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I could imagine Tesla to return back to its old trading channel. This is exceptional times.
Maybe, but I can't imagine it staying there for super long. Tesla is purely trading off of corona macros right now. Eventually there will be a point when Tesla's fundamentals will dictate its SP once again. This could take weeks, months, perhaps even a year, but eventually it will trade off of fundamentals again.
For the record, we've finally dropped enough for option premiums to be attractive to me again. I have a portion of my shares that I'm willing to exchange for options at the right prices, and I think I'll be converting 1/3 of those to options today. I'm looking at some relatively low risk long term options with Jun'22 expiration. I'll probably go for either the $700 or $800 strike. I'm going for long term, because I have to admit I don't understand the virus or crisis like this well enough to confidently predict that we'll be back to old levels by the end of the year.
I'm still holding some Jun'21 $900s, which I could see not going into the money if this crisis turns out to be really bad and lengthy, and affects Tesla a fair bit.
I'm also holding a bunch of Jan'22 $500s, which I'm fairly confident should be safe from this crisis. I reckon that by Jan'22 TSLA at least should be trading a couple hundred dollars higher again compared to where we're at today.
I also have a big bunch of Jun'22 $990s, which I'm also not too worried about, because I can't imagine the crisis keeping TSLA down for that long.
Super worst case, I still have all my shares to fall back, but let's hope that doesn't happen, because it'd be a bit painful
I hated that $250-$380 trading channel. It felt like being smothered with a pillowI could imagine Tesla to return back to its old trading channel. This is exceptional times.
Super worst case, I still have all my shares to fall back, but let's hope that doesn't happen, because it'd be a bit painful
I hope we flatline for a week or two around these prices, that would help bring IV down.
Swapped another 1/6 of the shares I'm willing to convert to options. This time I went for the Jun'22 $700 Call @ $82.
So now I've converted 1/2 of the shares I'm willing to convert. Probably would convert the rest if we somehow hit low 300s.
May I ask is your initial plan to convert Jun'22 $700s and Jun'22 $990s back to shares at certain price levels or roll them forward? At what price level would you do that in case company fundamentals remain strong and TSLA volatility remains high? Let's assume in my question that stock price breaks ATH levels well before that '22 expiry.
I'm currently trying to find alternative ways to leverage my position without cash margin. In other words, I'm probably converting some shares to options and/or shorting TSLA competitors. My plan is to convert back to 100% shares in few steps once this crisis is clearly over. The hardest part is to decide few optimal strikes for different risk scenarios. Also, I rather plan my convert-back-to-shares levels in advance to lock gains systematically. Just trying to validate my strategy a bit.
The most important advice I can give you is to calculate all your trades in # of shares rather than in $ values. Like if the Jun'22 $1,500s were trading for $100 right now, and you believed SP would go to $2,000 by then, you might think that's a great trade that will net you 5x your money if things go well, however, SP would also increase 5x, so in terms of # of shares you wouldn't gain anything, and the shares are much lower risk.
Right now it's hard to say exactly when I will convert my options back to shares, because there's a lot of uncertainty about how the virus-crisis will impact Tesla's business. But to give you an example, even though before this crisis started I was expecting TSLA to likely go to $1,500-$2,000, perhaps higher, by Jan'22, I was planning to sell my Jan'22 $500s when SP hit ~$1,000-1,100 for 60 shares a piece*. The reasoning for this was that even if SP went to $2,000 by Jan'22, $500 strike price options would only be worth about 75 shares each**, so 25% upside in that scenario. However, in case of a large drop I'm able to use shares to take advantage of new options deals. Sadly, we didn't quite reach the point where I was planning to convert my Jan'22 $500s, so I am still holding onto them, but that was the plan.
The options I'm currently holding, it's going to depend on various factors when I will convert them to shares. The more shares they are worth, the more sense it makes to convert them to shares, because an option will never be worth more than 100 shares, so upside becomes less, whereas downside risk always remains, especially as you get closer to expiration.
It's also going to depend on how leveraged I personally am. If we go back above ATH before the end of this year, I'll likely convert my Jan'22 $500s the soonest because of reasons listed above. When I do so, that'll deleverage me a lot, a lot larger portion of my portfolio will be shares, and therefore I'll be slightly more willing to take risks with and hold onto other options longer.
I don't know if I'll roll forward any options in the next 1-2 years. Even before the virus-crisis, I was of the opinion that based solely on fundamentals, it wasn't super likely for TSLA to go far above $2,000 by early 2022. Possible, but it'd require insane execution, the market to attach a high value to autonomy, or the market to attach a very high valuation multiple to TSLA that I'm uncomfortable betting on. Given this opinion of mine and recently very high IVs and option premiums, none of the $1,000+ strike price options looked particularly appealing to me. Perhaps if SP shoots up a lot, and I deleverage somewhat, I'd want to make a smaller 'bet' on the market waking up to autonomy's potential, and try to buy some Jan'23 $2,000s or something, but as of right now I have no plans for this as I'm leveraged more than enough for my personal goals.
*Jan'22 $500s would probably trade at 550-600$ a piece when SP is $1,000, so be worth 55-60 shares.
**$500 strike price options are worth $1,500 each if SP is $2,000 upon expiration. This means you can convert them to 75 shares each.
Is there a calculator to figure out when is the optimal price to sell the options at? I am new to this and I bought Jun'22 $750s.
Is there a calculator to figure out when is the optimal price to sell the options at? I am new to this and I bought Jun'22 $750s.
Is there a calculator to figure out when is the optimal price to sell the options at? I am new to this and I bought Jun'22 $750s.