TSLA Trading Strategies

[bdy0627]

Those puts were expensive leading up to the ER. Even with the huge drop in the stock price, they are only at breakeven right now. Crazy.

 

[elasalle]

No expert here, but all along I have also been
1. selling puts
2.diagonals and covered calls (30-40%)

the diagonals/covered calls I sold for Jan 18 (in 420-500) range against my Jan 19 LEAPS, all are expiring worthless - so some compensation due to the drop.

I have some mid-term April Puts that might get exercised and it will be a zero sum trade. Same for Long term LEAPS

If I am able to free up some monies(APPL, NVDA, BABA, FB) - I might consider selling more puts in next few weeks.

~ cheers

 

[AlMc]

My current plan: (subject to change in the event of something totally unexpected): I am sitting on a large amount of basket 2 and 3 Tesla Cash.
I will buy more J19 DITM LEAPS IF we see $280 before the J20s come available. Otherwise I intent to totally review the situation when the J20s come out and decide on a strategy. Currently I am looking at a combo of DITM J20s ($200) with basket #2 money and OTM J20s (400-450) with basket #3 money.

Not advice as we all have different frames of reference(age/households/other sources of income/other investments/risk tolerance)

Good luck all. The Q3, 3 delay and macro effects (tax bill proposals) will all add to price swings

 

[D-egg-O]

Those puts were expensive leading up to the ER. Even with the huge drop in the stock price, they are only at breakeven right now. Crazy.

They were. If not for going sub 300, they would have been at break even at best. Lesson for next time.

Edit: Thinkkng about trying ITM covered calls to buy ITM puts for next time. Higher capital needed...but who knows...

 

[neroden]

I'm closing a few of my short puts early (at a small profit) to deleverage. I decided my exposure to purchasing more TSLA was too large for my taste, even though I like the price. The high price of puts has benefited me; time value decay has been improving the value of the short put positions even while the large stock price drop has been reducing the value.

 

[Johann Koeber]

This is my current strategy:

I am long TSLA common (long term investment), plus some OTM LEAPS for leverage.

I am selling weekly OTM calls and puts with an initial delta of 0.2 or less. More calls than puts. The time decay on those more than offsets the time decay of the LEAPS plus makes me some money. Whenever these short calls run ITM, I roll them out (one, max 2 weeks) and OTM, usually for credit. Thanks to the amazing option premiums this is currently working very well.

Any comments by more experienced traders/investor are very welcome.

 

[MitchJi]

This is my current strategy:

I am long TSLA common (long term investment), plus some OTM LEAPS for leverage.

I am selling weekly OTM calls and puts with an initial delta of 0.2 or less. More calls than puts. The time decay on those more than offsets the time decay of the LEAPS plus makes me some money. Whenever these short calls run ITM, I roll them out (one, max 2 weeks) and OTM, usually for credit. Thanks to the amazing option premiums this is currently working very well.

I’d be extremely careful selling calls now. Once they get the M3 production worked out the SP could jump spectacularly.

 

[InvestWithEdge]

Hi all, I am long Tesla but I would like to have some downside protection. do you have any ideas for protecting downside with TSLA.

any comments here would be helpful for all others like me: Strategy for protecting downside with TSLA

 

[durkie]

I’d be extremely careful selling calls now. Once they get the M3 production worked out the SP could jump spectacularly.

do you think we're likely to get any more info on this before end-of-quarter/end-of-december when deliveries are announced? i would think the next 3-4 weeks would be pretty quiet news-wise.

 

[bdy0627]

do you think we're likely to get any more info on this before end-of-quarter/end-of-december when deliveries are announced? i would think the next 3-4 weeks would be pretty quiet news-wise.

Market may react quickly to perceived increased production numbers inferred through large numbers of Model 3s showing up on the market. Also, EM could tweet something significant about production. Remember, he enjoys crushing the shorts. Those are the main risks to betting on either the downside or neutral for the next month.

 

[MitchJi]

Market may react quickly to perceived increased production numbers inferred through large numbers of Model 3s showing up on the market. Also, EM could tweet something significant about production. Remember, he enjoys crushing the shorts. Those are the main risks to betting on either the downside or neutral for the next month.

I think that Tesla needs to produce at least 1.5k per week by the EOY to avoid a substantial SP dip. A problem with trying to gauge their progress is that they are likely to hit that (if they do) within a few days plus or minus of the EOY. In other words it might be impossible to “perceive” their production.

 

[bdy0627]

For those with LEAPs and other call options, I'm interested in how others are going to approach their investments on this next stock climb. I know that PF, Al, and others like to sell their LEAPs on the way up, often converting to stock. At what stock price are you planning to sell your LEAPs? What will you do with the cash? Buy more conservative LEAPs with a longer expiration date? Buy LEAPs with a lower strike price? Buy stock? Hang on to a portion of the cash?

I'm very comfortable with the plan that I executed on the way down. I'm still trying to figure out exactly what I'll do on the way up. Since there is so much potential for TSLA in 2018, I will be hesitant to sell any LEAPs over the next few months. But, I know that I tend to do best when I set up a plan in advance and execute it in automated fashion, keeping emotions out of it. As of now, I'm tentatively thinking that I will sell a portion of LEAPs (maybe 30%) when the stock gets to $420+, and then form my next plan from there. But, it will also depend upon the stock action at the time. Currently, I've got March, April, June, and J19 calls. I don't have any stock shares currently.

Thanks for any input!

 

[D-egg-O]

I will sell the handful of Jan2019 600 calls, that I bought post Q3 earnings, prior to Q4 deliveries. Thinking about taking those funds and adding to core shares.

 

[AlMc]

Selling/converting DITM LEAPS: Depends on a number of things. If we get a nice run up (which I anticipate in 2018) I will probably sell the LEAPS in early/mid 2019. If it appears that the run is going to continue I will move them into new LEAPS..2021..up in price but still DITM. If some new challenges exist I will convert to stock and look for the next opportunity to go back into LEAPS.

Realize I am not an 'all in TSLA' investor. There may be other opportunities that come up over the next 18 months that might deserve some of the profit money from TSLA LEAP sales.

I really have to give credit to Kenlilies on this strategy as I used to invest in stock only. I have done very well with this strategy over the last two years with AAPL, NVDA and TSLA

 

[bdy0627]

Thanks for the input. I want to get my plan set up before TT007 posts a bunch and I get too aggressive. That hurt me last time we went up to ATH. What I've got going now is plenty aggressive.

What about you Mitch?

 

[bdy0627]

I need some options suggestions. I'm nearing the point where I will have a good but difficult problem: when to sell March, April, and then June Calls. I thought I had a really good strategy for our downtrend. I bought the hell out of it, especially below $320. That was easy. My account was down big by the end of December. Now, I've had the best January ever by far. My account is getting close to where it was last summer at the high. I don't want to be overly greedy and pay the price. I plan to buy J19 LEAPs with most of the proceeds from selling these nearer term Calls. It would be ideal to sell them on the rise when premiums are high, and then buy J19 LEAPs when they have settled down. However, that involves a lot of luck with waiting for a dip after selling the Calls I have, hoping the stock actually gives me a dip. In reality, I may just sell these and immediately buy J19s. I think the best approach for me will be to do this in waves on the rise. Any suggestions from others who have done this and/or are planning something similar? After selling nearer term Calls, do you try to time purchase of LEAPs during some stock consolidation so implied volatility and premiums settle down? Or do you just go straight over to the longer dated Calls?

 

[Jonathan Hewitt]

I need some options suggestions. I'm nearing the point where I will have a good but difficult problem: when to sell March, April, and then June Calls. I thought I had a really good strategy for our downtrend. I bought the hell out of it, especially below $320. That was easy. My account was down big by the end of December. Now, I've had the best January ever by far. My account is getting close to where it was last summer at the high. I don't want to be overly greedy and pay the price. I plan to buy J19 LEAPs with most of the proceeds from selling these nearer term Calls. It would be ideal to sell them on the rise when premiums are high, and then buy J19 LEAPs when they have settled down. However, that involves a lot of luck with waiting for a dip after selling the Calls I have, hoping the stock actually gives me a dip. In reality, I may just sell these and immediately buy J19s. I think the best approach for me will be to do this in waves on the rise. Any suggestions from others who have done this and/or are planning something similar? After selling nearer term Calls, do you try to time purchase of LEAPs during some stock consolidation so implied volatility and premiums settle down? Or do you just go straight over to the longer dated Calls?

Other ideas are to sell calls against your long calls to create a call spread, butterfly off your calls (short 2 higher strike calls and buy one higher than that), or just sell a portion of calls for cash and let your current calls run. All of these will give you cash while maintaining some upside potential. When it comes to options, I've personally found that the best trading strategy for me is anything that puts more cash in my account. When you have cash you have choices. When you don't have cash you are much more limited in what you can do. You may miss out on some gains if all of your cash is not at work but as long as you have cash you can play "the game" and there will always be more trades to make with cash you have.

If you don't like having a chunk of cash (hard to get used to force yourself to follow but I highly recommend it for trading options) then you can put your proceeds into neutral strategies. You can buy calendars or put butterflies with a target strike below where TSLA is trading right now. These will lose if TSLA keeps going up but will make you money if it only goes up a little, stays the same, or goes down. One special type of butterfly strategy called the broken wing butterfly will actually make money if the stock goes up, down, or stays the same and only loses money on a huge run to the wrong direction. The negative of this strategy is the larger margin requirements than other defined risk trades.

Because most people probably haven't heard of the broken wing butterfly here's one example (not recommending it but wanted to give an idea). I chose $340 as the short strike beause Option Sniper said we will revist $341 in February. You can shift the strikes around to suit yourself, the key to the broken wing butterfly is to take in a credit on order entry. In this case, you would go Long 1 February $290 and 1 $355 puts and short 2 $240 puts. Putting on this spread gives you $236 up front. If TSLA keeps going up you keep that money until the spread expires or you close it out. You can not lose money on this spread if TSLA keeps going up. If TSLA goes down you will initially be red on the trade but as the date gets closer to expiration theta decay will occur and you will lose less and less until you are green on the spread. During the last week or 2 you will start to get very green! At this point you will be able to close out the trade for a credit! That's right, this is a trade that you can put on for a credit AND take off for a credit if you can pull it off. The only way you lose money on this trade is if TSLA ends below $322.64 third week of February. If TSLA expires between $330 and $350 you will do very well on this trade, though I wouldn't wait until expiration. I would take if off when you are happy with the level of profit you are at with it. The great thing about a strategy like this is you can use it to offset some losses on your calls if TSLA doesn't keep going up. If you bought ATM or OTM puts to hedge with and TSLA keeps going up or stays the same you lose 100% of that money. The negative of the broken wing butterfly is if TSLA really goes down you will lose a lot more than you could have made whereas puts could make you several times your investment (but rarely do). If you go out to March or April for your broken wing butterfly you can make the green triangle a lot wider and easier to hit or it will give you a lot more profit for the same strikes but in exchange you will have to wait a lot longer for theta decay to occur so I usually don't go more than 45 days out for these, at most 60 days. This is not an instant gratification trade like TSLA shooting up while you're holding long calls. There are tradeoffs with every strategy and no perfect obvious way to do anything...

 

[AlMc]

@Jonathan Hewitt : ^^^VERY interesting^^^. Thanks

 

[Jonathan Hewitt]

Other ideas are to sell calls against your long calls to create a call spread, butterfly off your calls (short 2 higher strike calls and buy one higher than that), or just sell a portion of calls for cash and let your current calls run. All of these will give you cash while maintaining some upside potential. When it comes to options, I've personally found that the best trading strategy for me is anything that puts more cash in my account. When you have cash you have choices. When you don't have cash you are much more limited in what you can do. You may miss out on some gains if all of your cash is not at work but as long as you have cash you can play "the game" and there will always be more trades to make with cash you have.

If you don't like having a chunk of cash (hard to get used to force yourself to follow but I highly recommend it for trading options) then you can put your proceeds into neutral strategies. You can buy calendars or put butterflies with a target strike below where TSLA is trading right now. These will lose if TSLA keeps going up but will make you money if it only goes up a little, stays the same, or goes down. One special type of butterfly strategy called the broken wing butterfly will actually make money if the stock goes up, down, or stays the same and only loses money on a huge run to the wrong direction. The negative of this strategy is the larger margin requirements than other defined risk trades.

Because most people probably haven't heard of the broken wing butterfly here's one example (not recommending it but wanted to give an idea). I chose $340 as the short strike beause Option Sniper said we will revist $341 in February. You can shift the strikes around to suit yourself, the key to the broken wing butterfly is to take in a credit on order entry. In this case, you would go Long 1 February $290 and 1 $355 puts and short 2 $240 puts. Putting on this spread gives you $236 up front. If TSLA keeps going up you keep that money until the spread expires or you close it out. You can not lose money on this spread if TSLA keeps going up. If TSLA goes down you will initially be red on the trade but as the date gets closer to expiration theta decay will occur and you will lose less and less until you are green on the spread. During the last week or 2 you will start to get very green! At this point you will be able to close out the trade for a credit! That's right, this is a trade that you can put on for a credit AND take off for a credit if you can pull it off. The only way you lose money on this trade is if TSLA ends below $322.64 third week of February. If TSLA expires between $330 and $350 you will do very well on this trade, though I wouldn't wait until expiration. I would take if off when you are happy with the level of profit you are at with it. The great thing about a strategy like this is you can use it to offset some losses on your calls if TSLA doesn't keep going up. If you bought ATM or OTM puts to hedge with and TSLA keeps going up or stays the same you lose 100% of that money. The negative of the broken wing butterfly is if TSLA really goes down you will lose a lot more than you could have made whereas puts could make you several times your investment (but rarely do). If you go out to March or April for your broken wing butterfly you can make the green triangle a lot wider and easier to hit or it will give you a lot more profit for the same strikes but in exchange you will have to wait a lot longer for theta decay to occur so I usually don't go more than 45 days out for these, at most 60 days. This is not an instant gratification trade like TSLA shooting up while you're holding long calls. There are tradeoffs with every strategy and no perfect obvious way to do anything...

View attachment 274568

Here would be a "normal" butterfly to compare with. Long the $325 and $375 and short 2 $350s.

You can lose 100% of your investment ($603) if TSLA goes up OR down too much but you won't lose anything if TSLA stays between $331 and $369. If TSLA ends close to $350 you can make 3 times your initial outlay. Just like the broken wing butterfly you will rely on theta decay. Nothing good will happen the first few weeks you have this trade on. The best thing I like about this trade compared to the other is the buying power reduction on this one is $6.03, whereas the other one it's going to be much higher. Both of them have similar max profits but in exchange for a higher chance of profit for the broken wing butterfly (82% vs 46%) you have to give up more buying power and have higher potential max loss if TSLA really moves down...

 

[GoTslaGo]

Now I got that song in my head... “Broken Wings” [I won’t link...]