trading

[FrankSG]

Recently enough that I doubt my opinion has changed since then. Although I hold more stock than I ever have, percentage-wise I still have a very large portion of my portfolio in DITM Jun'21 and Jun'22 calls.

I don't think any long-term options are priced attractively enough to leverage up right now. I'm still looking to deleverage completely at these prices and go around 100% stock, but with S&P inclusion still ahead of us at some point, I'm looking for a SP of at least $500, likely closer to $600 before I want to do so. Although I may deleverage Jun'21s sooner as time until expiration decreases, because they start to become more and more risky.

Looking at the Jan'23s, if the stock price is $800 upon expiration, you only break even on a $450 call compared to holding stock. Stock would nearly double, and those Jan'23 $450s would also nearly double. If stock is $1,000 upon expiration, you only net an additional 20% or so compared to holding stock.

These are horrendous returns considering the extra risk you take on, and considering the opportunity cost. Not only is there a possibility that the stock price doesn't rise that much in the next 2 years, even if it does, holding options instead of stocks means you no longer have the ability to leverage up during large crashes. If the market crashes and TSLA is somehow trading at $200 in March, if you hold stock there are likely good option deals you'll be able to take advantage of, if you already hold Jan'23s you won't have that opportunity.

My plan is to deleverage completely and go 100% stock, ideally at a stock price of ~$600, in the next few months (hopefully off of S&P or Q4 ER). Then after S&P inclusion has happened, I might look into selling some covered calls for the first time ever on a small % of my position. TSLA obviously can't go up 10x every 12 months, and imo the only large catalysts that could boost the stock 50-100%+ are:

1. S&P Inclusion
2. Market waking up to FSD/Robotaxi potential, although I'd guess this will be more gradual.
3. Huge ramping of production over the next few years from 500k to 2M+, but this will almost certainly be a more gradual thing, and happen over the course of multiple quarters.

Here are my thoughts on LEAPs from a month ago. These haven't really changed. I will most likely convert my highly leveraged position to 100% stock holdings at some point during the next 2-3 weeks. LEAPs barely offer a better return than stock if things go well, in return for far more risk.

I'm too busy atm thinking about the S&P inclusion and when to deleverage to do much thinking about the covered calls, but I still think there's a good chance I'll sell some far OTM covered calls. I'd likely sell cash covered puts with the profits.

 

[juanmedina]

Here are my thoughts on LEAPs from a month ago. These haven't really changed. I will most likely convert my highly leveraged position to 100% stock holdings at some point during the next 2-3 weeks. LEAPs barely offer a better return than stock if things go well, in return for far more risk.

I'm too busy atm thinking about the S&P inclusion and when to deleverage to do much thinking about the covered calls, but I still think there's a good chance I'll sell some far OTM covered calls. I'd likely sell cash covered puts with the profits.

That's what I am thinking too about selling puts with the money from my short term options; I would love to hear about your strategy about selling OTM covered calls. I have been selling calls for a while for pennies and its been great.

 

[FrankSG]

That's what I am thinking too about selling puts with the money from my short term options profits; I would love to hear about your strategy about selling OTM covered calls. I have been selling calls for a while for pennies and its been great.

I've never sold any before. But $2,000 calls might be available soon, and still 99.x% of my net worth is invested in TSLA in one form or another, so I wouldn't mind selling ~5-15% at that price regardless.

More importantly, there might be a point in time where IV is still high from the S&P inclusion, but where it is more or less clear that most indexers have bought in. If this point is at a high enough stock price (at least $800, preferably ~$1,000+), I might consider selling some Jun'20 or Sep'20 covered calls at $1,500-$2,000 if the price is right, on perhaps up to 40% or 50% of my position.

Clearly Q4'19, Q1'20, and Q2'20 earnings alone aren't going to double the stock price again after S&P inclusion. The only things, imo, capable of doing that would be autonomy being recognized and more priced in by the market, or maybe the market attaching more certainty to Tesla scaling production to 2-3M in the next 2-3 years and 5M by 2025, and the financials that will accompany those numbers.

I'll have to redo my financial forecasts for the medium-term as well as long-term before I'll be able to make optimal decisions, so that I can update my view on what I think TSLA will be worth in 2030 and so that I have a better idea of what the upcoming ERs and 2022 and 2023 forecasts will look like. The former is important to better understand the value of what I'm risking (TSLA stock), and the latter for how Wall Street's perception of the stock might change in the near-term.

 

[Criscmt]

Wouldn't this net out to selling your Jan '21 calls?

This looks to me like:
- Exercise the Jan '21 calls, acquiring shares at $500 (or whatever). Spend $500 per share.
- Sell a DITM call adequate to acquire at that share price. Pre-sell the shares in Jan '23 via call sale. If the Jan '23 call is also a $500 strike (presumably DITM) then you'll acquire the premium for those sales, but you'll be selling the shares at the same price you bought for (assuming you hold to expiration).

If you're able to get a $500 premium for a higher strike price, then you'rep reselling your shares for the change between the share prices, with the hope that you'll see a sufficiently smaller option premium between now and then that you can buy back the Jan '23s and keep the shares (netting the difference in premiums sold up front plus buy-to-close later).


Looking at available option choices right now, what sort of strike in Jan '23 would generate the premiums you need to exercise those calls (or allow to go to expiration). It won't be anything like a precise estimate, but it'll give you a flavor of what strike call you can sell to earn that $500. I suspect you're looking at an ITM call sale as well, but I haven't looked.

Firstly, this is influenced by the plan to keep the money in the stock, rather than cash out.
The idea is based on the assumptions

1. Growth in the stock after the calls were purchased, and
2. Likely "some or more" drop in the SP at some point of time after exercising the calls, and (well) before the expiration of the calls sold.

Let's take Jan-2021 C500

1. The premium now is ~$132
2. When (if) the SP goes to $700 in the next 2 weeks, the premium for Jan-2023 C250 would be $475.
3. I need $500 to exercise my Jan-2021 calls. For this I sell Jan-2023 C250, gets me $475, and pay $25 from my pocket. Total cost for acquiring the stock $132+$25 = $157.
4. If the SP at some point in the next 2-3 months gets to $550, the Jan-2023 C250 calls will be priced ~335. I buy back at $335. Now the total cost of acquiring my shares is $157+$335 = $488. If SP goes to $500, the effective cost of acquiring shares $157 + $288 = $441. One can add another complexity when it comes to buying back the calls sold. Rather than buying back the Jan-2023 calls, you can buy C240 (cost ~$338). Buying C240 rather than buying back C250 is to have taxes for 2023 calendar year rather than 2021.
5. Of course, if the SP never goes down (a) I have my money locked for 2 years, but for 60% gain (250/157) minus taxes. I must say, I don't see this choice as attractive. (b) I might have funds in the future to buy back the calls.

 

[ReddyLeaf]

Lucky day for me today. I was busy yesterday and then also missed today’s opening (slept late). I was quite disappointed most of the day, reading about how others had managed to capitalize on the lower prices. Then, when I checked my account this afternoon, something didn’t look right. There were buys in two separate accounts for 20 and 25 shares executed at 573.85, just a few seconds after the opening. Duh, I had put in limit orders late last night for 588 (expecting the SP to gap up), but had forgotten all about them. That’s was all the spare change, not enough to buy round lots of 100. HODLing through 2021+

 

[ReddyLeaf]

Hello,
On my broker, I can't make an order for more than 10 000€.
With the performance of Tesla this year, my paper gain are on the 6 figures, and most are in options that are expiring in January 2021.
So I tried creating an Interactive broker account, but I can't trade options if I'm less than 21. (And I'm less than 21)
Someone have a recommandation?
Thanks

Close out the options in 10 000 increments or call your broker to convert in larger increments. At such a young age, I recommend moving everything to shares and holding for the long term. In just ten years, 100 000 at 50% annual gain (current estimated Tesla growth) will be 57x or nearly 6 million. Go enjoy your youth, work just enough to pay the bills, and keep TSLA for the future.

 

[Cohiba]

Hello,
On my broker, I can't make an order for more than 10 000€.
With the performance of Tesla this year, my paper gain are on the 6 figures, and most are in options that are expiring in January 2021.
So I tried creating an Interactive broker account, but I can't trade options if I'm less than 21. (And I'm less than 21)
Someone have a recommandation?
Thanks

Trade Turbo’s on the Binck platform.

 

[EV forever]

Both Screenie1 and Screenie2 require upgrading my OS unfortunately.
Does csv file work for you? I attached the file to this comment. Apparently file extension .csv is not allowed to be uploaded?
I am not sure if this is intentional. I uploaded the file with .txt extension, please make changes as needed once you download.

Also, here are some stats, ignoring the probabilities/conviction paired with these SP numbers.
Stat | Week of 12/14 | Week of 12/21
Mean | 762.14 | 847.176
Median | 755 | 800
STDEV | 74.21 | 159.5452763
KURT | 1.09206608 | 1.971965825

Thanks for putting these together. As I have posted here before, I have converted a portion of my shares to call options immediately after the S&P announcement. The most difficult decision with call options is when is the best time to sell them. Since no one can really predict - the worksheet with the guesses from the group here is probably the best guesstimate for now.

So, in general, it appears that most folks predict that the peak is likely to be week of 12/21. Well, thankfully more than half of my calls are January 15 expiration date. But I do have some with 12/18 and 12/24 dates as well.

I am posting my plans here, hoping that others will post their thoughts as well.

For now, here is what I am planning to do (situation is fluid, may change my plans at any time)

• 12/18 expiration options have a strike price of 840 - seems unlikely to get there by Friday and these calls will lose premium value very fast. Well, I am fine with letting them expire worthless - no point in selling them at a loss now, might as well hope for a squeeze on 12/18. So, hold till expiration.
• For 12/24, I have some at 555 and 600 strike prices, and some at 690 and 750.
  • The ITM 555 and 600 strike options I will keep till 12/21 or 12/22 and then sell. These are unlikely to become worthless unless we suddenly see a crash.
  • The OTM 690 and 750 strike options, I will try to sell half of them week of 12/18 to recover cost. The rest will hold till 12/21 or 12/22
  • I would prefer to have all of these sold by 12/22 - will not wait till expiration
• For the few options I have for 12/31 and 01/08 - the strategy will be same as above. Sell them off by 12/22
• After these, I have a boatload of options for the 01/15 expiration date. Not sure how to handle these - right now my thought is that if we see a crazy run-up over the next 2 weeks, I will sell these off by 12/22 as well since there may be some correction likely afterwards.

All of these are in a IRA, so not concerned about taxes.

Some of the quotes from others in the main thread regarding expected share price are listed below.

Good luck to everyone here for the next few weeks! Whatever happens, this has been a ride beyond anything I could have ever imagined!

Edit: adding a screenshot of my option prices

I contributed. I
The 80% constraint is a tough one for me. I decided on $750 at the 80% level for this coming week, and $800 as the peak for the week after.

I was planning to go $800 next week at 70%, and $800 at 60% the week after.

Either way, I see the peaks as near the end of next week, and near the beginning of the week after, with a big dependency on the degree to which the forced buying is front loaded or back loaded in the Wed-Fri, and then Mon-Wed windows.

And if I'm really serious about those windows, then my $900 12/24 calls need to go

This is what resonated with me the most. A 17% investment in 15Jan calls has grown to 41% of my holdings.

Fairly certain I'll sell all of the calls next week, just trying to figure out a strategy for when.

I put in my estimates, which were mostly flat, since I have (yes, most likely misplaced) faith that the big buyers have planned for this S&P event by use of hedging or agreements with large stockholders-dark pools etc.

My estimate for the next few months in the new year after that is at $1,000+

In my mind Tesla is still a growth company, and it's stock can still be volatile.
Growth stocks can go from $50 to a $100 in less than a week, or $600 to $1,000.
TSLA can easily soon get to a Market Cap of $1trillion.
It wasn't that long ago that it was big news that AMZN, MSFT and AAPL were approaching $1T, and now AAPL is at $2T, AMZN at $1.5T, and MSFT at $1.6T, and nobody even mentions it.

Appreciate the mention....honestly, i think anyone trying to predict the SP is just throwing darts (like myself ) Could a squeeze happen? definitely....will the SP rise next week? Probably. The only thing that puts a little fear in me is that "EVERYONE" saw this coming when it was announced, and when "EVERYONE" knows something, it normally does not end well.

I honestly want to see what happens on Mon/Tue of next week. Right now I don’t have a great conviction.

I agree with Frank that people should be OK to lose whatever they are betting in the short term, no emotions, very similar to how you place a bet in poker or manage your bankroll.

Here’s a random thought: We know MMs like citadel have owned more than 5% of TSLA. What is stopping them from running the price up next week, spike IV, sell lots of call options and then dump all of their shares to S&P at a pre negotiated price on Sep18th? You get a great price on your shares and you kill all the options for the week of Dec 24th. I haven’t thought this through yet but would love for someone to poke holes in this theory.

Quick spreadsheet calculation of conviction-weighted averages gives $752/$853 for the two weeks´ highs.
And before anyone asks - I did not make my entry after calculating this .

 

[mickificki]

Thanks for putting these together. As I have posted here before, I have converted a portion of my shares to call options immediately after the S&P announcement. The most difficult decision with call options is when is the best time to sell them. Since no one can really predict - the worksheet with the guesses from the group here is probably the best guesstimate for now.

So, in general, it appears that most folks predict that the peak is likely to be week of 12/21. Well, thankfully more than half of my calls are January 15 expiration date. But I do have some with 12/18 and 12/24 dates as well.

I am posting my plans here, hoping that others will post their thoughts as well.

For now, here is what I am planning to do (situation is fluid, may change my plans at any time)

• 12/18 expiration options have a strike price of 840 - seems unlikely to get there by Friday and these calls will lose premium value very fast. Well, I am fine with letting them expire worthless - no point in selling them at a loss now, might as well hope for a squeeze on 12/18. So, hold till expiration.
• For 12/24, I have some at 555 and 600 strike prices, and some at 690 and 750.
  • The ITM 555 and 600 strike options I will keep till 12/21 or 12/22 and then sell. These are unlikely to become worthless unless we suddenly see a crash.
  • The OTM 690 and 750 strike options, I will try to sell half of them week of 12/18 to recover cost. The rest will hold till 12/21 or 12/22
  • I would prefer to have all of these sold by 12/22 - will not wait till expiration
• For the few options I have for 12/31 and 01/08 - the strategy will be same as above. Sell them off by 12/22
• After these, I have a boatload of options for the 01/15 expiration date. Not sure how to handle these - right now my thought is that if we see a crazy run-up over the next 2 weeks, I will sell these off by 12/22 as well since there may be some correction likely afterwards.

All of these are in a IRA, so not concerned about taxes.

Some of the quotes from others in the main thread regarding expected share price are listed below.

Good luck to everyone here for the next few weeks! Whatever happens, this has been a ride beyond anything I could have ever imagined!

Edit: adding a screenshot of my option prices
View attachment 617475

EV, thanks for posting and sharing your thoughts and what you're holding. I'm in a similar position, but with probably much less in my roth.

I have an 18 DEC 20 760 and several 24 DEC 20 580's. Also have 15 Jan 21 520's thru 700, as well as a 19 Feb 21 500 and 19 Mar 21 520 and 19 Mar 21 600.

This is my first rodeo, so I'm very glad to see what others are doing and the reasoning behind everything. If I were smart I probably would've sold everything, especially the 18 DEC 20 760 for 300% profit, but alas, like many primates...I lost self control and logic and will ride it till the bitter(or sweet) end.

From all the excellent posts I've been reading(thank you @FrankSG et al), yup it's probably the 18th and the 21st where a lot of the magic will happen. This week will be a memorable one, no doubt about it, and I hope everyone will be going bananas over the awesome results.

 

[corduroy]

This is my first rodeo, so I'm very glad to see what others are doing and the reasoning behind everything. If I were smart I probably would've sold everything, especially the 18 DEC 20 760 for 300% profit, but alas, like many primates...I lost self control and logic and will ride it till the bitter(or sweet) end.
.

Same boat. I am still holding some 18 DEC 20 800s that were up 400% at one point and just went negative today. Learning a lot about short term far OTM calls.

 

[mickificki]

Same boat. I am still holding some 18 DEC 20 800s that were up 400% at one point and just went negative today. Learning a lot about short term far OTM calls.

hope you're faring better in your other calls. Things are moving in the right direction, though IV has actually dropped from 104 at opening to 99.79%. Interesting...

 

[corduroy]

hope you're faring better in your other calls. Things are moving in the right direction, though IV has actually dropped from 104 at opening to 99.79%. Interesting...

I ended up selling the Dec 18 800s when they turned back green for 5% profit, and was happy to just get out unscathed.

The majority of of my calls are Dec 31 and Jan 15th 700s which are doing great and have lots of breathing room for S&P action.

 

[Davidzhao365]

For when the actual buying happens, I checked FB, twitter and serviceNow, and attached an actual screenshot of the Nasdaq Closing Cross. I think it is helpful for option trading.

https://twitter.com/davidzhao365/status/1338624307853840385?s=20

And thank Frank and Fact Checking for all the education of course.

 

[adiggs]

Is it just me, or is volume especially anemic today, at least so far?

 

[jeewee3000]

Is it just me, or is volume especially anemic today, at least so far?

It is.

Might be the silence before the storm on friday. Given the amount of speculating happening regarding inclusion and the amount of shares needed to be purchased, I am open to both possibilities on friday: huge drop or increase on great volume.

That's why I'm not playing this event. (I do have some LEAPS which I'll dispose off in case of a spike, but spikes are by nature very brief so it seems unlikely the LEAP option pricing will keep up. Weeklies have way higher liquidity and could spike, but LEAPS not so much in my experience)

 

[FrankSG]

I almost want to buy some weeklies for the first time in like 10 months. $750s for <$10 and $670s for ~$5 look pretty juicy from a risk-reward standpoint actually.

Don't think I will though. Already got enough options. But I feel like those are underpriced considering what week it is.

 

[TheTalkingMule]

Is it just me, or is volume especially anemic today, at least so far?

Think how low it would be if the aggressive MMD pushdown hadn't triggered a chunk of buying at the low. We are in the doldrums, no one is too interested in buying or selling until Friday hits. Or indexes start buying early.

 

[mickificki]

Has anyone lightened up on their calls that they purchased to play the S&P inclusion? I'm thinking I'll hold till the 21st but man...watching my profits go poof this week has been gut churning.

 

[adiggs]

Is it just me, or is volume especially anemic today, at least so far?

The anemic volume has persuaded me to exit the December positions I had. I did well enough on the early options (day after announcement) to offset the more recent losses. I'm not seeing the increasing volume (and share price) that I would associate with the index funds getting started. That doesn't mean it won't appear, but the options expiring this week and next are melting too quickly for me to ride them out and see what happens.


I still have my January calls that I'm aiming to close in early Jan which provides me leveraged exposure to the evolving inclusion event.

 

[corduroy]

The majority of of my calls are Dec 31 and Jan 15th 700s which are doing great and have lots of breathing room for S&P action.

This has not aged well. My Dec 31st calls went from +150% Monday to -40% now. The Jan 15ths are still holding up OK. Was seriously thinking of selling everything this morning, for a net profit using the Jan 15s to cover the loss on the Dec 31s. But at this point I am just going to ride it out until Friday and see what happens.