Today I was a buyer. The last buying time for me was the day of earnings (stock at $133) and I did a short-term OTM option trade that ended up okay (40-50% profit) but not as good as I was hoping for considering the risk. And then prior to that, I bought in at the Goldman Sachs dip (stock at $109) with Jan15 145/155 LEAPs. (background: I'm still holding my position that's about 70% stock avg $32, 22% various deep ITM Jan15 LEAPs, and 8% short-term deep ITM calls)
Yesterday I was talking to my wife and told her that I would start nibbling buying option calls if the stock went to $142 and that I would put in some real money if the stock went to $138 or below. So when the stock opened at $143 I knew today could be a buying day for me. I set aside in my head (I probably should have written this down too) an amount I was willing to spend. So, when the stock hit $142, I started to nibble... hoping that it would break 140 and hit 138. While it dipped to 140, I nibbled more. I was buying mostly Sept13 150 and 155 calls. My wife started buying Sep13 140 calls but I told her to be more aggressive as the stock price dropped. So she also started buying Sep13 150 calls.
During the first test of 138, I put in a limit order for $5 for enough Sep13 150 calls to spend 1/2 my allocated amount, and it got executed during a brief lunge to near $138. I also put in a limit order for $3.80 for Sep13 155 calls that also got executed during this first test of $138.
So half the money I wanted to spend was gone, and I put in more limit orders in case the stock broke $138 (I was going to be content if the stock recovered from this point and I couldn't use the other half I had intended, but would be very happy if it dropped more and I could use the full amount I had allocated). In my head, I was thinking that it would be tough to break $138 but if it did then it could test $133. However, at $133 I didn't think it realistic to break down that level because I'm thinking there are just too many buyers at that level. It's a proven low level (tested on earnings day) and breaking below that would quite remarkable. So, I'm not counting on it in any way. If it did break through $133 (and company fundamentals are same and economy is fine), then I'd plan on some mega buying move on my part. Anyway, I'm thinking more on realistic scenarios so the scenario I was hoping for was for the stock to break through $138 and since I see $133 was way too strong, I imagine the stock maybe touching 134 (or 135) and then reversing direction and saying goodbye to the 130s sooner than most people think. It's kind of like when a stock touches a place where it's just "too low" it brings out the buyers and this starts pushing up the stock, thus attracting more buyers.
Anyway, all day I was riveted to the screen hoping that the stock would break $138. I had a fairly large limit order for $4.5 for Sep13 150 calls. The reason I chose Sep13 150 calls is because I like the margin of safety that September gives. It's still over a month away (Sept 21 expiry) and if something happens that changes my mind regarding TSLA during that time I have time to close out my calls for a loss if it came to that (though I don't view that as likely). Also, I like the 150 price. It gives me a decent amount of leverage (vs ITM calls) and I'm fairly confident within the next month we'll see the 150s and probably 160s, and even if we only reach 145 in the next couple weeks I could close out my position if needed and possibly even still break even. Personally I'm seeing at least the 150s by Sept 21 because I view this correction/dip as driven by fickle sentiment/mood and I see it as exaggerated. Sentiment/mood changes go both ways, and as quickly as the mood went sour the mood can return to exuberance and propel the stock up. So, basically I'm expecting mood to return to exuberance and for the stock to follow. This is a based on my thoughts I've previously shared on volatility, short interest, and dispersion of beliefs. Basically, the hypothesis is we'll still have high volatility (due to wide ranging views on stock) and that will swing the stock in large up/down moves (similar to volatility in Q1). So, my conclusion was major dips are buying opportunities.
Here are a few other thoughts...
My wife was sharing how she was kind of scared the stock could keep going lower (under 120) because of the lockup expiration. I told her that I had read through the secondary filings a couple days ago and couldn't find anything about secondary buyers having a lockup period. I thought it was referring to Tesla being locked up to not do another offering during that period. And further, I shared that the funds/institutions who bought during the secondary aren't likely short-term flip funds. Most are looking for a good long-term investment, and even if there was a lockup period that expired on 8/15 and people were so scared they wanted to sell, how many shares would they realistically sell. Maybe 25% of what you bought? It's hard to see it more considering TSLA is already down from a $158 ATH and why would you sell more than 25% if you bought in as a long-term investment in the first place. So, I'm guessing max 750k shares they might want to sell, but that wouldn't be all in one day either. It's really not a significant amount of shares, and the whole scenario seems overblown even if true. I think the fear is probably uncalled for, and fear of others can present a pretty good buying opportunity. (I emailed Tesla investor relations this afternoon asking for clarification on if there's a lockup for secondary investors or not, and will update this post/thread if I hear back from them.)
Looking at tomorrow, I've got my hopes but also what I think might realistically happen. First, my hope is that it drops so I get an even better buying opportunity than today. Would love it if the bears come out in full force tomorrow. If it drops even more than expected, it'll be even better cause I'll be buying even more. The way I look at it is the more it drops the better because I can buy cheaper option calls and my risk is greatly reduced because I think it just has more room to recover. It's usually easier to retrace to a previous ATH than it is to make a new ATH. If/when TSLA recovers, if it goes even lower, then it could be quite a fast recovery.
However, what I realistically expect is different than my hopes. I realistically understand that nobody (or only a few) really know what's going to happen tomorrow. Personally I think a lot of it depends on what big money (hedge funds, funds/institutions) decide to do. And I'm not ruling out the possibility that some private hedge funds collaborate in some ways as well. If they go in strong selling/shorting, then we could see a dip at market open. If they buy, we could see it rise. But then, the same players that bought could sell/short and reverse. IMO us retailers don't have much accuracy in predicting intraday moves. It's pretty much guessing and throughout the day you might be able to see certain trends but it's really tough to know the day prior what a stock like TSLA will do the next day. Personally, I'm not expecting the stock to stay in the 130s for long, even if it dips tomorrow. I think as buyers start buying, then the mood starts changing and we'll see TSLA folks smiling again. But for me, I'd like to see if I can take advantage of this sentiment change where even TSLA investors' mood is being tested and they're wondering how low can TSLA go. I'll buy option calls now when they're not in demand as much, and sell them later when the mood has changed and they're in high demand. It's kind of playing off of the natural fickleness of human mood/sentiment. And my advantage (at least that what I'm hoping) is that I see the wide dispersion of beliefs and high short interest as only naturally causing violent up/down swings, and if the mood turns sour I'm betting the mood will turn back positive.
Now there's always the risk that the mood doesn't turn back positive as soon as I'd like. Meaning that the mood around TSLA remains sour for weeks or months. Sure, it's a possibility. But to me it's a low risk because Tesla is such a high-profile sexy stock. Great leader, great product, great customers, growing demand. What's not to like about it? Sure, people complain about valuation but again that's sentiment-driven. There's not much fundamental about Tesla that will drive a sustained sour/negative mood for months. That's just my opinion and I could be wrong. On the other hand, mood turned against AAPL at $700 largely because there were fundamental reasons (slowing growth trajectory, lack of new product roadmap, etc). The mood turning against AAPL at $700 is understandingly sustainable IMO because it was driven by not just mere emotions/mood but rather by changing company fundamentals.
Anyway, I like the odds of my $5 Sep13 150 calls. Here is how I'm thinking about the odds/numbers: (they are my estimates/forecasts/guesses based off my thesis of continued volatility and a continued uptrend in the stock)
- I see a 93% chance we see the stock touch $150 sometime between now and Sept 14 (one week prior to expiry for Sep13 calls). If the calls are at $150 on Sept 14, I'm expecting them to be worth $5, so it'll be break even. If it touches $150 prior to that, it'll be worth more than $5 because of time value, and I'll be making a profit if I sell.
- I see a 5% chance that we don't touch $150 but only touch $145 between now and Sept 14. If that happens, then I could still break even if it touches $145 in the next few weeks and I sell. If it touches $145 closer to the final week of Sept 21, then I could be looking at a loss.
- I see a very small chance (ie., 1-3%) that we don't hit $145 between now and Sept 14. I could take a full loss on this trade if the stock gets stuck in the 120s/130s (or lower) from now until Sept 21.
According to how I see the odds, I think I've got at least a 90% of a profitable trade if I can sell at the right time (which is another art).
However, if I'm miscalculating these odds because I'm overlooking something and not considering some risks as serious as I should, then I could be making a trade/investment that has worse odds than I am imagining. And I guess, that's one of the reasons why I like to share my thought processes... to enlist feedback and see if there's something I'm missing or not considering. I'd also still like to hear more details on why some think we won't see much volatility anymore. (final disclaimer: i'm sharing not to give advice on when/what to buy, but rather to stir discussion and learn from each other)
Yesterday I was talking to my wife and told her that I would start nibbling buying option calls if the stock went to $142 and that I would put in some real money if the stock went to $138 or below. So when the stock opened at $143 I knew today could be a buying day for me. I set aside in my head (I probably should have written this down too) an amount I was willing to spend. So, when the stock hit $142, I started to nibble... hoping that it would break 140 and hit 138. While it dipped to 140, I nibbled more. I was buying mostly Sept13 150 and 155 calls. My wife started buying Sep13 140 calls but I told her to be more aggressive as the stock price dropped. So she also started buying Sep13 150 calls.
During the first test of 138, I put in a limit order for $5 for enough Sep13 150 calls to spend 1/2 my allocated amount, and it got executed during a brief lunge to near $138. I also put in a limit order for $3.80 for Sep13 155 calls that also got executed during this first test of $138.
So half the money I wanted to spend was gone, and I put in more limit orders in case the stock broke $138 (I was going to be content if the stock recovered from this point and I couldn't use the other half I had intended, but would be very happy if it dropped more and I could use the full amount I had allocated). In my head, I was thinking that it would be tough to break $138 but if it did then it could test $133. However, at $133 I didn't think it realistic to break down that level because I'm thinking there are just too many buyers at that level. It's a proven low level (tested on earnings day) and breaking below that would quite remarkable. So, I'm not counting on it in any way. If it did break through $133 (and company fundamentals are same and economy is fine), then I'd plan on some mega buying move on my part. Anyway, I'm thinking more on realistic scenarios so the scenario I was hoping for was for the stock to break through $138 and since I see $133 was way too strong, I imagine the stock maybe touching 134 (or 135) and then reversing direction and saying goodbye to the 130s sooner than most people think. It's kind of like when a stock touches a place where it's just "too low" it brings out the buyers and this starts pushing up the stock, thus attracting more buyers.
Anyway, all day I was riveted to the screen hoping that the stock would break $138. I had a fairly large limit order for $4.5 for Sep13 150 calls. The reason I chose Sep13 150 calls is because I like the margin of safety that September gives. It's still over a month away (Sept 21 expiry) and if something happens that changes my mind regarding TSLA during that time I have time to close out my calls for a loss if it came to that (though I don't view that as likely). Also, I like the 150 price. It gives me a decent amount of leverage (vs ITM calls) and I'm fairly confident within the next month we'll see the 150s and probably 160s, and even if we only reach 145 in the next couple weeks I could close out my position if needed and possibly even still break even. Personally I'm seeing at least the 150s by Sept 21 because I view this correction/dip as driven by fickle sentiment/mood and I see it as exaggerated. Sentiment/mood changes go both ways, and as quickly as the mood went sour the mood can return to exuberance and propel the stock up. So, basically I'm expecting mood to return to exuberance and for the stock to follow. This is a based on my thoughts I've previously shared on volatility, short interest, and dispersion of beliefs. Basically, the hypothesis is we'll still have high volatility (due to wide ranging views on stock) and that will swing the stock in large up/down moves (similar to volatility in Q1). So, my conclusion was major dips are buying opportunities.
Here are a few other thoughts...
My wife was sharing how she was kind of scared the stock could keep going lower (under 120) because of the lockup expiration. I told her that I had read through the secondary filings a couple days ago and couldn't find anything about secondary buyers having a lockup period. I thought it was referring to Tesla being locked up to not do another offering during that period. And further, I shared that the funds/institutions who bought during the secondary aren't likely short-term flip funds. Most are looking for a good long-term investment, and even if there was a lockup period that expired on 8/15 and people were so scared they wanted to sell, how many shares would they realistically sell. Maybe 25% of what you bought? It's hard to see it more considering TSLA is already down from a $158 ATH and why would you sell more than 25% if you bought in as a long-term investment in the first place. So, I'm guessing max 750k shares they might want to sell, but that wouldn't be all in one day either. It's really not a significant amount of shares, and the whole scenario seems overblown even if true. I think the fear is probably uncalled for, and fear of others can present a pretty good buying opportunity. (I emailed Tesla investor relations this afternoon asking for clarification on if there's a lockup for secondary investors or not, and will update this post/thread if I hear back from them.)
Looking at tomorrow, I've got my hopes but also what I think might realistically happen. First, my hope is that it drops so I get an even better buying opportunity than today. Would love it if the bears come out in full force tomorrow. If it drops even more than expected, it'll be even better cause I'll be buying even more. The way I look at it is the more it drops the better because I can buy cheaper option calls and my risk is greatly reduced because I think it just has more room to recover. It's usually easier to retrace to a previous ATH than it is to make a new ATH. If/when TSLA recovers, if it goes even lower, then it could be quite a fast recovery.
However, what I realistically expect is different than my hopes. I realistically understand that nobody (or only a few) really know what's going to happen tomorrow. Personally I think a lot of it depends on what big money (hedge funds, funds/institutions) decide to do. And I'm not ruling out the possibility that some private hedge funds collaborate in some ways as well. If they go in strong selling/shorting, then we could see a dip at market open. If they buy, we could see it rise. But then, the same players that bought could sell/short and reverse. IMO us retailers don't have much accuracy in predicting intraday moves. It's pretty much guessing and throughout the day you might be able to see certain trends but it's really tough to know the day prior what a stock like TSLA will do the next day. Personally, I'm not expecting the stock to stay in the 130s for long, even if it dips tomorrow. I think as buyers start buying, then the mood starts changing and we'll see TSLA folks smiling again. But for me, I'd like to see if I can take advantage of this sentiment change where even TSLA investors' mood is being tested and they're wondering how low can TSLA go. I'll buy option calls now when they're not in demand as much, and sell them later when the mood has changed and they're in high demand. It's kind of playing off of the natural fickleness of human mood/sentiment. And my advantage (at least that what I'm hoping) is that I see the wide dispersion of beliefs and high short interest as only naturally causing violent up/down swings, and if the mood turns sour I'm betting the mood will turn back positive.
Now there's always the risk that the mood doesn't turn back positive as soon as I'd like. Meaning that the mood around TSLA remains sour for weeks or months. Sure, it's a possibility. But to me it's a low risk because Tesla is such a high-profile sexy stock. Great leader, great product, great customers, growing demand. What's not to like about it? Sure, people complain about valuation but again that's sentiment-driven. There's not much fundamental about Tesla that will drive a sustained sour/negative mood for months. That's just my opinion and I could be wrong. On the other hand, mood turned against AAPL at $700 largely because there were fundamental reasons (slowing growth trajectory, lack of new product roadmap, etc). The mood turning against AAPL at $700 is understandingly sustainable IMO because it was driven by not just mere emotions/mood but rather by changing company fundamentals.
Anyway, I like the odds of my $5 Sep13 150 calls. Here is how I'm thinking about the odds/numbers: (they are my estimates/forecasts/guesses based off my thesis of continued volatility and a continued uptrend in the stock)
- I see a 93% chance we see the stock touch $150 sometime between now and Sept 14 (one week prior to expiry for Sep13 calls). If the calls are at $150 on Sept 14, I'm expecting them to be worth $5, so it'll be break even. If it touches $150 prior to that, it'll be worth more than $5 because of time value, and I'll be making a profit if I sell.
- I see a 5% chance that we don't touch $150 but only touch $145 between now and Sept 14. If that happens, then I could still break even if it touches $145 in the next few weeks and I sell. If it touches $145 closer to the final week of Sept 21, then I could be looking at a loss.
- I see a very small chance (ie., 1-3%) that we don't hit $145 between now and Sept 14. I could take a full loss on this trade if the stock gets stuck in the 120s/130s (or lower) from now until Sept 21.
According to how I see the odds, I think I've got at least a 90% of a profitable trade if I can sell at the right time (which is another art).
However, if I'm miscalculating these odds because I'm overlooking something and not considering some risks as serious as I should, then I could be making a trade/investment that has worse odds than I am imagining. And I guess, that's one of the reasons why I like to share my thought processes... to enlist feedback and see if there's something I'm missing or not considering. I'd also still like to hear more details on why some think we won't see much volatility anymore. (final disclaimer: i'm sharing not to give advice on when/what to buy, but rather to stir discussion and learn from each other)
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