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

[Yonki]

I would respond with something witty, but you would probably be unable to see it.

Well that’s where you’re wrong, ️ELECTROMAN️- somehow you’ve evaded my blacklist.

You’ll have to try harder!

 

[ggr]

I was following the discussion regarding call spreads between @Lycanthrope @KarenRei and @Fact Checking with a lot of interest. So question for them. I have spent the last few hours reading up on these and entering different option scenarios in the Fidelity P/L tool to try and understand these strategies for myself. Since I am now quite comfortable with simple call options, trying to learn more complex strategies for future. Unfortunately, my IRA account will not let me enter a call spread directly, so I have to enter it as two trades, one to buy the long call option and one to sell the short call option. Since these are not linked, I get an error message that this leaves me at risk of a a large negative position. It will however let me enter a 'Combo' strategy which is to buy a long call and sell a put.

Can you help explain the difference between call spreads and the combo strategy (looking through fidelity options guides/info it appears combo is also called bullish split-strike synthetic)? From what I can see, the main differences are

1) Max Risk - for the call spreads as described by @KarenRei and @Fact Checking , the max risk is limited to the option premium that is paid, while for the combo strategy the max risk is substantial as the stock price can go to zero.

2) Max profit - in call spread the max profit is limited to the strike price of the short call option, while for the combo option strategy the max profit is unlimited

I worked out one possible trade scenario using the Combo Strategy - and one possible scenario using call spread

Combo Strategy scenario

View attachment 511719 View attachment 511720

Call spread scenario
View attachment 511726 View attachment 511729


In theory, I could do the combo strategy for $1065; if the stock goes up in price, the profit potential is unlimited, but risk is quite large if stock goes down. Worst case scenario, TSLA goes to 0, I would lose 60,000. But if stock did start going down, I could cut my losses by buying back the put I sold, correct? If I followed this strategy, is there a way to roll this over if stock moves up slowly? Say for e.g. the SP goes to $1000 in June this year, would you roll these further or just hold?

With the call spread scenario, I have the same question. If the SP drops, at what point would you consider cutting your losses with these? If it rises, at what point would you consider rolling it up further?

Sorry, didn't mean to make it such a long and complicated sounding post. But I have to work these numbers out for myself, that's the only way I can learn.

Well, I'm not either of the people you asked, but maybe I can shed a bit of light. The purpose of the spreads is match up a pair of option trades in such a way as to keep the leverage of the options, while trading off the best upside to limit the worst downside. Buying the lower call means that it increases in value as the stock goes up (bullish), while selling the higher call (which also increases its price as the stock goes up, but that is bad, because you have to buy it back at some point, so this is "bearish") means that if the stock goes above both, you stop making money.

However in your "combo" strategy, both halves of the trade are bullish. Both the bought call and the sold put go up in value (to you, that is) as the stock price rises. Both go down in value if the stock falls. So you have increased leverage but have also increased the performance in both directions. If the options are roughly at-the-money you have a synthetic long position; you have spent a lot less money for a position that moves in dollar value roughly like the underlying stock. This amplifies gains and losses.

 

[Singuy]

Dumb move. If he was a smart person, he could have bought faster and better EVs with 4X that range for the same money! How ? Of course, buying 2 Tesla Model S at nearly 400 miles range each

BTW, this morning Google recommended me this article:
Buy a Brand-New Car Online in California at a Great Price - Ageful
Looks like Tesla-effect hitting the traditional OEMs?
And CNBC anchors still wondering why TSLA valued so high...
Maybe because they keep selling every car they make at 60+% yearly growth rate ?

Maybe all I hear from this interview is "if you don't buy a Tesla, you'll have range anxiety". Pretty glad he picked up a Taycan and share about how his experience in anything but a Tesla(and how it's a mistake..lol).

 

[Fact Checking]

Marques Brownlee on Twitter

MKHBD did an interview with Bill Gates. Gates bought a Porsche Taycan and now lecturing about EV's and range anxiety...

Yeah, I don't think him ignoring Tesla was an accident, I just don't see Bill Gates using a Tesla anytime soon - due to Tesla using the wrong OS almost everywhere in their operations.

Gates is still of the Microsoft "old guard" who is (still) promoting platform dominance above everything.

 

[hacer]

Fortunately for you, one is not able to sell puts in an IRA account.

That is false. I've sold puts in my Roth IRA account. So long as the account has the cash (plus proceeds of sale) to cover the exercise it is completely fine. Selling such a put for the purpose of acquiring stock is often superior (and less risky) to a buy limit order.

 

[SO16]

Maybe all I hear from this interview is "if you don't buy a Tesla, you'll have range anxiety". Pretty glad he picked up a Taycan and share about how his experience in anything but a Tesla(and how it's a mistake..lol).

Id be surprised if a person who knows nothing about EVs, would think what you wrote based on that interview.

The average person would just hear EVs are overpriced and all you get is range anxiety..

 

[KarenRei]

1) Max Risk - for the call spreads as described by @KarenRei and @Fact Checking , the max risk is limited to the option premium that is paid, while for the combo strategy the max risk is substantial as the stock price can go to zero.

2) Max profit - in call spread the max profit is limited to the strike price of the short call option, while for the combo option strategy the max profit is unlimited

So, some nuance. At any moment of time, you can get the same net impact from any options strategy because the momentary change in assets with response to changes in the stock price reduces down to a single parameter - delta - and you can choose a given balance of delta-to-cost basis with any options strategy. Indeed, you can incorporate theta into the equation, and still yield the same result with any options strategy.

What a particular options strategy effects is how your options evolve over time with respect to given trends in the stock price. If the greeks on your options start to differ too much from your targets, you need to roll them. E.g., if a call spread starts losing delta relative to cost basis, you can roll it up, and thus, there is no true "cap" to your earnings. However, most people seek to avoid having to roll their options in excess (due to the effort, expense, tax consequences, etc), and want to choose options which continue to have desirable greeks and maximal profit over time. Your options strategy thus should reflect a Monte Carlo simulation of the trends you expect with the stock over time, judged based on how happy you would be with the outcome of the options strategy in that scenario.

A call spread strategy is a strategy focused against swings and only "keeping your eye on the prize". It limits your benefits from unexpected early SP jumps, but also limits your losses in unexpected early SP dips. So they're not always the "financially optimal" choice; indeed, if there was a single options strategy that was perfect, everyone would use it. I certainly had to roll plenty during the recent spike! But for a person whose main goal is the long term, e.g. "eyes on the prize" investment, I find them to be appropriate for me.

Based on the Q4 Model Y disclosures by Tesla my guess is now that this is a new high-tech foundry, located close to the BIW lines which will be able to make both Model 3's and Model Y's. The stamp shop might already have the required 300,000/year capacity to serve both Model 3 and Model Y stamping needs.

I've been leaning toward the foundry hypothesis for a while. They already have a press line, which I assume was sized based on their expected needs for the whole factory when they built it. The foundation looks different from the press line foundry. And Model Y apparently has some huge castings.

 

[Singuy]

Id be surprised if a person who knows nothing about EVs, would think what you wrote based on that interview.

The average person would just hear EVs are overpriced and all you get is range anxiety..

The person who knows nothing about EV also knows nothing about MKBHD. I guarantee you more people know what a Tesla is than MKBHD on the street.

 

[Fact Checking]

Well, I'm not either of the people you asked, but maybe I can shed a bit of light. The purpose of the spreads is match up a pair of option trades in such a way as to keep the leverage of the options, while trading off the best upside to limit the worst downside. Buying the lower call means that it increases in value as the stock goes up (bullish), while selling the higher call (which also increases its price as the stock goes up, but that is bad, because you have to buy it back at some point, so this is "bearish") means that if the stock goes above both, you stop making money.

However in your "combo" strategy, both halves of the trade are bullish. Both the bought call and the sold put go up in value (to you, that is) as the stock price rises. Both go down in value if the stock falls. So you have increased leverage but have also increased the performance in both directions. If the options are roughly at-the-money you have a synthetic long position; you have spent a lot less money for a position that moves in dollar value roughly like the underlying stock. This amplifies gains and losses.

Synthetic long and short positions are considered riskier than spreads, because of their easy leverage and the resulting big potential losses - while spreads have a limited downside. Synthetic options positions are "stock replacement strategies" that have less upfront cash/margin footprints than owning the stock.

As a stock replacement strategy another approach is to score a few long term lottery tickets that move deep in the money - those will follow the stock most of the time, but use up only a fraction of the initial investment. The downside is the significant premium paid relative to stock: a 2022/01 LEAP at-the-money contract is trading at a $220 premium at the moment - this is the amount of gains you give up over 2 years time period should the stock stay flat at the current $800, and you'll only start making at $1,000 and above.

Another approach is to go with deep out of the money options and write it off as an investment loss straight away - for example the 2022/01 LEAPS at $1,880's are going for around $55 right now - which is still elevated and assumes big, over 140% appreciation in the TSLA stock price in the next two years to reach the $1,935 break-even price, and IV of these is still well above the historic average of 50% at 53%.

The $1,500-$1,880 2022's are probably the closest to any realistically priced long term shots at the moment, but of course there's a significant risk of a 100% loss, plus there will be an unnerving draw-down of the position should there be a significant dip. No more inexpensive moonshots available anymore.

A middle-of-the-road approach would be $1,250 2-year LEAPs for around $110 which assume appreciation to $1,360 as a break-even point - this is a 35% annual upside which is more or less consistent with a bull thesis and allows the harvesting of any explosive appreciation.

There's significant downside risks compared to just using the cash to buy stock, and the leverage isn't all that great, a few days after a big run-up is usually not a good moment to buy bullish options.

Not advice.

 

[Hock1]

That is false. I've sold puts in my Roth IRA account. So long as the account has the cash (plus proceeds of sale) to cover the exercise it is completely fine. Selling such a put for the purpose of acquiring stock is often superior (and less risky) to a buy limit order.

I stand corrected. I have always had my money with a full service broker, whether it be as an employee or just a client . All these brokers allowed only selling covered calls and buying married puts. All other option transactions were not allowed. Just my experience. I actually agree with this more-conservative approach to options in an IRA.

 

[Fact Checking]

E.g., if a call spread starts losing delta relative to cost basis, you can roll it up, and thus, there is no true "cap" to your earnings. However, most people seek to avoid having to roll their options in excess (due to the effort, expense, tax consequences, etc), and want to choose options which continue to have desirable greeks and maximal profit over time.

Another reason for people preferring vanilla call options is the chance for a big gap-up in the price that doesn't give you any chance to roll up and capture the full rise.

For example if you were trading spreads on SPRINT:

Then if you were using call spreads which didn't capture the $5->$8.7 overnight gap-up on the merger approval news, but used the historic volatility of $1 width, then you were out of luck and lost much of the benefits of the gap-up.

But this is not really a big problem with TSLA under most circumstances, as the kind of over 100% gap-ups are unlikely due to its large market cap.

 

[Cosmacelf]

It’s just unfortunate when people like Bill Gates buy a Taycan and then mention how bad range anxiety is, how slow to charge, how difficult for long distance travel, how expensive EVs are for what you get and how amazing gasoline is for energy density. Had he instead purchased a Model 3 or Model S long range with Tesla’s super charger network, he may be less likely to stress those points as much. By bill saying what he did, I bet he turned off many future EV buyers.

I can see why MKBHD didn’t, but too bad he couldn’t have said a Tesla practically removes those concerns. The TM3 is an average priced car too. (Albeit quickly can get a bit pricey.)

Gates is no doubt a smart guy but I stopped listening to him on any technical topic when he was still pushing macros and BASIC as relevant technology in the 1990’s. His time has long since past and I’m kinda glad he doesn’t have a high profile anymore.

 

[JBRR]

Yeah, I don't think him ignoring Tesla was an accident, I just don't see Bill Gates using a Tesla anytime soon - due to Tesla using the wrong OS almost everywhere in their operations.

Gates is still of the Microsoft "old guard" who is (still) promoting platform dominance above everything.

I think Gates have been biased by listening too much to Vaclav Smil who seems to have an axe to grind with everything Elon Musk does.

 

[Fobble]

You're kidding. If they do that, it will be vulnerable to Chanos and his ilk just like it was when it was Solar City. Remember that Chanos' main reason for hating Tesla and Elon is that they prevented him from bankrupting Solar City.

That's is not a good reason not to spin off a division. Your reasoning sounds like: To avoid an issue from occurring is not to do it at all, instead of doing it with the best ability. By that time, the glass solar roof, energy storage, to name a few, are in good operational state and profitable. Once a good management team and good product line-up are in place, the short attacks will be prevailed.
Let's come back in 5 years and see which way it goes.

 

[Skryll]

Dumb move. If he was a smart person, he could have bought faster and better EVs with 4X that range for the same money! How ? Of course, buying 2 Tesla Model S at nearly 400 miles range each

The snarky explanation would be that bill probably refuses to buy MacBooks also and then complains about laptop battery runtime.

the real question is why the interviewer has not asked him the obvious question. Both are influencers.

what was the intent ?

 

[StealthP3D]

I can tell you never been to Texas.

I'm pretty sure Karen has been to Texas!

 

[dhrivnak]

Currently, the navigation screen shows how many stalls at a given in-range supercharger are occupied (shown in red).

It would be a significant improvement if the screen could directly recommend which stall to drive to (when the navigation destination is a Supercharger). Even if multiple Teslas are headed to a given supercharger site, Tesla would know this and should be able to estimate the order in which these cars will arrive at the site. As cars finish charging - and disconnect - the recommendations should be redone, so the top recommendation is the one that is most likely to give the highest charging power.

Due to unforeseeable circumstances (such as ICE'ing), the navigation screen should probably show a list of the (e.g. three) best stalls to connect to.

In fact, I have to assume Tesla have developers working on this.

??? Maybe I am missing something but how would this be helpful? All SuperCharger pairs should be at the same level. If possible do not share a pair which is easy to see when you pull in.

 

[2Pearls]

In the hopes we can wrap up this whole Taycan discussion, here's a post I can fully get behind as it expresses how I've been looking at this situation:


Think of the Taycan as a mix between the first Roadster and the early versions (2012-2013) of the Model S:

Is it sometimes tricky to drive it long distances because of insufficient and unreliable or slow charging availability? Yes.

Does it enter a somewhat rarified market (not much competition for its specific class)? Yes.

Is it the best value for money? Hardly!

Is it a good driver's car? Definitely!

The people buying the Taycan these days are the early adopters and/or people who won't use it as their only car. Sometimes as their main car (but with a backup), sometimes as the weekend fun drive thing. But remember, it's not for everybody, so let's not treat it as if it were. It doesn't tick all the boxes, it doesn't even tick most of them. Teslas, any of them, are clearly the superior EV in terms of range, charging convenience, space... just practicality. Taycan probably wins the luxury feel category, and -- according to people who have driven it -- it might win marginally on the driving feel category.

The Taycan is a Porsche. By that, I mean it fits the Porsche image. In that respect, Porsche can be proud of their accomplishments. The Taycan HAD TO have great driving performance, and a luxurious feel. Efficiency would have always had to come second.

So, the way I look at it is, more EVs in the market are good for Tesla. I really don't want a world where the ONLY EVs are Teslas. Because that would mean that people choose to buy Teslas rather than choosing to buy EVs. It would be: either a Tesla or an ICEV. No! Let the people have choices, and let Tesla vehicles be the best overall choice out of all EVs. I want to be able to say "Tesla is the best EV, and the best car overall", but for that we need something to compare them against. So, I don't want the Taycan project to die, I want it to improve and to thrive. Or at most, let it be "killed" by the Roadster 2. Again, efficiency numbers mean almost nothing to the target audience, it's really all about performance and feel.

Good Recap, Thanks

 

[imherkimer]

Sorry to bring the bad news guys:
Work halted in Berlin?
Bloomberg - Are you a robot?

@GFernandes, it would help if you read this thread before announcing that you are “sorry to bring the bad news.”
This topic has been discussed here for most of the last day.
It would also be helpful if you would say why this Bloomberg article is a better news source than the others which have previously been cited in this thread, primary sources direct from Germany.
Otherwise, have to say, your post smells really FUDdy, and makes you seem like a fuddy-duddy.

 

[LJS22]

@GFernandes, it would help if you read this thread before announcing that you are “sorry to bring the bad news.”
This topic has been discussed here for most of the last day.
It would also be helpful if you would say why this Bloomberg article is a better news source than the others which have previously been cited in this thread, primary sources direct from Germany.
Otherwise, have to say, your post smells really FUDdy, and makes you seem like a fuddy-duddy.

A few days ago they cleared a lower court ruling on construction in the forest. Today a higher court of appeals is declaring them to stop immediately. They are stuck in a judicial nightmare.