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Paydirt's (TSLA) Option Investing Guide

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I hold some Jan 20 1250 calls , cost $60 , now $500
I do not want to sell , but want to take out some insurance
What should I buy to , limit my downside , but still have some upside ?
Any thoughts appreciated
If I were you, I'd sell the $2k strike against that. It's trading at $275... You take out your cost, and $210 in profit. Plus you have a max upside of $750 ($2k - $1250) in case we expire above $2k... That's a pretty good deal... Best case scenario, your $60 goes to over $1k, worst case you go from $60 -> $275 and lock profits...
 
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@hershey101 The play I make today or tomorrow will likely be Sept or Oct. Not sure I will have the courage to hold until inclusion day. I tend to chicken out on my battle plan a bit. But super happy I reached my goal as evidenced by the 5,000 shares in my Roth :p

@paydirt76 I assume by "today or tomorrow" you meant (today 7/21) or tomorrow (7/22)... Unless you already made the trade yesterday before close/posting...

Waiting for you to guide us on a good oppertunity here... I am willing to throw a bit more money towards earnings... I already got my seed investment out on the runup last week and back... So I can go back in without risking much more than I had initally risked.
 

paydirt76

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@paydirt76 I assume by "today or tomorrow" you meant (today 7/21) or tomorrow (7/22)... Unless you already made the trade yesterday before close/posting...

Waiting for you to guide us on a good oppertunity here... I am willing to throw a bit more money towards earnings... I already got my seed investment out on the runup last week and back... So I can go back in without risking much more than I had initally risked.

Something like the around the money Sept monthlies, so something like that. Cannot say which one until it is done. and that may be too late for you to see.
 
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paydirt76

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SWEET SIXTEEN

So highlighted below is the day that the thread was started. I said volatility was cheap and many knee-jerked and debated me. Much hay was made in post P&D inclusion run up in Sept then Aug calls. Leaps were sold when the goal was reached, to own 5,000 Tesla shares and have cash leftover for other investments. Seeds will be planted in Sept calls again.

StartedThread.png
 
Something like the around the money Sept monthlies, so something like that. Cannot say which one until it is done. and that may be too late for you to see.
Haha don't worry, I doubt many here (besides you) have an account large enough to move the market...

I'm already in Sept $1600c... Good to know you are eyeing something similar.
 
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Cherry Wine

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@paydirt76 Did you add anything before close today? Looks like folks were right, most of the GAAP profit was priced in in the past $500.. $100 is nice, though I suspect folks that bought OTM weeklies/Aug. will be crushed on IV tomorrow.

I'm genuinely curious as to what IV will do post earnings. On the one hand, you remove the ER from the equation, but on the other hand, you confirm S&P eligibility, leaving room for potentially explosive upside. I expect we'll see a net decrease, but perhaps less than normal.

Thoughts?
 

azaz

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Apr 17, 2016
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Yeah IV was drifting lower today but I don’t expect it to fall all that much. Are you guys gonna take some calls off the table?

not sure what I’m gonna do with these 9/18 2000C I bought today, want to hold through official announcement today inclusion but macro has me concerned. July numbers will show plateauing recovery imo
 

vikings123

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I'm genuinely curious as to what IV will do post earnings. On the one hand, you remove the ER from the equation, but on the other hand, you confirm S&P eligibility, leaving room for potentially explosive upside. I expect we'll see a net decrease, but perhaps less than normal.

Thoughts?

Yes, this is what I'm thinking too. A 100$ jump will still keep IV relevant with S&P as the backdrop. I also think we will see more S&P front running starting tomorrow. I rolled most of of July 31 calls into Sep.

I just have one July 31 2000 call. I expect this to be still in play for tomorrow and next week. Might give it a few days to see if S&P announces something quickly.

edit: Since the market was pricing in a 14% move the short term options might take a big hit.
 
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This is why I have spreads and a call I've written far OTM.... I'm net negative vega, and positive theta, so lower IV is positive for me.
Do you mind disclosing your spread? I was thinking the oct
Yes, this is what I'm thinking too. A 100$ jump will still keep IV relevant with S&P as the backdrop. I also think we will see more S&P front running starting tomorrow. I rolled most of of July 31 calls into Sep.

I just have one July 31 2000 call. I expect this to be still in play for tomorrow and next week. Might give it a few days to see if S&P announces something quickly.

edit: Since the market was pricing in a 14% move the short term options might take a big hit.

The IV Crush is real. Options were too expensive
 

vikings123

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Do you mind disclosing your spread? I was thinking the oct


The IV Crush is real. Options were too expensive

They always are. The best way to make money during Earnings/P&D reports is to sell puts, especially when we are expecting good results. The shorts will never learn, just amazing how much easy money there is in selling puts.
 

paydirt76

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I thought I'd read all of your posts this thread, but where did you cover expiration choices and strike choices?

I covered maybe in the second half in a way but did not label. Thank you for the feedback. For long timers, you may gain nothing... but maybe long timers don't yet know about the "Options Ladder" tactic... Hint: it's almost the opposite of the "options wheel."

EXPIRATION CHOICES

In investing, timing CAN be everything. Leaps, while they do have an end date, are more like stock (with the exception of strike choices)... while shorter term options are more of a gamble or raw speculation. Here's some raw speculation thoughts (be prepared to lose it all)
  • The tighter (shorter term) you are with expiration choices given the catalyst you are wanting to take advantage of, the more the risk of loss. For instance, Tesla may announce +GAAP earnings for Q2 2020 and be added to the S&P 500. If you choose August 21 2020 calls, and the S&P committee happens to be slower than average, it's possible the date they announce be outside your expiration. If you choose September 18 2020, likely it lands before that for you, but it's possible (yet very unlikely) S&P could wait for a quarterly rebalancing or do a staggered addition of Tesla (per Tesla Daily's S&P 500 Inclusion Analysis Part 2 last night). So... if you think they do GAAP+ Q2 2020 and want "guaranteed" inclusion date maybe you go with October...
  • But then what if Tesla announces GAAP- Q2 earnings? then you will have wished that you own December or January calls. Remember for longer term plays that earnings month regular monthlies (not weeklies) expire before the earnings announcement that month. October expires before the the Q3 earnings announcement in October.
I realized in hindsight that by "doubling down" on options in December 2019, I got VERY lucky on timing. I did a very long postmortem to figure out some of the reasons why I did so well. I got a relatively INSTANT huge move in the underlying stock (Tesla). So how does one mitigate luck to some extent? Longer expirations and realistic strikes.

What I ended up changing my options position to on December 30 2019 was what I call an options ladder. Like a CD ladder, an options ladder has various "maturities" or expirations. I did this to "diversify" my timing risk. So I owned roughly equal parts of March 2020, June 20, Sep 20, Jan 21, Mar 21, June 21, Sep 21, and Jan 22 calls. I viewed March, June & Sept more as gamble/short-term and the other stuff as long-term. Though in the investment world, 1 year is "long-term" nowadays when degenerates are in an out of stocks in a day... This is short-term compared to longer-term owners of stock.
  • In my mind, longer-term maturities are for longer term catalysts such as 1+ year analyst price targets, low growth analyst assumptions vs the high growth that Tesla is actually delivering, FSD in case it follows Elon time, eventual S&P 500 inclusion. From the beginning in June 2019, I think I originally picked January 2021 as my starter investment because I thought the latest Tesla would qualify for inclusion would be by January earnings 2021. But after October 2019, I realized that I would need March 2021 if I wanted the benefit of the Jan 21 announcement plus post earnings run up. (At the time in June, the Jan 21 was 17 months out)
  • So then after stock was around $320 in October 2019, I sold the Jan 21 for a double. And bought the March 2021 420 calls with the proceeds plus some cash in the account that I didn't initially use. The rest is history.

STRIKE CHOICES

(will add after edits)

WHEN TO SELL

I realized in hindsight that by "doubling down" on options in December 2019, I got VERY lucky on timing. I did a very long postmortem to figure out some of the reasons why I did so well. I got a relatively INSTANT huge move in the underlying stock (Tesla). It continued to march upward in December, and then teleported upward in January on its way to $900 a share in early February. I was also very fortunate that I largely did not begin to sell until late January and was fairly serious about reducing risk in early Feb & late Feb 2020.

How was I able to hold on so long and not sell everything at $500 in January? Well, my original goal was for a 4x in Tesla share price ($235) in 2-3 years. At the time, I never made a commitment that I wouldn't sell or trim.

I did make a commitment that I broke to not sell any "options ladder" calls until expiration. When the stock started to run up in January, I changed my goal to own 5,000 deltas for the next 6,000 points. I want to invest alongside Elon and be "in" while Elon's options pay package is in effect. I knew that if I kept all the dollars in options that are currently in options forever that eventually Tesla would hit a two year period where I would bust out and LOSE EVERYTHING.
 
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paydirt76

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TODAY IS A GIFT

Today feels like a major headfake. We just got great news. Earnings speculators are being washed out, IV is being crushed. I am initiating a position today. My custodian froze when I tried to buy in the last 5 minutes yesterday. Lucky.

I suspect that people who are long on margin, just got margin called at 1:30pm. We shall see.

DON'T PANIC. Inclusion is still in play. While hardcore Tesla investors know what inclusion means, no one else appreciates it. Thus the major under reaction

I have no clue when the best time to buy, but I am buying today. Calls are cheap when stock goes on major runs and a (final?) one is about to begin anew.
 
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Do you mind disclosing your spread? I was thinking the oct


The IV Crush is real. Options were too expensive

Yeah sorry... I put it somewhere earlier... I had/have a 1600/2000 Sept call spread... and I financed part of the cost by writing 2800c against it. I bought back those 2800c yesterday and sold half my spreads to cover cost (+ some profit). Riding the rest.
 

MSMike

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Oct 6, 2014
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Good info here. Thanks for your posts. I also have done well in options for several years now. TSLA is indeed a unique opportunity in my mind. We have abundant gains and don't need to trade much anymore but still enjoy the game. I am holding only 4 contracts and am very happy to have some in my Roths.
Many new multi millionaires created and investing a company that is doing good in the world(maybe saving it) is just feel good.
Good luck to all of you.
 
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