When I mention time value I am including the implied volatility that is part of it. So are interest rates. The implied volatility can be calculated and is indeed related to the supply and demand for options. It is currently quite high for TSLA options. For the S&P 500 it is called the Volatility Index (VIX) and can be traded. I sold the $165 strike call at $20.35 to someone who expects the share price to be higher than $185.35 at the close on January 18th. If not, then he loses. If it closes at $165 or under, he loses his entire investment in the options. Of course this assumes he holds until expiration.
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Short-Term TSLA Price Movements - 2013
- Thread starter Robert.Boston
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When I mention time value I am including the implied volatility that is part of it. So are interest rates. The implied volatility can be calculated and is indeed related to the supply and demand for options. It is currently quite high for TSLA options. For the S&P 500 it is called the Volatility Index (VIX) and can be traded. I sold the $165 strike call at $20.35 to someone who expects the share price to be higher than $185.35 at the close on January 18th. If not, then he loses. If it closes at $165 or under, he loses his entire investment in the options. Of course this assumes he holds until expiration.
SebastianR
Active Member
So how come BMW is worth more than GM? ;-)
It's a funny graph but I have no idea what it is trying to say...
Thanks for the primer, Curt. I'm learning a lot about hedging with options just by reading this
You're welcome. Glad your appreciative. I already wrote a primer for McGraw-Hill about technical analysis. Perhaps I should do one for options.
Check out the Options Institute at the Chicago Board Options Exchange: Options Institute PLUS - The Gold Standard in Options Education
I used to daily interview CBOE instructors and market makers when I hosted a financial TV show in Chicago. Fortunately at no charge to me, I attended a couple of their day-long classes and participated in mock trading of options on the floor of the CBOE after regular trading hours. That was before trading was almost entirely taken over by computers. The CBOE instructors are good people. Jon Najarian (a CNBC regular) used to be one of them. I introduced him to TV performing. Did you know he was a Chicago Bear linebacker for four games until some guy named Singletary sent him off the gridiron and over to the CBOE?
So I understand taking advantage of the current high option premiums by writing covered calls or covered puts. As the stock stabilizes, you're expecting the option premium due to volatility to decrease. Thus, you can take advantage of the high option premium now (ie., writing $165 Jan14 calls for $20). Since option premiums are high it doesn't quite make sense to buy puts as a hedge because they're pricey (due to high option premium) and as a result don't offer as much downside protection considering the high price to pay for the puts. Further, you probably still strongly believe in the long-term future of Tesla, thus you're not looking for catastrophic downside protection (ie., under $100). So, if buying puts doesn't make sense, then you can write covered calls or puts to generate income right now and that is a hedge for downside risk.
However, I wonder why you didn't write puts but rather wrote calls? Because you could have written Jan14 $145 puts for $20, but instead you chose to write Jan14 $165 calls for $20. Both about $10 or so within stock price. Is it because you're more bearish currently on the stock price at $155 then you are bullish on the stock at $155?
Also, if you're more bearish on the stock at $155 is that more of a short-term sentiment, where you think it has downward risk in the coming weeks, and when/if the stock drops (let's say to $145 or lower) then you would close out your covered calls? Or is the bearish sentiment more over the term of the next 3-5 months, as you chose as Jan14 expiration for the covered calls your wrote?
mitch672
Active Member
I use Fidelity, when I've sold "covered calls" in the past, I show a negative credit on the option, until it's closed out, and a positive credit on the cash received when it settles... So you don't really have the money (you have a negative credit) I wouldn't, you might need some of it if you decide to buy back the covered call you sold.
You're welcome. Maybe we can induce Elon to split the stock so you can own 100 shares. :smile:
I chose the $165 strike because Goldman Sachs and its institutional clients can convert their notes bought in May to common shares, if the share price stays above $161.88 for twenty days during a period of thirty consecutive days at the end of a quarter. For those notes they paid a share equivalent of $124.52. So they would love to see that conversion condition met, but it does not have to be greatly exceeded.
Of course the further out the expiration for the option, the longer you can lock in the currently high premiums related to expected volatility. My expectation is that volatility baked into the premiums will be reduced. January was as far as I wanted to stretch it.
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Dave,
I believe selling puts require additional resources, either margin to cover at least 15-20% from a margin account (broker dependent), or cash (ie a cash secured put) in the entire amount, if one were conservative. With a covered call, neither of these is required. If puts are too expensive, one could always hedge with a bear put spread, but it will only provide protection to a certain level, not full protection like a put. For example, tsla at 153. Instead of buying a put at 150, buy a 150-100 bear put spread which would provide protection to 100 ( if you believe that tsla will not drop below that level.)
Initial investment in TSLA: 65 shares x $32 = $2080
Sold today: 20 shares x $152 = $3040
Still have 45 shares left just in case the stock keeps running like it has, but I can't see myself holding on for too much longer. Held the stock for the past two years. Best investment decision of my life (age 22) hopefully many more to come. Thanks for all the advice guys. Love reading the forum and this thread in particular.
Sold today: 20 shares x $152 = $3040
Still have 45 shares left just in case the stock keeps running like it has, but I can't see myself holding on for too much longer. Held the stock for the past two years. Best investment decision of my life (age 22) hopefully many more to come. Thanks for all the advice guys. Love reading the forum and this thread in particular.
I still own the stock. I benefit from its price increases. My call position could lose due to large share price increases, but probably not as much as the shares gain. It's quite possible for the share price to gently rise and for the put price to slowly wither to nothing at expiration. That's the ideal scenario for me. Writing puts is not a hedge for a shareholder. It's a bet that the stock closes above the strike price at expiration, thus allowing the entire premium to be retained. If the share price moves below the put strike, I could be forced by the put owner to buy TSLA shares from him at a price higher than what is then the current market price.
If the share price drops or remains below $165, I would not close out my covered calls. I would wait until expiration when I can simply keep the full premium I received today.
I see that a lot of people here are selling/taking profits/hedging etc.
Me, I went out and bought some more shares. Tesla is only going up (in the long run) and will cross $200 before the end of the year.
Me, I went out and bought some more shares. Tesla is only going up (in the long run) and will cross $200 before the end of the year.
i'm with you sleepy; from listening to the conference call, i'm confident they will make their 25% gross margin goal in the 4th quarter. i also think they are likely to increase guidance somewhat re: 2013 deliveries (to 22k at the very least) in their next earnings call, which will address those that still believe tesla has demand issues (despite elon repeatedly reiterating they are production constrained, not demand constrained). these are going to be the two drivers for the stock in the next six months (leaving aside broader market conditions...i think the stock market could be in for a correction).
surfside
surfside
That is why, if you are hedging with options, you want to do December strikes and not January. True, earnings will not be out yet, but there could be a run up in expectation of that announcement.
There could be a tweet in the 1st week of January from Elon, "Gross margin goal for the Model S achieved for Q4."
Short interest as of 7/31/13 (settled date) was published today (Tesla Motors, Inc. (TSLA) Short Interest - NASDAQ.com). As TSLAopt has noted it takes 3 business days to settle, so the 7/31/13 settled date is reflective of short interest as the end of trading on 7/26/13 (closing share price: $129.39).
As of 7/26/13, 25.7% of the float was short (19.78m of 76.93m shares in float). This was an increase from 7/10/13 (7/15 settle date, closing share price: $122.27), when 24% of the float was short (18.49m of 76.93m shares in float).
As of 7/26/13, 25.7% of the float was short (19.78m of 76.93m shares in float). This was an increase from 7/10/13 (7/15 settle date, closing share price: $122.27), when 24% of the float was short (18.49m of 76.93m shares in float).
| Settlement Date | Short Interest | Avg Daily Share Volume | Days To Cover |
|---|---|---|---|
| 7/31/2013 | 19,783,866 | 12,231,921 | 1.617396 |
| 7/15/2013 | 18,491,029 | 8,684,647 | 2.129163 |
| 6/28/2013 | 19,815,686 | 8,152,764 | 2.430548 |
| 6/14/2013 | 19,929,119 | 10,040,777 | 1.984818 |
| 5/31/2013 | 18,584,615 | 15,751,250 | 1.179882 |
EVNow
Well-Known Member
I don't want to go much into this - since it is the wrong thread. Just want to note that my comment was related to the land price.
ShortSlaver
Member
I can understand profit taking and covered call writing. For those of us in since sub $35, how much more greedy can you be? For someone like Curt, who has ALWAYS been in the hold camp, writing covered calls at this point makes sense. There's a chance you could lose and a good chance - but you won't be losing overall. The feeling is how much more upside do you need?
I do however believe TSLA has a ways up still. Today was a bit off putting but hey, we're pretty high up now. We likely don't have the short squeeze potential and there's plenty of people taking profits at this point and if I'm holding AUG options, I'm probably thinking about very short term potential. But this earnings beat has been underrated. I still think in the next 2 weeks we can see 175.
Keep in mind it was a pretty awful day in the markets and there's plenty of short pressure coming into TSLA.
I do however believe TSLA has a ways up still. Today was a bit off putting but hey, we're pretty high up now. We likely don't have the short squeeze potential and there's plenty of people taking profits at this point and if I'm holding AUG options, I'm probably thinking about very short term potential. But this earnings beat has been underrated. I still think in the next 2 weeks we can see 175.
Keep in mind it was a pretty awful day in the markets and there's plenty of short pressure coming into TSLA.
I sold some calls today since I over-allocated my retirement account with TSLA prior to earnings, in part thanks to your well-done second quarter analysis. What force will drive TSLA upwards before the next earnings report? There won't be much news, and the last two days of trading make it look like the market doesn't have the appetite for another run-up.
The short interest reported today was surprising (at least to me).
On July 10, you've got 18.49m shares short. Then on July 16, stock opened at $126.28 and then you have the Goldman Sachs dip. Let's say more shorts came in during the dip. Then, the stock rebounded and spent 6 days in the 119-122 range. July 25, it closed at $124.07. July 26 (date of short interest), it closed at $129.39.
You'd imagine shorts would look at how strongly TSLA recovered from the GS dip, and that they would cover. But no. They're not covering. It's crazy. Ok, maybe some did cover but overall short interest increased between 7/10 and 7/26. So, what do they do when the stock keeps rising from $129 in the coming days? I guess we'll have to wait until Aug 26 when 8/15 settled short interest is published. But my guess is that there's still a lot of shorts.
Looks like the shorts (even after all they've been through) still want to give us some more money.
It reminds me of Cramer's tweet a few days ago:
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I am pleased that the short interest remains at these levels as it gives me confidence that tsla can continue to go higher. The last thing I want is for tsla to become uniformly loved and praised (see apple) and for the short interest to become minuscule. If/when that happens (hopefully many moons from now), I will consider paring my position as there will be no one left to buy tsla.
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