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

[Jack6591]

Fear of Missing Out

I drive a Tesla and work at an electric utility—my fellow employee always ask me about tesla—cars and stock. I try to finish all conversations about by planting the seed, don’t miss out. I describe the marriage of solar power and energy storage as disruptive to the utility’s core business emphasizing, don’t miss out. Hedge your retirement.

Tesla cool factor is an easy sell—the final flourish, don’t miss out.

 

[UncaNed]

We have the exact same objective. All I'm trying to do is accumulate as many shares as I can, while not taking on any crazy risks.

All of the long term option plays I make, I've calculated potential pay offs in # of shares, rather than in $ gained.

Therefore, I expect to sell my Jan'22 $500s around the time we hit $1,000 or $1,100 per share, and buy shares with the proceeds.

I think there's way more money to be made by holding onto them longer, but even if stock is $2,000 upon expiration, that'd only translate into less than 20% upside in terms of how many extra shares I'll be able to convert them into.

At $1,000 tomorrow or next week, those options will likely trade for ~$600 each, and can be converted into ~60 shares each. At $2,000 upon expiration, they would be worth $1,500 each (2.5x), but can only be converted into 75 shares, which is less than 20% upside.

So I plan to exchange those for shares around $1,000-$1,100, and then if there is another dip, recession, Q1 turns out to be a disaster, or something of that nature, I could leverage up a bit again through different options.

When you cash in options, does it always make sense to convert all the resulting cash to shares, or does it make sense to keep the cash on hand?

 

[KarenRei]

When you cash in options, does it always make sense to convert all the resulting cash to shares, or does it make sense to keep the cash on hand?

Depends on how you want to adjust your leverage. 100% to cash (or stock) = deleveraging. 100% to new options at more ambitious strikes = increasing leverage.

 

[woodisgood]

When you cash in options, does it always make sense to convert all the resulting cash to shares, or does it make sense to keep the cash on hand?

I may be missing the nuance of what you're asking, but it seems equivalent to asking "I have cash: should I buy shares now or wait for a dip?"

If you cashed in an option (sold to close) at a high point, the SP is also at a high point. Depends on how you view the SP at that moment in time. Obviously you'll get more bang for your buck if you time a dip.

Remember that if you're in the money (ITM), you can exercise the option for shares at the strike price. This can make A LOT more sense than selling to close for cash, then buying with the cash at the current price. Not to mention you don't have to pay capital gains until you sell the shares.

Editing to add the caveat here for those that are learning that exercising requires you to have cash-on-hand to be able to actually buy the shares at the strike price. Difficult for many Tesla call option-holders but possible under the right circumstances.

 

[UncaNed]

I did notify everyone mid-December that possibly all options chains are mispriced (IV of higher strikes was still very low):

Provided you were aware of the standard disclaimer that the "bargain" might have turned out to be a 100% loss.

It goes without saying that you sir, are already our hero for your informative posts.

Edit - It was because of posts like that that I started buying my first even call options in November, with amazing results that I wish I'd cashed in (at least partly) at last week's peak value, but I'm confident I'll be just fine holding till the next, even bigger run up.

 

[RKyllo]

We're going to have an up day? What do you guys think?

 

[30seconds]

I like the action since the spike up/ down. Early, but maybe some support.

 

[KarenRei]

I like the action since the spike up/ down. Early, but maybe some support.

I'd appreciate more dramatic spikes, and a lot more of them

 

[SageBrush]

Wasn't there speculation that the cabin and battery heating was being sourced more efficiently from the drivetrain? I'd guess they are finding many improvements that have yet to be implemented in the 3.

In another thread, a closer look at the test data available so far appears to say that the Model 3 EPA sticker is 0.7 * the average of the city and highway test cycles whereas the Model Y is based on 5 different tests weighted according to the EPA prescription.

The 5 cycle test is probably closer to 'real world' for most people who live in 4 season climates but it does mean that the EPA results for the two cars should not be directly compared. For direct comparisons to try and tease out Tesla engineering advances we have to wait for the FTP, US06 and dyno coefficient raw data for the Model Y

 

[Artful Dodger]

So just 5.96M shares traded so far today (including Pre-Market and 1st hr of the Main session). Looks like MMs will successfully peg SP somewhere near their our Max Pain, and looks like there's a strong base building around here for next week.

So what's the good news for next week:

• GF3/Shanghai resumes production on Monday?
• First ship arrives in Zeebrugge?
• Could we get a side order of Texas Toast?

TIA.

Cheers!

 

[FrankSG]

Thanks for this post and appreciate your detail. I fear I am not quite following your logic. Have you calculated the exact price the option would need to reach to be an exact conversion to the underlying 100 shares at $500? Long term gains may be a consideration in some taxing authorities but is another issue.

I think when you are saying "20% upside" that I get confused. 75 shares?

Are you saying that beyond a certain price the conversion limitation of 100 shares at the strike price being the limit of the number of shares that can be captured in some way influences your value decision of holding the option longer?

All my calculations are based not on $ ROI, but # of shares ROI.

Investing money into an option instead of shares, costs me x number of shares, and payouts I also calculate in number of shares.

So in that specific example, I mean that there are significant diminishing returns at some point. The option will increase in $ value, but due to the underlying stock also rapidly increasing in cost, the # of shares you can buy per contract is indeed limited to 100.

My point was that converting those specific contracts to 60 shares at that price, is a pretty good deal, because even if the SP is twice ($2,000) upon expiration, I'd only gain an additional 15 shares, aka 20% more shares.

I am quite confident it will go higher than $1,000 by Jan'22, and I'd be able to convert them to more shares than 60 per contract, but it also means having that money tied up in the option contracts, and not being able to use them to buy other options when a good opportunity presents itself. Also, in some worst case scenarios and stock price somehow being <$500 upon expiration, I'd lose all of the money, whereas shares are of course much safer to hold.

 

[RKyllo]

Yes! It's going in the right direction.

 

[FrankSG]

When you cash in options, does it always make sense to convert all the resulting cash to shares, or does it make sense to keep the cash on hand?

Depends on your investment goals. For me, I generally convert to shares immediately. But I could see myself selling covered PUTs instead if I feel like the stock is likely to go down in the near term. Or a mix of convert to shares and sell covered PUTs.

Again, for me, my investment goal is to accumulate as large a # of TSLA shares as I can, while not taking stupid risks, and holding onto these shares most likely until 2030-2035 and a SP of at least $10,000. Probably $20,000+.

 

[Alphacrux]

There are lots of strawberry farms around the site of Giga Texas. He will have to wipe one out for the new factory. Then he will use a robot to plant a new farm elsewhere with 3 times as many strawberry plants.

Poteet, TX is the Strawberry Capital of Texas:
Poteet, TX - Official Website | Official Website
It is just south of San Antonio. It would be a straight shot south to Boca Chica.

I believe that Toyota built a truck plant in San Antonio in 2006:
Texas continues growth into auto industry powerhouse

 

[Nocturnal]

I may be missing the nuance of what you're asking, but it seems equivalent to asking "I have cash: should I buy shares now or wait for a dip?"

If you cashed in an option (sold to close) at a high point, the SP is also at a high point. Depends on how you view the SP at that moment in time. Obviously you'll get more bang for your buck if you time a dip.

Remember that if you're in the money (ITM), you can exercise the option for shares at the strike price. This can make A LOT more sense than selling to close for cash, then buying with the cash at the current price. Not to mention you don't have to pay capital gains until you sell the shares.

I'm always amazed by the size of some of the trading accounts here. If I had to actually exercise my options I'd be stuck with just 1 or 2 a year.

 

[Curt Renz]

Electrek - this morning: Tesla invents new aluminum alloys for die casting electric car parts - Electrek

 

[RKyllo]

It's going to jump a bit.

 

[ABCTG]

Tesla's Q1 international RO-RO shipments are in full swing, here's the ship positions from today:

The first European ship, Glovis Cosmos, should arrive in 1-2 days at Zeebrugge.

After listening to the third row podcast with Elon Part 2, and him talking about the tremendous costs associated with shipping. Even if Germany is not the cheapest location for a Gigafactory, it is still less expensive than the logistics involved with not manufacturing on the continent that you wish to sell your vehicles.

 

[UncaNed]

I may be missing the nuance of what you're asking, but it seems equivalent to asking "I have cash: should I buy shares now or wait for a dip?"

If you cashed in an option (sold to close) at a high point, the SP is also at a high point. Depends on how you view the SP at that moment in time. Obviously you'll get more bang for your buck if you time a dip.

Remember that if you're in the money (ITM), you can exercise the option for shares at the strike price. This can make A LOT more sense than selling to close for cash, then buying with the cash at the current price. Not to mention you don't have to pay capital gains until you sell the shares.

@woodisgood, Thanks for clearing up my thinking; indeed "I have cash: should I buy shares now or wait for a dip?" IS the same question.

 

[Nocturnal]

Does anyone want to buy 2 calls for $1050 that expire today? I'll give you 50% off what I paid. A bargain really.

Well said, although my personal experience is that as my net worth increased, my 'comfortable nest egg' amount became a moving target. It was not due to a change in living standard but two main things:

1. A desire to include my children in my security blanket
2. I incorporated the possibility of dips in my net worth of 30 - 50% from recessions or whatever.

The number I carried in my head for decades snowballed 4 fold. And the simple truth is that retirement brought a feeling of financial vulnerability.

Good point, I expect both my targets will increase as my net worth increases. I'm extremely lucky that I'm in a field where I will likely be able to work for as long as I wish and it's not likely to be overtaken by AI anytime soon. (software development in a niche market) So I don't feel too stressed about retirement age.​