TSLA Trading Strategies

[Menifeer]

Let me explain the actual conclusion:

You make money selling puts if you have cash (or stable securities to borrow against) and know a minimum reasonable price for the stock.

You make money selling calls if you have stock and know a maximum reasonable price for the stock.

(Of course if you know both the maximum and the minimum reasonable price, you can swing trade!)

The tricky part is knowing those maximum and/or minimum reasonable prices.

I disagree.

I'm an example of profiting while not knowing any of those things. I simply reap the lucrative profits available selling options due to the high TSLA option premiums.

TSLA is a God-send for short-term traders like me. I don't expect it to collapse or go to the moon. In a few years, it will probably be about where it is today and traders will have made lots of $$$. Long-term investors will still be waiting for the short squeeze and shorts will still be waiting for the bankwuptcy.

 

[EVMeister]

You were probably thinking the same thing several years ago when it was worth a fraction of what it is now. I see no reason for the stock price not to appreciate tremendously, if Tesla sticks to their plan.

 

[neroden]

I disagree.

I'm an example of profiting while not knowing any of those things. I simply reap the lucrative profits available selling options due to the high TSLA option premiums.

Full credit, there are a lot of different options strategies which can be used; you can use spread and straddle strategies without having a minimum or maximum price in mind.

However...

TSLA is a God-send for short-term traders like me. I don't expect it to collapse or go to the moon.

(Emphasis mine). That means you have an mental minimum and maximum price you are working with. Which is what I said.

 

[winfield100]

I disagree.

I don't expect it to collapse or go to the moon.

look at stock AMER (which became AOL and split about 128:1 or AAPL which split 56:1 ($10,000/share)
is $10,000/share "to the moon"?

 

[Boomer19]

ok so we are in the dreadful under 330 range
what’s the play?

events - our expectations / timeline
5k sustain goal - week
6k ramp - end of july/mid august
Q2 earnings - not thrilling but mkt reacts weirdly sometimes
Q3 deliveries - anything less than 55k is prob bad (23-25k sx + ~30k 3s)
i expect over 60 with the holdovers from Q2 being delivered early July. 65+ would be nice.
Q3 earnings - cash flow + profit
Q4 deliveries - must be 70-75k most likely to be viewed as positive (who knows where the ramp is by Nov)
Q4 earnings - continuation of q3

3/19 conv bond maturity; see
Short Squeeze Strategy
Short Squeeze Strategy

add ons
TE margins increase and contribution to earnings
announcements or developments (gf3 financing)

macro events;
will trump get europe and china to come to some agreement?
what’s the timeframe for something like this?
does it get worse before it gets better?

part of me thinks with short interest so high and good news on the horizon that it will take lots of ammo to keep SP suppressed at 300 or below. that said, we’re in for a sh!tstorm of epic proportions coming up from the usual enemies.

1) i think 30% chance we have opportunites below 300 before October. the vacuum between now and good news combined with unfavorable mkt conditions may allow some downdraft. i’m not sure it goes deep into 2s without macro fallout, but it could spike down like it has earlier this year. obv the face of tesla now is different even then a few months ago. that’s why i think maybe 250 is out, but 275 spike is possible on FUD combined wit macro.

2) 40% chance we, for the most part, stay in the dreaded 305-330 range until then. to me, this is two forces pulling in opposite directions. good news anticipation with fud ambush. this is because of the setup to keep stk below 360 for bond conversion (again, see the links and time put in by neroden) - forcing tesla to pay 900mm cash. if they can keep us down here now, then they may be able to fend off 360 when (nov-jan) the good news is really flowing...Q4 deliveries and Q4 earnings outlook will be expected to piggy back off of the prior Q3 earnings and deliveries. they’ll have ~30 point cushion to battle off good news.

3) then i guess the remaining 30% would be 335-375 (a wider range because of the consequences of good news and volatility of fud)

of course, i’m hoping tesla overcomes some major challenges and starts blowing out M3s like hotcakes...even then - the above may be the same because of the consequences of such high short %. it won’t be an easy battle.

...please share opinions on this as well
whether the estimates or the stock swings or all - thanks!

(those only LT investors prob think it’s silly to fret over this, but i do ST and LT so that’s why i waste my time with this)

 

[Boomer19]

ok so we are in the dreadful under 330 range
what’s the play?

events - our expectations / timeline
5k sustain goal - week
6k ramp - end of july/mid august
Q2 earnings - not thrilling but mkt reacts weirdly sometimes
Q3 deliveries - anything less than 55k is prob bad (23-25k sx + ~30k 3s)
i expect over 60 with the holdovers from Q2 being delivered early July. 65+ would be nice.
Q3 earnings - cash flow + profit
Q4 deliveries - must be 70-75k most likely to be viewed as positive (who knows where the ramp is by Nov)
Q4 earnings - continuation of q3

3/19 conv bond maturity; see
Short Squeeze Strategy
Short Squeeze Strategy

add ons
TE margins increase and contribution to earnings
announcements or developments (gf3 financing)

macro events;
will trump get europe and china to come to some agreement?
what’s the timeframe for something like this?
does it get worse before it gets better?

part of me thinks with short interest so high and good news on the horizon that it will take lots of ammo to keep SP suppressed at 300 or below. that said, we’re in for a sh!tstorm of epic proportions coming up from the usual enemies.

1) i think 30% chance we have opportunites below 300 before October. the vacuum between now and good news combined with unfavorable mkt conditions may allow some downdraft. i’m not sure it goes deep into 2s without macro fallout, but it could spike down like it has earlier this year. obv the face of tesla now is different even then a few months ago. that’s why i think maybe 250 is out, but 275 spike is possible on FUD combined wit macro.

2) 40% chance we, for the most part, stay in the dreaded 305-330 range until then. to me, this is two forces pulling in opposite directions. good news anticipation with fud ambush. this is because of the setup to keep stk below 360 for bond conversion (again, see the links and time put in by neroden) - forcing tesla to pay 900mm cash. if they can keep us down here now, then they may be able to fend off 360 when (nov-jan) the good news is really flowing...Q4 deliveries and Q4 earnings outlook will be expected to piggy back off of the prior Q3 earnings and deliveries. they’ll have ~30 point cushion to battle off good news.

3) then i guess the remaining 30% would be 335-375 (a wider range because of the consequences of good news and volatility of fud)

of course, i’m hoping tesla overcomes some major challenges and starts blowing out M3s like hotcakes...even then - the above may be the same because of the consequences of such high short %. it won’t be an easy battle.

...please share opinions on this as well
whether the estimates or the stock swings or all - thanks!

(those only LT investors prob think it’s silly to fret over this, but i do ST and LT so that’s why i waste my time with this)

This is how much Tesla could move ahead of earnings next month

- “massive bull bear debate”
- “talk about until we’re blue in the face”
- “may not resolve itself until 2020/2021”

3rd point i don’t agree with as much.
the war won’t be resolved. each stage is a battle. battles will be resolved at every iteration of tesla’s evolution/incremental failure

 

[Johann Koeber]

In the light of today's news:

How about purchasing TSLA stock at 380 today and selling 420 Calls, say for Jan20 @37.

If the deal goes through at 420, you make 40$ on the stock; the 420 Calls will expire worthless, giving you another 37$. (Invest 380-37 =) 343, make 77 which is about 22%.

And the deal should be done in weeks or months (it won't take till Jan. 2020).

 

[The Blue Owl]

In the light of today's news:

How about purchasing TSLA stock at 380 today and selling 420 Calls, say for Jan20 @37.

If the deal goes through at 420, you make 40$ on the stock; the 420 Calls will expire worthless, giving you another 37$. (Invest 380-37 =) 343, make 77 which is about 22%.

And the deal should be done in weeks or months (it won't take till Jan. 2020).

Nobody will pay $37 for those calls. The more certain the market becomes that the deal goes through, the more the time value of long-dated contracts approaches zero.

Put another way, all value above $0 for such calls directly reflects the uncertainty of the market that the deal will happen.

 

[mongo]

In the light of today's news:

How about purchasing TSLA stock at 380 today and selling 420 Calls, say for Jan20 @37.

If the deal goes through at 420, you make 40$ on the stock; the 420 Calls will expire worthless, giving you another 37$. (Invest 380-37 =) 343, make 77 which is about 22%.

And the deal should be done in weeks or months (it won't take till Jan. 2020).

That assumes someone is willing to buy the known-worthless calls

 

[pz1975]

I think a decent strategy may be to buy a whole bunch of Jan20 OTM (above $420 but not too far above like maybe $450 max) calls once the value of those options approach 0.

It would cost very little with huge potential upside if one of the 3 scenarios happen:

1. The private sale does not go through and the stock remains public. Even though the SP would drop a lot, the time value of those options would go way up since there would actually be potential again for them to end up in the money.

2. There is a short squeeze and the SP jumps way up. I can’t imagine that if the SP is say $600 that a $450 LEAP remains close to zero. It would have to go up by something and thus you could sell for a big profit if that happens.

3. The ultimate private sale price ends up higher than $420. You will profit by the amount above the strike price you purchased that the sale happens at.

 

[Marsnaut]

Does anyone know if you can write covered calls if the stock is private/special purpose fund? The answer is likely no but would like validation. I'll miss my form of passive income for the past few years - I guess all good things do come to an end.

 

[Gifford 3]

I'll buy common stock instead of options for voting.

 

[neroden]

Does anyone know if you can write covered calls if the stock is private/special purpose fund? The answer is likely no but would like validation. I'll miss my form of passive income for the past few years - I guess all good things do come to an end.

Not normally. They don't do exchange listed options on unlisted stock. (If you're rich enough, and someone else wants to buy your stock, and Tesla agrees to let you transfer it in private transactions, you may be able strike a special deal with custom-written options with one of the big money-center banks, but that's way beyond me.)

 

[Oil4AsphaultOnly]

Are we at the Solar-City-20%-discount scenario again? The market seems to be pricing in a discount if the deal doesn't go through. If we load up on shares now, would we be guaranteed a return like how owning SCTY in Nov 2016 gave us a 20% gain when they converted to TSLA? Would using deep-in-the-money options be an effective way to leverage this?

 

[ggr]

Are we at the Solar-City-20%-discount scenario again? The market seems to be pricing in a discount if the deal doesn't go through. If we load up on shares now, would we be guaranteed a return like how owning SCTY in Nov 2016 gave us a 20% gain when they converted to TSLA? Would using deep-in-the-money options be an effective way to leverage this?

I believe so, yes. If you believe that the deal will go through, and believe in Tesla's future even if it doesn't go through, then options make a lot of sense. You do want to make sure that the effective price (strike + premium) doesn't exceed $420, though, or they might be a losing proposition, so for long term options or LEAPS that implies fairly deep ITM.

 

[MikeC]

Are you guys selling 2020 LEAPs above 420? Seems like it should be free money, but I’m a little worried about getting my shares called away if we do get a squeeze.

Can anyone clarify the final settlement price for the purpose of LEAPs right before it goes private (assuming it goes private at 420) - will it be 420 or will it be whatever the last share sold at (potentially 500+)?

 

[mongo]

Are you guys selling 2020 LEAPs above 420? Seems like it should be free money, but I’m a little worried about getting my shares called away if we do get a squeeze.

Can anyone clarify the final settlement price for the purpose of LEAPs right before it goes private (assuming it goes private at 420) - will it be 420 or will it be whatever the last share sold at (potentially 500+)?

If it goes above the strike it is callable, why are you concerned with the last trade?
Also, calls may be insurance for shorts against a squeeze.

 

[MikeC]

If it goes above the strike it is callable, why are you concerned with the last trade?
Also, calls may be insurance for shorts against a squeeze.

I suppose because I’ve never actually had any of my sold calls exercised early, but this is a unique situation so definitely something to think about.

It’s quite interesting to see OTM LEAPs hardly lose any value on a day that TSLA dropped 5%.

 

[pz1975]

I’d be afraid of selling LEAP calls near $420 in case there is a short squeeze (although I doubt this personally) or the eventual buy-out price is higher.

I have instead sold some LEAP $400 and $420 puts since if this event goes through, the $420 price is a floor but not a ceiling.

 

[mongo]

I suppose because I’ve never actually had any of my sold calls exercised early, but this is a unique situation so definitely something to think about.

It’s quite interesting to see OTM LEAPs hardly lose any value on a day that TSLA dropped 5%.

Didn't the OTMs tank earlier this week?

I’d be afraid of selling LEAP calls near $420 in case there is a short squeeze (although I doubt this personally) or the eventual buy-out price is higher.

I have instead sold some LEAP $400 and $420 puts since if this event goes through, the $420 price is a floor but not a ceiling.

Same sort of issue though, if the price drops before then, they could be executed. Unless you don't mind buying more shares at a discount, then more power to ya!