Wiki Selling TSLA Options - Be the House

[elasalle]

Frustrating trading day today. I recently had to sell 20,000 shares. I wanted to buy 5,000 back. I was using RSI and MACD. Three times I bought the shares as the SP was rising, and then sold them again on stop loss orders as the SP came back down. The last attempt was at SP 220.76. Bought them back at 221 in the last 90 minutes of trading. I didn't want to go into tomorrow holding them in case the market dropped. Now with Netflix reporting good earning, and Tesla up AH, I probably could have held them. I might try again tomorrow, but I am nervous about a TSLA drop on Thursday regardless of how good the ER is. If the SP drops below 220 I will want the cash for margin.

If you want to get out at 600 and don't mind
sell some Jan 25 - 610 CC going for $19

Based on your portfolio, you must be up/down 1M for every +5-8$ in SP

(If jan 25 had 700 strikes I would be tempted ... Jan 24 has up to 800 but not much premium ... cheers!!)

 

[BornToFly]

I think because of the High IV it'll cost him some premium. Which means if he does want back in on those 5000 shares he needs to wait for an even lower price to break even/cover what he paid for the contracts.

The next few days will be interesting. Earnings is uncertain but general consensus on the board is a beat but then Elon may dump after earnings. So the upside risk may be limited while the downside risk is large (earnings miss and/or Elon selling). Kind of feels bad. Hopefully the bears and FUD spreaders (demand problems, Elon needs to sell, earnings miss) are wrong.

Right, which is why I'm trying to buy early in an upswing and then use a stop loss order in case the SP reverses. It's surprisingly difficult to do because the SP bounces a lot during most points in time, so I have to wait to put the stop loss order in until it's climbed a bit (which might not happen, potentially leaving me without a debit free out).

 

[BornToFly]

I'm trying to figure out how to protect myself if Elon announces tomorrow that he is selling more shares to buy Twitter. How much could the SP drop if earnings are a beat but he is selling? 205 strike Puts for Friday are $3. So protecting just 20,000 shares from a really big drop would cost $60,000. On the other hand, if I sell 20,000 shares tomorrow, and it gaps up $20 after hours, that is a $400,000 loss!
I could sell closer to the money CCs to pay for the puts, but if it gaps up and then runs, I'll be chasing those forever....

Thoughts?

 

[Yoona]

I'm trying to figure out how to protect myself if Elon announces tomorrow that he is selling more shares to buy Twitter. How much could the SP drop if earnings are a beat but he is selling? 205 strike Puts for Friday are $3. So protecting just 20,000 shares from a really big drop would cost $60,000. On the other hand, if I sell 20,000 shares tomorrow, and it gaps up $20 after hours, that is a $400,000 loss!
I could sell closer to the money CCs to pay for the puts, but if it gaps up and then runs, I'll be chasing those forever....

Thoughts?

uhmmm, 400k what-if loss is not actual dollar loss; it's not even paper loss.

 

[Knightshade]

I'm trying to figure out how to protect myself if Elon announces tomorrow that he is selling more shares to buy Twitter.

He literally can't do that.

Tesla has a mandated trading blackout policy. Typically 14 days before end of quarter, lasting until 2 days after the earnings call.

Many folks think he insisted on Oct 28th to complete the purchase specifically because he had to wait until after this week to do anything to sell any more shares.

So the earliest expiration you'd want puts for to protect again Elon selling would be 10/28.

 

[sdtslafan]

I'm trying to figure out how to protect myself if Elon announces tomorrow that he is selling more shares to buy Twitter. How much could the SP drop if earnings are a beat but he is selling? 205 strike Puts for Friday are $3. So protecting just 20,000 shares from a really big drop would cost $60,000. On the other hand, if I sell 20,000 shares tomorrow, and it gaps up $20 after hours, that is a $400,000 loss!
I could sell closer to the money CCs to pay for the puts, but if it gaps up and then runs, I'll be chasing those forever....

Thoughts?

How bout selling far OTM leaps to fund buying your short term puts? You have your pie and eat (most of it) too. Even if it gaps up you'll have plenty of time to buy the calls back later at a profit after the next round of FUD. For example you might consider selling 1/19/24 750 C for $3.45.

 

[BornToFly]

He literally can't do that.

Tesla has a mandated trading blackout policy. Typically 14 days before end of quarter, lasting until 2 days after the earnings call.

So you're saying that if on the call tomorrow someone asks him if he is going to have to sell more shares to buy Twitter, that he can't answer the question? I can't imagine him saying "I can't comment right now" being taken well by investors who could think that is an admission of future sales.

 

[BornToFly]

uhmmm, 400k what-if loss is not actual dollar loss; it's not even paper loss.

What do you mean? If I sell 20,000 shares at 224, and it gaps up to 244 AH, I will literally have to put in an additional $400,000 to buy the same number of shares back.

 

[Knightshade]

So you're saying that if on the call tomorrow someone asks him if he is going to have to sell more shares to buy Twitter, that he can't answer the question? I can't imagine him saying "I can't comment right now" being taken well by investors who could think that is an admission of future sales.

AFAIK that's not among any of the SAY questions near the top of the voting.

But yes, he couldn't legally comment.

 

[MrMoo]

I'm trying to figure out how to protect myself if Elon announces tomorrow that he is selling more shares to buy Twitter. How much could the SP drop if earnings are a beat but he is selling? 205 strike Puts for Friday are $3. So protecting just 20,000 shares from a really big drop would cost $60,000. On the other hand, if I sell 20,000 shares tomorrow, and it gaps up $20 after hours, that is a $400,000 loss!
I could sell closer to the money CCs to pay for the puts, but if it gaps up and then runs, I'll be chasing those forever....

Thoughts?

He won't announce it. He'll just do it and you'll find out later. This is to avoid front running, because let's be real if he announces it everyone is going to buy puts or sell shares to try to beat him to it.

There are a lot of factors at play here.

The first one is TSLA beats or misses. But in your scenario you said beats so if we go by a beat then we refer to the next factor.

You need to look at how much TSLA has gone down when Elon does sell. There was a day when the stock went down 11% when he sold. But there was another day when the market rallied and TSLA actually went up with Elon selling into that strength. If TSLA does beat there may be enough volume to just buy his shares and simply reduce the gain we have on the day rather than take us into the red.

Finally you need to find out when the window is / how long Elon has to sell after an earnings report. This will set your expiry. If you plan to buy weeklies but he sells next week then it's wasted money.

If you are under the assumption TSLA beats, I would find out Elon's selling window, wait for Elon to pump the stock in the earnings call because you know his going to pump it before he sells (which he did in Q1) then buy the puts because you'll take advantage of the earnings pop.

 

[vikings123]

I'm trying to figure out how to protect myself if Elon announces tomorrow that he is selling more shares to buy Twitter. How much could the SP drop if earnings are a beat but he is selling? 205 strike Puts for Friday are $3. So protecting just 20,000 shares from a really big drop would cost $60,000. On the other hand, if I sell 20,000 shares tomorrow, and it gaps up $20 after hours, that is a $400,000 loss!
I could sell closer to the money CCs to pay for the puts, but if it gaps up and then runs, I'll be chasing those forever....

Thoughts?

You have to look at these transactions from a % perspective. Breakeven is 202 so to be able to sell shares at 205 you are paying 60,000 premium. 20K times 202 is about 4 million. 60000 is about 1.5% of 4 million. I know the FOMO feeling if TSLA gaps up but this is insurance and the premiums for buying this insurance is not cheap

You are trying to have the cake and eat it too . You could always sell 200 contracts of maybe the 235 strike to fund the puts but then again you are capping your gains.

 

[Yoona]

What do you mean? If I sell 20,000 shares at 224, and it gaps up to 244 AH, I will literally have to put in an additional $400,000 to buy the same number of shares back.

you said "if I sell 20,000 shares tomorrow, and it gaps up $20 after hours, that is a $400,000 loss!"

if i am all-cash and sp climbs to 244 AH, i didn't lose money.

if i decide to buy shares @244 next day, my cost basis is 244. No capital gains. No capital loss. Spending an additional 400k (for the same number of shares) doesn't mean i actually lost 400k. It just means i could have bought it 400k cheaper - opportunity lost, not dollars.

listen starting at 12:57

 

[vikings123]

So you're saying that if on the call tomorrow someone asks him if he is going to have to sell more shares to buy Twitter, that he can't answer the question? I can't imagine him saying "I can't comment right now" being taken well by investors who could think that is an admission of future sales.

I think it is possible one of the analysts will ask this question but it does not mean Elon has to respond. It is possible Tesla IR sends a pre earnings note to the analysts to zip it since discussions are still happening with TWTR.

 

[BornToFly]

Great stuff everyone. This group rocks.

 

[WattsHappening]

AFAIK that's not among any of the SAY questions near the top of the voting.

But yes, he couldn't legally comment.

Doesn't the quiet period end as of the earnings release/earnings call?

Why wouldn't he be able to answer questions about his intention on the call?

 

[Knightshade]

Doesn't the quiet period end as of the earnings release/earnings call?

Why wouldn't he be able to answer questions about his intention on the call?

SEC quiet period does.

Tesla has their own specific employee blackout period on trading that extends to 2 days after ER.

 

[jeewee3000]

Doesn't the quiet period end as of the earnings release/earnings call?

Why wouldn't he be able to answer questions about his intention on the call?

Because publication of his intention to sell alone would tank the stock. He would have to sell more shares to get the same amount of capital together. Of course he won't do that.

 

[BornToFly]

Well, I was excited about the markets when I went to bed. Now, not so much. Hopefully buyers show up. It will be interesting to see how Netflix trades today.

 

[OrthoSurg]

Well, I was excited about the markets when I went to bed. Now, not so much. Hopefully buyers show up. It will be interesting to see how Netflix trades today.

At least I managed to close my uncovered calls on GOOG I sold ITM at 98 2 days ago instead of Puts with a small tiny profit.

Sold them at 6.63 and BTC at 6.50

Could have been worse.

Thanks to my first 2 patients who didn’t show up. Got paid 8 TSLA shares to correct my GOOG mistake.

General question here:
Anybody hedging against China economy break down with some YANG Triple bear ETF on China economy instead of SQQQ? The trader I know told me 3 months ago, his mandarin teacher was telling him how his family back in China was panicked that there were no jobs and that they were worried. They told him that the media was always saying that China is fine… but that it was a lie. Even if tawain is not invaded, China is a a house of cards according to him.

I don’t know how Zach will address the à China waiting list but if China economy is that bad, it might be bad news.

 

[SebastienBonny]

Where can we sign for a NFLX-scenario tomorrow?