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

[vwman111]

Bulk of my options are $900 - $1,400, so fairly deep ITM yes.

I assume you mean with regards to (short term) cap gains taxes? That really depends on where you live. In the US/Canada, maybe avoiding those will have to be taken into consideration when making decisions like this.

But even then, you might be able to effectively close out the options by selling calls at a slightly higher strike. Say you hold Jun'22 $1,090s, you could sell Jun'22 $1,100s, turn them into a spread, and effectively close out the position without paying short term capital gains taxes. I'm not an expert on this, so you may need to double check with a professional, but I believe this is legal and works.

Thanks @FrankSG

I'll look into the spreads.

Tax is definitely a consideration, however i was also considering the fact that you could buy twice as many shares if you hold and exercise your Jun 22 900 calls vs selling option and paying $2,000 per share. There would be the added risk that stock value may decrease, or that your would lose the premium over the next year if TSLA stays flat. However, if TSLA continues to rise at a steady amount, enough to offset the theta on the option then you should be twice as better off?

 

[AudubonB]

Chevron is still there. What the DJIA lacks is an alternative energy company and an automaker. Any ideas?

Aramco and Nikola?

 

[Boomer19]

The changes in the Dow Jones Industrial Average taking effect on August 31 were apparently inspired by the Apple (AAPL) stock split taking effect that day. The split will make Apple less dominant in the share price weighted DJIA. The changes may lead to better balance among and within industries.

There has been no automaker in the DJIA since the General Motors bankruptcy in 2009. So it is being asked why Tesla won't be added to the DJIA that same day, since it also splitting that day. Well all DJIA companies are also in the S&P 500. Both indexes are administered by S&P Global. And even after Tesla splits and is priced around $400, it would be by far the priciest stock if it were in the DJIA. So two things may need to occur for Tesla to enter the DJIA: inclusion in the S&P 500, and a further stock split.

do we think it’s the case that it has to become/display less volatile traits?
or
by nature of being added to S&P volatility may trim off a bit, and further if added to dow?

or the opposite,
would one or both of those additions make it even more volatile when tesla has its ups and downs,
kind of like the self fulfilling prophecy type trading when a surprise positive or negative is followed by over-acceleration due to everyone hedging, chasing, rebalancing at once?

one worry is that it will become too static...
what would we all do with ourselves...dear god :0

 

[FrankSG]

Maybe I'm not understanding your table right, but looks to me it's not apples to apples. The question folks would want to answer is, given $X, how will my ROI look like if I compare stock and LEAPS of various strikes? Which means we'd have to scale option returns based on how many of these contracts you could buy for the same price as 100 shares.

That's what it does. It calculates returns based on a 100 shares investment, currently equal to $201k

Umm...



and

Sounds to me like it'd work just fine. If you hold what is now an options spread until expiration, it'd count as long-term cap gains rather than short-term if you exercise the LEAPs after holding for less than 12 months.

EDIT: Didn't read the post carefully enough. You are right, it doesn't work.

Thanks @FrankSG

I'll look into the spreads.

Tax is definitely a consideration, however i was also considering the fact that you could buy twice as many shares if you hold and exercise your Jun 22 900 calls vs selling option and paying $2,000 per share. There would be the added risk that stock value may decrease, or that your would lose the premium over the next year if TSLA stays flat. However, if TSLA continues to rise at a steady amount, enough to offset the theta on the option then you should be twice as better off?

This doesn't make sense. If stock price stays the same, or rises just enough to offset time premium, you'll be able to buy just as many shares by selling and buying stock compared to exercising.

When stock is $2,000 and you hold 2x $1,000 calls, selling both for $200k and buying 100 shares, or selling one for $100k and exercising one, in both cases you'll end up with 100 shares.

 

[vwman111]

This doesn't make sense. If stock price stays the same, or rises just enough to offset time premium, you'll be able to buy just as many shares by selling and buying stock compared to exercising.

When stock is $2,000 and you hold 2x $1,000 calls, selling both for $200k and buying 100 shares, or selling one for $100k and exercising one, in both cases you'll end up with 100 shares.

Maybe i'm missing something here. If you exercise at expiry, would you not be able to buy 200 shares if exercised at the $1000 strike price vs selling and paying for 100 shares at $2,000?

 

[FrankSG]

Maybe i'm missing something here. If you exercise at expiry, would you not be able to buy 200 shares if exercised at the $1000 strike price vs selling and paying for 100 shares at $2,000?

In the scenario of stock price being $2,000 and owning 2 options at a strike price of $1,000:

Buying 100 shares shares at $2,000 may cost the same amount of dollars as exercising the options to buy 200 shares at $1,000, but if you exercise both options, you have to pay $200k out of your own pocket, whereas if you sell the options to buy 100 shares @ $2,000, the sale of the options nets you the $200k needed to buy the shares.

So yeah, you could buy 200 shares if exercising the $1,000 strike price options, but then you'll have to come up with the $200k yourself.

 

[lafrisbee]

So stock gurus, TSLA can NOT be sold in After hours on Friday nor pre-market before the stock market opens on Monday.
I can't find if this is done very often but if it isn't then I feel someone wants to see something about what is being done to TSLA by MM's.

The other issue with the no after hours Friday and the no premarket selling Monday will be some very interesting stock play and price movement at the end of this week. (It also might be the shenanigans are so strong now.) And an absolute explosion of the stock on Monday when the people that feel better buying TSLA for $400-$500/share.
?

 

[Curt Renz]

Cool video.

Side note - looks much foggier (thanks to the fires) than when the last time was in Cali.

Hope everyone is staying safe and healthy.

There was an unusually reddish Moon, while still fairly high in the sky tonight over Chicagoland. I suspect that was due to smoke from California already reaching this far east. If the Moon is even redder tomorrow night, that should cinch the notion.

 

[EV forever]

Sounds to me like it'd work just fine. If you hold what is now an options spread until expiration, it'd count as long-term cap gains rather than short-term if you exercise the LEAPs after holding for less than 12 months.

Unfortunately, the tax treatment rules for Options and spreads are quite complex and make this impossible. There was another thread here discussing similar issue. We concluded that there was no legal way to do this.

How to defer tax by reducing short term capital gain using call spread.

The bottomline is that any gain from selling a call (covered call or as part of a spread) is always considered short term gain.

What Are The Tax Implications of Covered Calls? - Fidelity

Tax Treatment For Call & Put Options

Buying LEAPS and selling for profit is different - if you hold for >12 months, the gain is long term.

If you figure out something different, I would be very interested. I am looking at some LEAPS in my taxable account purchased in February that have a huge gain of over 900%. I would like to sell if there is a big run up of SP over the next few weeks - but won't do so because of short term gain tax liability.

 

[gabeincal]

There was an unusually reddish Moon, while still fairly high in the sky tonight over Chicagoland. I suspect that was due to smoke from California already reaching this far east. If the Moon is even redder tomorrow night, that should cinch the notion.

We can't even see the sun here sometimes... Crazy to know the smoke spread that far.

 

[OrthoSurg]

I placed an order to buy 50 shares at $1930 today at the dip, didn’t go through

 

[Jack6591]

There was an unusually reddish Moon, while still fairly high in the sky tonight over Chicagoland. I suspect that was due to smoke from California already reaching this far east. If the Moon is even redder tomorrow night, that should cinch the notion.

@Curt Renz I spent the last two days moving from Los Angeles to Northern San Diego county. Granted, Los Angeles is five hundred miles south of the conflagration in Northern California — but still yet, the air in the LA Basin is awful.

Many would call me a tree-loving liberal; but I call myself fond of breathing, committed to Tesla’s Master Plan.

Your reddish Moon comment, scares the hell out of me, and I’m a fearless man.

 

[Paul_SF]

 

[Sudre]

What about the large number of calls arround 2090-2110. Over 50 000 in total, largest I've seen in a long time.

View attachment 580038

Anyone with thoughts?

Don't fall for these tricks. The volume for the Calls with the $2100 strike at the end of today was just over 21,000. We don't know which way that was going. It is just volume but it indicates most of those existing Calls could have been bought back as people took profits. The 2090s and 2110 did not trade much at all. We'll see what is still standing in the morning.

 

[Jovian]

That's what it does. It calculates returns based on a 100 shares investment, currently equal to $201k



Sounds to me like it'd work just fine. If you hold what is now an options spread until expiration, it'd count as long-term cap gains rather than short-term if you exercise the LEAPs after holding for less than 12 months.



This doesn't make sense. If stock price stays the same, or rises just enough to offset time premium, you'll be able to buy just as many shares by selling and buying stock compared to exercising.

When stock is $2,000 and you hold 2x $1,000 calls, selling both for $200k and buying 100 shares, or selling one for $100k and exercising one, in both cases you'll end up with 100 shares.

This is the thread where we realized we can't offset the option with other options in an attempt to delay taxes.

How to defer tax by reducing short term capital gain using call spread.

"Moderator comment added at the request of @Davidzhao365. Summary: this doesn't work, there is a special IRS rule against it. The blue text is what he asked to add. --ggr.

Options traders use option spreads containing offsetting positions to limit risk and provide a reasonable opportunity to make a net profit on the trade. That’s very different from an unscrupulous trader entering a complex trade with offsetting positions set up for no overall risk (the rule is substantially reduced risk) or reward. Why would an options trader do that? For tax avoidance reasons only.

The IRS straddle loss deferral rules are set up to catch this trader and prevent this type of tax avoidance. The straddle loss deferral rule defers a loss to the subsequent tax year when the winning side of the position is closed, thereby reversing what the unscrupulous trader was trying to achieve."

 

[FrankSG]

The bottomline is that any gain from selling a call (covered call or as part of a spread) is always considered short term gain.

You're right. I reread @dakh 's post and didn't read carefully enough the first time.

 

[Singuy]

And how many of your other stocks dropped ~10% this morning in a 15 min span?

Btw, since you found my post funny. It doesn't take very much to drop Tesla right now as stop losses are extremely abundance and tight without any consolidation trading and the stock is way over the upper BB. It could just be a whale dumping Tesla for Covid battered stocks and a few million dollars worth of sell off can trigger a load of stop losses which will drop Tesla faster than any other stocks without such run ups. Everyone wants to protect their profits in uncharted territory.

 

[Curt Renz]

We can't even see the sun here sometimes... Crazy to know the smoke spread that far.

@Curt Renz I spent the last two days moving from Los Angeles to Northern San Diego county. Granted, Los Angeles is five hundred miles south of the conflagration in Northern California — but still yet, the air in the LA Basin is awful.

Many would call me a tree-loving liberal; but I call myself fond of breathing, committed to Tesla’s Master Plan.

Your reddish Moon comment, scares the hell out of me, and I’m a fearless man.

Ah, poetry.

This appearance of the Moon is unusual but not rare. I've noticed it several times before. The most recent I recall was due to wildfires on the West Coast three years ago. The jet stream carries the smoke here. The 1980 Mount St. Helens eruption kept the Moon quite reddish here for many nights.

 

[ggr]

Chevron is still there. What the DJIA lacks is an alternative energy company and an automaker. Any ideas?

Oops... sorry.

 

[Ameliorate]

OT - Canadian Taxes
After hiring a $500/h accountant I learned that due to the amount of trades I made this year (150+) the CRA may (likely) define my income as "business income" as opposed to capital gains. This makes me responsible to pay the full 50% income tax as opposed to 25% capital gains on any realized gains this year. The guidelines are extremely subjective so they can more or less rule however they want. Fortunately only about 10% of my gains are realized for 2020.This caught me very off guard, thought you should know it's a possibility.

Hence why I will likely hold my LEAPS till 2021 at minimum or just exercise at expiry. They're so deep In the money (1000-1200 LEAPS) exercising one call gives me enough margin to exercise the next call and have some room leftover...... It's silly. Feels a little stuck if I'm forced to sell I have to forfeit an extra 25% to taxes, HODL.