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

[jw934]

Wasn’t there someone in this very thread lamenting recently that they had been doing this strategy during the recent TSLA run up and ended up effectively losing a lot of money relative to buy and hold?

Yes, that was me. Lost out on a small % of my holdings when Tesla went from $1400 to $1900 all of a sudden and I had to chase to buy back the covered calls by selling some shares.

 

[Congo Line]

Looks like ARKK sold some $TSLA today:

View attachment 589715

I believe they had picked up some shares during the sell-off last week. So perhaps they had to sell due to TSLA becoming 10% of portfolio again?

 

[Boomer19]

semi-mod: No more Tripp in this thread. Seriously. --ggr

society may grant these type clowns (him, gj, speig, etc) 15 minutes, no need for us here to extend the same courtesy, let alone prolong the exposure.

 

[Knightshade]

Regarding selling weekly covered calls in a taxable account in the US, my understanding is that selling weeklies against shares held short-term may reset the holding period of the underlying shares (so they won't become long-term assets). For this reason, I'm looking at doing that only in an IRA for now. I'm not an expert, this is not tax or financial advice.

FWIW one set of info that is not advice from me I've seen went like this:

Your cash account holds "real" shares bought with 'real' money you plan to keep long term.

Then use the margin available in most cash accounts to buy another set of temp shares (in blocks of 100 obviously, how many depends on your core holdings and how much margin that offers you)

So you buy those on Monday, sell a weekly covered call say 5% OTM (or 10% or whatever modest amount fits your intent), pocket the premium.... if the shares are called away you still get the 5% (or 10% or whatever) SP profit plus the premium, and your only cost is 1 week of the margin loan which won't be much.

Repeat weekly.

If the stock shoots way up, yes you lose the "above the strike" gains on the margin shares... but you retain it on your core shares anyway so you don't suddenly get called out of your "real" shares ever, but still get to use margin to (relatively safely) make some extra pocket change.

You don't even really care WHAT the stock price is on any given Monday for this method.

The shares going down a little bit is no issue either- the call expires worthless and you sell another one next week- you still stay way ahead of the margin cost.


The only real potential risk is you buy the margin shares Monday and suddenly the stock takes a HUGE dive... you have a few ways to go at that point... the more conservative way is you only do this with a portion of your available margin in the first place- so a margin call remains unlikely even in a significant dip. Otherwise if you are using margin higher you do risk a call that might require you either putting more cash in to cover, or selling the "temp" shares at a loss.


Again, not an advice.

 

[Jack6591]

Usually the info that is actually announced on these Tesla reveal days ends up underwhelming causing the stock price to drop. Even last November’s cyber truck reveal had a big price drop following (cause it was so weird initially).

However battery day feels like it’ll be different. Flying under the radar is Elon’s comment in Berlin that they’ll be announcing a new Model Y architecture. Add in new cells, new battery architecture, manufacturing, raw material lockups. It is going to be quite the day.

Stock could still drop Wednesday but I expect it’ll be up from here in a month.

I fully expect “Battery Day” to be historic; I am convinced it will mark mankind’s pivot away from mine and burn.

Do not underestimate the loyal opposition. They have no intention of going quietly into the night. Their attacks have been planned, and will be relentless. They will fight back.

Celebrate the event by controlling the narrative — tell your story of prospering while doing the right thing. It’s great trouble, fight back with a Tesla grin.

 

[Prunesquallor]

Looks like ARKK sold some $TSLA today:

View attachment 589715

Is there any info in this that affects retail TSLA investors? ARK claims they don’t accumulate more than 10% $ of any one company in any one of their funds. So buying/selling just reflects that limit, I would think.

There is undoubtedly some leeway they give themselves to buy/sell at opportune times. Is this what we are supposed to take away from these reports?

 

[StealthP3D]

What chassis? It's supposed to be a monocoque design, no? The "chassis" is the body. Isn't that the whole idea?

A chassis has many components. Not all of them will be made from the hardened SS sheet as is evidenced by photos showing an open door. The shapes in that area cannot be made from hardened SS (there are curves). It would not be practical to make every part of the chassis from flat planes. I suspect there will be a cast aluminum under-chassis so it can be form-fitted around the various parts of the powertrain. The obvious alternative would be stamped steel of a non-hardened variety.

 

[kengchang]

Regarding selling weekly covered calls in a taxable account in the US, my understanding is that selling weeklies against shares held short-term may reset the holding period of the underlying shares (so they won't become long-term assets). For this reason, I'm looking at doing that only in an IRA for now. I'm not an expert, this is not tax or financial advice.

Selling weekly option WILL reset the holding period. Only thing that won't impact the holding period is selling OTM covered call more than a month away.

EDIT

 

[Beltsbear]

I believe they had picked up some shares during the sell-off last week. So perhaps they had to sell due to TSLA becoming 10% of portfolio again?

They don’t need to do that. This has been posted many times.

 

[Prunesquallor]

In Grüneheide harvesters have starting cutting down trees in a new part of the wood close to the Tesla factory. This to make room for a transformer substation. On Tesla's own land work continues:

 

[Knightshade]

Selling weekly option does not reset the holding period. Your share just doesn't accumulate the time/day to become long term asset. Only thing that won't impact the holding period is selling OTM covered call more than a month away.

One note- selling non-qualified covered calls does reset the holding period in some cases.


See-
What Are The Tax Implications of Covered Calls? - Fidelity

If a non-qualified covered call is sold against a stock position that was held less than one year, then the holding period for that stock is terminated.

 

[agastya]

Thank you, will tweak my strategy based on upcoming events of course!!

Also, look at both sides of the trade - as in not just calls, but puts as well.

As an example, while the SP was in the 420s y'day I was pretty convinced there is a very small chance the stock doesn't run up leading up to battery day. A 9/25 420P was 39$ in premium, which was very good risk reward IMO. Sold one, and I would probably close it if stock hits 500 or so sometime next week. And well, if it drops below 420, since I already have 39 per share in premium, I just bought myself 100 shares at 381.

Also, there are detailed learning materials on most brokerage sites - but at a bare minimum please understand the Buy to Open, Sell to Close, Sell to Open and Buy to Close events as they relate to writing these.

Not advice.

 

[Artful Dodger]

"It's raining, no aerial record / Tesla Gigafactory 3" | Wu Wa (2 hrs ago)

 

[ggr]

Wasn’t there someone in this very thread lamenting recently that they had been doing this strategy during the recent TSLA run up and ended up effectively losing a lot of money relative to buy and hold?

Make sure you really do want to sell that stock cause if it goes up a lot you’ll be selling the stock (and at a discount to current market price).

Well, I hope no-one here had sold contracts at $260 or $350 today, 'cuz I just bought 1500 shares cheaply.

 

[Don TLR]

Don't mean to step on the OP's toes, but I expect he means by writing covered calls against long stock positions. Option premiums are very expensive due to volatile nature of stock, so writing covered calls is a good way to generate income. For example, earlier this morning, I sold a c530 expiring in a week for $12.60 (it's trading higher than that now as the stock price increased from when I sold the option). So if the stock price doesn't increase to >$530 by next Friday, I will have made $1,260. You can generate much higher income if you are willing to write calls at a lower exercise price.

You can see by owning 500 shares of stock (ok, that would require a $220K investment), you could sell 5 covered calls (each option covers 100 shares of stock). Do it weekly, and you can generate a lot of low-risk income.

Is there a newb investment way to get something like this done, low risk and low gain is just fine as I’m used to just holding and playing dead. It’s worked to be 630% up for now but a way to get closer to adding that comma would be nice too.

 

[kyzhk]

One note- selling non-qualified covered calls does reset the holding period in some cases.


See-
What Are The Tax Implications of Covered Calls? - Fidelity

I've asked this before but don't think I got an answer here - do you know what happens in the following example: let's say you have 200 shares with 100 shares that has already reached long term for capital gains purpose, and another 100 shares in short term status.

Sell 1 non-qualified covered call in the account where the 200 shares are held. Are you able to designate that the non-qualified covered call is sold against the long term cap gain shares, instead of the short term one?

Thanks.

 

[WattsHappening]

I've asked this before but don't think I got an answer here - do you know what happens in the following example: let's say you have 200 shares with 100 shares that has already reached long term for capital gains purpose, and another 100 shares in short term status.

Sell 1 non-qualified covered call in the account where the 200 shares are held. Are you able to designate that the non-qualified covered call is sold against the long term cap gain shares, instead of the short term one?

Thanks.

I know Schwab designates the order that shares are sold. I would think all brokerages do the same. The default is first-in, first out (FIFO). That is what you want. Just check with your account to make sure that's the methodology selected.

 

[ggr]

I've asked this before but don't think I got an answer here - do you know what happens in the following example: let's say you have 200 shares with 100 shares that has already reached long term for capital gains purpose, and another 100 shares in short term status.

Sell 1 non-qualified covered call in the account where the 200 shares are held. Are you able to designate that the non-qualified covered call is sold against the long term cap gain shares, instead of the short term one?

Thanks.

Sensible people would say yes. The IRS would probably say NO! The answer is somewhere in between.

 

[kyzhk]

I know Schwab designates the order that shares are sold. I would think all brokerages do the same. The default is first-in, first out (FIFO). That is what you want. Just check with your account to make sure that's the methodology selected.

Supposedly if one is successful with the covered call selling game you can go an entire year without assignment - where would share sale designation come into picture in this case?

 

[Mo City]

I love selling options for some extra money but 10k a week on 200k (or 5% ROC) tells me you are much more comfortable w/ lower strikes on CCs than I am. For example, let's say you own 500 shares and sold calls for next week, then you'd need to sell 5x 9/25 $505 calls (which closed at $19.70 today). Giving up the gains over ~525/share next Friday seems like a risky bet to me, but to each their own. When I do CCs I tend to go way out of the money and up to two weeks out.

What do you think of this: Today I sold 1x 11/20 $600 calls today for $43.55.