Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[⚡️ELECTROMAN⚡️]

Just bought 100 More shares, so expecting a significant drop now. At least I can slowly make my money back selling a covered call. How much should I expect to make selling these 100 shares as a call?

Please bear with me. I'm trying to figure out covered calls. I've never done this before. For example I'm looking at the options chain strike price of 490 for Nov. 20th the bid is 2.06. That strike is highly unlikely and I wouldn't mind selling and pocketing the $2,500 share appreciation anyway. So I might as well sell this call option for $206 and enjoy a nice night out on the town this weekend. Is that how it works? My only risk here is that I have to sell the shares I just bought for $465, for $490?

 

[Skryll]

Pretty sure those GFs would sit mostly idle because the rest of the raw mineral supply chain has not caught up (Lithium and Nickel in particular). Building those would be a big capex to support while waiting on them for 1+ years to start producing product to essentially pay for themselves.

That and incremental engineering improvements. Next GF should leverage lessons learned from these, so cascading makes more sense

 

[willow_hiller]

My only risk here is that I have to sell the shares I just bought for $465, for $490?

1. Don't forget the tax consequences on both sides. That $206 premium is short-term capital gains, and if you've got FIFO set the shares used to cover the call could trigger short-term capital gains too.

2. If the SP lands on $490.01 on November 20th, selling at $490 won't hurt. But I imagine if the SP is at $550 by then, selling 100 shares at $490 will feel painful.

 

[Quesder]

Please bear with me. I'm trying to figure out covered calls. I've never done this before. For example I'm looking at the options chain strike price of 490 for Nov. 20th the bid is 2.06. That strike is highly unlikely and I wouldn't mind selling and pocketing the $2,500 share appreciation anyway. So I might as well sell this call option for $206 and enjoy a nice night out on the town this weekend. Is that how it works? My only risk here is that I have to sell the shares I just bought for $465, for $490?

Yes , as long as you remember one option corresponds to the 100 share

 

[bkp_duke]

1. Don't forget the tax consequences on both sides. That $206 premium is short-term capital gains, and if you've got FIFO set the shares used to cover the call could trigger short-term capital gains too.

2. If the SP lands on $490.01 on November 20th, selling at $490 won't hurt. But I imagine is the SP is at $550 by then, selling 100 shares at $490 will feel painful.

This is my understanding as well.

I would add that I just started doing covered calls, and am doing them exclusively in retirement accounts to avoid the tax consequences you mentioned.

I have a CC at $445 that expires on Friday that is making me sweat a tad right now.

 

[EVortex]

No.

Gets my vote for quote of the day.

 

[UkNorthampton]

Pretty sure those GFs would sit mostly idle because the rest of the raw mineral supply chain has not caught up (Lithium and Nickel in particular). Building those would be a big capex to support while waiting on them for 1+ years to start producing product to essentially pay for themselves.

Not sure if possible, but overbuilding LFP (iron phosphate, but still needs lithium) for storage just accelerates everything, puts more pressure on fossils, their bankers and client politicians/regulators. My preference would be 4680 LFP in megapacks supporting solar and wind. There's a huge waiting list for megapacks anyway and I'm sure the demand would grow even faster as deployment occurs. Lastly, it removes any nonsense about whether renewables and electricity grids can support EVs.

 

[oldTAVguy]

Been on a little internet sabbatical... Did anything happen?

No.

 

[vikings123]

1. Don't forget the tax consequences on both sides. That $206 premium is short-term capital gains, and if you've got FIFO set the shares used to cover the call could trigger short-term capital gains too.

2. If the SP lands on $490.01 on November 20th, selling at $490 won't hurt. But I imagine if the SP is at $550 by then, selling 100 shares at $490 will feel painful.

Great points. You might as well just sell the stock if it hits 490 instead of selling a call in this case. Why bother capping your upside for a 200$ premium?

 

[TheTalkingMule]

+10% on below average volume. Hilarious. Best of luck to the shorts!

 

[LTC_RRR]

TMC needs a "hilarious" button. Posts like this one, "funny" just doesn't cut it!

TMC, give us grace to accept with serenity
The things that that are truly funny,
Courage to change the things
which should be pegged as hilarious,
and the Wisdom to distinguish
the hilarious from the funny.

 

[oldTAVguy]

Gets my vote for quote of the day.

Noted before posted?
( no first one did not show it was a reply, a consiquence of the internet dropping before a reply could be posted)

 

[mrmage]

Please bear with me. I'm trying to figure out covered calls. I've never done this before. For example I'm looking at the options chain strike price of 490 for Nov. 20th the bid is 2.06. That strike is highly unlikely and I wouldn't mind selling and pocketing the $2,500 share appreciation anyway. So I might as well sell this call option for $206 and enjoy a nice night out on the town this weekend. Is that how it works? My only risk here is that I have to sell the shares I just bought for $465, for $490?

The problem with selling covered calls is whether the ROI is worth the risk of losing the shares. Let's say you can make .45% ($2 / 450) a week, every week for 52 weeks. That's about 23% a year. That sounds good, until you consider how many times has TSLA exceeded 10% gain in a week over the past year, which is many times.

If you keep doing this to get an annual 25% ROI, there's a good likelihood based on historical behavior that you'll lose out much sooner than a year when TSLA shoots up 10 or 20% in a week. You would collect the 10% from the increase in SP, as well as whatever premiums you had before. However, you run the risk of being locked out of the stock as it zooms well past the amount you'd want to pay.

Just possibilities, not advice.

 

[bkp_duke]

The problem with selling covered calls is whether the ROI is worth the risk of losing the shares. Let's say you can make .45% ($2 / 450) a week, every week for 52 weeks. That's about 23% a year. That sounds good, until you consider how many times has TSLA exceeded 10% gain in a week over the past year, which is many times.

If you keep doing this to get an annual 25% ROI, there's a good likelihood based on historical behavior that you'll lose out much sooner than a year when TSLA shoots up 10 or 20% in a week. You would collect the 10% from the increase in SP, as well as whatever premiums you had before. However, you run the risk of being locked out of the stock as it zooms well past the amount you'd want to pay.

Just possibilities, not advice.

The counter argument to that, is that under most circumstances, with patience, you could buy back in at the same price you sold (or lower) within 1-2 weeks.

Not advice.

 

[StealthP3D]

I encountered a technical issue this morning upon checking my Schwab account.

I was smiling so big that my iPhone’s FaceID didn’t work to log me in.

I’ll file that into my Tesla Investor Problems tracker for future reference.

This is a perfect application for AI technology.

What is needed is millions of examples of how peoples facial features change when their brokerage accounts have suddenly increased or decreased substantially. Then Schwab could forward the underlying information (encrypted and generalized of course) to the facial models in FaceID to modify the acceptable facial images in the proper direction.

 

[Artful Dodger]

Tons of un-informed share holders out there. Less than a year ago, I was among them.

Let's wait to see what the FINRA Short Volume Report tells us after the Close. I suspect "Tons of un-informed naked shorts out there, aka MMs and hedgies (Note: many large Hedge Funds are also Market Makers. There are approx. 28 different TSLA Market Makers trading on NASDAQ).

Keep in mind, the FINRA typically reports on about half the daily TSLA volume on NASDAQ, so even these stats fail to capture a large portion of what's happening behind the curtain wrt TSLA shorting. However, it the only source of daily data we have. NASDAQ reports short interest just twice per month, and usually delayed 1+ wks.

So today, let's watch the proportion of FINRA "Short Exempt" volume again. It was at an unprecedented 7.61% yesterday, and that was on a day w/o public 'news'. Hmm...

FYI, the previous highest % "Short Exempt" vol day was 5.26% on May 12, 2020

No other day w/o the "Uptick Rule" in effect has seen "Short Exempt" vol % higher than 2.63% and even that level is already back to the 52nd Percentile ranking on this metric (very close to average).

TL;dr Something is going on with MMs and their Exemption to the prohibition against naked short selling.

"Benford's Law - How mathematics can detect fraud!" | Youtube

Cheers!

 

[EVortex]

This is my understanding as well.

I would add that I just started doing covered calls, and am doing them exclusively in retirement accounts to avoid the tax consequences you mentioned.

I have a CC at $445 that expires on Friday that is making me sweat a tad right now.

MMs seem to still be in control. If they keep it under $450 then it might not hurt too much. Just 1, right?

 

[Mo City]

I've been advocating for massive cash raising from the start of this run-up. If we can finance 4 more Gigafactories right now, why aren't we? It would cause a momentary glut in stationary storage, but IMO dragging pack production forward 1.5yrs is more important than caring if a bunch of lunatics can buy an island!

Construction is ongoing on 3 GFs right now. Last month the company announced $12 billion in cap expenditures over the next 2 years. What more do you want?

Also remember the DBE process must be perfected at scale. So much hinges on this. I think we all believe it's a matter of when, not if.

Even after all the bugs are worked out and 20 GWh battery lines come online, the company will be able to self-finance multiple new GFs because profits will begin exploding Q4 onward. Q4 profit is going to rock the marketplace.

I'm not suggesting capital raises won't happen again. It just depends. For example, Tesla won't ever need another cap raise if/when FSD develops into a legit L4/L5 product.

 

[bkp_duke]

MMs seem to still be in control. If they keep it under $450 then it might not hurt too much. Just 1, right?

2, but I will buy back in, and if I take a small haircut, so be it.

 

[UnknownSoldier]

Still surprisingly little volume on this news. There really is trader fatigue on TSLA or something. All the action has moved to NIO, XPEV, LI, etc.