Short-Term TSLA Price Movements - 2013

[Citizen-T]

You're forgetting the "every lease only counts for 1/2 a car" rule, because otherwise this quarter would be at 5150 vs. the previous 4900 and that would just be madness

I see. I am not familiar with these "Generally Accepted Car Counting Practices" I suppose. I prefer non-GACCP.

 

[jeffro01]

This is the flaw in the accounting practices, it isn't really a lease at all but since it's something that hasn't been done before it gets classified as one and thus it gets used against Tesla when it really shouldn't matter at all.

Jeff

 

[Johan]

This is the flaw in the accounting practices, it isn't really a lease at all but since it's something that hasn't been done before it gets classified as one and thus it gets used against Tesla when it really shouldn't matter at all.

Jeff

Tesla: "Reinventing personal transport (and accounting while we're at it)"

Symbolic how old world practices and rules don't quite fit Tesla.

 

[borat99]

Can't we just call them out as being anti-patriotic since a lot of them still prefer BMW and Mercedes instead of believing in what Tesla is trying to build in here America? :tongue:

 

[Citizen-T]

Can't we just call them out as being anti-patriotic since a lot of them still prefer BMW and Mercedes instead of believing in what Tesla is trying to build in here America? :tongue:

You know your Location says "Kazakhstan"? Is there a story there?

EDIT: Nevermind, just noticed your handle. Got it now.

 

[Curt Renz]

I've owned my TSLA shares for over six months. Today I hedged them for the first time by writing covered call options.

 

[jeffro01]

I've owned my TSLA shares for over six-months. Today I hedged them for the first time by writing covered call options.

What does that mean? Pardon my ignorance...

Jeff

 

[justdoit]

Reading the twitter feed for $TSLA gives me a lot of conviction. The vast majority of people there still believe that demand is falling off for Model S and are pointing at Q2 report as evidence. They are actively shorting the stock. I believe there is still another squeeze to come, but not right now...apparently Q2 was not a good enough punch in the gut yet.

Noticed the exact same thing. But there are a lot of weird people on twitter so you have to take everything with a grain of salt.

But it does seem like the most common bear argument now is that demand is slowing down. That's why I'm actually hoping there isn't a squeeze now, just a decent pop. Let more shorts jump in until Q3 or Q4, then raise the 21k cars delivered number. That would then definitely cause a squeeze.

- - - Updated - - -

Is it just me or is Seeking Alpha on a roll today.
"Is Tesla's drive out of energy"
"5 Troubling Takeaways from Tesla's second quarter"

Don't want to add the links and give them page views

 

[Curt Renz]

What does that mean? Pardon my ignorance.

Essentially, a covered call is a form of insurance against a decline in share price. Here is a link to a CBOE explanation of option basics: CBOE - Options Quick Facts - Equity

 

[marvinat0rz]

Well...I just sold 1/6 of my long-term position. Might get back in if there is a very significant drop, but not counting on it. I really hope I am wrong, but this price level is too high for me to be comfortable. I still believe in Tesla's future, but things are moving too fast for my comfort. At least now I'm hedged if the sentiment should turn sour. This is my first sale since I bought the stock at $34.

Thanks to all forum members for valuable input and discussion. Paying taxes on this is going to be ******, but that's a good problem to have

 

[DaveT]

I've owned my TSLA shares for over six-months. Today I hedged them for the first time by writing covered call options.

For the covered calls, what date/strike did you write?

 

[deonb]

What does that mean? Pardon my ignorance...

Jeff

It means he sold his soul. j/k

It means he sold the ability for someone to buy his shares at a specific price. E.g. allow someone to buy his shares for $160 each before September 21st.

For that, he gets $9.10 per share.

Of course, if the stock price never goes over $160, nobody is going to take him up on that offer, and he pockets the $9.10, and can do it again. So he just lowered his purchase price per share by $9.10 each.

The downside is, if the price goes to e.g. $180, he would still be forced to sell $160, and would make only $169.10 on the deal (the original $9.10 and the $160).

Covered calls at the money on a volatile stock like Tesla can net you around 7% per month on a volatile stock like Tesla. But you miss out on large upward price movements while still sitting with all the downside risk.

- Deon

 

[aznt1217]

My fingers also got itchy wanting to press sell, but I am mindful that next week is investor conference week. Where big questions will be answered. It seems like we are consolidating and establishing a 150-155 range. I think next week we'll be hovering around $160 (DB PT).

 

[DaveT]

It means he sold the ability for someone to buy his shares at a specific price. E.g. allow someone to buy his shares for $160 each before September 21st.

For that, he gets $9.10 per share.

Of course, if the stock price never goes over $160, nobody is going to take him up on that offer, and he pockets the $9.10, and can do it again. So he just lowered his purchase price per share by $9.10 each.

The downside is, if the price goes to e.g. $180, he would still be forced to sell $160, and would make only $169.10 on the deal (the original $9.10 and the $160).

Covered calls at the money on a volatile stock like Tesla can net you around 7% per month on a volatile stock like Tesla. But you miss out on large upward price movements while still sitting with all the downside risk.

- Deon

To clarify covered calls, if he writes a Sept 160 call (1 contract) and it goes to 170 and is the call is exercised, then the writer of the calls sells 100 of his own TSLA shares to the call buyer for 160.

But does the call writer now need to pay short-term capital gains on his profit from the 100 shares he sold (ie., if he bought at $35 and sold at $170, his gain would be $135 which would be taxed at income tax rates)? That seems to be a big risk because the call writer could wait until he's held his shares for 1 year before writing covered calls so he will only pay long-term capital gains tax if the covered calls are exercised.

 

[Curt Renz]

For the covered calls, what date/strike did you write?

January 2014 at a strike of $165.

 

[sullitf]

Yes, I believe you would pay capital gains on the sold stock and on the premium from the option you sold.

One more clarification, its considered a 'covered' call since the option writer owns the shares he sold an option on. If you don't already own the stock its a 'naked' option, meaning if the option is taken you must buy the shares at current value. This is very risky since you loose current value - option strike, if it you write a 160 strike and it goes up to 220 you now loose 60 per share.

 

[DaveT]

January 2014 at a strike of $165.

I'm not sure if I get your strategy considering those calls have a good chance of being exercised and you'll be liable for short-term capital gains tax on the gains of the stock that's transferred (ie., if original $35 cost basis for the stock, then $130 gains). I'm assuming you purchased your stock after Jan 2013 (but even if you purchased it in January 2013, isn't there a chance the calls are exercised early and you're forced to sell your stock before your reaching your 1 year holding period for LT capital gains?).

Are you just writing covered calls for a small % of your TSLA holdings (ie., 10-20%) and then using that money to later buy puts if the stock prices rises? I'm confused. I'm not getting the strategy considering the tax implications.

 

[Johan]

Perhaps Curt has already held the stock for >1 year?

 

[kevin99]

I'm not sure if I get your strategy considering those calls have a good chance of being exercised and you'll be liable for short-term capital gains tax on the gains of the stock that's transferred (ie., if original $35 cost basis for the stock, then $130 gains). I'm assuming you purchased your stock after Jan 2013 (but even if you purchased it in January 2013, isn't there a chance the calls are exercised early and you're forced to sell your stock before your reaching your 1 year holding period for LT capital gains?).

Are you just writing covered calls for a small % of your TSLA holdings (ie., 10-20%) and then using that money to later buy puts if the stock prices rises? I'm confused. I'm not getting the strategy considering the tax implications.

Jan 14 @165 is trading at $20, so that give Curt a protection from $145-$185, which is quite reasonable.

As in my previous posts, covered call in the case of TSLA is the most effective hedge that protect the 10-20% decline. In the scenario of 30-50% decline, the owner can continue to roll the covered call further into the money. Conversely, the owner can roll the call further out.

I tend to write much shorter covered call, more like weekly or monthly.

My speculation is TSLA will hit the $200 by year end, before settling back to the $180 range.

 

[Curt Renz]

But does the call writer now need to pay short-term capital gains on his profit from the 100 shares he sold (ie., if he bought at $35 and sold at $170, his gain would be $135 which would be taxed at income tax rates)? That seems to be a big risk because the call writer could wait until he's held his shares for 1 year before writing covered calls so he will only pay long-term capital gains tax if the covered calls are exercised.

In that case the short-term gain rate would apply. But when writing fairly long term out of the money options as I did, I can always buy back the options if the share price gets near to the strike price. It's highly unlikely that the options would be exercised while they are out of the money and far from the expiration date.