TSLA Trading Strategies

[MitchJi]

that or you roll 'em forward before time value starts tapering off drastically.

Or buy Jan18's, instead of Jan17's, because they will lose time value much more slowly.

 

[dakh]

Or buy Jan18's, instead of Jan17's, because they will lose time value much more slowly.

I'm buying Jan18's expecting to roll them forward

 

[Johan]

AlMc: considering the same strategy. When TSLA is depressed there's almost always a small run-up pre earnings and then mostly a sell-on-the-news dip. With calls this is exaggerated through the iv. crush. So barring huge surprises the logical move here is to buy shortish term slightly OTM calls now, sell them 1-2 days before Feb10th, sit on cash through ER, buy medium term calls or LEAPS (further OTM) day after ER in anticipation of Model 3 announcement. Right..?

Quoting myself from the short-term thread here. I'm going with this strategy, and trying to initiate leg 1 today: the purchase of calls (to be sold prior to earnings). Trying to be extra greedy here so looking to time the purchase near the 52-week low. Currently looking at for example the March $210 strike at below $10.

 

[uselesslogin]

Getting close to the 52 week low so I am buying some September options. I believe things should be looking rosier by then and am still comfortable with my reserves if we go lower.

 

[Papafox]

This is really well explained Papafox. Thanks for that. I think the medium risk solution you're proposing sounds very attractive. So once you purchase these options, you basically wait until it rises to your satisfaction (hopefully) and can sell at anytime? Ideally the faster the better if it spikes? Thanks.

As a newbie with options, look for "buy to open" to buy your calls and "sell to close" to sell. You may have to take a few steps at your brokerage to allow the trading of options, so investigate that angle first. Yes, once you think the best of the price surge is through, you can sell your options and preserve some of the time value if you have sold significantly earlier than expiration date.

 

[MitchJi]

There are lots of ways that options can bite you, so I will list a few and suggest a very conservative way to get your options feet wet. Hopefully, others will offer their own strategies so that you hear from several voices.

Things that can bite you with options:
*Your option expiring soon but TSLA hasn't gone to the moon yet. As you know, Tesla is often delayed in implementing things. Buy options with an expiration date that is well beyond your expected sales date because of delays and because you can profit from selling an option with some of its time value still remaining.

* Buying options with too expensive a time value. Take a look at Jan17 100 strike, Jan17 160 strike calls, and Jan17 190 strike calls. If you add the strike price to the approximate price of the call $100+$90=$190, $160+$46=$206, and $190+$32=$222, you get a number that can be compared to the current price of the stock ($188). The difference between the current stock price and the numbers we just computed is the time value you're paying for that option. By the time the option expires, the time value will be $0. The time value drops as time goes on but there's another reason for it to drop. The farther in the money the option is, the less time value as well. Thus, we see the time value for the $100 call as $190-188=$2, for the $160 call as $206-188=$18, and for the $190 call as $222-188=$34. You can see that the higher the strike price, the more leverage you have (you can buy 1 $100 strike call for <$10,000, 2 $160 calls for < $10,000, or 3 $190 calls for <$10,000). You increase your leverage as you raise the strike price, but you also increase the time value you're paying for the call, so in reality you will not make 3 times as much money with the $190 strike price as with the $100 strike price, even though you own three times as many calls. Which solution works better? It depends upon how high the stock price goes before you sell. If you go for out of the money calls (calls with a strike price greater than the current stock price), the time value is high but the leverage is of course higher, too. The negative is that you can lose all your money if the stock never climbs close to your strike price.

Hi,

I want to add some information, not recommendations:

The time value of options goes down much faster as time passes, so another way to reduce the loss of time value would be to buy J18's, instead of J17's. You can easily see that by comparing the price of J17's and J18's (e.g. J17 200's $28.35, vs J18 200's $39.00), so an extra year of time value is about $10.

Higher strike prices (less expensive) equals more leverage in two ways. More options, obviously, and in the value of the individual options. The value of the more expensive options will go up and down further in absolute amounts than less expensive options, but for the same change in share price the less expensive options will gain and lose a higher percentage of their value. **

Also with less expensive options you pay for and receive less time value in that you have less time, even with the same expiration date, to hit your target price and make a profit. **

** You can see these effects here:
Options profit calculator

This is really well explained Papafox. Thanks for that. I think the medium risk solution you're proposing sounds very attractive. So once you purchase these options, you basically wait until it rises to your satisfaction (hopefully) and can sell at anytime? Ideally the faster the better if it spikes? Thanks.

Yes.

Ideally it will rise enough that you can roll then into options with higher strike prices (if you still think the prospects are good), and pocket your $10k plus a profit.

 

[StephenM]

Hi,

I want to add some information, not recommendations:

The time value of options goes down much faster as time passes, so another way to reduce the loss of time value would be to buy J18's, instead of J17's. You can easily see that by comparing the price of J17's and J18's (e.g. J17 200's $28.35, vs J18 200's $39.00), so an extra year of time value is about $10.

Higher strike prices (less expensive) equals more leverage in two ways. More options, obviously, and in the value of the individual options. The value of the more expensive options will go up and down further in absolute amounts than less expensive options, but for the same change in share price the less expensive options will gain and lose a higher percentage of their value. **

Also with less expensive options you pay for and receive less time value in that you have less time, even with the same expiration date, to hit your target price and make a profit. **

** You can see these effects here:
Options profit calculator


Yes.

Ideally it will rise enough that you can roll then into options with higher strike prices (if you still think the prospects are good), and pocket your $10k plus a profit.

You guys are awesome. This was very helpful. Thank you!

 

[maoing]

Nice bounce for the general market will last in next a few weeks. Not sure TSLA? Especially what price action after Q4 ER. In beginning of January, I expected TSLA should be relatively immune to the market correction because of "exponential model X ramp up". Now investors got screwed up by TM's misleading statement. TSLA is not only drop more than rest of the market but also bounce weaker than rest of market.

Again, don't be scared by this manipulated market. We shall see nice bounce in next a few weeks. TA wise: MACD golden cross from the bottom for all major indices, that bode well for bounce; FA wise, Earing is not bad, Fed meeting minutes will be dovish even turbulence might be expected tomorrow; Btw, China will have lunar new year soon, so no more bad news from China in next several weeks. Beyond than that, I don't know:biggrin:

 

[Johan]

Quoting myself from the short-term thread here. I'm going with this strategy, and trying to initiate leg 1 today: the purchase of calls (to be sold prior to earnings). Trying to be extra greedy here so looking to time the purchase near the 52-week low. Currently looking at for example the March $210 strike at below $10.

Bought the June16 $210 Calls today for $11, as we bounced off the 52-week low, With TSLA around $184. Thanks Adam Jonas.

 

[maoing]

buy back my sold 10% position this morning and add short term calls around 183.

 

[AlMc]

I added to my strangle I set up for ER. 180put/190 call. Obviously I am expectinmg something big either way. Sitting on improving but still 'red' LEAPS. Not buying any stock at this point.
My strategy (or WAG) is to let the LEAPS pick up any big ER/CC price surge and buy stock (more LEAPS??) if we have a dip.

 

[MitchJi]

I added to my strangle I set up for ER. 180put/190 call. Obviously I am expecting something big either way. Sitting on improving but still 'red' LEAPS. Not buying any stock at this point.

My strategy (or WAG) is to let the LEAPS pick up any big ER/CC price surge /B] and buy stock (more LEAPS??) if we have a dip.[

I am considering doing something similar, buying LEAPS (still waiting to buy) and possibly puts.

Why are you buying the 190 calls when you already have the LEAPS?

Thanks! Good luck everyone!

 

[austinEV]

I added to my strangle I set up for ER. 180put/190 call. Obviously I am expectinmg something big either way. Sitting on improving but still 'red' LEAPS. Not buying any stock at this point.
My strategy (or WAG) is to let the LEAPS pick up any big ER/CC price surge and buy stock (more LEAPS??) if we have a dip.

Strangles feel like going to a roulette table and betting on red and black simultaneously. If you are lucky you end up net zero

 

[Jonathan Hewitt]

Strangles feel like going to a roulette table and betting on red and black simultaneously. If you are lucky you end up net zero

Yeah, I prefer to be the house and be the person that has to pay out to those who bet on red and black (write the strangle) but usually don't have the guts to do this move. To me it seems that a bigger move is anticipated than what usually happens...

 

[austinEV]

Yeah, I prefer to be the house and be the person that has to pay out to those who bet on red and black (write the strangle) but usually don't have the guts to do this move. To me it seems that a bigger move is anticipated than what usually happens...

I agree with this. writing a strangle pre-ER would allow one to pick up lots of nickels most quarters. But every 3-4 you get the steamroller.

Edit: I haven't figured out my sentiment to this ER. I think I might opt for the poor man's strangle and sit on cash through the ER. I think the content will be poor, but Market Sentiment may be so negative going in that as long as Elon doesn't commit any felonies during the call there will be a relief rally. I have no play yet.

 

[dha]

My opinion is that it all depends on how big a move is being priced in.

 

[AlMc]

Strangles feel like going to a roulette table and betting on red and black simultaneously. If you are lucky you end up net zero

I agree with this. writing a strangle pre-ER would allow one to pick up lots of nickels most quarters. But every 3-4 you get the steamroller.

Edit: I haven't figured out my sentiment to this ER. I think I might opt for the poor man's strangle and sit on cash through the ER. I think the content will be poor, but Market Sentiment may be so negative going in that as long as Elon doesn't commit any felonies during the call there will be a relief rally. I have no play yet.

My opinion is that it all depends on how big a move is being priced in.

It is a small 'play' ( 5 contracts of each at the moment ). The combo was/is up 15%. I have NO idea what the ER/CC will hold but I believe it will be a 10-15% move away from the $185 area which is when the first 4 contracts of each were purchased. Added a single contract of each today.

I plan to sell the calls if we get a run up pre ER for more (hopefully) than the put/call contracts combined. Post ER/CC if we get a drop then the puts have a small protective value. If we get a run up from the ER/CC the LEAPS will catch that. A drop in IV will kill them both ( weeklies) without a huge move.

My guess is a run up to $205-210 prior to ER/CC; Drop when ER is delivered by the 'bots', then rise with a pumping CC by EM. I will be buying stock between 4-5pm EST on the ER/CC day IF (big IF) the moves go as I have described.

I was wrong last ER, so by no means do I firmly believe I will be correct this time.:wink:

 

[austinEV]

It is a small 'play' ( 5 contracts of each at the moment ). The combo was/is up 15%. I have NO idea what the ER/CC will hold but I believe it will be a 10-15% move away from the $185 area which is when the first 4 contracts of each were purchased. Added a single contract of each today.

I plan to sell the calls if we get a run up pre ER for more (hopefully) than the put/call contracts combined. Post ER/CC if we get a drop then the puts have a small protective value. If we get a run up from the ER/CC the LEAPS will catch that. A drop in IV will kill them both ( weeklies) without a huge move.

My guess is a run up to $205-210 prior to ER/CC; Drop when ER is delivered by the 'bots', then rise with a pumping CC by EM. I will be buying stock between 4-5pm EST on the ER/CC day IF (big IF) the moves go as I have described.

I was wrong last ER, so by no means do I firmly believe I will be correct this time.:wink:

If I was forced to guess, I would say a run up to 205-210 as you say, and a sharp drop off after the ER (no EM pumping attempted or effective) to like 190/195. Then people getting in for the good news in March-april-may causing it to drift up.

If sentiment is flat to down, then I would expect a rally. Basically I expect stock prices of $200 post ER, with the route uncertain.

 

[dha]

Just shorted one March $180 put for $15.44 credit. Will be happy to pocket the whole $1,544 premium from some bear, or acquire 100 more shares for $165 each.

 

[HiTech]

Wow! That's what I've got to say.... Wow!
I've been trading for about 10 years, but haven't gotten into the puts/calls/shorts.... I prefer to stay with longer term strategies. Therefore, please excuse my following question......
Can someone help explain some of the acronyms and strategies behind what you are talking about (calls and puts, strangles, etc.)?
Thank you.