For the few that were discussing the calls and puts.... I appear to have caused some confusion when I joked that with my luck, the SP will be below my 320 SP at expiration for the Puts I sold.
No, the confusion was because you wrote
just below 320 at expiration and implied that would be
bad luck, when in fact it's absolutely the best you can hope for. You would get almost the maximum possible from the trade with no better strike price possible. It's like selling stock within a couple of cents of the high.
I'll illustrate with an
open trade of mine that I've mentioned before, meant to generate enough profit to buy a new Roadster in 2020. These 35 Jan '20 470 puts that I sold are currently valued at $144.95 (midpoint of the bid/ask). Since TSLA closed today at $346.05, that means that these way in the money puts have $123.95 in intrinsic value and $21 in time value. Since I sold them almost a year ago (2/15/18) for $171 when TSLA was at 323, they have gone down by $23.05 in intrinsic value and $3 in time value, so I could buy them back for $26.05 less than I sold them for, putting me ahead by about $91K at the moment.
For those wondering about the danger of being forced to buy the stock for $470 today, note that anybody exercising the put would be giving up $21 in time value, a total gift to me. I could sell the 3500 shares tomorrow for about $346. Along with the $171 I got for the puts originally, that would total $517 compared to the $470 I'm forced to buy them for, a $47 profit (compared to my $26.05 profit currently if I close the position by buying back the puts), a windfall!
Meanwhile, looking ahead to the expiration day a year in the future, the time value will go to 0, so I will be getting another $21 in profit. So if TSLA is anywhere above $324 ($21 less than today), I'll profit compared to closing the position today. My breakeven point is at TSLA $299, which was defined the moment I opened the position. My maximum profit point is TSLA anywhere over $470, so the puts expire worthless. But if it expires with TSLA just below $470 that's only slightly less than maximum profit, since I close the position for a few cents just before expiry. That's really good luck!
But not all maximum profit situations are identical. If TSLA is at 500 when this position expires, then if I want to take my profits and buy shares I'll have to pay $500 for them. And it just gets worse the higher TSLA goes. On the other hand, if I have no intention of reinvesting the money and will actually just go buy a Roadster with the ~$600K in profits, then anything over 470 is functionally identical. Here in California I'll end up paying >50% in taxes since such gains are treated as short term at the federal level and as regular income in CA, so if I actually do make all that money I expect it will barely cover a Roadster (and certainly not the SpaceX option!).
And of course if TSLA closes at $299 at expiration, I'll have ended up making nothing at all. And if it's below that then I'll lose money. And meanwhile, the trade is tying up a fair amount of cash collateral so I can't be making other trades. Like all other strategies, there's no free lunch. But I do love watching time value erode in my favor, unlike with buying calls. While I have no real knowledge of what TSLA will do in the next year, I'm quite certain time will pass.
