Social Chat - Short Term TSLA Movements

[wishing_for_S]

I use trailing stops to lock in gains, I have a real job (or two...) so I can't babysit the chart all day, but if I see a stock going up, and I think it's time to sell (it's getting near what I think is the top), I don't just sell, I put in a trailing stop at barely below the current price. The risk is that it drops to the stop and then flies upwards and I miss out, but more often it allows it to run up a bit more before selling and netting me just a bit more than had I sold using a market or limit order.
As with all other tactics there are risks, but there's never a way to avoid all risks, just mitigate them.

My brokerage has also just now implemented bracket orders, and I plan to use them a lot more in the future. Allows me to buy a stock, and set an automatic stop loss, along with a sell limit at the same time. Much better for peace of mind.

Thanks Green. I like this idea. I too have a job where I can't check the market all day and I have frequently received texts warning me of price movements that I can't do anything about. As for selling in general, my portfolio needs some rebalancing after making an average of 300% on my TSLA stock so I think I need to sell some of my position. The options are too rich for my blood so buying on the dips is out of the question.

 

[FANGO]

I think this is not the case. I think once they're long term, selling calls against them can no longer drop them down to short term. It can reset the clock as you describe, but only if held less than twelve months. After twelve months you're in the clear.

Here are the actual rules on this: Qualified Covered Calls—Special Rules

This is what I was referring to:

Treatment of capital gains with unqualified covered call. As a general rule, stock you own one year or more is taxed at lower long-term capital gains rates. But when you write an unqualified covered call against stock, the holding period is suspended. This means that counting up to the one-year holding period will not continue as long as the short option remains open.

So writing an unqualified covered call against your stock will suspend the counting of the holding period. If the holding period is already over a year, then it's still long-term held. With a qualified covered call the period isn't suspended either way. Apparently writing an OTM covered call has no effect on the status of the stock at any time, either.

 

[Robert.Boston]

I like doing this too. When I make a decision to sell something, either because I am satisfied it is at my goal or to cut losses, I instead set a stop loss just under market value. That way if I am wrong and it is set to run up so be it. Otherwise it will sell as I originally intended.

This makes sense to me; a trailing stop-loss doesn't. I view a sharp decline in TSLA as a buying opportunity, not a selling trigger. Obviously it would depend on exact
why the stock fell, but I wouldn't want to sell my shares under most circumstances. If you feel you've made enough money on the stock, then sell it.

 

[anon]

Apparently writing an OTM covered call has no effect on the status of the stock at any time, either.

I would like this to be true for sure, but I just want to point out that it unfortunately isn't set in stone - I researched the issue thoroughly at tax time earlier this year and could find only a handful of (mostly non-authoritative) articles that took this position. It certainly isn't in the IRS regulations; in particular, the wording of the qualified covered call regulations seems superfluous if any OTM covered call has no effect anyway.

However, if anybody does have an authoritative source for this (e.g. IRS ruling or some sort of formal legal precedent), I would very much like to see it because it would help a lot with my trading...

 

[green1]

I think it depends on the stock, I don't have a trailing stop on Tesla, but I do on some of my other stocks. In addition to what I mentioned earlier, I also use them on volatile stocks where I'm trying to make a quick buck, but that have the risk of going south, if I'm in a stock long term (like TSLA) then I'm willing to accept more downside for an expected long term gain.

It's all about the odds, some of my bets I feel only have a 60% chance, but it's still over 50, so worth trying sometimes. These are ones I'm trading, not on the strength of the company, but on the market technicals. If I'm trading more on company strength then it's more long term, and the trailing stop is not appropriate.

 

[32no]

I wrote an article on Seeking Alpha and witnessed a hilarious exchange in the comments.
Logical thought is a well known Tesla bear who owns a mutual fund and constantly spreads FUD on Tesla.

Logical Thought (LT): "...Tesla's $2.7 billion will be gone within 12-14 months, as explained here: (Link)"
Surferbroadband: "LT, your Mutual Fund will be gone in 12-14 months if you continue to short Tesla."

Don't go shorting Tesla guys :tongue:

 

[MikeC]

I wrote an article on Seeking Alpha and witnessed a hilarious exchange in the comments.
Logical thought is a well known Tesla bear who owns a mutual fund and constantly spreads FUD on Tesla.

Logical Thought (LT): "...Tesla's $2.7 billion will be gone within 12-14 months, as explained here: (Link)"
Surferbroadband: "LT, your Mutual Fund will be gone in 12-14 months if you continue to short Tesla."

Don't go shorting Tesla guys :tongue:

I'd be curious to know what fund he runs and how the returns have been over the last year and a half.

 

[eepic]

I'd be curious to know what fund he runs and how the returns have been over the last year and a half.

From back when I read SA, I recall he's an "executive" at Axion Power, ticker AXPW with a fun long term chart. I wonder if he still claims Tesla/Elon is a big fraud and how his company is poised to revolutionize batteries, etc.

Edit: Just looked again myself. Ironically, his company made a ~150% jump from .09 to .23 back in March because of the Tesla GF effect (same movement as a whole bunch of related micro resource and "green" companies like Ballard Power and Western Lithium Co.) before coming back down.

 

[MikeC]

From back when I read SA, I recall he's an "executive" at Axion Power, ticker AXPW with a fun long term chart. I wonder if he still claims Tesla/Elon is a big fraud and how his company is poised to revolutionize batteries, etc.

Edit: Just looked again myself. Ironically, his company made a ~150% jump from .09 to .23 back in March because of the Tesla GF effect (same movement as a whole bunch of related micro resource and "green" companies like Ballard Power and Western Lithium Co.) before coming back down.

Are you talking about John Petersen - or does Logical Thought have an interest in the same company?

 

[austinEV]

Hah! Checked my Schwab expecting to see the streets running blood red, and i was essentially flat. My leaps gained value today.

 

[eepic]

Are you talking about John Petersen - or does Logical Thought have an interest in the same company?

Oops. You're right, I'm mixing up the good old SA bear "regulars" lol

 

[chickensevil]

If I recall LT's TSLA position in the fund he manages is certainly doing poorly... I don't recall the overall status of his fund off hand though.

 

[mershaw2001]

On today's movement: While I was disappointed that our move over 260 the past few weeks didn't hold, I am very pleased with today's action. I was looking one of two different scenarios to play out in the 2-4pm range: A move to recover some fraction of what was lost in the morning, or a close near the low of the day. Given yesterday's reversal signal- start at all time high and end low, it seemed possible that we might have a slide today, a gap down tomorrow and land in the fun zone again: 240's. The 2-4pm time was critical, in my opinion, because we got a 3 dollar rally that took us from 254.80 to over 257 rather than an end at 252.

I think that we are seeing a lot of short sellers open up larger and larger positions here, believing that this is a double top. If you believe that q3 is going to be bad, this might be a double top. I think that with the firming up of the gigafactory and the "100,000 run rate" comment, we are now justified in seeing 260. The market needed a hammer today to say "255 is the current price of tesla and it's a good fair price".

It is my expectation that we hang out in the 255 zone for another few days before a piece of news puts us over 265, and if we hit 267 again we will hit 280. So I'm going to build up my position of shares and options with covered calls at the 280 level for september. As each week passes and nothing happens, I will prob get closer to buying short term options for late september, because i speculate that there will be model x news in september. Each passing week reduces the time premium, and makes those late-september options just a little more attractive. I don't think we can see an extension of the "handle" that is being formed on this cup and handle for more than another 2 weeks. One might argue that the cup portion was formed from march to august and therefore we should get a long handle, but i don't think that tesla can spend much time at the 260 level without something happening. Tesla had a periodicity that seems to change every 2-3 weeks, so I am gunning for sept 26 options.

 

[anticitizen13.7]

I wish there was more news on the Model X. Tesla must still have it under tight wraps beneath the roof of the Fremont factory.

Spy photos of a Model X driving around will surely send TSLA a few points higher.

 

[chickensevil]

I wish there was more news on the Model X. Tesla must still have it under tight wraps beneath the roof of the Fremont factory.

Spy photos of a Model X driving around will surely send TSLA a few points higher.

As much as I want it too, we won't see it until the beta reveal... Unless someone leaks some data which as nice as it would be I am betting on a Sept/Oct reveal. This is to likely help with Q3 outlook. If I knew I was going to very likely be putting out a negative financial I would try to time as much positive news around that negative as I could. An X beta event with a new surge of preorders and just review after review of how simply stunning the X is going to be... You wouldn't be able to drive the price down if you wanted... And I am betting they have the finalized site ready for the earnings release to further pad any potential for a negative... Just a guess... But if I was going to try to motivate the stock price and investors to swallow a negative EPS pill I would certainly have that pill ready to be washed down by a smooth glass of X and gigafactory

 

[pz1975]

I've posted this before but a TM employee told me that the reveal would be at the Detroit auto show in January. He said he was very confident in that.

 

[Jack6591]

California Gigafactory

As much as I want it too, we won't see it until the beta reveal... Unless someone leaks some data which as nice as it would be I am betting on a Sept/Oct reveal. This is to likely help with Q3 outlook. If I knew I was going to very likely be putting out a negative financial I would try to time as much positive news around that negative as I could. An X beta event with a new surge of preorders and just review after review of how simply stunning the X is going to be... You wouldn't be able to drive the price down if you wanted... And I am betting they have the finalized site ready for the earnings release to further pad any potential for a negative... Just a guess... But if I was going to try to motivate the stock price and investors to swallow a negative EPS pill I would certainly have that pill ready to be washed down by a smooth glass of X and gigafactory

California Senator Gaines and Senator Steinberg (President Pro Tem) are actively advancing legislation to provide tax breaks and to expedite any obstructions which may interfere with Tesla's Gigafactory construction.

Senator Gaines has spoke to $500 million dollar tax breaks, with additional advantages going forward. The last day for the California to enact new bills will be August 31.

Will the market react to such legislation?

 

[LonghornDub]

I tried out trailing % stop loss orders on some other stocks a few years ago. They were almost always a bad idea. Really they just solidify your losses at the worst possible time, sort of resembling margin calls that way. Never again for me.

Gotta disagree here. Studies have shown that trailing stops, properly used, can reduce investment risk at a statistically significant level. Ex: The Value of Stop Loss Strategies by Adam Y.C. Lei, Huihua Li :: SSRN . Worth a read for anybody who is interested in such things.

Does anyone have trailing stop loss/limit orders on their TSLA? I just added one at 20% below the price, but given TSLA's volatility I don't know if that will encompass the range of reasonable price fluctuations. What do you think?

The answer depends on your investment/trading goals, but I personally use trailing stop orders on anything I buy or short (except options). As you mentioned, the best trailing-stop methodologies will tie into the asset's volatility, so that you don't get shaken out on a fairly normal price movement. There are lots of ways to do that: average true range (ATR) stops, standard deviation stops, etc.

For TSLA specifically, its ATR right now is about a 7% move per week and a 13% move per month. That suggests to me that a 20% trailing stop is pretty reasonable if your timeframe is medium to somewhat long term. So you could comfortably stick with that.

Alternatively, if you're comfortable with monitoring the situation manually, you might consider setting a mental "trailing stop" a few points below TSLA's 200-day moving average. TSLA hasn't fallen below the 200dma since November 2012. That's a sign of a really consistent uptrend. If it finally drops below that level at some point, IMO that's a good time to sell and see what happens next before possibly re-entering. Of course, the 200dma is just a line on a chart, but a lot of people rely on it so it tends to create a significant psychological barrier in both directions.

Right now, the 200dma is around $197, so it's about 23% below the current price. That's a nice cushion for the day-to-day (and week-to-week) volatility.

 

[chickensevil]

California Senator Gaines and Senator Steinberg (President Pro Tem) are actively advancing legislation to provide tax breaks and to expedite any obstructions which may interfere with Tesla's Gigafactory construction.

Senator Gaines has spoke to $500 million dollar tax breaks, with additional advantages going forward. The last day for the California to enact new bills will be August 31.

Will the market react to such legislation?

Perhaps, but I don't think we saw much movement during the Reno site build discovery and such (course it wasn't fully discovered and mentioned until mere days before the Q2 release... so there was a lot going on at the time that it is hard to tell for certain the impact it had).

But CA passing legislation to help them get picked doesn't mean that TM will still end up picking them. So unless it comes from TM in Sept after the final call is made by CA, then I wouldn't think it would have too much of an impact... Crazier things have happened, of course.

- - - Updated - - -

Continuing with that thought for a second longer, if CA did pass something at end of Aug, based on the timeline of "decision by end of the year" if one of the other states is close to coming to an agreement as well, then I would think TM might hold out a little longer, show people the offer they have on the table by CA, which would further kick the other states into high gear that CA is ready AND this is what they are offering, give us something or we will move on this. CA legislation just gives TM more bargaining chips with the other states, honestly.

 

[v12 to 12v]

There has been a flood of upgrades and new price targets in the last several weeks. Back when they were predicting 200 to 260+, I was a bit skeptical that we would be here so soon. I expected at least a year to pass. But, here we are and new upgrades are still rolling in.

Has anyone, perchance, tracked price targets, the initiator, date and price at the time of initiation or upgrade? It would be interesting to see who the top performers are when it comes to analyzing Tesla. If someone has the info, I can put it into Excel and see what we can find.