Short-Term TSLA Price Movements - 2013

[c041v]

Thanks Jonathan, I've done some reading since posting and it seems like maybe Leaps is the way to go? I'm very bullish on tsla long term, so I have no problem locking myself into jan15 leaps. Reading "the options playbook" since my last post, it recommends Deep ITM calls so that the leaps mirror the stock very closely. Let's say I want to sell 300 shares now, and buy 6 contracts for Jan15 leaps, what strike price would I want to take advantage of any upwards movement of the stock from here? Won't be a problem buying back at least the 300 shares if things go my way with the stock moving up as I expect, would plan on the 600.

I am also considering converting some of my stock to LEAPS given the recent and potential sideways movement in the medium term future. I like the idea of a zero cost collar or similar spread strategy. Pending the arrival of Ongba's PDF, I am going to be doing a lot of reading and will eventually make a more formal request in the Advanced Options Trading thread regarding some advice on strikes and expirations, to any members who are willing to hand out a few pearls of wisdom.

I'm very bullish on TSLA in the long term future, but I've run a few numbers and their are some obvious advantages to correctly using the leverages provided by LEAPS vs. a simple buy and hold.

 

[Jonathan Hewitt]

Thanks Jonathan, I've done some reading since posting and it seems like maybe Leaps is the way to go? I'm very bullish on tsla long term, so I have no problem locking myself into jan15 leaps. Reading "the options playbook" since my last post, it recommends Deep ITM calls so that the leaps mirror the stock very closely. Let's say I want to sell 300 shares now, and buy 6 contracts for Jan15 leaps, what strike price would I want to take advantage of any upwards movement of the stock from here? Won't be a problem buying back at least the 300 shares if things go my way with the stock moving up as I expect, would plan on the 600.

I'm aware of short term tax issues but I think it's minimal vs what I will be able to take advantage of long term and allows me to pull some profits from the stock now without giving up leverage. To answer a follow up post, I could finance more or all of my model S but I can't wrap my head around a payment that big. I haven't used credit in about 8 years!

I also like the idea of naked puts backed by cash or margin. I have no problem buying the stock at a lower price, I may have to use this strategy as well. Not willing to go naked, would want the cash or margin available to cover the options worst case.

I just got my account setup for options trading this past week, i'm not even sure how to check on the price of Leaps yet. Advise?

I personally have some stock and LEAPS. I like the fact that the stock will never expire so it's a good base for my account. I also have some deep in the money MAR 14 calls. I figured those are not much less safe to have than stock right now, but will change them to LEAPS depending on how things go over the next month. The cool thing about DITM like you said is it's basically super stock. Acts just like stock but with bigger % moves up and down, and has an expiration date. You can use websites like yahoo or google to get options prices but to get real time prices you want to use your brokerage. You can probably also get the greeks from your brokerage, too. You want at least a delta of 0.8, 0.9 if possible, for it to act as much like the stock as possible. That would correspond to the JAN 15 $100s right now (I have some of these). Because you said you want to convert 300 shares to 6 contracts you could go deeper and get something like an $80 strike right now. It's up to you as far as much money you want to invest per contract.

As far as financing, I financed just enough of my Model S so that if the stock value were to vaporize I'd still be able to afford the monthly payments (financed about half the car). That would really suck, but I'd be more upset with myself if the stock goes to 300+ over the next few years like I expect and I had paid 100% in cash. I'm willing to take the risk of being stuck with a monthly payment I know I can afford in order to possibly make more money but was not willing to finance the whole thing and possible end up in a very bad situation. If financing any portion is more risk than you want, then don't do it, but don't feel like you have to finance the whole thing, either. It's up to you to decide how much risk you are willing to take.

I am only approved for L2 options trading ("insufficient trading experience") so can't give a ton of advice on selling puts...I really wish I could though, even if it meant having to do cash secured puts only. I don't see the big risk there if someone knows what they are doing.

 

[InTheShadows]

Thanks Jonathan for your insight. I'm reading "The Options Playbook" and finished the LEAPS chapter last night then I come here and read your insight which is identical from a slightly different angle. It's very helpful!

 

[Jack6591]

Hehe! I hope to become an “elite” trader one day (hopefully in the near future!), but am an avid “student” of the markets. Sadly, I missed most of aapl’s historic and epic run, but hope that lighting strikes twice and that history can repeat itself with tsla, as there have been great runs with exceptional companies over the past couple decades (MSFT, INTC, DELL, CSCO) to name a few off the top of my head. The elite trading forum is a good resource, but the forum I am referring to is the Apple Finance Board. The link to the site is:

http://www.macobserver.com/tmo/forums/viewforum/7/

The forum is a shadow of its former self, but the historical posts are worth the read. One should start in Dec 2005 and concentrate on the threads labeled “Options Strategy” and “Apple intraday activities”. The trader I referred to in my prior post went by the name “Snipus”. I have done a lot of the legwork by going back to the very beginning, and over many weeks/months perusing the forum, have compiled a 300+ page PDF which contains the posts and discussions that I deemed most important with regards to trading options/spreads which have helped formulate my thinking and strategy on how to become a successful long term options trader, and more importantly, to avoid wiping out my account, as options trading is indeed, a very risky and dangerous endeavor (anyone who tells you differently has either not been in the game long enough or have not at one point in time, been wiped out). Since a lot of members on this forum have been very helpful and given freely of their strategies and financial models on TSLA, and since there are many novice options traders on this forum , I would like to contribute what I can to help out others. If interested, please PM me with an email address, and I will email the PDF (with one caveat: these notes are what I think are important in going over 6-7 years of posts so they are biased based on my views; the source material is probably the best resource if one had the time and energy to start from the beginning). Would love to hear feedback and intelligent discussion once the PDF has been reviewed.

Thanks ONGBA,
i appreciate your sage advice.

 

[Jonathan Hewitt]

Thanks Jonathan for your insight. I'm reading "The Options Playbook" and finished the LEAPS chapter last night then I come here and read your insight which is identical from a slightly different angle. It's very helpful!

I'm glad it matches! First options I bought were back in April, first stock I ever bought (TSLA) was back in January. So take what I say with a truckload of salt, but I like to think I'm a quick learner

 

[deonb]

I like the idea of a zero cost collar or similar spread strategy.

What is the virtue of a collar on a stock that doesn't pay dividends?

 

[ppl]

Thanks ONGBA,
i appreciate your sage advice.

I think he stayed at a holiday inn last night

 

[sub]

Found the price for leaps, are they extremely expensive right now? Maybe all this option discussion should go in one of the options trading threads, sorry to be a bit off topic.

Example, if the 140 Jan15 leap is right now `$40.00, that would mean I need the stock price to be at least $180 in Jan15 just to break even correct? I'm trying to figure out where the advantage, or at least the disadvantage to turning some of my shares into leaps. It seems the time value/expiration is a risk, but if my leap only goes up in value the same as the stock on the run up to 180, where is the advantage? Yes I have less money into the leaps so my downside risk may be less up until the expire worthless?

When I started considering this idea I was thinking maybe the leaps were half that cost having looked at the examples in the options playbook.

The wife has nixed the model S right now regardless, wants to wait a few months. Bummer.

 

[Jonathan Hewitt]

Found the price for leaps, are they extremely expensive right now? Maybe all this option discussion should go in one of the options trading threads, sorry to be a bit off topic.

Example, if the 140 Jan15 leap is right now `$40.00, that would mean I need the stock price to be at least $180 in Jan15 just to break even correct? I'm trying to figure out where the advantage, or at least the disadvantage to turning some of my shares into leaps. It seems the time value/expiration is a risk, but if my leap only goes up in value the same as the stock on the run up to 180, where is the advantage? Yes I have less money into the leaps so my downside risk may be less up until the expire worthless?

When I started considering this idea I was thinking maybe the leaps were half that cost having looked at the examples in the options playbook.

The wife has nixed the model S right now regardless, wants to wait a few months. Bummer.

It only has to be above $180 come JAN15 for you to come out ahead. It could be worth more shorter term if the stock goes up from here or IV goes up. If we assume you hold onto it until close to expiration the benefit if the stock goes higher than $180 you start to make a very good % return on your money, much higher than stock would give you.

If you want to be more cautious you can buy LEAPS at a more in the money strike. It will cost you more money to buy each one but will take less stock movement to breakeven, assuming you held close to expiration.

Sorry about the Model S nixing. maybe in a few months you'll be able to afford 2 Model S's and be glad you waited

 

[sub]

I'm trying to learn all of this quickly, thanks for the help. I'm no where near close to pulling the trigger on an option, it would be blind gambling until I understand what i'm doing. Original plan has been to wait for the Model X to come out so I can compare to X and buy then. I know it's the right decision all the way around, I'm just bored. If I wait, I can hold my current position in shares and once I figure out options I can make some smaller wagers with money I'm willing to lose. In the mean time I will buy as many shares as I can on dips.

 

[marvinat0rz]

What is the virtue of a collar on a stock that doesn't pay dividends?

Just insurance. There is an argument to be made that downwards price movements usually happen much faster than upwards price movements, so that a collar which caps both your losses and gains at e.g. 15% will insure you from catastrophic risk while still allowing for most of the upside scenarios. There are exceptions, and as with everything else it is a gamble. If I understand correctly, you can "reset" the collar whenever you want, which you would want to do whenever there's been a considerable (>5%) upwards move but never if there has been a considerable downwards move. It will be sort of like a price ratchet which you jack up whenever there is movement in the right direction.

 

[Acmykguy]

I'm still in a very small position with TSLA. I still fear more downside. Options are overpriced and there isn't any predictable news ahead. Might be sideways for awhile here - I feel comfortable at this price and it fits a lot of price targets. I could be wrong but I think over the next 2 months there's other places to make money. But I'll have my eye open for any opportunity to acquire more position.

Remember, this stock was rather dormant before April 1st of this year. It would move in range but wasn't very volatile. The volcano might be done for now and we will just sort of stay sleepy until something happens to move it one way or the other. I feel like the drama is over for now.

Yea like short squeeze!

 

[ongba]

I think he stayed at a holiday inn last night

Yes, I seem to recall that you were at the Econo Lodge (Spend a night, not a fortune), right?

 

[ppl]

Yes, I seem to recall that you were at the Econo Lodge (Spend a night, not a fortune), right?

That's great advice

 

[maekuz]

The german website of Tesla Motors showed a text saying if you ordered right now a delivery this year would still be possible. The text is gone therefore i think they sold out this year's production capacity.

 

[Larken]

This article was just release on Seeking Alpha. Tesla Motors Inc (TSLA): Tesla Is Only Getting Started And The Future Looks Bright - Seeking Alpha
I must say I am very surprised they posted such a balanced and pro-Tesla article after weeks of negative ridiculous articles. Very good read and the author really understands what Tesla is all about.

 

[uselesslogin]

This article was just release on Seeking Alpha. Tesla Motors Inc (TSLA): Tesla Is Only Getting Started And The Future Looks Bright - Seeking Alpha
I must say I am very surprised they posted such a balanced and pro-Tesla article after weeks of negative ridiculous articles. Very good read and the author really understands what Tesla is all about.

Wow, last I looked institutional ownership was 70% now it is less than 60%. Shorts unwinding positions? General institutional profit taking?

 

[maekuz]

Up +3% and counting...a new uptrend establishing?

 

[sahanim]

im pretty new at this but im guessing more buyers adding tesla to their portfolio at the beginning of the week.

most mondays should look like this

Up +3% and counting...a new uptrend establishing?

 

[Citizen-T]

Up +3% and counting...a new uptrend establishing?

Not a new one, the same one we've been in since Elon tweeted that they are profitable.