TSLA Trading Strategies

[bdy0627]

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

That's an interesting strategy. I've got a couple of option strategy books. That's complicated enough that I need to learn more about it to digest it. Way more to think about than just doing calls and puts, which is the extent of my experience at this point. I don't even use margin. Thanks!

 

[bdy0627]

Who knows what the market will do tomorrow with the govt silliness going on. Any dip on that should be very short term. I just listened to Pulitzer's weekend review. TSLA upside target is $359-363. If drops, should find strong support near 200 MA ~ $334. Since I sold some March calls last week and have some cash, I will add if we test the 200 MA and sell more March calls if we approach $360. Given the stock's 12% rise in 2018 already, if I add, it will be J19s or possibly more June calls, nothing shorter term. I really like TSLA's odds of rising a fair bit between now and June. Calls are VERY expensive now though. Best to wait for a dip with some consolidation for lower premiums. Here's a chart with projected profit/loss with different call options assuming various stock prices in May:

 

[cricketman]

Hi everyone, I am new to posting here but been reading for a while. I have been buying into Tesla for the past 18 months and have now met my goal of 500 shares at an average of $290 per share. I am still young so playing this long. I see shares at between $5,000-$10,000 within 10-15 years. I don't see Tesla hanging around as a mediocre company. Its either going big or going to fizzle and die, my bet is its going big.


Imo, it’s a fools game trying to time the market unless you are bored and like having fun/getting stressed out. Leverage in, sit back and relax. And if shares get seriously good value like last week, then use those opportunities to get more leverage if you want to.


I have been thinking about when and how to get out of Tesla shares. I am thinking of selling 50 shares for every 1,000 added on the share price, so a bit like Elon’s comp deal but in reverse J. That will be a nice little earner for my family over the next few years.

 

[AlMc]

Hi everyone, I am new to posting here but been reading for a while. I have been buying into Tesla for the past 18 months and have now met my goal of 500 shares at an average of $290 per share. I am still young so playing this long. I see shares at between $5,000-$10,000 within 10-15 years. I don't see Tesla hanging around as a mediocre company. Its either going big or going to fizzle and die, my bet is its going big.


Imo, it’s a fools game trying to time the market unless you are bored and like having fun/getting stressed out. Leverage in, sit back and relax. And if shares get seriously good value like last week, then use those opportunities to get more leverage if you want to.


I have been thinking about when and how to get out of Tesla shares. I am thinking of selling 50 shares for every 1,000 added on the share price, so a bit like Elon’s comp deal but in reverse J. That will be a nice little earner for my family over the next few years.

Welcome. Your strategy for the buy side (already done) and the sell side are good as long as your SP projections come to fruition.

 

[steve3]

When buying $200 strike with $10 time-value premium, you're paying $10 to save spending $190 ($200-$10)
Your rate is 10/(200-10)*100%= 5.26%, for some 10-11 months, so close to 6%

I'd look into strikes that are even lower than $200, as per my post above time-value really melts as you approach $100... I'm personally using $100 to $180 strikes, leaning more towards $100, but I fully intend for most of these to hold until maturity and conversion. For me they're direct share replacement and I buy as many lots as I would be able to buy shares, and keep rest in cash, unless I intentionally leverage...

For example, say I have $1M. That would buy me 39 lots of $100 strike at $252 price, but I buy instead 28 lots as that represents 2800 shares that I have money to own (1M/$351=2849 shares), and keep $297K dry powder

@Zhelko Dimic, thanks for posting this (a month ago, in Market Action thread), it really works for me. So yesterday I picked up some J’19 100s that I intend to exercise and hold long term, bought using only cash from selling all my J’19 calls (150s, 250s, 350s) at 357 a few weeks ago, due to the M3 ramp delays. So this week’s drop was unexpectedly quick.

In the event of a further dip into 200-220 territory, I’d like to be prepared to act quickly and put in play a more leveraged strategy using small/modest amounts from HELOC that if lost would’t put me between a rock and a hard place, but if doubled would conveniently cover costs to exercise the 100s. I’m not approved to sell options and not interested in that route. I’m thinking about J’19 250s...any thoughts?

 

[Gwgan]

Thoughts on best setup for “bigger” short squeeze?

 

[bdy0627]

Thoughts on best setup for “bigger” short squeeze?

I like SEP21 $300 calls to go along with a mix of J19 $300s and J20 $450s. That's what I'm personally looking at. I wouldn't leverage hard for a sudden squeeze because that can be hard to recover from if we take a dive instead.

 

[Tenable]

I have a ton of calls right now with my shortest term being Sept 300s. But I would highly caution those investing with a squeeze in mind. I'm not one to doubt Elon that it may happen, but it is very unlikely shorts let go in numbers that will cause a squeeze anytime soon.

 

[Causalien]

Thoughts on best setup for “bigger” short squeeze?

Call spread so that you are relatively immune to volatility increasing or conference calls crashing premium.

 

[D-egg-O]

I've been selling OTM cash backed puts for about a month now. Have plenty of TSLA exposure. Loving this strategy as a means to steadily grow the retirement accounts as the sp is depressed and IV is really high.

 

[bdy0627]

I've been selling OTM cash backed puts for about a month now. Have plenty of TSLA exposure. Loving this strategy as a means to steadily grow the retirement accounts as the sp is depressed and IV is really high.

What expiration dates are you using? How quickly can you close these?

 

[D-egg-O]

What expiration dates are you using? How quickly can you close these?

Doing weeklies. Going about $10, maybe $20 OTM during the morning dips on Mondays.

 

[Menifeer]

Doing weeklies. Going about $10, maybe $20 OTM during the morning dips on Mondays.

Of all the ways to make money with options, that's my favorite. It's also likely the most reliable way to make money in short-term options.

 

[bdy0627]

I thought I would post some data that may be useful for swing-trading TSLA on these dips. Here's some historical data going back to November 2014. This supports the idea of buying in tranches rather than going all in at some level since picking the right level to go all in is difficult. Use caution adding leverage before a dip hits 16%, since that is still relatively small by TSLA standards. Once a dip has hit 20%+, the data supports heavy leverage based upon TSLA's historically quick reversal and subsequent climb within a few weeks. I have a very difficult time not adding leverage even with a 5% dip, so I set up a plan that keeps my leverage small until a dip enters the 16%+ territory, then I start getting serious with the leverage. I add starting at 8% and then again at 12%, but just a few LEAPs since they will likely be underwater as the dip worsens, which is common. As the dip heads to 16% and then 20%, shorter term calls than LEAPs make sense based upon history but do carry higher risk. If a dip gets to 26% and even 32%, the risk/reward equation of calls 1-3 months out is very favorable, but again does carry higher risk. This data only goes back to 2014, which includes only one correction of about 18% for the Nasdaq in 2016. I think this pattern is likely to continue, assuming similar market conditions with no more than a 20% market correction. This strategy requires a plan for selling the leverage on the subsequent climb. It makes sense to do that in tranches as well. Data on the climbs is listed below. The main cautionary suggestion is to avoid lots of leverage on a smallish dip since that will be heavily underwater on a larger dip, and a larger dip is not rare.


There were 26 dips of more than 10% since November 2014 (using high and low stock levels on a weekly chart)

• 9/26 (35%) dips ended by 12%
• 13/26 (50%) dips ended by 16%
• 18/26 (69%) dips ended by 20%
• 23/26 (88%) dips ended by 26%
• Only 1 dip was over 32%
• Note that 69% of dips reversed by 20%. Based upon historical patterns, this is a very reasonable place to bet on a reversal.
• 88% of dips reversed by 26%. This is a reasonable level to get serious with adding leverage.
• All subsequent climbs were rapid, usually 1-2 weeks, but occasionally 4+ weeks

Dips of 12% or Less:

• 9/26 (35%)
• Smallest Climb: 10.9%

Dips greater than 12%:

• 17/26 (65%) dips were greater than 12%
• 4/17 (23%) ended by 16%
• 9/17 (53%) ended by 20%
• 14/17 (82%) ended by 26%
• 16/17 (94%) ended by 32%
• Note that once a dip has gotten past 12%, it is unlikely to end by 16%; only about 50% chance of ending by 20%; very likely to end by 26%
• Smallest Climb: 9.7%

Dips greater than 16%:

• 13/26 (50%) dips were greater than 16%
• 5/13 (38%) ended by 20%
• 10/13 (77%) ended by 26%
• Note that once a dip has gotten past 16%, it is unlikely to end by 20% but very likely to end by 26%
• Smallest Climb: 11.4%

Dips greater than 20%:

• 8/26 (31%) dips were greater than 20%
• 5/8 (62%) ended by 26%
• 7/8 (87%) ended by 32%
• Note that once a dip has gotten past 20%, it is pretty likely to end by 26%
• Smallest Climb: 14.5%
• Note the smallest climb with dips greater than 20% is much more than after smaller dips

Dips greater than 25%:

• 4/26 (15%) dips were greater than 25%
• 3/4 (75%) ended by 32%
• Note that once a dip has gotten past 25%, it is very likely to end by 32%
• Smallest Climb: 18.8%

Dips greater than 30%:

• 3/26 (11%) dips were greater than 30%
• 2/3 (67%) ended by 32%
• Note that once a dip has gotten past 25%, it is very likely to end by 32%
• Smallest Climb: 26.6%
• Note the smallest climb with dips greater than 30% is much more than after smaller dips

 

[elasalle]

Anyone considering rolling Deep ITM Jan 19s to OTM jan 20s Calls? in recent dip, I was able to get some prime Jan 19s, have good profits and am considering rolling them ...in next 1, 2 days .. still considering though ...

 

[neroden]

Anyone considering rolling Deep ITM Jan 19s to OTM jan 20s Calls? in recent dip, I was able to get some prime Jan 19s, have good profits and am considering rolling them ...in next 1, 2 days .. still considering though ...

I only have a few calls, all deep ITM Jan 19s, but my plan is to execute them using cash from a merger arb which is supposed to pay out sometime this year (if I'm lucky).

 

[mershaw2001]

Currently my tsla position is 70% stock, most of it I've sold covered calls against in the following strikes: 345 to 385.
At this point in the tesla cycle I do not ever sell calls against the whole position in the event that this goes up more than I expect. However, since I'm utilizing all of my margin at almost all times I want to take money off the table with the 345 calls and I sold these when the price was in the 340's. I would have liked to have waited but being heavily leveraged I thought it was prudent to remove some after a 50-65 dollar run up.
Then I've got 30% of my position in short puts with high strikes, 375-400.
I currently believe shorting puts is the way to play tesla for the time being. Tax issues might cause this to be an issue.

 

[jeewee3000]

In the dip to $347 I rolled some shares over into august and october OTM calls, mainly based on the current uptrend and Elon's confidence that shorts will explode in three weeks.

Already up on those calls, but planning to hold till July 10th or so and re-evaluate. IF something big is coming I'll take profits and roll the money back to shares.

Never played those LEAP options (strike price years from now). Are those worth holding so long and missing other opportunities? I can't imagine getting better return than with monthlies. Anyone can elaborate on how to play those LEAPS?

 

[neroden]

LEAP calls are a mildly leveraged alternative to holding stock, basically.

 

[emupilot]

[QUOTE="jNever played those LEAP options (strike price years from now). Are those worth holding so long and missing other opportunities? I can't imagine getting better return than with monthlies. Anyone can elaborate on how to play those LEAPS?[/QUOTE]

LEAPs greatly reduce your risk compared to monthlies: if TSLA goes into a downward phase, you can ride it out with LEAPs but with monthlies not so much.

I don't normally hold calls less than 6 months from expiration but had September calls in anticipation of this run-up. I have rolled those into January and will start rolling those into Jan 2020 and/or selling them as TSLA (hopefully) continues to rise over the next few weeks.