TSLA Trading Strategies

[MitchJi]

Think about what you're asking; basically you're asking how to predict stock movement before it occurs which is what all trading is about.

I believe the correct answer is that you can only recognize a true short squeeze in retrospect.

Unlike its triggered by institutions recalling shares to vote. If so the peak will be either a little before the vote date or possibly on the vote date. Which makes this squeeze unique.

 

[Papafox]

Let's talk about shares vs. calls during a squeeze. It seems to me that it might be tough to sell calls quickly for an appropriate price during a massive squeeze. If one has transitioned to shares before the squeeze goes nuts, one can sell shares much more easily than certain calls (like deep itm calls, for example), I would suspect. Anyone have any experience here or suggestions?

 

[Mario Kadastik]

Let's talk about shares vs. calls during a squeeze. It seems to me that it might be tough to sell calls quickly for an appropriate price during a massive squeeze. If one has transitioned to shares before the squeeze goes nuts, one can sell shares much more easily than certain calls (like deep itm calls, for example), I would suspect. Anyone have any experience here or suggestions?

If it goes really nuts and the calls are deep in the money, then their premiums are hard to predict and you can always just exercise them and sell the shares immediately.

 

[Tenable]

Do we have any visibility as to when the vote will occur?

 

[MitchJi]

Do we have any visibility as to when the vote will occur?

Three to five months.

 

[Papafox]

If it goes really nuts and the calls are deep in the money, then their premiums are hard to predict and you can always just exercise them and sell the shares immediately.

Good point, but if I have half a million dollars worth of calls to exercise, my piggy bank can't support it. I suppose everyone has to look at their individual situation and devise a strategy. Looks like my strategy will be to convert deep ITM leaps to shares before the most intense portion of a squeeze takes place so that I can trade shares instead of leaps when things get crazy. The trick is to not convert too early.

 

[ggr]

Good point, but if I have half a million dollars worth of calls to exercise, my piggy bank can't support it. I suppose everyone has to look at their individual situation and devise a strategy. Looks like my strategy will be to convert deep ITM leaps to shares before the most intense portion of a squeeze takes place so that I can trade shares instead of leaps when things get crazy. The trick is to not convert too early.

You should be able to instruct your broker to basically use what liquidity you have to exercise one call (I believe there's no fee/commission to do that, at least not at my broker (ETrade)), sell those shares, now you have more cash to exercise more calls, ... and so on. They can do it for you, for a small (relative to 100 TSLA shares during a short squeeze) fee.

I had to raise some cash the other day and was faced with exactly this problem. I had some Jan 17 $100 calls, and they wouldn't sell even at their intrinsic value! I was just about to call the broker when a pop in the stock price caused the intrinsic value to go up enough to trigger at my limit, which was at that instant about $0.20 cents LESS per share than I would have made by exercising and selling at market.

 

[tander]

Three to five months.

I thought it was going to be mid-September after the go shop 45 days?

 

[MitchJi]

I had to raise some cash the other day and was faced with exactly this problem. I had some Jan 17 $100 calls, and they wouldn't sell even at their intrinsic value! I was just about to call the broker when a pop in the stock price caused the intrinsic value to go up enough to trigger at my limit, which was at that instant about $0.20 cents LESS per share than I would have made by exercising and selling at market.

Can he just set a somewhat low limit? Normally he wouldn't want to do that, but, if the SP goes crazy and the bid/ask is something like $450/$500 would they sell at something like $440?

It would be a small bummer to do that, but if he paid about $100 each it wouldn't be too bad.

Also aren't the market makers required to buy them at something close to the bid price?

 

[esk8mw]

Attempting to use the crazy lack of put-call parity to my advantage here. Just went in on a synthetic, December 230 strike. I was able to buy 2 calls for every short put and pay only a dollar (i.e., $100).

 

[Papafox]

You should be able to instruct your broker to basically use what liquidity you have to exercise one call (I believe there's no fee/commission to do that, at least not at my broker (ETrade)), sell those shares, now you have more cash to exercise more calls, ... and so on. They can do it for you, for a small (relative to 100 TSLA shares during a short squeeze) fee.

I had to raise some cash the other day and was faced with exactly this problem. I had some Jan 17 $100 calls, and they wouldn't sell even at their intrinsic value! I was just about to call the broker when a pop in the stock price caused the intrinsic value to go up enough to trigger at my limit, which was at that instant about $0.20 cents LESS per share than I would have made by exercising and selling at market.

Thanks for the suggestion. I'll speak with my brokerage on the phone and get an idea of what is possible (not like the short-squeeze is going to happen right away).

 

[Papafox]

My latest strategy is to remain positioned for any kind of a pop in TSLA but also not subject myself to the cruel uncertainties of short-term trading. To remain positioned for good things, I wish to be leveraged somewhat, and deep ITM leaps have served me well in the past because there's virtually no time-factor to decay while you're waiting. I currently have a substantial number of Deep ITM J17s that I have begun transitioning to deep ITM J18s. My strategy is to work in an assumed temporary trading range of 220-230 (and possibly higher) to sell J17s toward the top end of the trading range and buy J18s in the bottom half of the range. I'm willing to pay $4 or $5 time value using this method because otherwise I have to go too deep[ for $0 time value and lose too much leverage. What I like about this strategy is that I can always sell those J18s in the summer of 2017 and migrate them to J19s without paying too much time-value, if I choose. The trick is to use TSLA's volatility to your advantage by using it to slide your calls to later expiration dates without appreciable costs.

 

[MitchJi]

What I like about this strategy is that I can always sell those J18s in the summer of 2017 and migrate them to J19s without paying too much time-value, if I choose.

IMO the summer of 2017 could be a dangerous time. Even minor hiccups in the M3 ramp could cause major hits to the SP. I'm planning to get out of my J18's by March or April, hopefully earlier.

Thanks for the suggestion. I'll speak with my brokerage on the phone and get an idea of what is possible (not like the short-squeeze is going to happen right away).

Please let us know what you find out, and the name of your broker.

 

[MitchJi]

I thought it was going to be mid-September after the go shop 45 days?

SEC approval process can take anywhere from 2-4 months. It really depends on how much they dig into the filings. Note that a lot of things can be sped up in life but SEC approval is not one of them. There are many rounds of comments back and forth, potentially in-person hearings, etc. Given the scrutiny placed upon Tesla generally I wouldn't be surprised to see it near the 3-4 month mark.

Once approval is in hand the vote can follow shortly thereafter. Tesla will issue a press release announcing a (probably) future record date (a week or so out is my guess) and a vote shortly following the record date, like 1-2 weeks after. Wild guess - everything is concluded by mid December.

 

[Chickenlittle]

for those buying deep in the money long term calls, today a good day to extend out till 2018 from jan2017 calls. almost no time premium on the 2018 (paid 50 cents more) to avoid outlay of cash for another year. when getting rid of the 2017 calls, i exercised them and sold stock. got 2 to 3 dollars more a share. in IRA account, if your not think about tax consequence first.

 

[durkie]

Cross-posted from the Tracking Short Interest thread...

FYI, because there are so many people here with their TSLA holdings at IB, IB seems to have removed TSLA from their special margin stocks list.

Previously you were required to maintain 100% margin on TSLA, meaning that your TSLA stock could not be used to initiate a margin loan and take advantage of IB's super low margin rates. No longer the case. Checked my IB app this morning and my buying power has shot through the roof.

Personally, this was the main reason I transferred my TSLA to IB in the first place and I felt pretty stupid for not realizing there were special margin stocks. I wanted to use TSLA as collateral to buy safer stuff at low margin levels and also have some quick cash around to deploy in buying opportunities.

Of course, we also have the TSLA short-lending program paying out daily fees in the range of 8% APR right now, so you might have to initiate a pretty big margin loan to beat that (especially since it's paying actual cash on a daily basis).

 

[MitchJi]

Think about what you're asking; basically you're asking how to predict stock movement before it occurs which is what all trading is about.

I believe the correct answer is that you can only recognize a true short squeeze in retrospect.

Or you could ask Jesse.

 

[Menifeer]

for those buying deep in the money long term calls, today a good day to extend out till 2018 from jan2017 calls. almost no time premium on the 2018 (paid 50 cents more) to avoid outlay of cash for another year. when getting rid of the 2017 calls, i exercised them and sold stock. got 2 to 3 dollars more a share. in IRA account, if your not think about tax consequence first.

Agreed. Today I paid $103.50 for the Jan'18 $120 when the stock was trading at $223.30. That amounts to a 20-cent time premium. At that kind of premium, it makes no sense at all to buy shares instead of calls

 

[geneclean55]

Just noticed that Merrill Lynch doesn't consider my buying and selling of TSLA call options with different strike prices to be 'substantially equivalent stock'

Accordingly, a bunch of transactions that I thought would be subject to to the 'wash-sale rule' are in the clear. An unexpected pleasant surprise for my tax bill if true!
Any one can confirm this with their own transactions?

 

[austinEV]

Just noticed that Merrill Lynch doesn't consider my buying and selling of TSLA call options with different strike prices to be 'substantially equivalent stock'

Accordingly, a bunch of transactions that I thought would be subject to to the 'wash-sale rule' are in the clear. An unexpected pleasant surprise for my tax bill if true!
Any one can confirm this with their own transactions?

This is a low value reply with no actual information, but there is no way that is true. If I wanted to wash out an SCTY loss and bought SCTY calls at the same time that should invalidate the wash sale. If not the SEC is really asleep at the wheel or Merril is messing up. Of course you have plausible deniability during an audit so it all works out for you.