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i didn't open my IC yet coz i observe on Mondays and decide on Tuesdays (my theory is that Mon STO doesn't necessarily mean higher income, and Tue STO is lower risk)... my pc refused to boot up today so i brought it to a shop before Market Open and that saved me from opening anything for this weekI need Yoona to post something about why we aren't going to hit my BPS short leg of 790 on Friday....
We are still less than a week out from something like a 150% earnings beat.
I need Yoona to post something about why we aren't going to hit my BPS short leg of 790 on Friday....
We are still less than a week out from something like a 150% earnings beat.
I think I thought like you few years back - safe small gains are safer than additional small exposure. After lots of experience with both, I've changed my mind.No, I haven't read your other posts. I'm just pointing out the increased potential for unrealized/realized losses over time, not a margin call specifically.
I obviously don't know what his portfolio looks like but based on his income, I'm assuming he got in early in TSLA and it makes up a large %.
Your suggestion is get even more long to provide some short term income. I'm all about downside protection so I suggest considering CCs to cushion the blow if things get bad or stay flat. I'd rather say something to help him keep the gains even if it limits his upside. I think even far OTM CCs can provide a decent income considering his salary.
Don't take it personally (I don't think you did), but I'm always skeptical. I'd say the same thing to an irl friend, if I had had any who traded like us. I think it can come off wrong sometimes but I end up learning a lot because now I'm looking at the TSLA options chain more than I would have today.
I'm always going to point out the what ifs when it comes to doubling down on long positions using leverage at the beginning of what might be an ugly bear market. Especially seeing how people regularly get wrecked trading something as volatile as TSLA.
Let us not forget the looming share split. Forcing all naked short to find shares is the ultimate demand creator. Which as we know from the past then creates further demand from retail short covering and MM hedging.Something I use to calibrate myself to possible drops and rises, and its not technical analysis, is I ask myself where new buyers are going to come from (there are always plenty of sellers that want to push the share price down). For the share price to go up from $900 we need buyers that want to own the shares even when its 950. And more buyers at 1000. And more yet at 1300 for an ATH. And 1400, and ...
So - where do those buyers come from. I see two possible sources right now - maybe 3.
1) The people that invest almost solely based on financials. The P/E ratio and other metrics will get so stupidly low for such a fast growing company, or just plain stupidly low regardless, and we'll find new buyers in this crowd. People that will keep buying on the way up as long as the ratios continue meeting their criteria.
The folks that invest based on financials probably need 2 more quarters of great and improving numbers to start believing what they're seeing (my guess).
2) The investment grade rating upgrade. There are investors that would probably like to own Tesla right now, but their rules for investing require them to invest in investment grade companies. In Tesla's case this seems like an odd requirement to impose as I see no reason for Tesla to request / pay for a bond rating evaluation as Tesla is getting out of the bond selling / borrowing business (that makes me happy). So there needs to be some other mechanism for the rating reevaluation - Tesla doesn't care one way or the other.
But if/when this happens, that will unlock new buyers.
3) Macro story changes significantly and improves, and investors that left Tesla as they left all growth companies return. Russia's war on Ukraine ends favorably for Ukraine. Strong evidence inflation has reached its peak and is coming back down, with employment staying strong. Interest rate increases go more slowly than currently expected - stuff like that.
Notice that I didn't include the Tesla Story in the list. The story is already so good, and I believe known in its outline to the investing community, that the lack of investment today is not due to ignorance about Tesla; it's lack of belief in the story and/or a desire to time the market. For this to move the share price in a big way, we'll need somethign really big announced that changes the Story. Berlin and/or Austin ramping faster than anticipated by a quarter or so doesn't hack it - sounds like the existing story.
FSD being solved and Tesla getting approval to run fully autonomous cars in some locales - I think that might do it.
In the meantime I predict that we've got a month and a half of the stock price being dominated by the macro story and those that manipulate the share price down to make money. I'm expecting roughly 800-1000 share price throughout May. Just normal gyrations primarily among the day traders as we mark time waiting for the next news, or big change in the macros.
Then in June, especially the back half, people will start positioning for a big production report and we'll be moving back up.
The thing about TSLA that I've seen before, having been invested since 2012, is that the story and associated fundamentals at that point in time can be so amazingly good, and the share price doesn't take off and reflect that. This is NORMAL. The lack of reaction can go on for YEARS.
I lived through ~5 years of sideways trading, prior to the stock breaking out of its $40-80 trading range to where we're at today. We -might- (though I strongly doubt) that we're just at the start of another multi-year sideways action on the shares.
I get that a couple won't wipe him out. If you can't tell, I'm pretty bearish now and that's why I feel strongly about using leverage in a market like this. Also not a fan of sitting on unrealized losses for an extended period of time. I still plan to buy more shares but I also bought far OTM puts on this latest run up.I think I thought like you few years back - safe small gains are safer than additional small exposure. After lots of experience with both, I've changed my mind.
I've lost few thousand shares at prices around $120-$130, and barely saved few more thousands around $300. So while I didn't really lose anything (I've booked gains), missed opportunity certainly feels like a loss, as perceived from this side of the events.
I'll repeat - I find CCs (either short or long term) way more dangerous for long term health of portfolio, as compared to longer term (say Dec'22) short puts with strike close to SP - assuming short puts are sold in low doses compared to available margin.
Point to use low amount of available margin is super important, as this prevents margin call, and only margin call can dislodge one from a position, and long term puts have deep break-even buffer. So no matter what happens, with short put, strategy is: wait and do nothing. (again, when margin is plentiful). For demonstration, here is an example with 1500 shares around 1000 SP/strike:
- with one put, you get margin call at TSLA ~$140 (though put could be exercised earlier due to no time-value)
- with two puts, you get margin call at TSLA ~$240 (see above)
- with four, you get margin call at TSLA btw $450 and $500 (my calculations almost omit time premium as it decreases with put deeper ITM, so they may need slight adjustment downward)
- One theoretically could sell between 12 and 15 contracts against 1500 shares at strike=SP, depending on one's initial/maintenance margin (assuming 55/50%), but one shouldn't do it, because then there is no margin space to protect against any drop. This is why small use of margin is important, to buffer us against huge drops. But selling one contract against 1500 shares? Very low risk, unless you expect that TSLA never comes back. And there is NO riskless trade.
In both cases, we're selling time premium; however, long term direction is naturally up, i.e. in the desired direction for being short put(s). Bear markets don't change that, except temporarily.
Possible drawdowns are limited (to SP=0), and there is no need to manage the short put trade (when small) until closer to expiration or when SP drops >50%; worst comes to worst, say further 50% drop, put can be rolled for another year for more premium, or out and down.
On the opposite side, upside is unlimited, so while CCs seem safe, unless actively managed, this is the feeling that lasts only until one loses shares and observes missed gains.
I'm trying to convey my experience in the hope my 7 figure lesson is useful to others; yet, it seems that option lessons are best learned trough pain and stress...
I thought about the share split later in the day after my post. I definitely add that as a catalyst that draws in new buyers. In theory a split makes no difference to the share price or company value. This is true in a world where the market has manufactured 0 additional shares not issued by the company.Let us not forget the looming share split. Forcing all naked short to find shares is the ultimate demand creator. Which as we know from the past then creates further demand from retail short covering and MM hedging.
100% agree that the "story years" are over, we are now on to fundamentals. I just foolishly assumed people would recognize the fundamentals far earlier. Can wait a bit....
IMO the next phase will be the "no way they do this with Energy too" phase.
I think you're right about the Energy business as well. If for no other reason the path from here to there doesn't require any nearly impossible to solve problems. Its just more of what the company is already doing, with an even greater emphasis on battery production.
I thought about the share split later in the day after my post. I definitely add that as a catalyst that draws in new buyers. In theory a split makes no difference to the share price or company value. This is true in a world where the market has manufactured 0 additional shares not issued by the company.
Regular short sales of shares aren't an issue - there's a negative share position to pair up with a positive share position, for a net zero change in shares. Naked shorts though represent new shares for the (supposedly) brief period of time they are in existence. To the degree these are manufactured by market makers that maintain a net 0 delta position (i.e. they are actually making a market in TSLA trades, rather than trying to be directional), they come and go and I even agree with the claim that they are a good thing.
But these assumptions aren't true. I went looking recently - I thought market makers had more time to locate shares to back naked shorts than they have. It looks like a 3 day settlement period rather than 2 days for the rest of us. That is still an extra day for manufactured shares to live, and that's time for naked shorts to sell shares they haven't borrowed, and keep them alive via BTC / STO using the wider settlement window.
I'm pretty sure that pile of manufactured shares requires settlement prior to the split happening, and this drives incremental buying that doesn't otherwise exist. It also shrinks the pool of actual shares in circulation (float) - more demand (buying) from a shrinking pool of supply (float) = fun times for long term buy-n-hold.
Long winded way of say yes to the stock split - totally agree its a source of new buyers that will move the share price in a big way.
I think you're right about the Energy business as well. If for no other reason the path from here to there doesn't require any nearly impossible to solve problems. Its just more of what the company is already doing, with an even greater emphasis on battery production.
the theory goes that there's a cartel among which the naked shorts are circled, i.e. at the moment naked short party 1 has to cover, they call the other naked shorter 2, who will provide them with virtual shares, only to do the reverse thing a few days later. this way there are no FTDs because none of the two parties ever fail to deliver, they just deliver virtual shares instead of actual ones.I thought market makers had more time to locate shares to back naked shorts than they have. It looks like a 3 day settlement period rather than 2 days for the rest of us.
this I also don't understand.If I can make up fake shares at all, and short one of them to you....and a 5:1 split happens- why can't I make up 4 more fake ones for you?
I mean, that'd literally be what would happen if I had shorted one naked before the split, BTC it before the split, then STO the same $ amount of naked shorts after the split, right? (assuming unchanged stock price during that time)
So why does the split itself "force" me to suddenly deal in real shares that day when I can otherwise make fake ones all the time?
I'm not sure I understand it either, but I think the issue is that for the split, they all have to cover on the same day....the theory goes that there's a cartel among which the naked shorts are circled, i.e. at the moment naked short party 1 has to cover, they call the other naked shorter 2, who will provide them with virtual shares, only to do the reverse thing a few days later.
this I also don't understand.
you'll have n times the put, but your exposure remains the sameUsing the December 22 single put sell example and assuming a n:1 split occurs before that, what is the playbook with regards to the sold put?
Massive overreaction on $GOOGL, beginning of the week I was still holding 5x -p2700, but wanted to derrick this and wrote 5x -p2400/-c2400 straddles as part of the solution, the puts are cash covered and I can roll them down, wouldn't even mind the shares at these prices, totally crazy
I bought more stock at openMassive overreaction on $GOOGL, beginning of the week I was still holding 5x -p2700, but wanted to derrick this and wrote 5x -p2400/-c2400 straddles as part of the solution, the puts are cash covered and I can roll them down, wouldn't even mind the shares at these prices, totally crazy
And 5 minutes before close yesterday I setup a 5x 4/29 -c2400 / 7/15 /c2600 calendar spread, almost the same premium for each side of that trade, so essentially I get 5x 7/15 +2600's for free that I can sell calls against for the next couple of months