trading

[generalenthu]

Question for @FrankSG and/or @generalenthu :

First, thank you BOTH for your generous contributions to the board! Frank, I've read all of your blog posts, and I make reference to your models often. Generalenthu, I've referenced your delta hedging tables a few times before, and I always pay attention when I see either of you post.

Yesterday, I was playing with Frank's new S&P Inclusion model (Gosh-darn thanks again Frank!), and I'm curious about the inputs section. In particular, I can't figure out how to estimate potential Total Delta Hedge Inventory for price moves larger than the 100pts represented in Generalenthu's super-awesome tables.

My feeling is that we’ll see varying conditions between now and the inclusion date, and I’d love the ability to keep my inputs current.

The range shown on the tables usually provides plenty of headroom, but during the inclusion period I’d love to be able to assess a wider range, similar to this section from Frank’s newest post:



I understand if you’d rather not share this info publicly, so thanks regardless. You’ve both already been a huge help!

Side note: I do remember some discussion here when @generalenthu first presented these tables, but I wasn’t able to dig it back up. If there’s existing discussion on the methodology, and you’d rather just point me there, I’d appreciate that as well.

Thanks again!

Go Go TSLA Longs!

Don't have time to keep up with more than the main thread, but looks like I was summoned here!

I am just rerunning the numbers for these large moves offline, as I don't want to mess with the automated job that updates the online tables.

Perhaps I could post them on Twitter or here till the inclusion is behind us.

That said there is one other adjustment I am eyeing. The numbers I gave @FrankSG for his model are inclusive of all expiries for an instantaneous stock move. Now that we have more clarity on the inclusion date, I can perhaps ignore 12/4 and 12/11 expiries, which would be more representative of what the market makers need to hedge as we get closer to inclusion.

I will look to publish Thursday AM as I have numbers from last Thursday and it will be a good week over week comparison.

 

[Rb48888]

Don't have time to keep up with more than the main thread, but looks like I was summoned here!

I am just rerunning the numbers for these large moves offline, as I don't want to mess with the automated job that updates the online tables.

Perhaps I could post them on Twitter or here till the inclusion is behind us.

That said there is one other adjustment I am eyeing. The numbers I gave @FrankSG for his model are inclusive of all expiries for an instantaneous stock move. Now that we have more clarity on the inclusion date, I can perhaps ignore 12/4 and 12/11 expiries, which would be more representative of what the market makers need to hedge as we get closer to inclusion.

I will look to publish Thursday AM as I have numbers from last Thursday and it will be a good week over week comparison.

That's AMAZING, thanks again for your hard work! + you just gained a twitter follower

 

[ReddyLeaf]

I'm doing the opposite. I have 5x $400 calls expiring tomorrow, which I will allow to be exercised (bought for $17.10 two weeks ago), to add to my core HODL stock. Then, whatever cash I have leftover, I will buy another 5 calls, probably for end of December expiry, to replace the ones that expired.

I was planning to ask this question in the newbie thread, but since you jogged my brain: Do deep ITM calls automatically convert to shares or must the option holder “request” exercise? I have some 12/24 545c that are doing quite well and I expect them to finish ITM. I would like to hold shares for the next 5-10 years, so would prefer to have this happen automatically. I don’t see how to request exercise on my trading platform, but I haven’t really looked. Worst case I will sell to close on the 24th and buy shares. However, I don’t want them to expire and to get nothing. Obviously, this is a newbie question and I’ve never held an option to expiration.

 

[ggr]

I was planning to ask this question in the newbie thread, but since you jogged my brain: Do deep ITM calls automatically convert to shares or must the option holder “request” exercise? I have some 12/24 545c that are doing quite well and I expect them to finish ITM. I would like to hold shares for the next 5-10 years, so would prefer to have this happen automatically. I don’t see how to request exercise on my trading platform, but I haven’t really looked. Worst case I will sell to close on the 24th and buy shares. However, I don’t want them to expire and to get nothing. Obviously, this is a newbie question and I’ve never held an option to expiration.

If they are in the money they will automatically be exercised, unless you specifically request that they not be (requires a phone call). Also to request an early exercise requires a phone call. You have to explain to them that you know what you are doing, basically that the time value is negligible or there are tax reasons.

 

[vikings123]

I was planning to ask this question in the newbie thread, but since you jogged my brain: Do deep ITM calls automatically convert to shares or must the option holder “request” exercise? I have some 12/24 545c that are doing quite well and I expect them to finish ITM. I would like to hold shares for the next 5-10 years, so would prefer to have this happen automatically. I don’t see how to request exercise on my trading platform, but I haven’t really looked. Worst case I will sell to close on the 24th and buy shares. However, I don’t want them to expire and to get nothing. Obviously, this is a newbie question and I’ve never held an option to expiration.

Generally speaking it depends on your broker. If you have enough cash or margin then they get exercised automatically or they will liquidate that position for you.

On IBKR platform you can do the early exercise through the software itself, no phone calls needed.

if this is a taxable account you don’t want to sell the option and then buy shares. This action will create a taxable event vs exercising the call option.

 

[generalenthu]

For those following the conversation on hedge need on large moves, I just posted my numbers on twitter.

https://twitter.com/generalenthu/status/1334505248220700676?s=20

 

[mickificki]

https://twitter.com/emmetpeppers/status/1334963359033126913?s=21

 

[Criscmt]

<CROSS POST>

I am not sure about the overlap of active members b/n this thread and applying-options-strategy-the-wheel-to-tsla
Thus, posting here too.

Thoughts on exercising Jan-2021 $500-$600 calls by effectively financing through selling DITM calls?

I have Jan-2021 500, 600 Calls in profit. My plan on these is to take profit in this month.
I prefer holding stock than cashing out these and triggering taxes for 2020.
I am looking at ways to accumulate shares, at the same time optimize on taxes.
Here are the options

1. Sell short calls against these long calls, the calls with same expiry and a little higher (next available) strike. This will have the tax event for 2021 instead of 2020. Buy stock with the proceeds.
2. I have capital to exercise 1 contract. (a) Exercise one contract, say 500 strike. (b) Sell Jan-2023 Covered Call at a strike which nets me $500, that would be very DITM strike. If stock were at $700 on that day, my Jan-2023 CC strike would be ~225. (c) Then use the proceeds to exercise next Jan-2021 option, and again sell Jan-2023 DITM call, and repeat 'a', 'b', 'c'. If stock goes down at some point, say to 600, I will buy back the Jan-2023 calls through some temporary financing. Not per se buy back the Jan-2023 calls, but buy Jan-2023 calls with strike a little lower than my short calls. This will lead to tax event falling into Jan-2023 tax year.

 

[adiggs]

Thoughts on exercising Jan-2021 $500-$600 calls by effectively financing through selling DITM calls?

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.

 

[juanmedina]

I think holding options until 12/18-21 is going to be really hard

 

[Ocelot]

I think holding options until 12/18-21 is going to be really hard

ha. i sold some dec 18 700 when I woke up this morning. to see them down 5 per cent from when purchased a week ago, as was down 40 per cent or so at close of last week. should of waited till now of course, then would be up. oops. i could of sworn i bought them forever ago, but just checking way more somehow has messed up my internal timeline.

 

[ReddyLeaf]

Unfortunately or perhaps fortunately, I have a boat load of 12/18 700c. I’m really nervous about those, because it’s basically a large YOLO bet. I sold shares to buy them, so if I don’t sell them, or they finish OTM by even $0.01, I will be screwed out of a lot of TSLA’s future appreciation. Since the MM have a great ability to keep the SP below max pain or whatever price they want on Friday expiration’s, I’m super nervous these will expire worthless at 4:00 pm with SP=699.98. Then after hours and Monday, the SP will explode.

I cannot put in a market orders on options, and I cannot put in trades quickly on my platform. How can I prepare for the last 5-15 min of trading without losing it all? I’ve put in some limit orders at $20, $40, $60, $100, and $200/contract. Too high? Too low? Any advice in advance would be greatly appreciated.

You "will be screwed out of a lot of TSLA’s future appreciation" by yourself. Trying to play sophisticated games when you "cannot put in trades quickly" is putting yourself at an enormous disadvantage. Don't do that.

Roll your options to 12/24

Not advice!!! But you sound like you have a lot of them. I've seen and used a technique of spreading the risk up and down the price range and time duration. So instead of having say 10 700 calls, have 3 680s, 3 700s, and 4 720s (not linear in price, hence having the most at a higher strike price.). I do this with time as well, but in this case, I'm not sure what's going to happen at that exact time (after hours on the 18th through before trading on the 21st). If there is a spike at 4pm and after hours on the 18th, and most people are predicting a drop after inclusion, having the options that expire the next week (12/24 due to Christmas) might be a detriment!

Assuming you’ve made some money on this already, you may want to move some out a week, and maybe move some back to stock. We all have different comfort levels. This could be a YOLO win, but could be a total loss. Betting against time is usually a big loser, but a short squeeze is a time winner. If I was 20 years younger, I might let it ride, but moving at least some to 12/24 seems wise, since we don’t know how the 12/18 close is going to work.

No one knows. We know the idea of the INFINITE SQUEEZE is out of play. Daily 4% gains didn't happen. Personally, shares are safer. BUT if you pull this off, you will be driving a Roadster on your own private island. Chickens*it shareholder like myself will be driving a Model Y SR in the suburbs due to modest profits from limiting risks.

A heartfelt thank you to everyone. I’m reading and learning as quickly as I’m able but it’s still a struggle to flip the switch from passive mutual fund investing to highflying TSLA and options all in less than three months. I started buying shares around $350, though some mis-timed and bought some “peaks” in the 420-460 range. It took some time to get all the various IRA accounts switched over to the brokerage and approved for options. My largest account is still a 401(k) that cannot trade stocks, so I’m using that as my safe backstop. Following the S&P inclusion announcement, I decided to jump on call options before they got too expensive. This is very much outside my normal comfort zone as you might expect from my lack of trading experience. In my accessible accounts I was basically all in on TSLA shares and had to sell 10% of the shares to buy call options.

My question above was just about my 12/18 700c which I was most worried about. Thanks for the input. For diversity I already have some 12/24 545c, 900c, 12/31 900c, and Jan23 1100c. Today, so that I could sleep better, I sold 10% of the 700c and 900c for a nice profit. I also put in additional sell preorders at $10 increments for those as well. The 545s are well ITM and I plan to hold those until the 23rd (though I do have a $200 sell preorder in for those that I will need to update to a higher price given today’s action). Though I won’t be buying any islands, this is way more concentrated risk than I ever expected to have in my portfolio, and so far my trading gains have paid for my S70D and my future cyber truck and model Y. If these options pan out, I’ll be halfway to Teslanaire status. I’m hoping to clear enough to double my holding shares and purchase a couple of vehicles for family. I’m definitely holding the core shares 10+ years because they are in inaccessible IRAs, and then probably only selling covered calls to generate income for those future purchases. I believe in Tesla’s mission and want to give back to make them profitable. Edit: moved out of the main investor discussion to this trading thread so as not to clutter the other thread.

 

[Bet TSLA]

Edit: moved out of the main investor discussion to this trading thread so as not to clutter the other thread.

Good choice.

But you should be aware there are only three ways this will end. First, and most likely, you'll lose all your money quickly. This is, arguably, the best outcome because you'll learn a valuable lesson and it won't cost you too much.

Second, you'll about break even. You'll learn nothing and be eager to try again. Not as good.

Third, you'll make a bunch of money. This is very bad. You'll be convinced you're clever and you'll do it again, losing twice the money you would have this time. You'll know you were just unlucky the second time and proceed to lose twice as much again. But really you were just lucky the first time, because given your level of understanding at this point, it's gambling and winning is just luck.

So, give yourself a break and keep your losses small. Better yet, paper trade for a year or so before putting in any real money. This story has been told over and over, and it usually ends in tears.

Your questions sound a lot like -- "Hey guys, I just picked up this cool machine gun at a show and I'm going to try it out. Can somebody tell me what this recoil thing is all about? I want to be careful."

 

[ReddyLeaf]

Thanks again for the advice. Just a quick update. A couple more of those preset sales of the 700c and 900c closed today for a bit more profit, enough to buy another 200 shares. I got my money back and then some and will let the rest ride for the week. So I’m down to sleeping level. I should clarify that the “boat load” of those 12/18 700c was less than 5% of my accounts. Definitely a lot by my trading standards, but probably not by most people’s. Since I’ve sold down some of the calls, the potential gains are more modest, but should still be enough to be generous in the future when I’m able to access the IRAs.

 

[strago13]

<CROSS POST>

I am not sure about the overlap of active members b/n this thread and applying-options-strategy-the-wheel-to-tsla
Thus, posting here too.

Thoughts on exercising Jan-2021 $500-$600 calls by effectively financing through selling DITM calls?

I have Jan-2021 500, 600 Calls in profit. My plan on these is to take profit in this month.
I prefer holding stock than cashing out these and triggering taxes for 2020.
I am looking at ways to accumulate shares, at the same time optimize on taxes.
Here are the options

1. Sell short calls against these long calls, the calls with same expiry and a little higher (next available) strike. This will have the tax event for 2021 instead of 2020. Buy stock with the proceeds.
2. I have capital to exercise 1 contract. (a) Exercise one contract, say 500 strike. (b) Sell Jan-2023 Covered Call at a strike which nets me $500, that would be very DITM strike. If stock were at $700 on that day, my Jan-2023 CC strike would be ~225. (c) Then use the proceeds to exercise next Jan-2021 option, and again sell Jan-2023 DITM call, and repeat 'a', 'b', 'c'. If stock goes down at some point, say to 600, I will buy back the Jan-2023 calls through some temporary financing. Not per se buy back the Jan-2023 calls, but buy Jan-2023 calls with strike a little lower than my short calls. This will lead to tax event falling into Jan-2023 tax year.

I am in a similar situation where I bought some inclusion calls which are DITM (Jan 15 2021 570's). I would like to exercise these but dont have a ton of spare pocket change lying around. The best way for me to do this at this point would be to sell a few of them for cash and use that to fund the exercising? Are there any other options?

 

[FS_FRA]

I am in a similar situation where I bought some inclusion calls which are DITM (Jan 15 2021 570's). I would like to exercise these but dont have a ton of spare pocket change lying around. The best way for me to do this at this point would be to sell a few of them for cash and use that to fund the exercising? Are there any other options?

Call your broker. They might be able to sort this out for you in one transaction.

 

[juanmedina]

Call your broker. They might be able to sort this out for you in one transaction.

what do you mean?

 

[FS_FRA]

what do you mean?

I mean, call you broker (if you can), explain what you want to do (exercise option) and what the boundaries are (don't have cash to exercise), and see if they have an idea for you how to best do it.

 

[strago13]

I mean, call you broker (if you can), explain what you want to do (exercise option) and what the boundaries are (don't have cash to exercise), and see if they have an idea for you how to best do it.

thanks, I'll let everyone know what they say if it helps me at all.

 

[mickificki]

So over in the Investor's Roundtable, @Blue horseshoe made the following post:

Tesla, TSLA & the Investment World: the 2019-2020 Investors' Roundtable
"I've been chewing on the $5 billion cap raise announced yesterday and Elon's statement it would retire debt and provide a larger war chest. With his statements in germany that he's confident level 5 autonomous driving will happen in 2021 it's my speculation that he needs to reduce debt and strengthen the balance sheet to offset a planned Tesla fleet.

In California there are supposedly 200k uber drivers so if Tesla were to funnel a percentage of production vehicles into a robotaxi fleet there's going to be some significant changes to cashflow right?

I'm probably off base but Elon's statement the cap raise was to retire debt threw me for a loop and I remember reading that and saying to myself, "huh." Especially since they aren't over-leveraged"

I've been mulling this over and was wondering other people's thoughts regarding FSD and the roll-out of the Tesla network and fleet and its monetization. My guess is TSLA will see several step changes in price coming up: 1. the S&P inclusion(duh), and 2. when the MM fully understand FSD and its implications.

FSD beta should go wide-release in early '21, and project dojo will come online some time in '21. I believe Elon might've mentioned Dojo to be used in mid-late '21? So let's assume FSD doesn't go level 5 according to the state DOT regulators in 2021. However, just because Dojo isn't fully working in '21 doesn't mean FSD isn't making dramatic progress. Elon mentioned that they're hiring hundreds of labelers to manually input objects(? not a SW programmer) into the system to improve functionality with the NN. At the same time in '21 the Tesla network should be in release or very close to complete for rollout and testing with drivers.

A full year of 2021 for FSD beta videos to be posted on youtube so the world can see its improvements and functionality will allow the state regulators time to think about things and to hear from their friends and kids on how awesome the FSD is...a sort of marinating process, if you will. In 2022 is where it gets interesting. After a full year of FSD testing and labeling improvements and Dojo coming online and the initial rollout of the Tesla network, IMO 2022 or even late 2022 is where the MM realize (finally) that FSD is legit and the monetization implications of FSD would be staggering.

So my question is: how would you folks play this(#2 above) out trading-wise? To be clear I'm a newb when it comes to trading/options. My thought is to play the LEAPS game, maybe some Jan 23, or Sept 22 LEAPS, maybe purchase them in Jan 21 or Feb 21 when IV dies down and the TSLA price follows a "normal" channel after the S&P spike.

I'm not sure what's considered pricey in terms of premium. Jan 23 600 strike are around $260-ish.

Any thoughts and advice are appreciated.