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

[ammulder]

Personally I write weekly margin covered puts DOTM.

Thanks. How far OTM if you don't mind my asking? It looks like a large swath of the lowest strikes wouldn't even earn $100 in premium. Do you have a target premium you're going for?

 

[smorgasbord]

OK, so let me check my mental picture of this. Let's say today you sold a $300 Put for Oct 16, 2020, earning you roughly $850. Seems pretty safe, and if you were "forced to buy" at $300, you figure you'd later be crying all the way to the bank.

The thing is, you have to keep $30,000 cash on the sidelines in case you're forced to buy, right?

Sorry, I should have made it clear that selling Puts is best done in a margin account. Selling Puts without a margin account isn't the best use of cash.

When you say you sell Puts when the price is lower than you think it should be, wouldn't you do better to buy shares or calls at that time? They seems like they'd be positioning you to take greater advantage of an impending rise.

With TSLA, what you think is a low price is often not a low price. Like when it dropped from $510 to $450 and then $420.69 and people like me were buying shares, only to see it head towards the mid $300s and then have little dry powder left. Puts give you some protection from that. Especially if, like me, you already have a full allocation of TSLA.

If I'm going to gamble, wouldn't I do better to do it on a call that might return 10x or more, giving me a better chance of paying off the initial investment right off the bat instead of requiring like 10 successes? Am I patient enough for selling Puts?

I don't think I'm tempting myself yet. But it's not clear that I have the right picture.

The thing about buying calls is that you have to get the timing right. As we've seen in the past, a 3-4 month timeframe may not be enough time for TSLA to recover. TSLA (and the market as a whole) are trading differently than a year ago, but as we just saw, TSLA is still volatile. The market reacts strongly to unpredictable vaccine news. If Battery Day is a bust in analysts' eyes or ZM gets into the S&P in Dec and TSLA still doesn't, etc. the stock could drop 20%, as we just saw. It might take 6 months to recover, or longer. A Sep 2021 $400 Call will cost you $140 per share today. Even the $800 Call will cost you $64, meaning TSLA has to reach $865 in a year for that to be profitable.

 

[stealthyc]

Thanks. How far OTM if you don't mind my asking? It looks like a large swath of the lowest strikes wouldn't even earn $100 in premium. Do you have a target premium you're going for?

I suppose DOTM is relative. I typically end up in the 12-15% below market range depending on price movement / IV at the time. I guess I shoot for about 1% return weekly. Obviously there is a totally reasonable chance of assignment, and I expect it, but I'm fully aware of that risk and how much money I have involved and can handle a total loss if a black swan event were to happen post assignment.

 

[smorgasbord]

I would prefer to sell, for instance, December 2020, $800 strikes - if I did that right now, I would net $60k in premiums.

Now why would I do that? Well, I'm just in the process of arranging a sizeable mortgage - I prefer to borrow money at the current interest rate over selling my shares. I realise I can service the mortgage by selling calls against my shares. That $60k I could get for selling December calls ...

Dec 2021 $800 Calls on TSLA net about $19.75 per share right now. So, that's just under $2,000 per contract of 100 shares. To get to your $60k number you're talking more than 30 contracts, putting over 3,000 shares at risk of getting called away. You're earing 5% in premium by putting $1.2M on the line to max out at $2.4M.

That may sound good right now, but go back a year when TSLA was trading $300 pre-split ($60 post-split) and ask yourself today how you'd feel if you had sold calls forcing you to sell at $120 post-split. I personally think that's OK for a portion of one's allocation, it's often good to take money off the table as a stock rises quickly, but I wouldn't want to sell most of my allocation at just a double. If 3000 shares is a small portion of your entire portfolio, then congrats, btw.

 

[Artful Dodger]

Pre-Market High:
$440.40 +4.95%
(08:44:11 AM)

Pre-Market Volume:
1,951,757

 

[Artful Dodger]

got the spanking machine ready for early morning paddling of our dear little shorty shorts.

Nice! Personally, my proudest achievement is that I have successfully predicted 11 of the last 9 bottoms.

Cheers!

 

[Snerruc]

So a while back I made a new account on robinhood. As discussed previously I wanted to see how it would handle me trying to buy shares without funds sitting in the account already.

Sep 3, I linked it to my checking/savings accounts and tried to buy several shares of TSLA. It prompted me to pull $1875 over to fund my account.

Sep 4, I get a message the transfer started

Sep 8, I stare at TSLA sitting at $330 and wonder why robinhood is so crappy about handling a funds transfer when I could have easily sent 5x that much money to almost anyone in the US no questions asked in less than 48 hours by a dozen various methods.

Sep 11, I get a message the transfer completed. I notice I could have bought in at $365 instead of $330 it was at a few days before.

I thought robinhood was supposed to be a modern newfangled broker. Apparently they haven't figured out how to move money fast yet. I wonder how many years it'll be until they or another broker figures out how to move money around at a reasonable speed?

I’ve played with Robinhood some. After the first transfer, mine go through in 2 business days. They give me access to $1000 immediately. They are for small investors not larger ones. They do have a more advanced service. Have you tried that?

 

[Intl Professor]

The @Krugerrand, can you please ask your mom for her estimate of TSLA share price the day after Battery Day. She called the $500/SP spot on a week last Friday. Your mom rocks!

You too! A pebble here, a pebble there....

 

[Tslynk67]

Yes, makes a lot of sense.. except that if it's exercised and you go in reverse with DOTM puts, you have to keep the cash around, which will net you no benefits if the SP keeps going up..

I would be selling very aggressive puts if I were to get exercised, essentially the same strike to get back in - always worked in the past likely, but not guaranteed to happen in the future.

So yeah, there's an element of risk, but the risk is that I have $2.4m cash in my account, which is one, frankly, I'm prepared to take. Not to mention that if I did have $800 strike calls being exercised, then my trading account - which is mostly 2022 LEAPS, would, well, explode

The options you get once you've got a decent amount of capital, are ridiculous.

 

[Tim S]

Dec 2021 $800 Calls on TSLA net about $19.75 per share right now.

Dec 2020

 

[Snerruc]

Whelp. I learned something. Looks like Sprung are more capable than I thought.

There is one in Kona, Hawaii that is 30+ years old. Originally used by a company building metal frame houses. Currently used for a variety of purposes. Summer all the time and still in good shape.

 

[TheTalkingMule]

Rumors on Twitter that Chamath’s IPOB is gonna merge with Neuralink. Just a rumor for now, but IPOB did jump up this morning.

IPOB is apparently the Opendoor fund, not Neuralink. Still doing quite well pre-market after announced IPO/merger.

I wonder if this means we pile into IPOC as its more likely now to be targeted at Neuralink?

The whiney kid on CNBC was trying to rip into Chamath this morning for taking fees......it didn't go well.

 

[ammulder]

A Sep 2021 $400 Call will cost you $140 per share today. Even the $800 Call will cost you $64, meaning TSLA has to reach $865 in a year for that to be profitable.

Yeah, I wasn't thinking buying a call that you expect to exercise someday. I was thinking of buying a shorter-term call (maybe a couple months out) that you sell if it goes up 5x or 10x or whatever in value. And if it doesn't, you try again, and hope you get at least one of your first 5 or 10 attempts right. But if you're starting from a position where TSLA feels undervalued, the odds of catching a spike should be in your favor.

I guess in know in my head that TSLA traded sideways for a pretty long time... but it feels like we're past that now. I think the odds are low that factory capacity expands 50% per year and the stock stays level. Nobody on Wall Street actually believes deliveries will increase 50% per year, no matter WHAT Elon says on the conference calls. They like nod and write down 20%. There are going to be upside surprises. Of course we'll have to wait for The Krugerrand's Mom to say when... but Q3 sounds promising.

 

[BrownOuttaSpec]

Here we go gents! What a way to start the morning! 440 and climbing!

 

[TheTalkingMule]

I thought $435 was kind of a strange open... 30 seconds later we're at $441. Nice try MM.

 

[Artful Dodger]

Here is this morning's Tech Chart from 09:30 AM:

Cheers!

 

[ProfTournesol]

Dec 2020

My 700 dec 2020 calls are bright green!

 

[Big Time]

Spank spank spank

 

[jhm]

The typical analyst reaction to Battery Day would have been that it all sounds very expensive and risky. By Tesla raising $5B beforehand that reaction will be muted and the SP will be much better off. That was a very smart time to raise.

This sounds like a potential answer to my query about whether 9/22 or 9/23 will be the better day to buy Tesla. You could argue that ample cash in hand helps to avoid a fall off in price on 9/23.

 

[ggr]

New acronym: MMMD = Mini Mandatory Morning Dip.