I'm ready for my anthonyj tattoo!$1,880 calls are gonna go ITM and y’all gonna mark this as “funny” just like you did when I said buy $600 calls a few months ago
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Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable
- Thread starter AudubonB
- Start date
Just a reminder that last Mon, Feb 3, 2020 we opened at $673.69 so we're up about $130 or +20% over 1 week...
Now me Winthorp, would you sell your Rouchefoucauld for 50 bux?
Cheers!
That was only a week ago?!
Did I hop into an alternate simulation that runs through my life 10x faster than normal?
Isn't this how it works?-
Executing call options = more share purchased so SP rises
Closing losing the call options by selling the options only raises the SP if the resulting money is used to buy TSLA shares, no?
If it hits 1880 end of February, I'll legally change my name to Anthonyj
"God damn it lady, it ends with a j. I know!"
TheTalkingMule
Distributed Energy Enthusiast
We are now in a world where 15 second swings equal the IPO price.
to be fair Tesla's making the entire 2010 in less than a day.
Yeah but Bay Area mobile homes are still selling for 5 million right?
Max Pain for this week is currently 710$, far below the current SP of 818$ (!)
I (and I believe others) have previously made comments to the effect that some contracts could be so far OTM or ITM that they would not influence the Max Pain, and that these outliers should be ignored in favour of an 'effective Max Pain'. Such comments are not supported by the definition of Max Pain.
The actual definition of Max Pain is the SP where the gain of the holders of the options is minimal.
So let's look at this definition, specifically for how it can create a pressure on the SP to move from its current value down to(wards) that of the Max Pain. The below assumes that Max Pain is lower than the current SP, but an identical reasoning can be made for the opposite case.
Several things happen with the options when the SP makes a downward move towards that of the Max Pain, of say X [dollars], X > 0:
1) All put options that are already in the money each increase their gain (per share) by X,
2) All call options that remain in the money each decrease their gain (per share) by X,
3) All call options that were ITM by an amount of at most X become worthless (OTM to be strict),
4) All put options that were OTM by an amount of less than X become ITM.
For 1) and 2) the actual strike price does not matter in the context of Max Pain. What matters is the difference in the number of the two kinds of opposing contracts times X, this is the change in gain. A larger number of call options than put options means that the max pain supports the price move, by this net difference times X.
So for these (deep) ITM contracts, it is really the net number of put vs call contracts that determine whether they support a max pain price pressure.
For 3) and 4): If the intrinsic value of the call options in 3) prior to the move exceeds the intrinsic value of the ITM puts in 4) after the move then the max pain supports the price move.
In total the max pain pressure on the SP is:
The contribution of 1)+2) i.e. the net difference of far ITM put vs call contracts times the price move X and to that added the difference between the gain by the put options that end up ITM by less than X and the loss of the call options that were ITM by less than X prior to the price move.
As such, the max pain does not support the statement that certain contracts with a strike price very far ITM can be ignored and consequently there is no 'effective Max Pain' - there is just the computed Max Pain.
Unless I have misunderstood everything, in which case I will be interested to learn how.
I (and I believe others) have previously made comments to the effect that some contracts could be so far OTM or ITM that they would not influence the Max Pain, and that these outliers should be ignored in favour of an 'effective Max Pain'. Such comments are not supported by the definition of Max Pain.
The actual definition of Max Pain is the SP where the gain of the holders of the options is minimal.
So let's look at this definition, specifically for how it can create a pressure on the SP to move from its current value down to(wards) that of the Max Pain. The below assumes that Max Pain is lower than the current SP, but an identical reasoning can be made for the opposite case.
Several things happen with the options when the SP makes a downward move towards that of the Max Pain, of say X [dollars], X > 0:
1) All put options that are already in the money each increase their gain (per share) by X,
2) All call options that remain in the money each decrease their gain (per share) by X,
3) All call options that were ITM by an amount of at most X become worthless (OTM to be strict),
4) All put options that were OTM by an amount of less than X become ITM.
For 1) and 2) the actual strike price does not matter in the context of Max Pain. What matters is the difference in the number of the two kinds of opposing contracts times X, this is the change in gain. A larger number of call options than put options means that the max pain supports the price move, by this net difference times X.
So for these (deep) ITM contracts, it is really the net number of put vs call contracts that determine whether they support a max pain price pressure.
For 3) and 4): If the intrinsic value of the call options in 3) prior to the move exceeds the intrinsic value of the ITM puts in 4) after the move then the max pain supports the price move.
In total the max pain pressure on the SP is:
The contribution of 1)+2) i.e. the net difference of far ITM put vs call contracts times the price move X and to that added the difference between the gain by the put options that end up ITM by less than X and the loss of the call options that were ITM by less than X prior to the price move.
As such, the max pain does not support the statement that certain contracts with a strike price very far ITM can be ignored and consequently there is no 'effective Max Pain' - there is just the computed Max Pain.
Unless I have misunderstood everything, in which case I will be interested to learn how.
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$1,880 calls are gonna go ITM and y’all gonna mark this as “funny” just like you did when I said buy $600 calls a few months ago
I have positioned accordingly
Krugerrand
Meow
You know they’re getting close to understanding what’s going on when they start talking about the stock movement being an animal spirit. I’m just disappointed they didn’t specify which animal spirit.
SageBrush
REJECT Fascism
Nice insight; I'll just point out that the MM did pay a hefty price for the options mispricing, just not as much as it would have been without manipulations
Krugerrand
Meow
I know a few people who’d love to get into a Tesla, but just can’t swing for a new one. They’ve been looking around for used 3s and there just aren’t any that don’t scream, ‘****! That price isn’t much different than a brand new one?!”
Looks like OI for these contracts alone doubled over the weekend. Sitting @ 10.1k now.
maybe it's just me, but it seems used S's are priced more competitively than used 3's
LN1_Casey
Draco dormiens nunquam titillandus
StealthP3D
Well-Known Member
And that, my friend, illustrates the power of compounding when one learns how to Buy and HOLD (rather than nervously exiting positions of great companies due to perceived "over-valuation") !
Life is much better when one is not concerned about whether it goes up or down a couple hundred thousand in an hour. Because in the end it's all just white noise.
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