Requests for advice (getting advice or not, either way it's your own responsibility)

[kenliles]

I want to learn how to short

Consider staying clear of this four letter word: TSLA

 

[uselesslogin]

OK, so I am mulling option strategies. Essentially I want to sell 100 shares but it seems I can do better if I do the following.

Sell Jan '16 call @255 for about $66 (the call is covered with the 100 shares I am talking about)
Sell Jan '16 put @255 for about $71
Buy Jan '16 put @120 for about $12

So, then if the stock is above $255 I get the $255+$66+$71-$12=$380
If the stock is below $120 I still get $66+$71-$12=$125 but I also can immediately sell the shares I now have to buy at $255 for $120. So that costs me $255-$120=$135 but since I still got $125 from the other sales I am only out $10 on the entire setup. Now, I still own the shares that I wanted to sell in the first place but that is the only significant downside I see. And if I were really worried about it I could always buy 2 puts.

Is this as strategy that is common? Is there a name for it? Is there anything I am overlooking here?

edit: I just realized that on the downside I still own my shares and I can't sell them @255 anymore so I lose that opportunity cost. It makes more sense to me now because until I realized that it was seeming like free money. So I am still wondering if this is a reasonable strategy or if there is something else that makes more sense and does something similar.

 

[marvinat0rz]

So I've been thinking. Lately I have been hedging by simply selling common stock. For tax reasons, this is painful, and I also miss any potential gains on the shares I have sold. It does help me sleep better at night, but the missing potential upside is painful.

So I was thinking: Perhaps I should use a costless collar strategy for some of my shares: Selling a covered OTM call option and using the proceeds to buy an OTM put option. Do any of you have any experience with this? Any special risks or disadvantages to consider? Has this strategy proved expensive when used on TSLA?

 

[Lauren Martins]

Hi Lauren, I'm glad you want to learn how to short. There are plenty of people out there who will tell you when something is a good short, in fact I can suggest one of the best. This man will help you learn:
Douglas Kass (DougKass) on Twitter

Thanks Mershaw, Ive been watching some videos in how to short, seems a bit risky! I manage to go from 25 to 41 shares by tryng to by low and sell him following the graph, am I doing the right way? ear the word short a lot here, do a lot of people take this risk? Am I the only female around 20 years old here? please private message me!:redface:

 

[bonnie]

Here is a resume about Lauren Martins
I following tesla since the start, I ended up learning to invest on my own, with the up and downs I manage to go from 25 to 41 shares valued around $10.000;but I sold it at $214! mistake! ;So glad I found this forum! I want to learn how to short

Cheers Lauren

You paid an average of $10 for your 41 shares? Or did I misread that?

 

[Larken]

Thanks Mershaw, Ive been watching some videos in how to short, seems a bit risky! I manage to go from 25 to 41 shares by tryng to by low and sell him following the graph, am I doing the right way? ear the word short a lot here, do a lot of people take this risk? Am I the only female around 20 years old here? please private message me!:redface:

I might be going out on a limb here, but one word. Troll. JP is that you? or maybe Mr. Illogical Thought from SA

 

[Lauren Martins]

You paid an average of $10 for your 41 shares? Or did I misread that?

Hi Bonnie, what do you mean? sorry I'm not yet really familiar with the technical terms. I started with 25 shares, selling them up and buying then dropping, each time I mande a small profilt just enough to buy a new share, Ive been doing that in my free time together with royalties from being a youtube partner, when I'm not working in my regular job.

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I might be going out on a limb here, but one word. Troll. JP is that you? or maybe Mr. Illogical Thought from SA

I'm new here and unfamiliar with it all and probably speaking a lot of nonsense, but im dead serious

 

[Larken]

Hi Bonnie, what do you mean? sorry I'm not yet really familiar with the technical terms. I started with 25 shares, selling them up and buying then dropping, each time I mande a small profilt just enough to buy a new share, Ive been doing that in my free time together with royalties from being a youtube partner, when I'm not working in my regular job.

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I'm new here and unfamiliar with it all and probably speaking a lot of nonsense, but im dead serious

Alright, if you say so. Well, best of luck to you is all I can say

 

[Lauren Martins]

Alright, if you say so. Well, best of luck to you is all I can say

Thanks, I'm a little bit overwhelmed with so much information and technical terms I was doing it all on my own and by Google news! This place is wonderful

 

[keithz]

You paid an average of $10 for your 41 shares? Or did I misread that?

Possibly European where decimal is comma. So maybe she meant her 41 shares are worth about $10k?

 

[kcveins]

Possibly European where decimal is comma. So maybe she meant her 41 shares are worth about $10k?

Exactly.

 

[neroden]

Do what makes you comfortable.

No investment choice is worth sleepless nights.

What keeps me awake at night is not what keeps you awake at night. You have to understand your own emotional reactions.

I'm more comfortable concentrating in a few well-vetted companies which I am sure won't go bankrupt, and mutual fund holdings keep me awake at night. I'm weird that way.

(I also keep a *huge* cash cushion. Not everyone feels the need to do this.)

 

[sleepyhead]

Mike, let me just say that I am a little older than you and have a little more money in my 401(k) and I have 70% of my 401(k) invested in one stock CSIQ.

You are too young to be investing in dividend paying companies. I would look at putting 100% of your money in TSLA. Your $40k will most likely turn into $400k in 10 years. Your dividend stocks at best will turn $40k into $100k.

Even if TSLA goes bankrupt and you lose that $40k it will not put a big dent into your retirement planning. On the other hand $400k will make a big difference.

Mike - I also started with a lot less money at the beginning of the year in my 401(k) than you have now, and now I have a lot more than you (this is a long only, no options, no shorting, no margin account). If we hit a recession next year then you will probably have more money than me with this strategy though. So there is a lot of risk, but if you can spot the recession coming in advance (very hard to do) then you can still cash out with minimal losses.

I am not bragging here, just trying to show you the power of focused investing that DaveT has been talking about.

It is not for everyone and I am not saying that you should do this, but do your research on this topic and especially on TSLA. Instead of diversifying away from TSLA I would rather have you do a lot of research on Tesla and then decide whether 22% of your portfolio is too much TSLA. You might be surprised with your findings and decide that 22% of TSLA is nowhere near enough exposure. TMC is a great place to learn about the company.

Risk is relative. I believe that there is a lot less risk in investing 100% of your money in TSLA than it is to invest in the S&P 500 index (perfect diversification of US stocks) for a 10-year period. But that is just my personal opinion and a lot of people would disagree with me.

Since neroden brought this thread back from the dead I will give you guys an update on my "focused" investing comments:

In the 401k that I mentioned here, over the past two months, I have invested 99% of it in JASO.

I looked up the account and overall since 9/24/2013, when I made these comments, my 401k is up 98.3% (over 200% annualized) through end of trading on Friday 3/14/2013. This is a straight long stock portfolio, with no margin, no options, or any other form of leverage.

Of course if the market goes south big like in 2008 then I can lose a lot of it; but so will everyone else. Even if I lose 70% while others lose 40% (like in 2008) then I think that I will still come out ahead by a long shot with this strategy.

 

[mershaw2001]

Sleepyhead, I was wondering how you deal psychologically with the loss of value by CSIQ, given that it is 70% of your 401k. When you are focused investing and things don't move how you expect, is it an opportunity to buy more or have you had to take "evasive action"?
There is a good set of data out for the Taiwanese market and its been analyzed by a few papers: Among Taiwanese day traders, there were two predictions of which traders would do well in the next year:1) those that did well in the prior year, and 2) those that focused their investments in a limited number of stocks.