I would assume the timing of your conversion from shares to options worked out pretty well? It seemed that right about the time you said you were buying options was about the time TSLA started going up.
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TSLA Trading Strategies
- Thread starter Robert.Boston
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I would assume the timing of your conversion from shares to options worked out pretty well? It seemed that right about the time you said you were buying options was about the time TSLA started going up.
Zhelko Dimic
Careful bull
I'm about 25% good on new money (February entry) as of end of today, but may portfolio is still in poor shape from the last summer.
I am contemplating one as well. It seems to me that you would want at least June expiration, thereby including the 1st qtr ER. I am thinking about pushing even further out, so that I can cover 2 earnings reports. I feel fairly confident that enough news is coming down the pike to warrant quite a bit of volatility, between the model 3 reveal and the model X ramp up. I am hoping that soon, like in the next 5 or 6 weeks at the latest, that the Model X will be pumping out at 500+ per week. I am also considering buying multiple calls but only one put, because I am leaning towards the bullish side currently.
For shareholders now is a good time to build a synthetic long position. I sold a J17 put @200 for $42.25 and bought a J17 call @200 for $32.75. That is like buying shares for $190.50 when the price is at $200.
what is it about now in particular? simply that calls are cheaper than puts?
dc_h
Active Member
Options question:
I have July 210 calls. I'm considering selling 240 calls to reduce my risk. Cuts my exposure in half, but limits my upside.
Assumptions:
1 210 Call buy @ 16 my risk is 1600 per contract my upside is "unlimited"
1 240 call sell @ 8 my risk is unlimited but I get 800 per contract now.
My cost is 800 and my exposure is no more than 800. My upside is now capped at 3800 per contract, if TSLA closed in June at 239.99.
Am I missing some math here? The downside is limited win, but reduced risk. Assuming TSLA rises, the price of my 210 call will rise more quickly than the 240, so for every dollar rise in the 210 contract, I should see about a 60 cent rise for the 240 contract. I'm sure there is a differential equation showing the ratio changing as the price approaches 240, but that would be a good problem to have.
Appreciate any concerns with my model. I'd like to learn to manage risk better and increase my odds for wins.
I have July 210 calls. I'm considering selling 240 calls to reduce my risk. Cuts my exposure in half, but limits my upside.
Assumptions:
1 210 Call buy @ 16 my risk is 1600 per contract my upside is "unlimited"
1 240 call sell @ 8 my risk is unlimited but I get 800 per contract now.
My cost is 800 and my exposure is no more than 800. My upside is now capped at 3800 per contract, if TSLA closed in June at 239.99.
Am I missing some math here? The downside is limited win, but reduced risk. Assuming TSLA rises, the price of my 210 call will rise more quickly than the 240, so for every dollar rise in the 210 contract, I should see about a 60 cent rise for the 240 contract. I'm sure there is a differential equation showing the ratio changing as the price approaches 240, but that would be a good problem to have.
Appreciate any concerns with my model. I'd like to learn to manage risk better and increase my odds for wins.
That is a bull call spread. You are trading potential reward if the stock moves over $240 for less downside risk.
Bull Call Spread Explained | Online Option Trading Guide
This is a strategy many find attractive. To quote my link: "The bull call spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go up moderately in the near term."
dc_h
Active Member
Thanks. Seemed like good math. The odds of going over 240 are probably about <25%, the odds of 230 are probably 25-35%, but the odds of getting to my hedged break-even at 220 seems better than 50%. I should have opportunities to exit at a gain before June, or if we run up, ride out the time value. Seems like the biggest risk is not selling before time value slope goes parabolic.
Zhelko Dimic
Careful bull
Well, no, you upside is capped at $3000-$800 (not +$800, bc you spent $800 net, didn't get credit), so it's $2200 (not $3800)
So, you can lose $800 or win $2200 - your reasoning is correct, except for that piece of math.
Another point is that the delta for this spread is lower. This means that if the SP moves sharply upwards before June, the spread gains less than a plain call. I this situation, you would probably sell the call option for profit, but with the spread you could possibly try to wait a bit longer to see if it moves even higher.
Short interest has hit an all-time high. There is a shortage of shares available to borrow, which means put / call parity has started to break down considerably. This means that some new and interesting options strategies become possible.
Here's a low-risk, medium-reward strategy that I have my eye on:
1) Buy a Jan 17 $200 call for ~ $38 and sell a Jan 17 $200 put for ~ $38. (The midpoint of the put bid/ask is actually a bit HIGHER). Think about what this means...you just bought an IN-THE-MONEY call, sold an OUT-OF-THE-MONEY put and got PAID to do it. Under normal circumstances, the call would be considerably more expensive.
2) Enjoy 100% of the upside > $200 "for free", with the only risk being the possibility of being forced to acquire shares for $200.
3) Profit. You are guaranteed all the gains of somebody who bought shares at $200 even though share price is currently $208.72.
If you hold shares in a tax-free account, intend to hold through 2017, liquidated all your shares and replaced them with this spread, you would be guaranteed an instantaneous 4.36% profit.
One disadvantage to this strategy is that it does tie up a lot of buying power (100 shares worth per contract). But the risk / reward profile is very attractive if one is bullish but not SO bullish as to buy calls outright.
Here's a low-risk, medium-reward strategy that I have my eye on:
1) Buy a Jan 17 $200 call for ~ $38 and sell a Jan 17 $200 put for ~ $38. (The midpoint of the put bid/ask is actually a bit HIGHER). Think about what this means...you just bought an IN-THE-MONEY call, sold an OUT-OF-THE-MONEY put and got PAID to do it. Under normal circumstances, the call would be considerably more expensive.
2) Enjoy 100% of the upside > $200 "for free", with the only risk being the possibility of being forced to acquire shares for $200.
3) Profit. You are guaranteed all the gains of somebody who bought shares at $200 even though share price is currently $208.72.
If you hold shares in a tax-free account, intend to hold through 2017, liquidated all your shares and replaced them with this spread, you would be guaranteed an instantaneous 4.36% profit.
One disadvantage to this strategy is that it does tie up a lot of buying power (100 shares worth per contract). But the risk / reward profile is very attractive if one is bullish but not SO bullish as to buy calls outright.
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I am a novice / new options trader. This sounds AMAZING! It sounds like I'd be silly not to liquidate some of my shares and turn them into 200 put/call combos. Is there a downside I'm not seeing? Why wouldnt everyone do this? If you can get the put and call for the same price.. how does this limit the upside? It seems like you're saying we get to buy the options for under market share value and we have no more exposure than if we had bought the shares ourselves at 200 and held them. I very much appreciate the information, this is an education I am absolutely in love with.
By put/call combos I just want to be sure you understand the put it sold, not bought. That means you also should account for that $20,000 that is needed to cover the put. For me since I trade in a cash account I am forced to front the money. Now if you are selling 100 shares for this then you get to keep $872 as a present from the shorts and it otherwise behaves exactly the same as holding 100 shares.
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
Like useless says, the downside (and probably the reason not "everyone does it") is the large amount of liquidity the selling of the put ties up, either in cash or use of margins. This has what is known as an opportunity cost - i.e. could that money have been put to better use in some other way instead?
So I kept the shares I have but closed out all my longer term options, set aside a bunch of cash, and bought June calls @$260. If we finally break past the ATH I think we will be well into the $300s and these will do quite well for me. Otherwise I have cash set aside to buy longer term options once again. I'm sure I'm not the only one who felt a little burned at $150 and I hope to be prepared if that happens again now that my portfolio is in better shape.
Rolled July 160's that were over 100% up, up and out into J17 240's. Sold half of Apr 8 220's that were almost 100% up so the rest are free now, will hold that past reveal. Will sit on cash that's left over from the above in case there's a huge selloff after reveal.
chickensevil
Active Member
Yeah, getting burned so badly was quite painful. I lost 100% of my option money and 50% of my trading share value. That was a hard lesson that I have learned to take macro events more seriously and not underestimate how much a growth stock can be hit during a downturn.
I am about recovered from all that back to break even. I still need to take my portfolio back up around another 20-30% to completely recover and I'm not willing to risk it all on the way that this event will be taken. I'll gamble a little bit, but nothing serious while I wait to see if we can break 240 or if we are going to go back down again.
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