InTheShadows
Active Member
I have J16 250's and 400's. I'm thinking about selling half of the 250's when they are in the money again and moving them to 500's, or whatever the highest is at that time.
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Advanced TSLA Options Trading
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yep- could see that play. Also consider, doing it in 2 steps.
Roll the (half)250s to 450s, then assuming TSLA moves to $400 well before expiration, move those $400s to $500
If you are a little less bullish 2015 TSLA, you might also
move the $250s to $350s, maintaining the $400s for the upper leg, then leapfrog $350s to $450-$500 if it gets there soon enough.
Any of those scenarios seem a reasonable play to me, matched against how bullish you are.
Sometimes the net result of 2-3 rolls yields a better overall return than 1 move- On the other hand if holding for CapGains Tax is important, your high strike hold might be better for holding 1 year before roll. I don't play against a tax consideration personally.
Mario Kadastik
Active Member
Seems I'm already partially in this play though not fully 
I have a bunch of 2015 $300 and $400 and some 2016 $320's. I guess I should add 2016 400+ options to effectively make it a similar play to what you describe kenliles.
I have a bunch of 2015 $300 and $400 and some 2016 $320's. I guess I should add 2016 400+ options to effectively make it a similar play to what you describe kenliles.Seems I'm already partially in this play though not fully
yep- that would do it Mario-
I've noticed you and I tend to make similar trade (or at least strategic level) decisions, so not surprised to see you're in s similar position already.
I'm currently in the middle of rolling- moving remainder of J15 $250s
to $350s (already holding the $300 for lower leg);
and to J16 $400 ($300s are already in place there, to be moved to $350 if we hit $300 later or LEAP-frog(sorry) to $450 if get to $300 more quickly;
not adverse to carrying a little J16 $500 too if we get a dip on Ukraine
I think we will likely range trade for a while
Also, not forgetting J17 will come available Nov- so will be adding those from the lower leg of the J16s; so want to be a little heavy on the J16 lower leg going into that- and also keeping that leg a little lower strike than normal for that reason.
It's the latter. Although I've had several requests for reference books. I don't really know of any. A few articles I ran across from time to time; Also, see some related posts in the Alternative Energy thread that further delineate what companies qualify well for this method;
Currently, I use it for TSLA of course, as well as small group(definitely not all) of Solars (SCTY, SPWR, CSIQ)- the Solars are just coming into the qualification criteria as they emerge from the huge filtering time. Those that qualify are emerging winners that should grow for years to come
Jonathan Hewitt
Active Member
I'm buying a new house and plan on using the equity in my current house for the downpayment on the next (moving for a new job). It's quite possible that I don't have the house sold in time to close on my next house. I'm looking at a close date for the new house in early/middle August. I am thinking of selling my TSLA stock and buying Jan 16 LEAPS to replace the stock so I don't miss on any upward movement of the stock while I wait for my house to sell.
Once my house sells I could then sell the options and rebuy the stock or put the cash in a "high yield savings account" until I reach long term capital gains on the options and then switch it back or I could pay cash for a relatively large solar system.
The biggest negative I see with this plan is I bought in at $34 a share so I would have to pay significant taxes on these gains. (I'm not complaining about having this problem!) I could try to offset this with installing a solar system on my new house (I offset my gains last year with buying a Model S ) Second biggest negative would be the risk of losing all money if the stock ends below the strike price in Jan 16 but I could offset this risk by rolling forward my options to Jan 17 once available at a loss.
I looked at buying options at a strike price of $100, $150, $175, $200, $250, or $300 and different mixes of them. $100s do a great job of being a 1:1 stock replacement due to being so DITM. My favorite for this strategy is probably $175s or a mix of $150s, $175s, and $200s because these options are DITM enough that I'm not paying a lot for time value but if I buy the same cash value as the $100s I would get a greater return if the stock goes up.
Anyone have any advice?
Once my house sells I could then sell the options and rebuy the stock or put the cash in a "high yield savings account" until I reach long term capital gains on the options and then switch it back or I could pay cash for a relatively large solar system.
The biggest negative I see with this plan is I bought in at $34 a share so I would have to pay significant taxes on these gains. (I'm not complaining about having this problem!) I could try to offset this with installing a solar system on my new house (I offset my gains last year with buying a Model S
) Second biggest negative would be the risk of losing all money if the stock ends below the strike price in Jan 16 but I could offset this risk by rolling forward my options to Jan 17 once available at a loss.I looked at buying options at a strike price of $100, $150, $175, $200, $250, or $300 and different mixes of them. $100s do a great job of being a 1:1 stock replacement due to being so DITM. My favorite for this strategy is probably $175s or a mix of $150s, $175s, and $200s because these options are DITM enough that I'm not paying a lot for time value but if I buy the same cash value as the $100s I would get a greater return if the stock goes up.
Anyone have any advice?
Have you considered taking out margin if needed instead of selling your stock?
Jonathan Hewitt
Active Member
Don't you have to have cash in your account to pull it out? Or do I call my broker and ask to take money out on margin?
You don't need cash in your account to pull. You can call your broker and they can usually wire money to your bank account same day or next day.
For example, let's say you have 1000 TSLA shares in your account with no cash. With TSLA at $200, you can probably pull $100k cash on margin (depending on your broker's margin requirements).
Jonathan Hewitt
Active Member
The Blue Owl
Endangerous Herbivore
I would also consider the risks. If TSLA has a significant drop before you have a chance to repay the cash, you could get hit with a margin call, which would probably ruin your day. You'll have to decide how likely this scenario is, and how comfortable you are with the risk.
I know I wouldn't do it, but you know best what works for you. Just thought I'd throw this out there.
Make sure you ask your brokerage about TSLA margin maintenance requirements and do some research on how often your brokerage changes those requirements. Sometimes when a stock drops significantly a brokerage might raise the margin requirement. I think IB did this with TSLA when it dropped from 194 to 120 (I'm not sure the details but somebody with IB could probably share more). But most brokerages I've seen have a 50% margin requirement with TSLA and kept it the same during the 194 to 120 drop. Btw, what brokerage do you have?
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Yep a margin call is a definite risk if there's a significant drop. But overall, taking out margin could be a better move (vs liquidating stock and paying taxes), since if there is a significant drop you could liquidate your stock at that time and then buy Jan16 LEAPs which would be had a discount (vs now).
The Blue Owl
Endangerous Herbivore
True. You'd have to work the numbers, though, for such a scenario to see how many LEAPs you can get after liquidation and paying down the margin (I would certainly not go all LEAPs while being on margin.) This calculator over at optionsprofitcalculator.com is helpful for such what-if scenarios (I've posted it before.)
It's not very likely to happen, but it's better to think it through beforehand.
Jonathan Hewitt
Active Member
I'm using USAA right now. I've been strongly considering switching, though. They are supposed to be changing their services to a Fidelity based service sometime this summer. TSLA is not on their list of volitile securities and I don't think they ever put it there, even during the drop. Most of the solars are, though. https://www.usaa.com/inet/pages/inv_margin_securities
Another option that hasn't been mentioned is I could convert some of my stock to options so not as much cash is borrowed on margin. This could be a good mix of the two options discussed.
Agreed. When I take out margin I map out various scenarios including if the stock drops to under $100. One of the key variables is if the brokerage changes margin maintenance requirements for TSLA during a big drop, and that's tough to plan for but something to include in scenarios as well.
I also usually have different approaches for holding margin short-term vs long-term.
Jonathan Hewitt
Active Member
I agree. My wife and I were planning on doing that initially as we are going to build a house. We were initially under the impression it would take 5 months to build, which would have been plenty of time to sell our current house for our market. The problem is that when we showed up to sign all the paperwork we were told 75-90 days is the current build time...We could've still have backed out at that point but papers were in front of us, pens in hand, and we were pleasantly surprised about how quick they would build the house as our first thought was less time in temporary housing. It wasn't until we were walking out that I got the "oh shoot" feeling that we might not have our current house sold by then...So yeah, great advice but too late.
Back on March 25th the stock was about $220 and I bought a bunch of Jan 2015 LEAPS. Today, the stock is $25 higher and those Jan 2015 options are worth barely 50% of their original value. LEAPS as stock replacement and rolling them seemed like a sound strategy, but I guess it would have to have been 2016 LEAPS to have any shot at working?
On the bright side we kept them when they were down as much as 75%.........I am going to ride mine a bit more. The 300s are the only ones underwater for me now, so if we can keep the momentum going we could get closer to breaking even on those. :wink:
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