Beware of your own psychology as well as others’.
Have you realized how much “sentiment” has changed in just 2 weeks? Has Tesla discovered a cure for cancer? No, there has been absolutely nothing different about the company that has occurred in the last 2 weeks. The only thing that changed is the price action.
Ok, so Elon going back to full time CEO-ing Tesla might not be an earth shattering change in reality. But, what if we open tmr at 175 and MMs race to delta hedge? One thing feeds on another and maybe we’ll see 180. Then people are going to think to themselves the big boys must be buying because they like this news. So now the people are going to buy some for themselves. And what if Tesla raises prices by just another measly $250? Suddenly everybody is going to associate this latest gamma squeeze with the TWTR CEO and suddenly it becomes the best thing that has happened to Tesla since the model S. What if Adam Jonas writes a letter saying they like this decision from Elon?
Im not saying these things will happen, but we have seen enough to see its a possibility. The bottomline is the world today is different from when you sold those calls and you are simply trying to justify those positions based on how insignificant you think this announcement is, thereby suggesting everybody else must feel the same which means the stock shouldnt rally. Yet, as we have seen times and times again, feelings can change with every movement in the SP.
My wave count indicates that 102 was the generational low and 152.3 could have been the last major dip before a sustained multi years bull run. Thats why when my positions were caught offsided, I rolled them out as far as I should reasonably. I will then go back to observe the chart for more clarity. I admitted that I was wrong although I did the best I could.
Im not trying to scare anybody, but please heed my warnings and make sure you dont get yourself dug in unable to think straight under a SP that could spiral out of control.
Wise words and I totally agree, nothing changed for Tesla's at all, but TSLA has always been a "story" stock and this does shift the narrative, the sentiment has flipped considerably the last few weeks
Furthermore, Q2 deliveries are looking amazing in Europe - doesn't mean the total P&D will be dramatically higher, but the wave is smoothed, equalling lower logistics costs and certainly seems to be no lack of demand, in the US the low MY inventory would indicate quite the opposite and maybe a price-rise is looming there...?
Needless to say I had another sleepless night running multiple analysis and scenarios on my 90x -c150's. Yesterday I had decided to buy them back, take the loss and go aggressive on puts, but after much reflection this seems like a knee-jerk, emotional reaction and is a very high risk strategy:
- Implied volatility is very low right now, not a great tie to be selling DITM anything
- Extrinsic for July -p230 is almost zero
- Any sudden move down would likely result in an early assignment
So after being wiped-out with calls, I see the potential for a reversal, wouldn't take much, and lose even more in the other direction - this is what happened early 2022, flipping the trade every week led to nearly 7-figure realised losses by March that year
My new plan, which I think is relatively low risk:
- Allow the calls to exercise
- BTO 90x December 2025 c150
- Sell weeklies, aggressive on puts, safe on calls - against the LEAPS
- With IV still being very low, LEAP prices are still very good for the moment
So the idea is to be able to buy back the shares end of 2025 for what I sold them for today. Is that risky? A little, but would need to be something pretty major for the SP to be below 150 by end 2025
LEAP premiums are still very low - by way of example, I bought Jan 24 c233's last year for $128, so Dec 2025 c150's for $75 seem like a bargain
~140 weeks until expiry, write OTM calls against those, 50c per week, and you'll likely get the premium back, probably safer to write $1 against 45x or $2 against 30x
Also gives a large cash balance for selling puts, which if we think the SP is going to drift upwards, will be a profitable strategy if done carefully with risk management, i.e. commit only 50% of capital on any given week
Will be doing more analysis before markets open
optionstrat.com
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