TSLA Trading Strategies

[Papafox]

HiTech, there are lots of websites that can tell you the basics of options trading (puts, calls, strangles, etc.). Just do a google search. That said, there's lots of ways to get bitten by options if you aren't knowledgeable. Once you familiarize yourself, you might want to do some pseudo-trading with imaginary money first, to see if your strategy pays off on a reliable basis. If you decide to dabble in calls, please avoid short-to-mid-term calls and go for "leaps" instead. Also, far out of the money calls are much more likely to bite you.

 

[AlMc]

Despite the carnage that has befallen my DCA'd ( not quite DOA) LEAPS, I was able to sell half the put part of my strangle today with Feb 12 expiry. I will probably let the rest ride up to ER/sell the profitable part and ride the rest up or down following the ER/IV crush. I bought some Feb 5 185s today for $1 thinking that we might just see a bump tomorrow and they are worth half that now! In addition I bought my first stock in a long time at $171-172.


Since the technical are broken I plan on sitting on cash or investing it elsewhere. What is everyone else doing? Just curious.

 

[dakh]

Since the technical are broken I plan on sitting on cash or investing it elsewhere. What is everyone else doing? Just curious.

Reminds me of this Sufi story:

Mulla Nasruddin went to the market and saw a big bushel of hot chilli peppers on sale. He bought them, returned home, and began to eat.


A little while later, his disciples came and saw the Mulla with tears streaming down his face, his mouth and tongue burning. "Mulla, Mulla, why do you go on eating them?" As he reached for another, Nasruddin replied, "I keep waiting for a sweet one."

 

[AlMc]

Reminds me of this Sufi story:

:wink: OK....So what are you doing presently with regards to your TSLA/TM investments?

 

[dakh]

:wink: OK....So what are you doing presently with regards to your TSLA/TM investments?

I'm just a monkey with a grenade. Picked up a few short term calls when we dropped to low 180's, sold half when we got to high 190's to make the rest "house money", going to keep that until ER or if we're over 200. Still sitting on core account with '17 and '18 LEAPs (most very red) and straight stock (most neutral), not really sweating much over that. Picked up some more '17 LEAPs today in the non-taxable account, will either hold or convert to '18 by fall depending on price action.

Basically to be consistent if I was buying at 200's and 220's then there's no reason for me not to be buying now, nothing material changed since. Sure emotional response is trying to get in the way but we're cold blooded profit takers here aren't we?

 

[Blip]

Probably completely OT and wrong place to ask, but I'l try anyways... I use finance.google.com to watch SP and extended hours, but the "settings" have disappeared. The extended hours is still showing, but I can't find a way to turn it on/off. In addition, the sub-chart is also missing (used for moving average, RSI etc). I've tried to "google", but can't find anything about this...

 

[uselesslogin]

$165. Close enough to $160. I added.

 

[Svetlin]

Got 5 $165 calls for today for $1.65. Tired of looking at all the red so I figured I won't have to look at it after today. And if past few days (weeks) are any indication, I hope it moves higher by market close. Max pain is $175 for today.

Obviously just a gamble.

In my IRA I've converted all shares to leaps, and looking to get into September calls if we stay low.

 

[austinEV]

Got 5 $165 calls for today for $1.65. Tired of looking at all the red so I figured I won't have to look at it after today. And if past few days (weeks) are any indication, I hope it moves higher by market close. Max pain is $175 for today.

Obviously just a gamble.

In my IRA I've converted all shares to leaps, and looking to get into September calls if we stay low.

I wonder how much selling pressure has come from longs going from shares to leaps... That is sort of bullish in the sense that those sellers will dry up too soon.

 

[Jonathan Hewitt]

You can write a TSLA Jan 17 $115 put and get $16 for it. That's a 16% return for a cash secured put in less than a year's time or the chance to buy TSLA for an effective $99/share if it's below $115 come January.

Wow!!

 

[Svetlin]

Also just converted 10 contracts for Jan '17 $200s to 13 Sept '16 $200s. Q2 at the very latest should be when they hit FCF positive.

 

[phigment]

I have a feeling this is the wrong place to put this, so if anybody has a suggestion on where I can ask this question, please feel free to direct me there.

I have noticed a on a low volume stock that I'm watching, there is a steady trickle of order coming in. It has a cadence of one lot (500 shares) every 6 minutes (at market value about I think... $0.58).

What would be the point of this?
I can understand breaking up a large order in to multiple chunks to ensure a lower price, but for such a small order at such low share price, this doesn't make sense to me.

 

[MitchJi]

I don't understand the reasoning behind attempting to buy LEAPS, and paying as close to zero for time value as possible. I am not questioning the strategy of buying deeply ITM calls.

Example:

I saw price action on Friday, and we finally hit $158, I run out to get some money out of credit line into brokerage account. By the time I was back and ready, price hit 162.5 (damn), but I deployed about 1/3 into '18 leaps strike $100 with $12.5 time premium (was in a hurry, could have maybe gotten a touch better).

To pay $12.50 for time premium, means he paid $75 per option. A short time ago at least two people purchased the same call for $103, when the SP was $100, mentioning that they only paid $3 for time value. So by the metric of attempting to pay as close to zero for time value, it's 4x worse to buy the same option for $28 less! Looked at another way when making a purchase with a time horizon of 12-24 months, with a stock th

There are two other ways to reduce what you pay for time value, when buying LEAPS. First example is absurd, but it illustrates a point:
Buy way OTM LEAPS, the last transaction price on Friday for J18's with a 450.00 strike, was $3.90. The problem is that you get (you get what you pay for) almost zero time value.

Long call (bullish) calculator shows that the SP has to be at $200 by Feb 24-2016 (about 3 weeks) just to break even. OTOH if the SP hits $210 by Feb 24-2016, it will be worth $107!

Another way is to roll your LEAPS 8-12 months before expiration like this:
Jan18s, strikes $160-$170 with the last transaction price on Friday:
160.00 43.50
165.00 41.50
170.00 40.00

Jan17s, strikes $160-$170 with the last transaction price on Friday:
160.00 33.40
165.00 31.80
170.00 27.03

More leverage ='s less time value received ='s more risk due to less time and increased leverage (more shares goes up faster and down faster).

Leverage almost twice as high (about 4:1), for paying out the about the same amount for time value. More risk with a higher potential reward. A big increased risk is obviously that you get much less time value, again you get what you pay for. So the risk is if you bought LEAPS last year with a SP at ~$230, you will start paying higher time value, while waiting (hoping) for the SP to rise. IMO the most important factor to weigh is leverage (more leverage ='s more risk), while obtaining a corresponding time horizon that fits your convictions.

To minimize your risk, either buy stock, or when buying options maximize your time horizon and minimize your leverage.

MY point is that in terms of deciding on LEAPS strike price to buy that worrying about the amount of time premium you pay for, seems similar to worrying about mosquito bites when you are being stalked by a mountain lion (leverage).

Note: The prices for all of the examples in this post were from Friday Feb 5, 2016 after the close with SP of $162.60 except the $103 option price which were purchased with the SP at about $200.

 

[Zhelko Dimic]

To pay $12.50 for time premium, means he paid $75 per option. A short time ago at least two people purchased the same call for $103, when the SP was $100, mentioning that they only paid $3 for time value. So by the metric of attempting to pay as close to zero for time value, it's 4x worse to buy the same option for $28 less! Looked at another way when making a purchase with a time horizon of 12-24 months, with a stock th

To minimize your risk, either buy stock, or when buying options maximize your time horizon and minimize your leverage.

MY point is that in terms of deciding on LEAPS strike price to buy that worrying about the amount of time premium you pay for, seems similar to worrying about mosquito bites when you are being stalked by a mountain lion (leverage).

This was my example, so let me address your post.
When talking about highly volatile stock like TSLA that moves $10 in a day, paying $3 or $12.5 time premium for 2 year option, who cares? $3 is close enough to $12 on a $160 stock that goes like a yo-yo. So we agree on that.

Buying very long term option, very deep in the money is minimizing leverage and leading to low time value. With low time value, one can threat such option almost like a stock. Long horizon allows one lots of time to turn out to be right, with very small time decay penalty.

You mentioned rolling options. This assumes shorter initial horizon, i.e. higher leverage. Any higher leverage puts one in position to pay dear price for rolling out options, should stock be down from purchase price and/or some time has passed.

Looking at low time value is the best indicator that you can sit tight for quite long (it also means you're lightly levered), and this method is more intuitive to me than looking at gamma, theta and option calculators in general.

To clarify, once I decided to buy on this day, the only question was what? Stock or options? I decided options to have some leverage. I want to be as safe as possible, so jan '18 was furthest away and obvious choice. Really, question is which strike. $100, $150, $200, $250 or something in between? This is where $100 becomes winner as time value is much lower than other options, and I want to have option to sit until the expiration time. I have just secured Tesla at $175 two years from now, twice (and more) as much as I could buy with funds I have available today. Does this makes sense?

 

[MitchJi]

You mentioned rolling options. This assumes shorter initial horizon, i.e. higher leverage. Any higher leverage puts one in position to pay dear price for rolling out options, should stock be down from purchase price and/or some time has passed.

Not exactly. In the example $160 strike price example I used that is correct. But you should still roll, or sell your options with a substantial amount of time remaining or you face the same risk, only at a later date.

Looking at low time value is the best indicator that you can sit tight for quite long (it also means you're lightly levered), and this method is more intuitive to me than looking at gamma, theta and option calculators in general..

You are mostly restating my main points with different language, and reach most of the same conclusions. The only difference is that I believe the best indicator to achieve those goals is to look at the leverage, instead of the time value, which we both agree is not very important.

To clarify, once I decided to buy on this day, the only question was what? Stock or options? I decided options to have some leverage. I want to be as safe as possible, so jan '18 was furthest away and obvious choice. Really, question is which strike. $100, $150, $200, $250 or something in between? This is where $100 becomes winner as time value is much lower than other options, and I want to have option to sit until the expiration time. I have just secured Tesla at $175 two years from now, twice (and more) as much as I could buy with funds I have available today. Does this makes sense?

Yes it does. I pretty much agreed with the decision you made (except investing money you can't afford to lose). The reason I posted this is that the more clearly anyone understands what they are trying to accomplish the more likely their choices will reflect their goals. I wanted to be sure that you and anyone else who reads your post understands that most of what the reduction of time value achieves is the side effect of lower leverage.

 

[AlMc]

I am probably going to sell the 'put' portion of my strangle prior to earnings. I may miss some 'profit' but I am really unsure of what ER holds. I will keep the call portion through ER unless by some near miracle we get a run up Tues/Wens prior to ER.

Anyone doing anything based on the price in the 150s/low 160s with the ER pending?

 

[MitchJi]

I am probably going to sell the 'put' portion of my strangle prior to earnings. I may miss some 'profit' but I am really unsure of what ER holds. I will keep the call portion through ER unless by some near miracle we get a run up Tues/Wens prior to ER.

Anyone doing anything based on the price in the 150s/low 160s with the ER pending?

I'm going to do almost exactly the same. Sell puts on Wed before ER and keep calls regardless through the ER.

 

[SBenson]

Thinking of buying LEAPs. But a general question, do you guys like to buy after you see a small rebound? or just keep buying on the way down? I only have one or two shots left. So maybe wait for the downtrend to arrest?

 

[ev-enthusiast]

I will keep my puts through ER, dead in the green right now.
My expection is for a 10% post ER drop based on known Tesla issues, macro environment and current momentum.

 

[SBenson]

10% drop is just... blah

We are dropping about that much on a daily basis now.