TSLA Trading Strategies

[MitchJi]

I sold all of our TSLA options except our J18 $280 LEAPS. Not a lot about $2.5k.

Mostly about 50 March 380 lottery tickets. I put the proceeds into SCTY J17 $18's.


The two risks are that the merger gets voted down (if I don't take a profit before then, they are green now), or that the merger gets delayed.

OTOH at a TSLA SP of only $200 equates to a SCTY of $22 and I expect TSLA to go up as well.

Here's the chart:

 

[Turing]

Whelp I have short term bets in place now - basically December calls. It seems to me like it is a natural up-cycle then a strong delivery report and even just non-GAAP profitability could move it up from here. But I am really thinking it looks like they are getting tons of cars that were given October delivery estimates out this quarter which means GAAP profitability is a real strong possibility.

I'm not doing SCTY only because I don't really understand the chances of the merger happening and I would hate to watch GAAP profitability happen and then end up with nothing because the merger falls through.

Took a similar approach, i held on to j18 leaps but sold shares and scattered my call bets across tsla and scty nov/dec/j17s mostly atm biased towards where I was able to shave the most on the spreads.

 

[neroden]

Yes, but timidly. I'm a little puzzled why those on here that are pretty sure the deal is going through aren't considering picking up a modest amount of SCTY nov or dec calls?

I'm trying to avoid the tax complications of the wash-sale rules due to some trades I made earlier. When the 30-day period is up...

 

[MitchJi]

I'm sitting here wracking my brain and wondering why I shouldn't just back up the truck to buy medium-term SCTY calls near the deal price. Is anyone doing this?

Yes (sort of). I put 100% of our short-term portfolio into J17 $18's which were ATM at that time. I'm happy with the decision to buy J17's, but if I did it again I'd buy higher strike prices for more leverage.

I kept all of our J18 leaps, currently wondering if I should sell a few of those to buy more SCTY.

 

[MitchJi]

I'm sitting here wracking my brain and wondering why I shouldn't just back up the truck to buy medium-term SCTY calls near the deal price. Is anyone doing this?

There are two ways to make money from that trade. The difference between SCTY and Tesla will (if the merger passes) become one ninth of Tesla.

And the SCTY SP should also increase by one ninth as much as Tesla increases. That means that if there's a large increase in the Tesla SP you need to purchase nine times as much SCTY to break even, on the Tesla price increase portion of the trade.

 

[austinEV]

Hey the 2019 options are for sale on SCTY... is that new?

Not surprisingly the 2019 trade for about what 2018 does. Not a lot of credit to time value for that extra year.

 

[MitchJi]

I just sold about 45 J18 $280's.

Replaced with about 50 Mar $230's. In addition to the additional contracts the delta is higher, on the Mar $230's.

My reasoning is I think that the SP is going up soon (Q3 numbers in Oct and Nov, TE V2, solar roof etc.).


This is extremely risky. This is not not a recommendation.

 

[Svetlin]

Hey the 2019 options are for sale on SCTY... is that new?

Not surprisingly the 2019 trade for about what 2018 does. Not a lot of credit to time value for that extra year.

Wouldn't that be a way to get TSLA 2019 options now, before they become available in November? I know they will be weird options and thinly traded, but by 2019 a lot of strikes should get in the money.

Of course, the big assumption is that the merger happens, but this sounds like a double discount - the arbitrage opportunity, and also cheaper time value for the additional year, compared to what standard TSLA 2019 options would certainly have, with everyone betting that the Model 3 would have started bringing in the big bucks by then.

 

[neroden]

Wouldn't that be a way to get TSLA 2019 options now, before they become available in November? I know they will be weird options and thinly traded, but by 2019 a lot of strikes should get in the money.

Of course, the big assumption is that the merger happens, but this sounds like a double discount - the arbitrage opportunity, and also cheaper time value for the additional year, compared to what standard TSLA 2019 options would certainly have, with everyone betting that the Model 3 would have started bringing in the big bucks by then.

I'm sure you're probably right, but I figured out I don't like having time value working against me so I'm not buying calls -- not right for my psychology. And sadly the fact that the 2019s are trading at the same price as the 2018s means selling 2019 puts isn't a good deal!

 

[Svetlin]

I'm sure you're probably right, but I figured out I don't like having time value working against me so I'm not buying calls -- not right for my psychology. And sadly the fact that the 2019s are trading at the same price as the 2018s means selling 2019 puts isn't a good deal!

Yes, selling puts was nice even during the recent drops. I came out about even because the eroding time value compensated for the share price drop.

I took the plunge this morning and loaded up on SCTY '19 $35 calls. That's like buying TSLA '19 ~$320 calls for about $12. Given that TSLA '18 $320 calls trade for about $6.50, that's still a good premium I ended up paying for the extra year, but I believe that's the cheapest TSLA '19s will ever be, since the real TSLA '19 options become available in mid November, when TSLA should be a lot higher.

 

[austinEV]

Wouldn't that be a way to get TSLA 2019 options now, before they become available in November? I know they will be weird options and thinly traded, but by 2019 a lot of strikes should get in the money.

Of course, the big assumption is that the merger happens, but this sounds like a double discount - the arbitrage opportunity, and also cheaper time value for the additional year, compared to what standard TSLA 2019 options would certainly have, with everyone betting that the Model 3 would have started bringing in the big bucks by then.

Geez I hadn't considered that. I bought '18's like a dummy.

 

[ZenMan]

Just bought Oct 21, 2016 Bull Call Spread.
Bought the 220 strike, sold the 235 strike. Cost was $1.15 each.

Bought twice as many as I felt comfortable with. Will sell half if Tesla jumps $10 next week. At about $213 should be able to sell these for at least $2.30 each. Then can let the remaining calls mature risk free.

Maximum loss $115 per contract if Tesla is <$220 at maturity. Maximum gain $1500 per contract if Tesla >= $235 at maturity. 13X potential gain.

 

[MitchJi]

Geez I hadn't considered that. I bought '18's like a dummy.

Something to consider is that the loss of time value on options accelerates as they get closer to expiration. It probably makes more sense to roll them to later options at least 6-9 months before expiration, which will be difficult with SCTY LEAPS.

 

[austinEV]

Something to consider is that the loss of time value on options accelerates as they get closer to expiration. It probably makes more sense to roll them to later options at least 6-9 months before expiration, which will be difficult with SCTY LEAPS.

Well I am calling myself a dummy because I bought 18's when I could have had 19's for nearly the same price. Since I wasn't thinking of holding them to expiration I didnt' think it mattered, but as said upthread, I could have thought of them as future TSLA options which has value.

 

[FluxCap]

I'm so tempted to go even harder into SCTY on this dip down. My baseless fear-o-meter is running high and I've made decent returns buying when the FUD-slinging is at its most frenetic in the past. We shall see how things shake out over the coming week / month, but I like my odds. Wish I had bought more at 16-17.

 

[tander]

Geez I hadn't considered that. I bought '18's like a dummy.

I'd be happy for others to double check the math but I was just looking at those 2019 scty calls and assuming the merger goes through and they turn into fractional tsla options, it looks like there's a pretty good discount. For example the 2019 scty 35 calls (gives you tsla for about 318 if my math is right) (10 scty calls=1000 scty shares for 35,000=110 (1000x.11) tsla shares for 318 (35,000/110)) are cheaper than buying the 2018 tsla 320 calls. So you get a discount and an extra year.

My biggest concern is that for some reason the scty options don't turn into tsla options. The language in the s4 seemed to talk about employee options, but not necessarily calls/puts.

 

[austinEV]

Well I am calling myself a dummy because I bought 18's when I could have had 19's for nearly the same price. Since I wasn't thinking of holding them I didnt' think it mattered, but as said upthread, I could have thought of them as future TSLA options which has value.

I'd be happy for others to double check the math but I was just looking at those 2019 scty calls and assuming the merger goes through and they turn into fractional tsla options, it looks like there's a pretty good discount. For example the 2019 scty 35 calls (gives you tsla for about 318 if my math is right) (10 scty calls=1000 scty shares for 35,000=110 (1000x.11) tsla shares for 318 (35,000/110)) are cheaper than buying the 2018 tsla 320 calls. So you get a discount and an extra year.

My biggest concern is that for some reason the scty options don't turn into tsla options. The language in the s4 seemed to talk about employee options, but not necessarily calls/puts.

Tander I was kind of concerned about that but look: these leaps have market value. That is all you need to know. If those options become worthless in the event of a successful merger then they would be trading for near zero.

The problem with these new post-merger TSLA leaps is they will be really goofy fractional contracts and super thinly traded. So they would have a worse bid/ask spread post-merger and therefore deserve a bit of a discount now for that reason.

 

[Svetlin]

I'd be happy for others to double check the math but I was just looking at those 2019 scty calls and assuming the merger goes through and they turn into fractional tsla options, it looks like there's a pretty good discount. For example the 2019 scty 35 calls (gives you tsla for about 318 if my math is right) (10 scty calls=1000 scty shares for 35,000=110 (1000x.11) tsla shares for 318 (35,000/110)) are cheaper than buying the 2018 tsla 320 calls. So you get a discount and an extra year.

My biggest concern is that for some reason the scty options don't turn into tsla options. The language in the s4 seemed to talk about employee options, but not necessarily calls/puts.

I'm not seeing how you get them cheaper than the current TSLA '18 $320 calls (say you can get those at $6). That means you spend $600 to be able to buy 100 TSLA shares at $320. If you bought a SCTY '19 $35 call (say you get it for $0.8, or $80 for 1 contract), that lets you buy 11 TSLA shares at ~$318, so you paid $80/11 = $7.27 for the right to buy 1 TSLA share.

Still a great discount, because of the arbitrage, the cheaper time value of the extra year for SCTY, and the fact that you can get it now, while TSLA is still on sale this week. But not cheaper than the comparable TSLA options for 2018.

As far as the options disappearing, I just don't know. The general consensus here seems to be that one contract for SCTY turns in to 1 special contract of TSLA, with a weird strike price (say $318.18) and an "options multiplier" of 11, instead of 100. I am not an expert, but I'm willing to risk it, because my limited research confirms this.

Edit: Agree that there is the additional disadvantage of them being thinly traded post merger. I'm thinking if TSLA is at $500 in mid 2018, the time value of anything this deep in the money is negligible, so you'd just exercise the options and sell the shares. Being special options with only 11 shares makes them way easier to exercise (it costs $3500, not $32,000).

 

[MitchJi]

My baseless fear-o-meter is running high and I've made decent returns buying when the FUD-slinging is at its most frenetic in the past. We shall see how things shake out over the coming week / month, but I like my odds. Wish I had bought more at 16-17.

I wish I'd bought more when SCTY was st $18 too!

But thanks to your suggestion I didn't miss this completely!

 

[austinEV]

I'm not seeing how you get them cheaper than the current TSLA '18 $320 calls (say you can get those at $6). That means you spend $600 to be able to buy 100 TSLA shares at $320. If you bought a SCTY '19 $35 call (say you get it for $0.8, or $80 for 1 contract), that lets you buy 11 TSLA shares at ~$318, so you paid $80/11 = $7.27 for the right to buy 1 TSLA share.

Still a great discount, because of the arbitrage, the cheaper time value of the extra year for SCTY, and the fact that you can get it now, while TSLA is still on sale this week. But not cheaper than the comparable TSLA options for 2018.

As far as the options disappearing, I just don't know. The general consensus here seems to be that one contract for SCTY turns in to 1 special contract of TSLA, with a weird strike price (say $318.18) and an "options multiplier" of 11, instead of 100. I am not an expert, but I'm willing to risk it, because my limited research confirms this.

Edit: Agree that there is the additional disadvantage of them being thinly traded post merger. I'm thinking if TSLA is at $500 in mid 2018, the time value of anything this deep in the money is negligible, so you'd just exercise the options and sell the shares. Being special options with only 11 shares makes them way easier to exercise (it costs $3500, not $32,000).

Ooh, actually that is a compensating value actually. These contracts are desirable bite-size if that is the case.