trading

[ev-enthusiast]

Looking to add some calls tomorrow based on the Model X power steering issue.

As far as I can see the issue with the Model X power steering is in fact a fast rusting screw that can be replaced during the next inspection.
The issue of the disproportionate increase in corona infections and deaths today is a leap in statistics by recognizing other (simpler) diagnostic methods, taking into account the symptoms of the disease and not just the test for the virus.
I am curious how the market will react today and how strong the news will be on the SP.

 

[ev-enthusiast]

Two edged sword. Any ideas on trading the equity rise news?

 

[ammulder]

For a short term recovery play of a dip I usually use a price close to SP (about 5% out of the money) and an expiration about one month out.
Please be aware that this is very risky and be prepared to lose all your money in a very short time.

OK, so taking a peek this morning, 1 call with March 13 expiration and $760 strike is roughly $5700. Same expiration for $800 strike looks like about $4300. Does that sound right?

That's higher than I might wish for money I'm prepared to lose.

 

[ev-enthusiast]

OK, so taking a peek this morning, 1 call with March 13 expiration and $760 strike is roughly $5700. Same expiration for $800 strike looks like about $4300. Does that sound right?

That's higher than I might wish for money I'm prepared to lose.

Yes, that sounds right. It's a lot of money.

Try to split your holdings in a big core and and small trading shares.
This way you can keep your core shares long term and try to time the market and SP moves with your trading shares.
You get all the short term excitement without losing too big
Be careful.
Good luck!

 

[ammulder]

Yes, that sounds right. It's a lot of money.

Try to split your holdings in a big core and and small trading shares.
This way you can keep your core shares long term and try to time the market and SP moves with your trading shares.

I'm not looking for "day trading" in general. Rather, I'd like to try to take advantage of major news when it comes -- yesterday's funding announcement, an earnings report, etc.

In the main thread, someone reported Thursday morning just after the announcement of the funding round, buying $900 calls with expiration Friday (the next day) for $0.07 at or near market open, and selling them a few hours later for $4.20.

The $7 per contract for that sounds like a more appealing gamble on a major news release than the $4000-5000 per contract described above.

I should point out that the $0.07 contract was only selling for $4.20 for something like twice within a 5 minute period during the whole day... odds would have been much better of selling at $3, where it stood for (I think) a few hours. That would still be an amazing return, of course.

And I get that it's gamble. At the same time, I believed the funding round was going to be good for the company and the stock price, and the price had not reflected that early on. I wasn't so sure that I was prepared to gamble increments of $5000 on it, but I definitely would have been willing to gamble increments of $7 on it, had I seen that in time. So... this is me trying to be prepared with more strategies for the next news.

 

[JakeP]

In the main thread, someone reported Thursday morning just after the announcement of the funding round, buying $900 calls with expiration Friday (the next day) for $0.07 at or near market open, and selling them a few hours later for $4.20.

The $7 per contract for that sounds like a more appealing gamble on a major news release than the $4000-5000 per contract described above.

I should point out that the $0.07 contract was only selling for $4.20 for something like twice within a 5 minute period during the whole day... odds would have been much better of selling at $3, where it stood for (I think) a few hours. That would still be an amazing return, of course.

And I get that it's gamble. At the same time, I believed the funding round was going to be good for the company and the stock price, and the price had not reflected that early on. I wasn't so sure that I was prepared to gamble increments of $5000 on it, but I definitely would have been willing to gamble increments of $7 on it, had I seen that in time. So... this is me trying to be prepared with more strategies for the next news.

This is exactly the kind of bet I would like to make, understanding that you probably need to make quite a few of these before you hit the lottery ticket day like .07 to $3 or $4. But I’m scared to death of buying a hundred or even ten contracts and having it expire ITM without being able to sell to close first, and not having the cash to buy the 1,000 or 10,000 (!) shares at the strike price.

 

[pz1975]

This is exactly the kind of bet I would like to make, understanding that you probably need to make quite a few of these before you hit the lottery ticket day like .07 to $3 or $4. But I’m scared to death of buying a hundred or even ten contracts and having it expire ITM without being able to sell to close first, and not having the cash to buy the 1,000 or 10,000 (!) shares at the strike price.

You can always just sell the contracts before they expire. There will always be a buyer for them (even if you have to sell at a slight discount to a market maker).

 

[jeewee3000]

I'm not looking for "day trading" in general. Rather, I'd like to try to take advantage of major news when it comes -- yesterday's funding announcement, an earnings report, etc.

In the main thread, someone reported Thursday morning just after the announcement of the funding round, buying $900 calls with expiration Friday (the next day) for $0.07 at or near market open, and selling them a few hours later for $4.20.

The $7 per contract for that sounds like a more appealing gamble on a major news release than the $4000-5000 per contract described above.

I should point out that the $0.07 contract was only selling for $4.20 for something like twice within a 5 minute period during the whole day... odds would have been much better of selling at $3, where it stood for (I think) a few hours. That would still be an amazing return, of course.

And I get that it's gamble. At the same time, I believed the funding round was going to be good for the company and the stock price, and the price had not reflected that early on. I wasn't so sure that I was prepared to gamble increments of $5000 on it, but I definitely would have been willing to gamble increments of $7 on it, had I seen that in time. So... this is me trying to be prepared with more strategies for the next news.

In that case, you'll want to try your luck on "weeklies".

The trick with these however is that it's pretty much all or nothing. To land a profit you must:
- be correct about the direction of the SP that day/week;
- be correct about the timing of the above event (the Theta of these weeklies is huge, they drop in value right before your eyes);
- be confident enough not to give up on them when they go green. Your example of a $0,07 contract going to $4,20 shows confidence. Most traders would have bailed out way before that (even at $1).
- do the above enough to make up for all your other losses playing weeklies.

So overall playing weeklies is very risky and to be honest, I mostly get burnt. I avoid it nowadays, since I better put all those possible losses in one 6month-away-call than in many weeklies. That way I make a profit more often than not AND I can bail out with minimum losses if the trade doesn't go my way.

That said, many traders love weeklies and if used well, they are a powerful tool.

Best tactic is to buy at least 5 contracts at a time, so you can gradually take profits. If you're confident you can also add contracts if the price drops after your initial buy, averaging down and then riding up again. If you only have one contract, you risk selling too soon way too many times. You'll rarely have the guts to "let it ride" since it is extremely frustrating to have a weekly up 30% and then seeing it go red forever. On those occassions you let one ride and the stock goes your way, you can make 1000's% in a day though.

Anyway, just sharing my experiences and thoughts on these types of trades. Not advice, besides: be careful.

 

[ammulder]

In that case, you'll want to try your luck on "weeklies".

The trick with these however is that it's pretty much all or nothing. To land a profit you must:
- be correct about the direction of the SP that day/week;
- be correct about the timing of the above event (the Theta of these weeklies is huge, they drop in value right before your eyes);
- be confident enough not to give up on them when they go green. Your example of a $0,07 contract going to $4,20 shows confidence. Most traders would have bailed out way before that (even at $1).
- do the above enough to make up for all your other losses playing weeklies.

OK... though I don't want to do this on the average week. I don't have enough time for the market all the time. I'd rather focus on significant events like delivery announcements, earnings reports, investor days, etc., with the occasional surprise like yesterday's funding round. I'd be OK with a miss, given that this is supposed to be "money you're willing to lose"... For instance, I don't remember the specifics but my impression of the autonomy investor day was that it didn't cause any great rise in the stock. On the other hand, it didn't seem like much of a stretch to believe that the Q4 delivery numbers were going to be great (we all noticed how relaxed Elon was near the end of the quarter), and it didn't seem like much of a stretch to me to think the funding round was going to be well-received once people thought it through.

On the confidence, I don't think I could plan to hold an entire purchase until I saw 100x gains. I think I would hope to sell 10% here and there on the way up -- first aiming to cover initial investment, then aiming to lock in some gains, but perhaps hanging on to half if it seemed warranted (e.g. if stock price kept rising through the day, etc.). I wouldn't expect to maximize even those returns... If it rose like crazy and then dipped, I guess I'd probably be tempted to sell a bunch of the remainder then and not bet on a further turnaround and rise. So I'm sure any gains would be substantially more modest than "the best possible trade".

The question is whether I could do better than just sitting on the sidelines and holding my shares. I guess there's one way to find out.

 

[Zhelko Dimic]

OK... though I don't want to do this on the average week. I don't have enough time for the market all the time. I'd rather focus on significant events like delivery announcements, earnings reports, investor days, etc., with the occasional surprise like yesterday's funding round. I'd be OK with a miss, given that this is supposed to be "money you're willing to lose"... For instance, I don't remember the specifics but my impression of the autonomy investor day was that it didn't cause any great rise in the stock. On the other hand, it didn't seem like much of a stretch to believe that the Q4 delivery numbers were going to be great (we all noticed how relaxed Elon was near the end of the quarter), and it didn't seem like much of a stretch to me to think the funding round was going to be well-received once people thought it through.

On the confidence, I don't think I could plan to hold an entire purchase until I saw 100x gains. I think I would hope to sell 10% here and there on the way up -- first aiming to cover initial investment, then aiming to lock in some gains, but perhaps hanging on to half if it seemed warranted (e.g. if stock price kept rising through the day, etc.). I wouldn't expect to maximize even those returns... If it rose like crazy and then dipped, I guess I'd probably be tempted to sell a bunch of the remainder then and not bet on a further turnaround and rise. So I'm sure any gains would be substantially more modest than "the best possible trade".

The question is whether I could do better than just sitting on the sidelines and holding my shares. I guess there's one way to find out.

Be careful of data points you choose - Elon was very relaxed, BBQ-ing on the rooftop of GF just before disastrous Q1'19 delivery info. There was similar case during MX ramping too.

I've been very successful with other companies before TSLA in couple of years or less, and it took me 5 years of investment in TSLA to make some serious money.

Point being that Elon is like no other executive, and Tesla is like no other company. I now truly believe that with TSLA anything could happen.

 

[Zhelko Dimic]

I've sold 70% of my TSLA during this run-up, and bought myself enough dividend stocks to not have to work ever again. The rest of TSLA will stay in the account for 10 years, or may never be sold, passed to kids...

BTW, dividends in Canada are 4-6% from good stable (slow growth) companies, which does make me think that US market is overheated.

I will probably increase my stake again, if TSLA ever goes under $600

 

[jeewee3000]

I spent my last 4k on tesla 840 Feb 21 calls on Friday

This post aged nicely. Congratulations.

 

[FrankSG]

Yeah, looks like I was 1 week too early with my weekly calls last week. Oh well, my long term positions don't mind this movement at all, so I ain't complaining.

I won't be able to stay up until after market open tonight, but if my Jan'22 $500s are worth 60 shares of TSLA each at some point tomorrow or in the next 1-2 weeks, I'll convert them to shares.

I think it's likely they'll be worth more than 60 TSLA shares upon expiration, but upside is limited. Even if SP goes to $2,000 by expiration, they'll only be worth 75 shares each, which is only 20% further upside from the 60. The advantage of converting them to 60 shares now is that I'll have the option to sell a portion of those shares and buy options at a discount, if/when there is a large dip, whereas I wouldn't want to sell the Jan'22 $500s if they're suddenly worth only 40 or 50 shares each, because there'd suddenly be a lot more upside again.

 

[Boomer19]

It's my understanding that if you have any options or short sales in your account that the entire account becomes collateral, even if you have a positive cash balance. That means your broker can loan out your shares. This could vary depending upon the specific agreements with different accounts and different brokerages, but I believe it holds true extensively, across the board. It's the norm.

If you don't want TSLA shares held in your account to be loaned to shorts without you knowing, it's a good idea to put them under a limit-sell order at a high price (mine is currently at $2200) to prevent your broker from loaning them out for short selling purposes.

if you have a margin account, and are using margin to support any of the positions within your portfolio, all positions are subject to liquidation/loan

brokers don’t do security by security margin. meaning i bought my tesla with cash but used broker margin to buy calls, or another stock, (security B)

therefore if security B takes a dump, and your maintenance requirement is exceeding your net liquidation value (your portfolio value), you are subject to getting not only security B liquidated, but also TSLA.

the outstanding GTC will not prevent this.

as far as loaning out your position, they can only loan out what is owned in excess of what you paid for with your money.

so, in general;
if i opened an account with 50k cash and bought 50k of tsla, and i do not opt into sec lending, they can’t touch those shares. they can go to 0, my buying power will decrease with the price and value of the position, but they can’t go negative, so i won’t owe broker anything.

if i use the 50k worth tesla as leverage to buy 10k worth of security B, i’m now on margin.

that 10k loan is subject to liquidation and/or loan to street. so in that sense, i agree with you.

as the two securities fluctuate in value, so does the the margin requirement against the net liquidation value of the acct.

if during the duration of ownership of those two securities, the broker finds it can make money off the 10k loaned to you by loaning out tsla or security b (but only up to 10k loan value), they will most likely do so.

should things go haywire with one or both securities, they broker will liquidate whatever it can as fast as it can to recoup it’s 10k that it loaned to you.

i guess my point is, i don’t see gtc preventing either of those two scenarios, because once you get into margin on security B, the broker can do what it wants with that 10k.

they can’t, by rule, do anything with fully paid shares. they are segregated and reported daily to DTCC, and subject to audit by finra, exchanges, sec, etc

 

[StealthP3D]

as far as loaning out your position, they can only loan out what is owned in excess of what you paid for with your money.

so, in general;
if i opened an account with 50k cash and bought 50k of tsla, and i do not opt into sec lending, they can’t touch those shares. they can go to 0, my buying power will decrease with the price and value of the position, but they can’t go negative, so i won’t owe broker anything.

if i use the 50k worth tesla as leverage to buy 10k worth of security B, i’m now on margin.

that 10k loan is subject to liquidation and/or loan to street. so in that sense, i agree with you.

I agree with your examples but I think you had better read your brokerage agreement with regard to your first statement.

My Schwab agreement says that if I open an account with 50K and buy 5K worth of TSLA and then short-sell 1 share of Ford, my entire account is pledged as collateral for that 1share of Ford sold short. And that gives Schwab the right to loan out all my TSLA shares to short-sellers.

I don't have any short sales in my account, nor do I buy or sell any options that have the potential to lose more than the initial cost, but I still have the GTC limit sale order because it's not clear to me that Schwab can't loan out my TSLA shares simply because the account has the potential to be on margin. I could call them and ask them, but there is no guarantee I would get a legally correct answer the first time (and it's a lot easier to place a GTC limit-sell order than to call them).

 

[Boomer19]

I agree with your examples but I think you had better read your brokerage agreement with regard to your first statement.

My Schwab agreement says that if I open an account with 50K and buy 5K worth of TSLA and then short-sell 1 share of Ford, my entire account is pledged as collateral for that 1share of Ford sold short. And that gives Schwab the right to loan out all my TSLA shares to short-sellers.

I don't have any short sales in my account, nor do I buy or sell any options that have the potential to lose more than the initial cost, but I still have the GTC limit sale order because it's not clear to me that Schwab can't loan out my TSLA shares simply because the account has the potential to be on margin. I could call them and ask them, but there is no guarantee I would get a legally correct answer the first time (and it's a lot easier to place a GTC limit-sell order than to call them).

well that seems odd to me. i’ll see what my broker documentation says and report back....

 

[Boomer19]

I agree with your examples but I think you had better read your brokerage agreement with regard to your first statement.

My Schwab agreement says that if I open an account with 50K and buy 5K worth of TSLA and then short-sell 1 share of Ford, my entire account is pledged as collateral for that 1share of Ford sold short. And that gives Schwab the right to loan out all my TSLA shares to short-sellers.

I don't have any short sales in my account, nor do I buy or sell any options that have the potential to lose more than the initial cost, but I still have the GTC limit sale order because it's not clear to me that Schwab can't loan out my TSLA shares simply because the account has the potential to be on margin. I could call them and ask them, but there is no guarantee I would get a legally correct answer the first time (and it's a lot easier to place a GTC limit-sell order than to call them).

well that seems odd to me. i’ll see what my broker documentation says and report back....


update - thats not how IB works.

and what i said earlier was a bit off about utilizing positions “up to the debit balance”.

brokers, by rule, can do whatever they want with up to 140% of your debit balance.

so, no matter what method, transaction, or series of transactions a trader finds their way into a debit balance, the broker can utilize up to 140% of portfolio securities to loan (pledge, hypothecate, re-hypothecate)

gtc orders have 0 impact on this.

generally, for reg-t margin, a short sale requires 30% of the collateral/margin requirement to maintain the short position.

if we go back to scenario of 50k cash used to buy 50k of stock, under reg-t i’ll have about 100k worth of buying power still.

i can use that to short another security. but i’ll need to maintain 30% of the total value of short in my remaining buying power. so i should be able to short about 35k worth of stk B

as soon as stock a goes down or stk b goes up, my maintenance requirement will increase and i’ll either be liquidated or margin called, depending on broker

the GTC thing is meaningless at IB. they don’t prevent the broker from loaning my shares, or liquidating any positions.

they cancel gtcs automatically when a security goes through a corporate action, or position transfer, etc.

the only way a broker can touch your shares is if you enter into margin debit or opt into fully paid lending.

if you enter into margin debit, they can utilize up to 140% value of that margin debit.

 

[Boomer19]

And this process is audited by the SEC or some other blind-eyed system? (Sorry, OT here, but leveraging is just too tempting for the powerful, they'll always want more.)

Also, pretty hard to sell when everyone is saying buy buy buy and the stock rises. Damn...

the only way a broker can touch your shares is if you enter into margin debit or opt into fully paid lending.

if you enter into margin debit, they can utilize up to 140% value of that margin debit.

meaning if you are running a 10k margin debit
your broker can “utilize” up to 14k of any security or combination of securities in your account.

 

[SOULPEDL]

the only way a broker can touch your shares is if you enter into margin debit or opt into fully paid lending.

if you enter into margin debit, they can utilize up to 140% value of that margin debit.

meaning if you are running a 10k margin debit
your broker can “utilize” up to 14k of any security or combination of securities in your account.

When they follow the rules. So who's buying TDAmeritrade again?

 

[Boomer19]

When they follow the rules. So who's buying TDAmeritrade again?

correct. there are past examples of rule breaking. but segregating customer from firm funds is like rule #1. something corzine and Mf global chose to ignore.

schwab bought TD
MS buying etrade