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

[TheTalkingMule]

There are a lot of us who are applying the wheel strategy with some trading shares, then using gains to add to our core positions - to me that's a very bullish overall strategy. This trade had a 92% probability of ending in my favor, but alas, a record 11 days updays in a row of an awesome rally caught me off guard.

I am new to options and making mistakes all the time, and trying to learn from them. Reading other people's posts about losing trades has always helped me, so I try to return that favor - even if that means exposing my own naivete'.

Would it be rude to ask for some details around this trade? I've never rolled anything. This might make a ton of sense if you absolutely want to keep the shares, depends on how much that rolling costs you. I see nothing wrong with it on the surface if it's part of a long term "system" you have going.

 

[bkp_duke]

Would it be rude to ask for some details around this trade? I've never rolled anything. This might make a ton of sense if you absolutely want to keep the shares, depends on how much that rolling costs you. I see nothing wrong with it on the surface if it's part of a long term "system" you have going.

IIRC you use Fidelity.

Info here:
Options trading | Exercise, assignment, and roll | Fidelity
Rolling Covered Calls - Fidelity
Rolling a Covered Call | How to Roll a Covered Call - The Options Playbook

How-to (I use the web interface for this):
Click on your call, there will be a green option called "Roll". It will open a new window, pre-populated with your existing call set to Buy to Close, then on the next line you select the Sell to Open that you want to replace it with. The system will calculate your net credit or net debit.

The beauty of a covered call roll is that it is essentially treated as one execution (i.e. you don't have to have enough free cash or margin in your account to cover the "Buy to Close" part of the transaction, since it is immediately funded by the "Sell to Open" side).

 

[JustSaying]

That donor advised funds exist is true. And yes, you can donate appreciated stock for a major tax savings. And you can put off deciding what charities to donate to. But their rules are all over the map. Some are fairly absurd.

And be clear that the way this is legal is because it's not your money any more. You are merely an advisor as to what's done with it. In any sort of crisis it might just disappear.

I looked around a bit a few years ago and decided on using this one (American Endowment Foundation): How a Donor Can Open a Donor Advised Fund. So far they've done pretty well for me.[/QUOTup and funded

Depending on the amount you want to put into a DAF President Biden's tax plans include;
"A limit of 28% on itemized deductions. For each dollar of itemized tax deductions, including charitable contributions, a taxpayer or couple filing jointly would only receive a maximum benefit of $0.28. This 28% limit would hold true even if a filer is paying a higher marginal tax rate."
(Probably not a bad plan , not sure when it will happen.) I know December 2020 was a very busy month for tax accountants and estate attorneys, we finally succeeded in getting
a DAF set up and funded in the last week of December.

 

[Rarity]

What the hell you talkin bout? If this is a legit new narrative, take it to the shorting oil thread because I'm interested!

Stockpiles in the US:

View attachment 626397

Imports from Saudi Arabia(implying the oil is going somewhere it's less accurately quantified):

View attachment 626400

It appears that Saudi Arabia has reverted to its swing producer role.

OPEC+ Meeting Ends With Major Surprise Cut From Saudi Arabia | OilPrice.com

 

[Silent Ludicrosy]

I just don't understand this at all. People keep talking about "rolling" their failed covered call bets as though that's some sort of way to redeem their losses

Its not a loss, its a gain that isn’t as high as it could have been.

Heres an example. Say I sold 1x $800 call for Jan 15, 2021 at $20. On Jan 11th the stock is at $869. I decide to buy the call back but now its $90. To cover the cost, I sell a $820 Jan 22nd for $90. It’s still in the money which is bad for me, but delaying one week got me an extra $2000. And I can keep doing this and hope the stock drops back OTM.

 

[StealthP3D]

Yes but there have to be calculations on how the float changed through buying in the last weeks after inclusion. This price action for 11 green trading days is very unnatural to my eye.

People here did predictions like this in Nov/Dec when S&P inclusion was announced. Their predictions spanned a VERY wide range. Most also thought that buying would happen within 1-2 weeks of the inclusion date.

As you can see, most (all?) were wrong and we are still seeing buying because the MMs didn't follow expectations.

I think people trying to guess these things will only be right about 50% of the time but I'll leave it to you two guys to duke it out.

 

[TheTalkingMule]

It appears that Saudi Arabia has reverted to its swing producer role.

OPEC+ Meeting Ends With Major Surprise Cut From Saudi Arabia | OilPrice.com

Did you read the article? This is basically Russia demanding to pump whatever they like and SA agreeing to try and offset that as much as they can. The net on this is likely more production into a market that is already fully saturated.

Tuesday’s meeting saw the groups agree to lift oil production by 75,000 barrels per day over January levels, according to OPEC’s post-meeting press release.

But Saudi Arabia’s late announcement after the meeting sent oil prices soaring—that Saudi Arabia would voluntarily cut an additional 1 million barrels per day in February and March above its current quota—all while OPEC’s allies get to ramp up production.

It's a fascinating period of time right now. If this positive narrative runs through Feb/Mar and we start seeing the pandemic actually come to an end, futures prices will be high enough for frackers to finance a big chunk of production we don't need. All this makes the massive global oversupply far far worse if demand doesn't recover to 100Mb/d(which is definitely will not).

 

[bkp_duke]

I think people trying to guess these things will only be right about 50% of the time but I'll leave it to you two guys to duke it out.

I wasn't arguing with him about that. Go back and re-read, it was simply an observation on my part that pretty much no one got the "gamma squeeze" timing right in this thread.

 

[elasalle]

I am developing a plan along #4 for selling covered calls 1 to 3 weeks out. I have a formula to choose a price point and regularly my returns change due to volatility. I started with very small number and have been slowly expanding with experience.

I expected increased volatility approaching the Q4 financials but expected the S&P inclusion to be mostly worked out. I sold some on Wed and then early Thursday morning I sold 5 or 10 for just a few hundred dollars for Friday spread at 850, 860, 880 strikes.

I considered a 100 pt rise highly unlikely given the 5 for 1 split and I was seriously wrong.

By Friday morning at 5am I realized I was going to lose money and possibly thousands. After the market opened, I watched carefully for 20 minutes or so while resetting buy back limits and hoping for a pull back. I was over my reserve cash so moved to guess what my losses might be and set a limit sell for 50 shares of long term stock. The stock sold and I began buying to close at market as fast as I could all calls up to 1000 strike.

I ended up losing about $50k. This would be the definition of picking up pennies before a steam roller. This was the second time i have ever sold a Tesla share. First time was tax strategy selling.

All things considered by the end of the day, it was a very good day, perhaps one of the best as far as Tesla investing. Then I shared what I had done with my spouse - the bad and the good. Although the selling process may be ok, I need a better process for closing related to unexpected volatility if I am going to do #4.

I post here to share my mistakes so we can learn together a bit. What a week on so many levels!

Did you consider rolling your calls for higher calls, at dates further out? The loss you see in current call is picked up by the person buying the strike further out. Worst case, your shares will get exercised at a higher strike. If SP keeps going up, new strikes will open up.

Unless FSD is announced, there is going to be a reversion to the mean etc, once the S&P and post S&P bench mark buying slows.

Personally, I have many CC's and given the latest it looks like I have March 23 1600's as highest strike, furtherest out Options to roll up to, before I contemplate closing the CC's at a loss. Given this steep SP rise, even trying to maintain Delta's can't be done.

( the worst time to talk about CC's is when the SP keeps going up)

 

[bkp_duke]

Its not a loss, its a gain that isn’t as high as it could have been.

Heres an example. Say I sold 1x $800 call for Jan 15, 2021 at $20. On Jan 11th the stock is at $869. I decide to buy the call back but now its $90. To cover the cost, I sell a $820 Jan 22nd for $90. It’s still in the money which is bad for me, but delaying one week got me an extra $2000. And I can keep doing this and hope the stock drops back OTM.

In this example, yes, the gain is not as big as it could be, but a lot of people take the premium from the initial covered call and buy more shares with it. So you do have to factor in the increased value of those shares.

 

[TheTalkingMule]

IIRC you use Fidelity.

Info here:
Options trading | Exercise, assignment, and roll | Fidelity
Rolling Covered Calls - Fidelity
Rolling a Covered Call | How to Roll a Covered Call - The Options Playbook

How-to (I use the web interface for this):
Click on your call, there will be a green option called "Roll". It will open a new window, pre-populated with your existing call set to Buy to Close, then on the next line you select the Sell to Open that you want to replace it with. The system will calculate your net credit or net debit.

The beauty of a covered call roll is that it is essentially treated as one execution (i.e. you don't have to have enough free cash or margin in your account to cover the "Buy to Close" part of the transaction, since it is immediately funded by the "Sell to Open" side).

Awesome, thanks. I'm gonna put some scenarios in and see how the cost looks. My sold calls are all at strikes and dates I'm fine with, except one @ $900. Now that the other half of the inclusion buying is processing, it's clear my levels are off by $150! I'm not as OK with selling even just 100 shares at $900 since I don't think this buying/mania has nearly run it's course.

Hell, might be worth rolling just to see it happen and be familiar with the process. Thanks again.

 

[Big Time]

Monday open price projections?
Mine is......905.... based off... nothing but last weeks action.

 

[bkp_duke]

Awesome, thanks. I'm gonna put some scenarios in and see how the cost looks. My sold calls are all at strikes and dates I'm fine with, except one @ $900. Now that the other half of the inclusion buying is processing, it's clear my levels are off by $150! I'm not as OK with selling even just 100 shares at $900 since I don't think this buying/mania has nearly run it's course.

Hell, might be worth rolling just to see it happen and be familiar with the process. Thanks again.

The only downside that I am aware of, is that the trades are executed at market, you cannot put limits on them, since one order by nature is necessary to fund the other.

 

[Rarity]

Did you read the article? This is basically Russia demanding to pump whatever they like and SA agreeing to try and offset that as much as they can. The net on this is likely more production into a market that is already fully saturated.

It's a fascinating period of time right now. If this positive narrative runs through Feb/Mar and we start seeing the pandemic actually come to an end, futures prices will be high enough for frackers to finance a big chunk of production we don't need. All this makes the massive global oversupply far far worse if demand doesn't recover to 100Mb/d(which is definitely will not).

Yes, I read the article. The status quo before this was that SA would pump as much as they liked and Russia would do likewise. Now, SA is offsetting Russian production. That's a big change. The price of oil is $50+. Higher than during the glut.

 

[TheTalkingMule]

The only downside that I am aware of, is that the trades are executed at market, you cannot put limits on them, since one order by nature is necessary to fund the other.

I pushed it out a ways and jacked up the strike to $1300 at zero cost(hopefully). I remain OK with selling shares above $1T valuation in 2021 and pocketing premiums to buy back in at a later date. Gracias.

 

[elasalle]

A covered call is a limit on one's bullishness, not necessarily bearish.
trading

Not if the premium collected is being used to buy more shares/calls of the same underlying.

 

[TheTalkingMule]

Yes, I read the article. The status quo before this was that SA would pump as much as they liked and Russia would do likewise. Now, SA is offsetting Russian production. That's a big change. The price of oil is $50+. Higher than during the glut.

Go read the Shorting Oil thread, reality is much closer to the exact opposite. This isn't "Russia gaining power as a new swing producer", this is the further erosion of OPEC+ and SA acting way outside their own interest to hold it together.

 

[ZachF]

Go read the Shorting Oil thread, reality is much closer to the exact opposite. This isn't "Russia gaining power as a new swing producer", this is the further erosion of OPEC+ and SA acting way outside their own interest to hold it together.

Yep.

Petro-States are between a rock (Coming demand collapse from EVs) and a hard place (Fracking supply waiting to come back on line).

 

[bkp_duke]

Yep.

Petro-States are between a rock (Coming demand collapse from EVs) and a hard place (Fracking supply waiting to come back on line).

Yep, and I have zero sympathy for SA, Russia, and other oil producers (including US).

 

[MP3Mike]

Build more lines nearby? Take over more watermelon fields?

Already in progress.