Great minds, I need some advice. We're buying our dream house and I need a bit of cash for downpayment since we'll be carrying 2 mortgages for a while. I am running BPS weekly, but that wont generate enough to cover the amount we need by closing. Other possible options are to sell some CC for way off in future (Jan 2024 1600) against ALL my shares and then buy it back when we inevitably dip or just take a cash margin loan out from my account. For instance, I could easily cover what I need for the down payment now (with BPS active) w/ a margin loan. Im leaning towards the latter since I will be able to repay that in full via several means in < 6 months and also still sell options. This is a taxable account and I prefer to not sell shares since
This wouldn't be possible if I hadn't invested in Tesla, and listened to the collective TMC great minds...so thank you all so much for all your advice! It is truly amazing to think we are in the position we are because of this company and this forum.
I may be able to offer an idea here. It looks like taking the margin loan is the most straightforward approach, and coupled with how much margin you are utilizing for the BPS, if you think you have enough of a cushion just go for it. If you are writing BPS from the margin generated by your tesla holdings, you may want to play with a margin gaming tool your broker provides
An alternate idea I have been exploring to hedge downside risk, with reasonable costs for a short period, is what is called a pay later put hedge (PLP). This typically involves going far out in time and getting into a net zero credit 2x1 ratio put spreads. As an example you could do something like 2023 June +600 vs -800 in a 2 : 1 ratio. At expiry, if the stock price is above, 800, you end up paying nothing. and your downside breakeven is a little bit under 500, but the point is to never hold these to expiry.
The Pros:
1. Initially costless, and generates margin on a portfolio of long stock. especially if your broker gives you only 40% margin
2. Protects you from a downside move initially in multiple ways
a) Because you are long vol and
b) you are long skew
c) you are short deltas
3. Has much smaller negative theta than outright put purchases
The Cons:
1. spreads that far out have relatively less liquidity.
2. You are long volatility and skew. So a drop in IV from here here will be a bad guy
a) remember your continued earnings from deep OTM BPS are dependent on vol and skew staying high. you're doubly exposed with this.
3. A muddle around 800 is bad for this position
Its is hard to offer solid advice given the risk appetites of folks, but if you want to hedge your position for a short time due to an upcoming liquidity event, you could do much worse than above.