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S&P spike - when to sell and when to re-buy?
- Thread starter Buckminster
- Start date
Loved the blog post from @FrankSG :
Tesla's S&P 500 Inclusion Part 2: Predicting the transformation of the TSLA float
Three thoughts:
1) The model doesn't reflect that buyers buy early and sellers sell later - triggered by an increase in SP. Not all the sellers will get to the reduced AUM without the SP going up hugely.
2) The model doesn't reflect the lag between the SP increasing and sellers selling. Funds that need to buy have a plan. Their bosses have agreed a purchase at a certain value within constraints. If the SP is higher than expected they will have emergency meetings planned in if necessary. Selling funds will not have such plans and will want to capitalise on a spike (eg. ARK right now). Board meetings may be required taking days to organise in some cases.
3) Sellers are in the main not required to sell within the "spike" window
Therefore I think the model is brilliant for the longer term but I expect a spike beyond these prices.
Tesla's S&P 500 Inclusion Part 2: Predicting the transformation of the TSLA float
Three thoughts:
1) The model doesn't reflect that buyers buy early and sellers sell later - triggered by an increase in SP. Not all the sellers will get to the reduced AUM without the SP going up hugely.
2) The model doesn't reflect the lag between the SP increasing and sellers selling. Funds that need to buy have a plan. Their bosses have agreed a purchase at a certain value within constraints. If the SP is higher than expected they will have emergency meetings planned in if necessary. Selling funds will not have such plans and will want to capitalise on a spike (eg. ARK right now). Board meetings may be required taking days to organise in some cases.
3) Sellers are in the main not required to sell within the "spike" window
Therefore I think the model is brilliant for the longer term but I expect a spike beyond these prices.
Tes La Ferrari
Active Member
Apologies @adiggs - I just noticed my autocorrect f'd my comment and I can't go back and correct it.
I meant to say Thanks for your thorough response!
TheTalkingMule
Distributed Energy Enthusiast
TheTalkingMule
Distributed Energy Enthusiast
Correct.So sell on December 23rd 2020 9:35am and re-buy on June 20th, 2022 11:45am?
I am thinking of buying some $350/$400 jan15 and Feb19 puts and find them somewhat cheap, but they are creeping higher last few days even though in the long term chart they are trending lower. This is confusing.
Question to more experienced folks, do you believe the put contract prices will become cheaper with higher and higher stock prices? So, I can wait to buy the same puts cheaper at SP $900/$1000?
Or even buy half and wait for the rest?
This is good! I've filed away for some yet-undreamed-of time: "Thank you for your thorough 'tho rough response..."
pz1975
Active Member
Although the puts will increase in price with rising IV, stock price is a much much stronger mover of put values. Unless you think we are nearing the top now, I wouldn’t be buying any puts.
S&P Dow Jones Indices Announces Implementation of Tesla’s Addition to S&P 500
NEW YORK, NOVEMBER 30, 2020: S&P Dow Jones Indices (“S&P DJI”) has determined it will add Tesla to the S&P 500 at its full float-adjusted market capitalization weight effective prior to the open of trading on Monday, December 21, 2020.
As announced on November 16, 2020, S&P DJI conducted a consultation with market participants regarding the implementation of the addition of Tesla Inc. (NASD: TSLA) to the S&P 500. During the consultation, which closed on November 20, 2020, S&P DJI received a variety of feedback, including implementation suggestions beyond those proposed in the consultation.
In its decision, S&P DJI considered the wide range of responses it received, as well as, among other factors, the expected liquidity of Tesla and the market’s ability to accommodate significant trading volumes on this date. After the market close on Friday, December 11, pro-forma files will be distributed, and a press release will be published announcing which company T esla will replace in the S&P 500.
Timeline.
- Throughout - speculative purchasing from active funds that benchmark against S&P500 (plus other funds etc.)
- 11th December - S&P announce who Tesla will replace
- 16th December - Most indexes can start purchasing
- 18th December - Some indexes to have completed purchases
- Premarket 21st December - Inclusion
- 24th December - Most indexes must have completed purchasing
- 4th? Jan - P&D
adiggs
Well-Known Member
From the behavior of my calls today, it looks like IV has dropped some today after the announcement last night. The rise in share price today should have exceeded the theta decay on my calls, so there is something extra going on.
It might be that with the SP 500 announcement about how the inclusion will happen, there has been a drop in IV due to the removal of some of that uncertainty. I expect the IV to resume increasing so at least for today and into this week I am not particularly worried about that drop in IV.
It might be that with the SP 500 announcement about how the inclusion will happen, there has been a drop in IV due to the removal of some of that uncertainty. I expect the IV to resume increasing so at least for today and into this week I am not particularly worried about that drop in IV.
adiggs
Well-Known Member
I've been thinking more about this, and I can say without reservation that I'm surprised at the drop in IV. My own view of things is that I expect IV to be rising throughout the month. Then again, I'm a noob - especially at buying options - so the fact that I'm surprised isn't necessarily a very good indicator of anything
So I expect an increase tomorrow and/or this week. That increase might just take us back to something like where we were yesterday / Friday.
(This and $5 might be worth a cup of coffee)
I've been thinking more about this, and I can say without reservation that I'm surprised at the drop in IV. My own view of things is that I expect IV to be rising throughout the month. Then again, I'm a noob - especially at buying options - so the fact that I'm surprised isn't necessarily a very good indicator of anything
So I expect an increase tomorrow and/or this week. That increase might just take us back to something like where we were yesterday / Friday.
(This and $5 might be worth a cup of coffee)
Wouldn't this simply mean that options market is predicting that single stage S&P inclusion is going to produce a more stable share price than unknown or dual stage inclusion? In a way the "unknown" part was still at play including possible date change so I think it's somewhat logical that IV is a bit down.
adiggs
Well-Known Member
Yes, I think you're right. I think that'll mean those that want to leverage further into the buy will be able to do so at lower premiums.
Runarbt
Active Member
Well, the action these past days are beyond stupid.
I bought 15x 12/18 $950 calls yesterday, and bought a other 15 today, as they were $0.7.
30 calls is enough.. expect sp to jump any time now. This drop is just pure stupid..
maybe not abvoe 950 be 18th, but if it does I am prepared.
..but my timing if often kinda off, so I guess 12/24 would have been a better bet.
I bought 15x 12/18 $950 calls yesterday, and bought a other 15 today, as they were $0.7.
30 calls is enough.. expect sp to jump any time now.
This drop is just pure stupid.. maybe not abvoe 950 be 18th, but if it does I am prepared.
..but my timing if often kinda off, so I guess 12/24 would have been a better bet.
Just wondering why buy a call expiring on the 18th? Why not go to the 24th or 31st? Would that not give you a greater chance to cover the run up in the sp, or are those considerably more expensive?
Runarbt
Active Member
I know.. but I am addicted to volume.
Got 30 calls now - a later expiry would only have gotten me a fraction of this. :-D
... I know.. wont matter when these expire worthless, and would have been ITM a week later.
I NEVER learn..
I know.. but I am addicted to volume.
Got 30 calls now - a later expiry would only have gotten me a fraction of this. :-D
... I know.. wont matter when these expire worthless, and would have been ITM a week later.
I NEVER learn..
Looks like 12/18 calls are under water 20-40% for lot of guys that bought recently, like me. Hmmm. There is no free money.
I have few 0115 700 calls and those are the only one little green today for me.
Given a choice, will you roll your 1218 calls to longer dated calls, like 1231/0108 etc?
mickificki
Member
I have a 12/18 call, profits are dwindling dramatically. Haven't decided what to do. On the one hand I'm expecting high IV's the week of the 14th, but the time decay would kill the call wouldn't it? Also hoping for solid IV/momentum the next two weeks(really expected more but there's still time)...Hoping someone with experience can shed some light.
use the options profit calculator to get an idea what could happen: Long call calculator: Purchase call options. I got most of my short term call by selling calls and puts so I am not that worried but I am not sure what to do either.
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