TSLA Trading Strategies

[neroden]

I've found through experimentation that sometimes the theta decay is better on 30 day puts than 45 day puts, and sometimes it's better on 60 day puts than on 45 day puts. Honestly, I dunno why, it just varies...

 

[dalalsid]

Question: Is the trend in max-Pain over option expiry dates of any use for trading?: e.g. here is the max pain price for all expiry dates for TSLA options:

 

[EinSV]

Question: Is the trend in max-Pain over option expiry dates of any use for trading?: e.g. here is the max pain price for all expiry dates for TSLA options:

View attachment 223748

So if I am reading this correctly one explanation is lots of shorts are likely to be way underwater on J 2018 puts.

 

[D-egg-O]

Ahead of Q1 2017 earnings release, what's a good simple trading strategy? For Q4 2016 I bought puts ahead of ER as insurance for my core investment. I'm leaning towards using the same strategy for Q1 2017. I know the market action thread is very bullish on the next ER, but I still want to protect my core investment against a short price drop. I'm treating these puts as insurance.

Any feedback is greatly appreciated.

 

[neroden]

Ahead of Q1 2017 earnings release, what's a good simple trading strategy?

Buy and hold? Can't get much simpler than that.

Put insurance only makes financial sense if you are really planning to sell the stock for expenses soon so that you can't afford to wait for it to recover; usually you end up losing money on it. Though if it helps you sleep at night, go for it.

If you're sure the stock will go up or down but not stay the same, you could try a spread of some sort, but beware of the complicated tax rules on them. The long straddle is the classic, but the short butterfly is a credit trade. I don't do these myself.

 

[geneclean55]

Ahead of Q1 2017 earnings release, what's a good simple trading strategy? For Q4 2016 I bought puts ahead of ER as insurance for my core investment. I'm leaning towards using the same strategy for Q1 2017. I know the market action thread is very bullish on the next ER, but I still want to protect my core investment against a short price drop. I'm treating these puts as insurance.

Any feedback is greatly appreciated.

I might day trade some shares (into the AH session), and also do some small dollar value call bets.

 

[kenliles]

Buy and hold? Can't get much simpler than that.

+1000
For TSLA with today's opportunity and macro environment:
Risk layers-
Layer 1 (Core)- Buy as much as you can afford to hold for 5 years
Layer 2 (Trade)- Hold as much as you can afford to buy for 1 year
Layer 3 (The Bellagio)- Buy only what you can afford to lose

 

[D-egg-O]

Buy and hold? Can't get much simpler than that.

Put insurance only makes financial sense if you are really planning to sell the stock for expenses soon so that you can't afford to wait for it to recover; usually you end up losing money on it. Though if it helps you sleep at night, go for it.

If you're sure the stock will go up or down but not stay the same, you could try a spread of some sort, but beware of the complicated tax rules on them. The long straddle is the classic, but the short butterfly is a credit trade. I don't do these myself.

No need to sell the stock any time soon, so it's not really insurance per say. It is a short term price drop mitigation strategy I suppose. I was able to sell between $275-$280 and buy back in at in the $240s last earnings go around. Puts cost was about $9 per contract.

 

[MitchJi]

Ahead of Q1 2017 earnings release, what's a good simple trading strategy? For Q4 2016 I bought puts ahead of ER as insurance for my core investment. I'm leaning towards using the same strategy for Q1 2017. I know the market action thread is very bullish on the next ER, but I still want to protect my core investment against a short price drop. I'm treating these puts as insurance.

Any feedback is greatly appreciated.

It depends on what you think might happen, or exactly what you want to protect against. If it's a big decline then I'd buy pretty far OTM puts. Otoh if you expect a minor dip then I'd buy close to the money puts.

You should consider if you want to try to replicate a solution that worked when the SP dropped or try a similar strategy with calls (long).

 

[elasalle]

Anyone considering selling out of money calls (on non core ) positions, to make a few extra $$
Given M3 announcement coming in July, June 17th , 380-400 seems out of reach for June?

 

[neroden]

Anyone considering selling out of money calls (on non core ) positions, to make a few extra $$
Given M3 announcement coming in July, June 17th , 380-400 seems out of reach for June?

I don't have any non-core positions, so I am much too worried about the stock skyrocketing *before* I expect it to, which has happened several times already.

So instead I sell cash-secured puts so I can load up on dips even if I'm on vacation. Usually they expire and I just make money instead.

 

[elasalle]

I don't have any non-core positions, so I am much too worried about the stock skyrocketing *before* I expect it to, which has happened several times already.

So instead I sell cash-secured puts so I can load up on dips even if I'm on vacation. Usually they expire and I just make money instead.

Ya I have PUTS as well for 150, 190 and 290. 290 seemed so far fetched a while back, i sold it when stock itself was around 245(& for 60$). No more $$ to play with, so only selling PUTS is what i am considering(only option). Non-Core position, because I am selling planning on selling puts against 2019 LEAPS(basically creating Calendar spreads). A while back I had to close the spread(bought back 2018 calls) against the same 2019 LEAPS, because the stock moved too quickly. Feeling luck I got out, even though I did pay 5$ more for closing the 2018 calls.

 

[MitchJi]

I do want to call in the fact, that if you don't leverage, you will lose equal or less nominal $ by holding this kind of assets vs stock, so your description of danger is correct when you're leveraged, but otherwise it's not.
1.Now, most ppl do this for leverage, but you don't have to.

For example(assume SP $300 for ease of calucation), If I buy 10 contracts of $150 strike TSLA, instead of 1000 shares($300K), I will pay around $150-$153K, deploy about 50-51.5% of the capital.

2. If stock dropped 50%, I would lose around 150K in shares, but probably around 120K in options, as options would recover some time value and be priced around $30 (price for Jan 19 if Tesla was 150 - sounds about right?)
Furthermore, if Tesla dropped to $100, I would have lost $200K in shares, and loss in options is limited to invested $150-$153K, but option would still probably be worth some $10, so loss would be around $140K
3. Taken to logical extreme, if TSLA goes to 0, I lose 150-$153K in options, but $300K in shares.

4.So DITM calls are actually safer, if you don't leverage yourself.

Disagree.
1. You can choose to use some of the gains from leveraging to mitigate the risks incurred from leveraging, but that does not mean that you are not using leverage.
2 You need to sell the options, but you can hold the shares indefinitely.
3. You mean taken to an absurd extreme.
4. Absolutely false!

I just started the transfer of more $$ into my Fidelity account so I can make a play after the ER if the SP goes down. I want to buy DITM Jan 2019 calls. I just don't know how deep to go. $100, $200? I would love to hear advice on which to buy. Thanks guys!

I will probably sell them in 10 months or less because I will want the cash for something else. If the stock is at 350 in 8 months, will I make more money buying 2 calls with 200 strike, or one call with a 100 strike?

I posted some opinions about choosing option strike prices here:
TSLA Trading Strategies
And here:
TSLA Trading Strategies
I explained how I use this calculator:
Long call calculator: Purchase call options
In one of those posts I said:

LEAPS's buying decisions should depend mainly understanding the SP, not on in depth understanding of options:
I agree with that as excellent general advice for trading options. But IMO that and particularly most of the rest of your post is irrelevant if what he want's is advice on buying J2019 LEAPS's now (while the SP is below or close to ~$200). For that he might want to consider the following recommendations:

IMO the main consideration for buying LEAPS's should have very little to do with understanding options. Mainly you need to be extremely confident that at least 1-10 month's (6-10 is better) before the January 2019 expiration date that the SP will increase enough that you will make a substantial profit. I believe that now is an excellent time for the following reason. If this belief turns out to be correct you should definitely buy some LEAPS's:
I strongly believe that by November 2017-September 2018 (almost a full year later than their goal) Tesla will be profitably producing M3's at a rate of at least 7k per week. When that happens I believe that the SP will rise to at least $300.

The reason I quoted that here is that all of the mostly excellent you were given is about how to trade options, rather than understanding the SP. Buying calls is extremely bullish. My advice is not to do that with a substantial amount of money unless you are extremely confident that the SP will rise more than enough to make your trade profitable 2-3 months before you plan to sell.

The other situation when I buy options are relatively inexpensive "lottery tickets".

 

[surfside]

This question should probably be in the beginners options trading thread, but figured i would go ahead and post here, as it is a potential trading strategy (i guess):

-Let's say I have J19 LEAPs that have significant gains that I would like to sell but would be subject to short term capital gains.

I was trying to think this weekend how I could lock in those gains but then also figure out a way to ensure I get long term capital gains treatment, and came up with the following idea:

If I were to sell a call (sell to open) at the same strike price as the long call LEAPs I had previously bought as opposed to selling to close the options I bought a couple months ago (which would result in a short term capital gain), and then hold both the long call and the short call for one year to get long term capital gain treatment, is there something I am missing about this scenario that doesn't work? Or some risk I am taking?

The other benefit that I see to this strategy (similar to a bull call spread) is that if the price does drop, I could decide to buy back the long call i sold if I felt the price was likely to go back up.

Curious for folks thoughts re: what I may be missing.

Thanks in advance,
surfside

 

[MitchJi]

If the SP continues to rise, which is extremely likely IMO, you will be kicking yourself!

 

[surfside]

If the SP continues to rise, which is extremely likely IMO, you will be kicking yourself!

i appreciate the sentiment; still think it is worth evaluating my strategy going into earnings. I'm inclined to agree with you, but i have been thinking through what to do from a tax perspective over the course of this year and i'm curious to understand whether or not there are flaws in my thinking re: this new strategy.

surfside

 

[ggr]

This question should probably be in the beginners options trading thread, but figured i would go ahead and post here, as it is a potential trading strategy (i guess):

-Let's say I have J19 LEAPs that have significant gains that I would like to sell but would be subject to short term capital gains.

I was trying to think this weekend how I could lock in those gains but then also figure out a way to ensure I get long term capital gains treatment, and came up with the following idea:

If I were to sell a call (sell to open) at the same strike price as the long call LEAPs I had previously bought as opposed to selling to close the options I bought a couple months ago (which would result in a short term capital gain), and then hold both the long call and the short call for one year to get long term capital gain treatment, is there something I am missing about this scenario that doesn't work? Or some risk I am taking?

The other benefit that I see to this strategy (similar to a bull call spread) is that if the price does drop, I could decide to buy back the long call i sold if I felt the price was likely to go back up.

Curious for folks thoughts re: what I may be missing.

Thanks in advance,
surfside

My broker won't let you hold opposing positions on the same security. I don't know whether this is some sort of IRS rule, or just the broker.

 

[Oil4AsphaultOnly]

This question should probably be in the beginners options trading thread, but figured i would go ahead and post here, as it is a potential trading strategy (i guess):

-Let's say I have J19 LEAPs that have significant gains that I would like to sell but would be subject to short term capital gains.

I was trying to think this weekend how I could lock in those gains but then also figure out a way to ensure I get long term capital gains treatment, and came up with the following idea:

If I were to sell a call (sell to open) at the same strike price as the long call LEAPs I had previously bought as opposed to selling to close the options I bought a couple months ago (which would result in a short term capital gain), and then hold both the long call and the short call for one year to get long term capital gain treatment, is there something I am missing about this scenario that doesn't work? Or some risk I am taking?

The other benefit that I see to this strategy (similar to a bull call spread) is that if the price does drop, I could decide to buy back the long call i sold if I felt the price was likely to go back up.

Curious for folks thoughts re: what I may be missing.

Thanks in advance,
surfside

Open a separate trading account (at a different broker), transfer your stock there and then sell the calls from there. That will get around any broker restrictions and also circumvent the wash sale rule (not sure if it's 100% legal, but the year-end tax statements sure won't report it).

 

[surfside]

so I caught up with my broker and they confirmed that it is not possible to hold both the long and short side of an options contract.

thinking that I am likely to just sell the next highest strike price to create a (very small) bull call spread.

now I just have to decide if/when to make the trade.

surfside

 

[AlMc]

@surfside: Thanks to you and others for your recent analysis that incorporate the NCIs from the former SCTY.

If your analysis is correct I do not think a 'beat' on earnings is priced in at this point. From what I have seen the average analyst has a loss of close to 70 cents/share. I have not even seen a 'whisper' number close to a 'beat'.

The SP seems to have been affected more by EM reinforcing the '3' will go into production in July and the Tesla semi reveal in September.

yes, the SP has seen a nice increase over the last several weeks but do you feel that the market is expecting a 'beat' or even a modest loss?