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

[Curt Renz]

Sam Alexander - yesterday:

 

[FrankSG]

If you're counting on TSLA doing well in the near term (e.g. 2-3 months out), a 1 year LEAP seems enough. But if you're not sure and want 1.5 to 2 years to be conservative, I'll throw out spreads as an alternative.

Jun 2024 1000c:
Breakeven at 1240
100% at 1480
500% at 2440

Jan 2024 1200c:
Breakeven at SP $1450
100% at $1700
500% at 2700

Jan 2024 1200/1700c bull call spread (for example)
Breakeven at SP 1280
100% at $1360
500+% at $1700

Gains never stop for naked calls. However, for spreads you can adjust the strikes to match where you think the SP could be. For example, if there's a reasonable chance for SP 3000 in 2 years, increase the strike on either or both legs (e.g. 1400/1700 gives up to 650% ROI).

Edit: Like this enough to convert 12% of my shares to these, because it only requires 1/5 the capital for similar gains in two years even if SP reaches 2000.

If you're selling shares to make these trades that you otherwise would've held onto, you're making a big mistake by calculating your returns in $ values. That money invested in common stock would've done better than breakeven at your calculated breakeven points, so these aren't actually your breakeven points compared to not changing your strategy.

If you want to accurately evaluate the performance of an options position compared to your old common stock position, you need to calculate your option returns in # of shares.

Here is an old example from an old blog post I wrote:

For every options trade, you can't just look at whether the trade will be profitable or not, it has to be more profitable than investing in the underlying stock, especially in the case of TSLA, because the underlying stock is such a safe, high potential upside investment over the next decade. Therefore, one must calculate every options trade in number of shares, rather than in monetary value, gained or lost.

Applying this to the Jun'22 $1,000 call option, gives us a cost of about 28 shares ($22.5k option cost divided by current SP of $800), and if the SP reaches $2,000, a pay off of 50 shares (($2,000 - $1,000) * 100 = $100,000 profit on option, which is 50 shares at a SP of $2,000). Turning 28 shares into 50 shares is a return of less than 2x in terms of shares, compared to the more than 4x return in terms of monetary value.

Let's do this comparison between calculating option ROI in dollars and number of shares one more time more slowly:

An options trade calculated in dollars

1. Buy a Jun'22 $1,000 call option for $22,500.
2. If upon expiration the SP is $2,000, the option will be worth $2,000 minus $1,000 times 100 = $100,000.
3. Profit is $100,000 minus the $22,500 initially paid for the option, so $77,500.
4. ROI is $77,500 / $22,500 = 344%.

An options trade calculated in number of shares

1. Buy a Jun'22 $1,000 call option for $22,500. $22,500 is currently worth $22,500 / $800 = ~28 shares.
2. If upon expiration the SP is $2,000, the option will be worth $2,000 minus $1,000 times 100 = $100,000. This $100,000 is equal to exactly 50 shares at a SP of $2,000, because $2,000 * 50 = $100,000.
3. Profit is 50 shares minus 28 shares, so 22 shares.
4. ROI is 22 / 28 = 79%.

You can see that there is a huge difference.

My TSLA Investment Strategy

 

[FrankSG]

Anyone want to make a case for Jun ‘23 1000c vs Jan ’24 1200c?

That's the two LEAPS I have my eye on. Really it's about do you want the extra 6 months of buffer. The break even prices are about a $200 difference in share price

With the Jan' 24 1200c because in 1.5-2 years time, a 6 month gap can mean A LOT in terms of earnings and can easily be a difference larger than $200 in share price, I'm inclined to go with the Jan '24 1200c. I'll likely just split my funds between the two of them

Consider getting spreads going short the $2,475 call rather than getting naked calls. Although there's a few downsides with spreads, I think the pay-offs are more attractive atm than naked calls, unless you believe there's a significant chance of the stock going to $4k or higher in the next 2 years.

Payoffs for naked calls:

Payoffs for -$2,475 spreads:

 

[woodisgood]

Nice to see you Frank!

 

[ZeApelido]

Ah Olaf, that'll be why progress on the factory is frozen... sorry

Let it go

 

[tivoboy]

Consider getting spreads going short the $2,475 call rather than getting naked calls. Although there's a few downsides with spreads, I think the pay-offs are more attractive atm than naked calls, unless you believe there's a significant chance of the stock going to $4k or higher in the next 2 years.

Payoffs for naked calls:

View attachment 746464
View attachment 746465

Payoffs for -$2,475 spreads:

View attachment 746466
View attachment 746467

If anything, these are REALLY pretty and make me want to go and grab some mushrooms from the Forest. ;-)

 

[mrmage]

If you're selling shares to make these trades that you otherwise would've held onto, you're making a big mistake by calculating your returns in $ values. That money invested in common stock would've done better than breakeven at your calculated breakeven points, so these aren't actually your breakeven points compared to not changing your strategy.

If you want to accurately evaluate the performance of an options position compared to your old common stock position, you need to calculate your option returns in # of shares.

Here is an old example from an old blog post I wrote:


My TSLA Investment Strategy

Your point is well taken if comparing calls / spreads to stocks of course. OP wanted to compare the two calls, so I assumed that was new money.

The main point was, just as yours was in the post below, that even modest spreads offer a better ROI than naked calls unless one has strong conviction that SP will be more than several times higher in a couple years.

 

[RobDickinson]

xmas update 2021.44.25 is rolling out, some great features in there like blind spot monitoring etc

 

[generalenthu]

xmas update 2021.44.25 is rolling out, some great features in there like blind spot monitoring etc

Ooh, the FSD beta 10.8 must be close for the non-plebs. Am done with 10.6.1 and need my new fix.

 

[woodisgood]

Your point is well taken if comparing calls / spreads to stocks of course. OP wanted to compare the two calls, so I assumed that was new money.

The main point was, just as yours was in the post below, that even modest spreads offer a better ROI than naked calls unless one has strong conviction that SP will be more than several times higher in a couple years.

Yes, new money…conversion is super tempting under the right circumstances but I’d rather not touch core holdings. I do always compare an option play to buying the same amount in shares.

I tend to end up in spreads, but manually and not pre-planned in one calculation. I’ll add the short calls when the price spikes based on what has a nice premium, and pick up the long calls when we’re down. That makes the ROI a little more difficult to anticipate until all legs are in hand, and also makes cost of entry higher since the long calls aren’t being subsidized.

But we‘re probably veering into “other thread” territory.

 

[TSLA Pilot]

This post isn't in reference to any silly merger rumors.

TeslaBjorn has done a series of videos reviewing the EQS and he's very impressed with it - he would like to own one himself - which is quite high praise for someone who has been doing in depth reviews of EVs for a decade and is a Tesla fan. He likes the quietness, smooth ride, large battery, fit and finish, etc. It's a complete power hog but has a large battery and very fast charging.

Looking around online it appears the starting price would be similar to the Plaid - however Mercedes' options would likely add a lot more to the price. They might even be able to earn a positive margin.

Step 1 for Mercedes' chance to survive is a decent product - which the EQS appears to be. It will be interesting if they can figure out how to scale and get their EV supply chains in order.

And, let us not forget: Bjorn has yet to drive a Plaid or even a refresh LR so he is making Apples to Oranges comparisons, at least in his mind . . . .

 

[Boomer19]

If you're selling shares to make these trades that you otherwise would've held onto, you're making a big mistake by calculating your returns in $ values. That money invested in common stock would've done better than breakeven at your calculated breakeven points, so these aren't actually your breakeven points compared to not changing your strategy.

If you want to accurately evaluate the performance of an options position compared to your old common stock position, you need to calculate your option returns in # of shares.

Here is an old example from an old blog post I wrote:


My TSLA Investment Strategy

good to see franksg
hope all is well

 

[RobDickinson]

Matt Watson just reviewed the AMG EQS, top spec £155k or so, 0-60 in 3.1s, heavier than standard, bit sporty, ceramic brakes.

Seemed like a decent car but still , £155k amg merc it should be!

 

[Zero CO2]

Consider getting spreads going short the $2,475 call rather than getting naked calls. Although there's a few downsides with spreads, I think the pay-offs are more attractive atm than naked calls, unless you believe there's a significant chance of the stock going to $4k or higher in the next 2 years.

Payoffs for naked calls:

View attachment 746464
View attachment 746465

Payoffs for -$2,475 spreads:

View attachment 746466
View attachment 746467

welcome back @FrankSG!!!! ... doling out golden nuggets again in rapid fire ... like you never left us

 

[generalenthu]

Comedy gold:

https://twitter.com/x/status/1473110445145800705

 

[Ogre]

Another EV startup/ concept company goes down the toilet… well mostly.

Canoo loses chief technology officer and two co-founders

More changes in a year full of them for the EV startup

www.theverge.com

Losing your CTO and 2 founders has got to be hard to rebound from.

So long… we hardly Canoo Ya.

 

[AudubonB]

Tippecanoo and Nikola, too?

 

[inconel]

All this talk about the higher R-value of Omicron makes me wonder if someone has estimated the R-values of different car brands. I have a feeling that Tesla will rank first with a much higher value than the average. Some brands might even have a negative R

Personally I think that I am responsible for 5 relatives and friends who bought a Tesla after test driving mine.

 

[Chunky Jr.]

Too early to tell if Elon is done or not, but apparently no sales today.

https://twitter.com/x/status/1473142638949945349

 

[dhanson865]

Sam Alexander - yesterday:

Really a 15 minute video and all you have to say about it is "yesterday"