What other tech stock to consider?

[ckessel]

That means I could face a margin call if CCIV goes bonkers while I'm unable to exercise the warrants. So, beware on that, leave yourself room for margin expansion on the CCIV covered calls.

As something of a followup on that, buying a warrant ties up the $30/share for that purchase, then nearly double that in margin "buying power" for the sold call. So, I'm tying up about $85/share in buying power to make between $-7 and $+41/share in Jan 2022. So, it's not exactly free money, that buying power is something I'd normally use to sell strangles and such.

Still an amazing opportunity, just noting that it's not without opportunity cost.

 

[juanmedina]

I found the document - revised recently it looks like. It says later of August 3, 2021 or 30 days after merger completion. When I first researched this it implied Sept 30, 2021 (it said 1 year after offering which I found to be Sept 30, 2020 but it must have meant 1 year after announcement or filing or something). Anyways, that does make the Aug 20 calls more attractive if the merger is done by July 20.

https://fintel.io/doc/sec-churchill-capital-corp-iv-sc-13g-2021-february-16-18674-661
Page 6, 2nd paragraph

so which calls you ended up selling?

 

[pz1975]

so which calls you ended up selling?

Haven’t done anything yet today - I’m at work and don’t have time to call my broker to buy the warrants (I can’t buy them directly). I’m in no rush to do another round of this so I may wait and watch the numbers to try and optimize the trade. Ideally I want it when the sold call premium is as close to the warrant price as possible. If they are equal, the risk of loss (ignoring margin use) approaches zero.

I will still likely do the Jan22 calls as I like the extra time in case a merger is delayed or something.

 

[ckessel]

I will still likely do the Jan22 calls as I like the extra time in case a merger is delayed or something.

It probably doesn't matter too much what call you sell as you can always roll them to a later/earlier date.

 

[c041v]

Looks like my Naked Call order keeps getting rejected... on the phone with Broker.

 

[ZeApelido]

Do we seriously think Lucid can sustain a valuation over 60 billion right now? Could it go to 100 billion? That seems crazy.

 

[bkp_duke]

Do we seriously think Lucid can sustain a valuation over 60 billion right now? Could it go to 100 billion? That seems crazy.

By logic, yes it does. But Nikola had/has an absolutely absurd valuation for a long long time. I would argue that NIO is currently massively overvalued as well, but that same argument would likely apply to TSLA as well (to a degree).

 

[chronoreverse]

Do we seriously think Lucid can sustain a valuation over 60 billion right now? Could it go to 100 billion? That seems crazy.

Sustain? No idea, hit that value out of exuberance? Absolutely.

 

[pz1975]

Do we seriously think Lucid can sustain a valuation over 60 billion right now? Could it go to 100 billion? That seems crazy.

Rivian is planning to IPO at $50 billion or more this year and will likely jump above that after starting to trade as most "hot" IPOs recently have done. I would argue Lucid should be valued in the same ballpark as them if not more.

Amazon-Backed EV-Maker Rivian Aims for IPO This Year

 

[dakh]

Lynas Rare Earths jumped up almost 12% today seemingly on no news. Glad it did but am I missing anything?

Oh and for the somewhat off-topic conversation on dividend stocks, consider STWD. Rock star manager and they've been paying around 10% for a while now. I follow a few folks who do a lot of due diligence on it, it of course was a much better buy at $10 but even at current prices looks like a pretty reasonable long-term buy.

 

[bkp_duke]

Haven’t done anything yet today - I’m at work and don’t have time to call my broker to buy the warrants (I can’t buy them directly). I’m in no rush to do another round of this so I may wait and watch the numbers to try and optimize the trade. Ideally I want it when the sold call premium is as close to the warrant price as possible. If they are equal, the risk of loss (ignoring margin use) approaches zero.

I will still likely do the Jan22 calls as I like the extra time in case a merger is delayed or something.

I have to straight up admit, I stared at this trade all day long and re-ran the numbers at least a dozen times. I was still too chicken $&!T to try it. Probably missed the better of opportunities . . .

 

[ZeApelido]

I have to straight up admit, I stared at this trade all day long and re-ran the numbers at least a dozen times. I was still too chicken $&!T to try it. Probably missed the better of opportunities . . .

Imagine with all that lost time you could have gotten your pickaxe and been mining crypto...

 

[pz1975]

I have to straight up admit, I stared at this trade all day long and re-ran the numbers at least a dozen times. I was still too chicken $&!T to try it. Probably missed the better of opportunities . . .

I don't think it's as complicated as you think it is.

 

[chronoreverse]

I have to straight up admit, I stared at this trade all day long and re-ran the numbers at least a dozen times. I was still too chicken $&!T to try it. Probably missed the better of opportunities . . .

I tell myself that I didn't jump into it because I don't have the ability to deal with options in my account but the reality is I could open one that could within a couple days and I'm too chicken to jump into this because it seems too good to be true.

 

[juanmedina]

I have to straight up admit, I stared at this trade all day long and re-ran the numbers at least a dozen times. I was still too chicken $&!T to try it. Probably missed the better of opportunities . . .

I don't think it's as complicated as you think it is.

I felt the same way specially the naked call part of it and something happening with the warrants. Anyway I did entered the position but it is relatively small with January $60 calls.

 

[pz1975]

I don't mind being the guinea pig since it was my idea to begin with! I'll keep you all updated. I am in for 20,000 warrants and 200 sold calls so far. I may add more in the future but am watching to see if the spread between warrant price and sold calls premium closes. Ideally I want to try and do this with close to zero potential loss like my current position is (~$0.60 maximum potential loss per share).

 

[Cosmacelf]

I have to straight up admit, I stared at this trade all day long and re-ran the numbers at least a dozen times. I was still too chicken $&!T to try it. Probably missed the better of opportunities . . .

I noticed that in your calculations, you were going to bet with serious money. Maybe just enter into the trade with a lot less money just to see how this one works through SPAC acquisition (or early exit if you double your money or something) and see how it turns out in reality. If it works, there will be plenty of other SPAC opportunities going forward. It isn’t for me since I’m too busy these days helping out a local private company I’m on the board of. And I invest long term anyways, not do stuff like this which requires constant attention to the markets and rumors.

 

[bkp_duke]

I don't mind being the guinea pig since it was my idea to begin with! I'll keep you all updated. I am in for 20,000 warrants and 200 sold calls so far. I may add more in the future but am watching to see if the spread between warrant price and sold calls premium closes. Ideally I want to try and do this with close to zero potential loss like my current position is (~$0.60 maximum potential loss per share).

Thank you for verbalizing this. In hindsight, at least to a degree, this kept me from jumping in. Something about the numbers didn't feel "as good as it should be". I know that's too much "feeling" for what should be a hard numbers play, but something like this trade would be my first foray into this, and I want to think it through and do it "right".

I've also been distracted by an absolute ton of options expiring on Friday in various positions, TSLA, etc. One of them surprised me today (MSFT) because it was called away early, so I've been doing a "post-mortem" analysis on if I missed something important that I should have. First world problem, I made money on the trade, but had planned on rolling it up further tomorrow or Friday.

 

[ckessel]

I have to straight up admit, I stared at this trade all day long and re-ran the numbers at least a dozen times. I was still too chicken $&!T to try it. Probably missed the better of opportunities . . .

That was me yesterday as I tried to figure out how it couldn't be as good as it looked .

I put about 15% of my portfolio into it this morning at a net ~$8 difference between the warrant cost and the sold Jan 200 $60 strike. So my risk is $8/share. My potential profit is $10/share on the warrant/stock gap + $23/share on sold call time decay (plus any rise in stock between now and $60, a whole $4 potential at this moment).

The drawback is the forced wait. If I could buy a warrant, immediately exercise it, and sell the stock for $10 profit, I'd cycle that as madly as I could click on the orders! Or, if the warrant/stock gap closed tomorrow, I'd sell everything and exit the position for a $10/share gain. That Jan 2022 covered call is just to de-risk the position while waiting for that warrant/stock gap to close. As a bonus, the time value of that covered call melts away while I wait. The IV is high, so that time value decay is pretty good, but I entered the position for the warrant/stock gap.

I'll note that the warrant/stock gap seems about the same right now as before, but the covered call prices aren't as good as they were this morning. This morning I bought the warrant for $31 and sold the Jan 200 60 strike $23. Right now, they're at a $12 difference ($35 and $23). The combo still works, but it has a bit more risk or you'd have to sell a lower strike for less potential time decay profit as you wait.

And, as noted earlier, you tie up a lot of margin on that covered call which means it's not being used elsewhere.

 

[bz51]

Thank you for verbalizing this. In hindsight, at least to a degree, this kept me from jumping in. Something about the numbers didn't feel "as good as it should be". I know that's too much "feeling" for what should be a hard numbers play, but something like this trade would be my first foray into this, and I want to think it through and do it "right".

I've also been distracted by an absolute ton of options expiring on Friday in various positions, TSLA, etc. One of them surprised me today (MSFT) because it was called away early, so I've been doing a "post-mortem" analysis on if I missed something important that I should have. First world problem, I made money on the trade, but had planned on rolling it up further tomorrow or Friday.

MSFT went ex-dividend today. If the dividend is greater than the remaining time value of the call, then the owner of the call may choose to exercise early in order to obtain the dividend. This is referred to as "dividend poaching" and is not uncommon in situations involving blue--chip stocks that pay a healthy dividend. One of the benefits of selling calls against TSLA shares is that you don't have to worry about this, but on stocks that do pay a dividend, that ex-dividend date may be important.