Short-Term TSLA Price Movements - 2013

[sleepyhead]

Interesting to see how the stock reacts to the article. It is a jerk knee reaction first, then shrug off like nothing new.

The stock has behaved in similar contrarian fashion to the last several non-trivial events, both positive and negative. It seems there are plenty of people on both sides: buyers who are ready to buy at 3-5% dip; sellers who are ready to sell when it gets to $170.

Nothing beats a hedged play when price are bound in the range.

Kevin, I am glad to hear that you are making money on your strategy. I heard a traded recommend a similar strategy with TSLA on Bloomberg the other day. Sell 10% OTM weekly calls and puts simultaneously.

I am taking a different approach and I have been loading up on calls since IV has been coming down in the past two weeks. TSLA will not be range bound for long and I believe that this might be the last opportunity before the next run up. I am still prepared to buy more calls in case I am wrong in the short term and TSLA goes down instead.

 

[kevin99]

Kevin, I am glad to hear that you are making money on your strategy. I heard a traded recommend a similar strategy with TSLA on Bloomberg the other day. Sell 10% OTM weekly calls and puts simultaneously.

I am taking a different approach and I have been loading up on calls since IV has been coming down in the past two weeks. TSLA will not be range bound for long and I believe that this might be the last opportunity before the next run up. I am still prepared to buy more calls in case I am wrong in the short term and TSLA goes down instead.

What is "IV"?

Yeah there are many different ways to make money. As long as the approach has the congruent price volatility and time frame, you will be on the winning side.

It is also about adaptability and speed. If your read my "Tezillionaire" article, within 5 minutes, I shifted my entire account from hedged to full speed. With this kind of agility, I can afford to trade in a shorter time frame and perhaps pickup some more gain. I don't mean I can catch the bottom and the top, but so far I am about 80% right or better, and that is way more than sufficient to make handsome gain with a hedged approach.

 

[Mario Kadastik]

Kevin, I am glad to hear that you are making money on your strategy. I heard a traded recommend a similar strategy with TSLA on Bloomberg the other day. Sell 10% OTM weekly calls and puts simultaneously.

I am taking a different approach and I have been loading up on calls since IV has been coming down in the past two weeks. TSLA will not be range bound for long and I believe that this might be the last opportunity before the next run up. I am still prepared to buy more calls in case I am wrong in the short term and TSLA goes down instead.

You could combine the two. Basically sell the OTM straddle to finance buying the longer term calls. That's kind of what I do except I only sell the puts, but might add the calls too just to have a balanced hedge and more range. The only risk is that there might be a good news that starts the rally so I'll have to monitor the market hard during open times and possibly use a short call spread as I think run up is far more likely than a run down.

- - - Updated - - -

What is "IV"?

Implied Volatility.

 

[sleepyhead]

What is "IV"?

Implied Volatility. IV has been going down in the past couple of weeks (I presume, because I actually do not look at IV but options are getting cheaper as TSLA trades in a range). As soon as the stock shoots out of this range IV will go up again.

 

[Causalien]

Broke the channel. Looks like we will be going sideways. HV is now lower than IV. Indicating that most options are overpriced. Expect IV to slowly come down to meet HV or an explosive event happening soon if the current channel is to hold. As a historical reference. The last time HV was this low, was 2 month before TSLA shoots up from $40 to ~$70

 

[Gtoffo]

Broke the channel. Looks like we will be going sideways. HV is now lower than IV. Indicating that most options are overpriced. Expect IV to slowly come down to meet HV or an explosive event happening soon if the current channel is to hold. As a historical reference. The last time HV was this low, was 2 month before TSLA shoots up from $40 to ~$70

I usually look at this: Free weekly implied volatility, historical volatility and volatility percentile data | Option Strategist
It's pretty helpful.
Right now for TSLA:
Symbol (option symbols) hv20: 35 --- hv50: 64 --- hv100: 77 --- DATE:130913 --- curiv: 49.92 --- Days/Percentile: 600/ 52%ile

So we are in the 52th percentile in terms of IV (taking into account the last 600 days). That should mean the prices are "fair". As you have pointed out though....hv20 (the average IV in the last 2 days) is quite lower than the current values.

 

[RobotGrease]

Broke the channel. Looks like we will be going sideways. HV is now lower than IV. Indicating that most options are overpriced. Expect IV to slowly come down to meet HV or an explosive event happening soon if the current channel is to hold. As a historical reference. The last time HV was this low, was 2 month before TSLA shoots up from $40 to ~$70

What channel are you looking at? According to my chart, at the bottom, but nevertheless, still in the channel.

This is a good entry point IMHO, consolidating nicely. However, this is also a vulnerable place for the stock to be in general, since any significant negative news could knock us out of the channel when lying so close to the bottom. When we are somewhere in the middle to upper portion of the channel, we have a little more cushion for one-time events, with less risk to the uptrend.

 

[justdoit]

You could combine the two. Basically sell the OTM straddle to finance buying the longer term calls. That's kind of what I do except I only sell the puts, but might add the calls too just to have a balanced hedge and more range. The only risk is that there might be a good news that starts the rally so I'll have to monitor the market hard during open times and possibly use a short call spread as I think run up is far more likely than a run down.
.

I've also been selling weekly OTM calls and puts as a way to get some cash. Didn't sell any calls this week, just puts. Getting more and more afraid of selling calls

 

[bonaire]

Implied volatility changed materially once the closes started happening above 161.88. You should really only look back to August. There is support at 162, of course and it is flopping around above that through day trading and whatever else is going on.

What if you do chart work from August 1 - today?

 

[justdoit]

I did, that is why I bought more Dec calls. Already up 10%.

There is no reason for TSLA to go down. If it does, I might have to sell everything else I have and load up on TSLA.

There is significant upward pressure on TSLA right now and all it needs is a catalyst to catapult past its ATH into the $180s. If this catalyst doesn't come in the next couple of weeksthough, then we might see some downward pressure on TSLA.

@sleepyhead are you buying Dec calls with the plan of holding till after Q3 earnings report? Won't time kill most of the value of those calls? Or are you assuming that volatility will increase around Q3 and that will make up for it?

 

[arashlzy]

Seeing how the stock has barely moved in the past few weeks, and on low volume too, I am selling short term ( 1-2 week ) near the money puts/call....This is where you let you time decay work in your favor. Have stop losses ready if it starts making big jumps

 

[Mario Kadastik]

Seeing how the stock has barely moved in the past few weeks, and on low volume too, I am selling short term ( 1-2 week ) near the money puts/call....This is where you let you time decay work in your favor. Have stop losses ready if it starts making big jumps

The biggest risk with this is that if there is a news in non-market hours the stock might shoot high/low before opening meaning that you cannot catch the stop as soon as you'd like. I'm taking a calculated risk with that on the naked puts, but I don't quite dare doing close to the money straddles.

 

[Causalien]

What channel are you looking at? According to my chart, at the bottom, but nevertheless, still in the channel.

This is a good entry point IMHO, consolidating nicely. However, this is also a vulnerable place for the stock to be in general, since any significant negative news could knock us out of the channel when lying so close to the bottom. When we are somewhere in the middle to upper portion of the channel, we have a little more cushion for one-time events, with less risk to the uptrend.

This channel that the closing price has been following in the past week:

*excuse me for my Picasso. I've added some more drawings recently to flesh out my Q3 strategy. Just look at my mouse pointer.

 

[sleepyhead]

@sleepyhead are you buying Dec calls with the plan of holding till after Q3 earnings report? Won't time kill most of the value of those calls? Or are you assuming that volatility will increase around Q3 and that will make up for it?

I am buying Dec calls, because I think that Q3 earnings will be very, very good. So either the market will figure this out before ER comes out in early November and the stock will go up, in which case I will either:

1. sell my calls before Q3 report when IV is highest; maybe sell half and let the other half ride out the report; or
2. Sell a higher priced call to create a risk free bull call spread, and let it ride close to expiry. I will definitely do this if TSLA moves up in the very near future.

On the other hand if the market doesn't figure this out and the stock hovers around $160 - $180 immediately before ER, then I will ride the calls naked into earnings since this will give a better chance for a blowout post earnings than if the stock climbs to $190+ before ER.

Of course there is the chance that TSLA goes down and my options become worthless; I am prepared for that too. E.g. if TSLA falls to $130 - $150 before ER, then I will accept my loses on those Dec. 200s and will load up on a bunch of other November calls since the probability of a blowout post earnings will be exceptionally high.

Everybody acts like there aren't any catalysts left for TSLA till next earnings report, but this isn't true. All it takes is for one of the following to happen to spark another rally:

-Deutsche Bank to come out with a new $200 price target to spark a 10%+ rally
-Elon musk might tweet something like "1,000th reservation made in China today"
-The Model X is finalized and first delivery date is announced
-TSLA signs deal with Samsung and can now build 40,000 annually
-Tesla signs deal with BYD to supply batteries
-Tesla signs joint venture deal with JAC to produce cars in China
-Tesla preannounces earnings in early October. E.g. 6,000 cars delivered vs. 5,000 guidance.
-Model S gets best score ever from a reputable European Magazine

On the flip side some negative news may cause a correction, but TSLA is still operating in a channel and this is easy money for the traders. Nobody wants to leave this channel, it doesn't make any sense to leave this channel unless something really bad happens.

I am just playing the odds here, and I think that they are in my favor. I have a plan and I am sticking to it, we will see how it goes from here.

IMO TSLA has to go up prior to earnings. All of this information is public, and even though I don't believe in the efficient market hypothesis, sooner or later the market will figure out that production is ramping up really quickly.

 

[fjm9898]

The premiums on the Jan $250 calls keep coming further and further down as we sit here relatively flat. Every now and then i pick a up a few more, bringing my cost average down. I am going Jan $250s purely as a Q3 report play as i dont expect the stock to actually reach that by years end, although some analysis says its possible. We all know the stock is going to see a rise from here due to Q3 run up or the report itself. If we do see a pull back before Q3 i will grab more up. I have other ITM and OTM calls but the Jan $250s are for aimed at a Q3 pop. If we see a fed taper pull back tomorrow i might pick up a few more even though they are really testing my patients as they have only been going deeper into the red.

 

[justdoit]

The premiums on the Jan $250 calls keep coming further and further down as we sit here relatively flat. Every now and then i pick a up a few more, bringing my cost average down. I am going Jan $250s purely as a Q3 report play as i dont expect the stock to actually reach that by years end, although some analysis says its possible. We all know the stock is going to see a rise from here due to Q3 run up or the report itself. If we do see a pull back before Q3 i will grab more up. I have other ITM and OTM calls but the Jan $250s are for aimed at a Q3 pop. If we see a fed taper pull back tomorrow i might pick up a few more even though they are really testing my patients as they have only been going deeper into the red.

I think that far OTM calls usually don't get the pop you'd expect. I remember the day after the Q2 report, the really deep OTM calls (like 180 and up I think) didn't do that well b/c the stock only jumped to about 150 or so. I'm guessing since 180 didn't seem within reach and with IV decreasing, those calls didn't perform that well. I'll probably go back and research this a bit. But for my OTM calls, I think I'll stick to what I think is fairly possible after a Q3 earnings pop.

Anyone else also notice that?

 

[Causalien]

I think that far OTM calls usually don't get the pop you'd expect. I remember the day after the Q2 report, the really deep OTM calls (like 180 and up I think) didn't do that well b/c the stock only jumped to about 150 or so. I'm guessing since 180 didn't seem within reach and with IV decreasing, those calls didn't perform that well. I'll probably go back and research this a bit. But for my OTM calls, I think I'll stick to what I think is fairly possible after a Q3 earnings pop.

Anyone else also notice that?

Yeah. Vega decreased more than Delta increased. You actually end up with a loss usually. Then again, delta is a function of vega and theta, so what actually happened is Vega decreased, so the multiplication it gives to delta decreased.

We all know when it comes to multiplication vs addition, multiplication wins. Except in the fuzzy area between 0 and 1.

 

[TSLAopt]

I am buying Dec calls, because I think that Q3 earnings will be very, very good. So either the market will figure this out before ER comes out in early November and the stock will go up, in which case I will either:

1. sell my calls before Q3 report when IV is highest; maybe sell half and let the other half ride out the report; or
2. Sell a higher priced call to create a risk free bull call spread, and let it ride close to expiry. I will definitely do this if TSLA moves up in the very near future.

On the other hand if the market doesn't figure this out and the stock hovers around $160 - $180 immediately before ER, then I will ride the calls naked into earnings since this will give a better chance for a blowout post earnings than if the stock climbs to $190+ before ER.

Of course there is the chance that TSLA goes down and my options become worthless; I am prepared for that too. E.g. if TSLA falls to $130 - $150 before ER, then I will accept my loses on those Dec. 200s and will load up on a bunch of other November calls since the probability of a blowout post earnings will be exceptionally high.

Everybody acts like there aren't any catalysts left for TSLA till next earnings report, but this isn't true. All it takes is for one of the following to happen to spark another rally:

-Deutsche Bank to come out with a new $200 price target to spark a 10%+ rally
-Elon musk might tweet something like "1,000th reservation made in China today"
-The Model X is finalized and first delivery date is announced
-TSLA signs deal with Samsung and can now build 40,000 annually
-Tesla signs deal with BYD to supply batteries
-Tesla signs joint venture deal with JAC to produce cars in China
-Tesla preannounces earnings in early October. E.g. 6,000 cars delivered vs. 5,000 guidance.
-Model S gets best score ever from a reputable European Magazine

On the flip side some negative news may cause a correction, but TSLA is still operating in a channel and this is easy money for the traders. Nobody wants to leave this channel, it doesn't make any sense to leave this channel unless something really bad happens.

I am just playing the odds here, and I think that they are in my favor. I have a plan and I am sticking to it, we will see how it goes from here.

IMO TSLA has to go up prior to earnings. All of this information is public, and even though I don't believe in the efficient market hypothesis, sooner or later the market will figure out that production is ramping up really quickly.

I like your strategy.

I wanted to go Dec too but I decided to take a flyer with very cheap Oct 18th expiry 210 calls since they were just under $1 each today (Dec 210 calls were around $7 so I bought 7 times as many of the Oct instead)...bought a lot of them as a flyer as I think there's a decent chance the stock could break out of this range to 200+ before the earnings report as shorts could get nervous and want to cover before it.
I had a similar inclination on the 75 calls back when the stock was just under 50 and at the time was heavily considering buying several hundred June 75s really cheap but instead bought 1/10th as many Sept 75 Calls (they were about 10 times more expensive than the June 75s if I remember correct) at the time to be conservative. While I did great with the Sept 75s I would've made a lot more if I stuck with my original instinct.

this is why I'm going with the cheaper Oct 210s this time, so I can buy a ton of them for cheap and see if history repeats itself.

 

[sleepyhead]

This guy on CNBC knows what he is talking about:

Trader: “Tesla is Apple, pre-iPhoneâ€￾ | Talking Numbers - Yahoo Finance

 

[bonaire]

You are talking about nearly 25% price rise on a stock that already has sales in 2017 factored into the current price. Isn't that a bit exuberant? All with a possible 6000 unit sales number which I believe is still in the range of prior guidance - that being 21500 in 2013. The wildcard is Europe. Sales in Norway are 511 thru 9/16 for the year. Pretty good but an outlier.