to miss out on a huge gain from the earnings.
Mario Kadastik
Active Member
You could also make it a risk free spread although if it's up 30% it may not be too many strikes. As an example I bought during some dip the Jan $140 call for 2016. It cost $44 approx. Today I sold the same date $225 call at the same cost making it a risk free spread and gaining the capital back that I re-invested in some other options that increased my overall delta.
So you could look at eliminating the risk. You would still have some upside (as lower strike calls have higher delta) and you could reinvest some of the original cost into shorter term plays though at current IV that might be hard to find good deals
So you could look at eliminating the risk. You would still have some upside (as lower strike calls have higher delta) and you could reinvest some of the original cost into shorter term plays though at current IV that might be hard to find good deals
What Mario said, but be very careful this close to earnings. Implied Volatility or IV spikes way up right before earnings reports, then plummets afterwards, and IV is one of the most important factors to consider in options pricing. So your short-term option bought today could be worth much less after earnings is reported if you pick the wrong strike price and/or earnings isn't what you hoped it would be.
If you don't have money to "play with," can afford to lose, and expect to need use of those funds soon, I would not advise trading in options at all. There are ways to make pretend trades to learn about options trading, and lots of books you could read if you want.
If you don't have money to "play with," can afford to lose, and expect to need use of those funds soon, I would not advise trading in options at all. There are ways to make pretend trades to learn about options trading, and lots of books you could read if you want.
Mario Kadastik
Active Member
Actually considering it's 2016 options I'd keep them for longer snd not mind about every ER. If you are really worried you can hedge at a far enough strike price (e.g. Ca 30% of initial investment value) just the day before earnings. Then if the ER is bad you can sell the original call and close the hedge as well, hopefully cushioning the drop as the move should have less of an impact with LEAPs. If TSLA runs up the gap in strikes eorks for you and you gain more money even though you hedged...
You can get better returns from short-term options if the stock goes up (as many of us found after 2013 Q2 report) and you can lose it all if it goes down (as we found out after the 2013 Q3 report). Long-term options like your Jan 2016 are actually a good balance since you get much better returns than just owning the stock but you will have a long time for the stock to recover if it takes a dive.
@CaptainKirk
My advice is close to Mario's second post. Given you nearly in the money 2 years from expiration, I would just hold it as a stock replacement for 100 shares of TSLA at a much lower cost of risk capital. IMO that 30% you are afraid of losing will look puny to the low risk gain in 2 years
My advice is close to Mario's second post. Given you nearly in the money 2 years from expiration, I would just hold it as a stock replacement for 100 shares of TSLA at a much lower cost of risk capital. IMO that 30% you are afraid of losing will look puny to the low risk gain in 2 years
FYI, I was lamenting the high cost of calls for next week, then I remembered my old friends, the deep-in-the-money calls. Sept 22 160s (and below) are selling at near face value. No chance for a multi-bagger, but still 40/200=5x leverage over shares.
Yep and a lot less risk. I've used those before for the same reason. Take what the market(makers) give you
just to clarify, do you mean february 22nd DITM calls or september 20th DITM calls?
the february calls are at face value; the september calls have ~$15 of time value...
surfside
Yea this is a good point. I'm thinking of selling my Feb $225 calls if we have a run up until earnings and maybe buy some of those 160's. It's getting harder to get a multi bagger even with OTM calls b/c they're so expensive.
So I've always just held shares/LEAPs through earnings, and never really paid attention to IV and how it fluctuates before and after.
I am currently holding some feb 22 200 calls now though worth 10.44. So after earnings the stock will have to be above 210 or so for them to retain this price? With IV so high is it even worth trying to buy some OTM flyers or are deep ITM going to be the best bet?
Also this may be a horrible idea, but assuming Tesla has a great report, Solarcity should react positively as well? Perhaps buying OTM solarcity calls would be a clever way of working around Teslas high IV?
I am currently holding some feb 22 200 calls now though worth 10.44. So after earnings the stock will have to be above 210 or so for them to retain this price? With IV so high is it even worth trying to buy some OTM flyers or are deep ITM going to be the best bet?
Also this may be a horrible idea, but assuming Tesla has a great report, Solarcity should react positively as well? Perhaps buying OTM solarcity calls would be a clever way of working around Teslas high IV?
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Your crystal ball will have to tell you. The point of the OTM calls is you can buy more of them and get more leverage in the event of a crazy upside. You can get many times more OTM calls even with the high IV than you can face-value ITM 160's. So if the stock goes to 240 the 200's are clearly better, if it goes up but somewhere between here (195 and 210) you actually lost money. I am not sure where the crossover is, but it is pretty high up there. Someone refer us to an online calculator now...
Muskol
Member
Newbie looking for some advice or strategies on rolling up strike prices on in-the-money LEAPS.
I have two strikes in particular that I'm starting to wonder if I should roll up to higher strikes to maximize my leverage after the recent run up.
1x JAN16 $175 currently up 140%
2x JAN15 $180 currently up 170%
Any suggestions or are there any general rule of thumb in this regard?
I was thinking to sell them both and pickup the cheapest strike price that allows me to double the amount of contracts I had before. Does that make sense?
I have two strikes in particular that I'm starting to wonder if I should roll up to higher strikes to maximize my leverage after the recent run up.
1x JAN16 $175 currently up 140%
2x JAN15 $180 currently up 170%
Any suggestions or are there any general rule of thumb in this regard?
I was thinking to sell them both and pickup the cheapest strike price that allows me to double the amount of contracts I had before. Does that make sense?
If you're bullish on TSLA, then you can markedly improve your leverage by selling these calls and buying something OTM, like $250 or $300 LEAPS. For each dollar increase in TSLA price, their value will increase (as a percentage of dollars invested) much more than your ITM calls. The reverse is also true: their value will decrease more sharply if TSLA price falls.
I've recently sold some really deep in the money LEAPs (Jan 2015 125 and Jan 2016 130), figuring I would roll into a higher strike price. I'm personally pretty ambivalent about the quarterly report, figuring that at current prices high expectations are baked in so the stock is more or less as likely to go down as up after the report. My plan is to either catch a pre-earnings correction to buy back in to LEAPs or wait until the dust settles after the report. How much time value are LEAPs likely to lose after the report comes out?
It's a pretty classic risk vs reward trade-off. I'm pretty cowardly so I'm planning on getting LEAPs more or less at the money.
It's a pretty classic risk vs reward trade-off. I'm pretty cowardly so I'm planning on getting LEAPs more or less at the money.
InTheShadows
Active Member
I was thinking about doing this with my feb and march calls that are now pretty deep in the money. Does it make sense to do it with near term options too?
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