I was 90%+ sure TSLA was going to go up after the S&P announcement so I bought short-term calls. I’m not going to rehash all the arguments here written by others that led to this - we all know them. The point of me posting my trades is to give a strategy on how to take advantage using options at a time like that when the movement of the stock was a very high chance in one direction. I wouldn’t risk a significant % of my portfolio (majority TSLA shares plus some LEAPS) on that bet though, but I wanted to show how a smallish % of one’s investment (willing to lose) can become something significant if done properly and with conviction. That was my 40x in January. 40 x 1% of a portfolio is a lot (later diluted since the rest of the portfolio went up as well of course).
I don’t think TSLA is dropping back to pre-S&P levels after the buying is done. I agree there will be a new higher level. I do think the SP will overshoot its ultimate new level as it usually does (go look at previous very large increases over weeks - always followed by a drop back of some amount).
The point of buying puts (and maybe sell some way OTM calls when IV is crazy high) is to take some of the profit from the calls I will make if the SP keeps going up, and try to squeeze a little more from the anticipated downward correction. The profit I will use (again I will only use some) will be “house money” at that point so I am willing to lose it. I estimate a 70-80% chance of some sort of significant drop IF the SP has gone to a very high level (over 750-850). The higher it goes, the higher my conviction that there will be a drop and thus the higher the profits I will get by playing both directions if I am right. I oils never expect to time the movements perfectly but I don’t have to in order to do well.
