I am thinking ahead to various scenarios and trying to have a plan in place in the event this short squeeze accelerates. I believe Warren Buffett’s advice of being greedy when others are fearful (e.g. TSLA = $179 / share) and fearful when others are greedy (e.g. EVERYONE is talking about TSLA millionaires and what crazy returns you get, and it’s a cant lose... ) is very wise.
1) My history:
What I’ve done to this point is to increase leverage as the stock price decreases and reduce it as share price increases. I’ve done this through use of margin and pure shares.
E.g. I was at 125% pure Tesla shares when the stock 1st broached $340.00.
I couldn’t believe when it dropped to $245 and increased leverage to nearly 200%. This was successful, yet criminally stupid because for my situation, goals, security, it was FAR TOO RISKY.
Since then I’ve still increased leverage during drops and increased it on rises but with ever safer amounts of leverage, and I am now 80% TSLA and the rest non-TSLA stocks. I arrived at this because if Tesla retreats, I will probably rebuy the shares at lower prices than I sold on the way up and just periodically rebalance between Tesla and non-Tesla. So it’s a simple plan and gives me psychological comfort, nice safety buffer, relatively good growth...
It will be very tough if the big fund managers decide again Tesla is really only worth $380 per share, shorts get gleeful again as the stock starts falling and jump back in, and keep driving the share price lower..., but I will be ok with it, because I will be in better shape than I was when it was last at $380 per share, or $180 per share. It hurts like hell to only get 80% or so of the gains I would otherwise if I just held pure shares, but I need that peace of mind should Tesla drop from here.
Through this forum I have learned about options and I’ve just added some catastrophic insurance puts (e.g. Model 3 batteries all have a fundamental flaw that only shows up after 5 years, and are immensely dangerous...). And I’ve added some call options (wish I had understood them far better when TSLA was $180 per share)
2) My Steps from here:
I am totally fine with my current plan, EXCEPT in the case of a violent short squeeze and retraction. E.g. stock rises to $1500 per share (Tesla stock rise fuels a bunch of buying by people who only have heard about the stock and want to board the gravy train), and then drops back to $400 after shorts rocket fuel runs out (short interest < 5%), and big funds sell.
I am considering actually decreasing my leverage even further as the share price rises (e.g. 70% then 60% shares, then maybe even lower...). I am also considering de-leveraging through options.
3) EVERYONE Should Have a Plan
I would love to hear other’s plans, thoughts, advice... I’m really writing this post today because the rapid price rise yesterday and @ReflexFunds excellent dissertation on the positive feedback loop that may provide even more rocket fuel on top of short covering, made me wonder if we could see an acceleration of the squeeze and what I should do.
I am normally loathe to give hard and fast advice, but I feel the advice above is pretty safe to give,
Geaux TSLA!
1) My history:
What I’ve done to this point is to increase leverage as the stock price decreases and reduce it as share price increases. I’ve done this through use of margin and pure shares.
E.g. I was at 125% pure Tesla shares when the stock 1st broached $340.00.
I couldn’t believe when it dropped to $245 and increased leverage to nearly 200%. This was successful, yet criminally stupid because for my situation, goals, security, it was FAR TOO RISKY.
Since then I’ve still increased leverage during drops and increased it on rises but with ever safer amounts of leverage, and I am now 80% TSLA and the rest non-TSLA stocks. I arrived at this because if Tesla retreats, I will probably rebuy the shares at lower prices than I sold on the way up and just periodically rebalance between Tesla and non-Tesla. So it’s a simple plan and gives me psychological comfort, nice safety buffer, relatively good growth...
It will be very tough if the big fund managers decide again Tesla is really only worth $380 per share, shorts get gleeful again as the stock starts falling and jump back in, and keep driving the share price lower..., but I will be ok with it, because I will be in better shape than I was when it was last at $380 per share, or $180 per share. It hurts like hell to only get 80% or so of the gains I would otherwise if I just held pure shares, but I need that peace of mind should Tesla drop from here.
Through this forum I have learned about options and I’ve just added some catastrophic insurance puts (e.g. Model 3 batteries all have a fundamental flaw that only shows up after 5 years, and are immensely dangerous...). And I’ve added some call options (wish I had understood them far better when TSLA was $180 per share)
2) My Steps from here:
I am totally fine with my current plan, EXCEPT in the case of a violent short squeeze and retraction. E.g. stock rises to $1500 per share (Tesla stock rise fuels a bunch of buying by people who only have heard about the stock and want to board the gravy train), and then drops back to $400 after shorts rocket fuel runs out (short interest < 5%), and big funds sell.
I am considering actually decreasing my leverage even further as the share price rises (e.g. 70% then 60% shares, then maybe even lower...). I am also considering de-leveraging through options.
3) EVERYONE Should Have a Plan
- Think ahead for negative as well as positive scenarios. Mentally test it with extremes like jumps to $10k per share or $0.00 / share, as well as more reasonable cases.
- This plan should NOT include past net worth, previous share prices paid (except for tax consequences) any history whatsoever. However you arrived at your current allocation, net worth, number of shares is completely irrelevant. The only thing that matters is your present state.
- Don’t base your judgment for TSLA being over-valued vs. undervalued on the share price (except for trying to think through market psychology). What matters is company valuation. E.g. Tesla’s real current value is the sum of all future earnings discounted to the present. What is that highest point, lowest point, likeliest outcome. At what market valuation today would you consider Tesla fairly valued? If you’re okay with the psychology of the share price dropping dramatically for several years, then you should hold TSLA until it reaches your fair discounted value and sell when it’s above it and you have another investment opportunity that you determine is undervalued.
- Think through what a rapid overvaluation might look like. I remember a post by @StealthP3D where he referenced everyone and their neighbor talking about some “It stock”.
- If you are in a situation where you need a very safe haven (non-Tesla, cash, bonds, TSLA puts, assets (like a Model S and don’t have one, think about building it now, or to start building it as the stack rises. Think of it like a storm shelter.
I would love to hear other’s plans, thoughts, advice... I’m really writing this post today because the rapid price rise yesterday and @ReflexFunds excellent dissertation on the positive feedback loop that may provide even more rocket fuel on top of short covering, made me wonder if we could see an acceleration of the squeeze and what I should do.
I am normally loathe to give hard and fast advice, but I feel the advice above is pretty safe to give,
Geaux TSLA!