Social Chat - Short Term TSLA Movements

[kenliles]

Yes, rolling forward is definitely better when the underlying stock price is high.

Calculations (again using a roll from Jan15 300 to Jan16 300; keeping IV constant at 42):

If stock price is 200 today, the value of a Jan15 300 is $4.10 and Jan16 300 is $16.04. Thus, one could roll forward 1 Jan15 300 into 26% of a Jan16 300 call.

If stock price is 250 today, the value of a Jan15 300 is $16.20 and Jan16 300 is $35.42. Thus, one could roll forward 1 Jan15 300 into 46% of a Jan16 300 call.

If stock price is 300 today, the value of a Jan15 300 is $38.53 and Jan16 300 is $60.52. Thus one could roll forward 1 Jan15 300 into 64% of a Jan16 300 call.

This makes me realize that when buying LEAPS it is probably better to not go too far OTM. Even though the potential gain is somewhat limited (although still way better than common stock), the net capital would be preserved much more if the stock ends up down or neutral over the year.

These calculations have helped me a lot. I think I will roll forward to slightly lower strike prices going forward than what I have been doing, probably mostly 10-20% OTM with maybe only a small amount to higher OTM strikes.

yes- exactly and that's not including the anticipated movement difference if realized; regarding your OTM strike preference- it's true for a slower growth you'r net capital preserved goes up (some people I know actually prefer ITM or DITM for that reason); but keep in mind the ROI is also higher for a correctly established OTM strike (less capital for same or more gain). That's the reason I established (after years of hard lessons) and 2 strike program for each leg; One closer in that tracks the underlying better and produces less risk and the upper leg that captures high ROI gains if the stock really moves fast compared to expectations. Sometime I'll even do a 3 strike position, but normally 2 for each leg works well. This will change over time of course- TSLA in the 'early days' could move 100% in a matter of days - now that's not in the cards- so adjust the strikes accordingly to be less OTM over the life of the growth. For example, I'm currently finishing a decade long play in Apple with the same program- this will be the last year as I'll close out my final leg (J15 $100s notice close to the money on those) later this year and simply move to a strong stock position- anticipating growth to be steady and sure but not for the LEAPS-stock program. By the way the returns on that over those years far far exceeds a stock buy and hold, even including some massive downturns; I expect the same for TSLA;

I have a ton of stuff to catch up on, so I'll close for now with this for TSLA- those that stayed with it through this fairly extreme downturn will be glad of it. And for those ready to roll; now is a decent time, but if I still held the option currently, I'd be targeting the upcoming ER run-up as perhaps a better roll or at least phased to include some of the J15 position for roll at that time- splitting the roll is also a good option; Either way, though do not wait beyond the results of the ER- at a gain or a loss, roll at that time or before latest - is my advice; for what it's worth
best to all...!

 

[ckessel]

In other words, the overall loss of Jan15 value from now to mid-August is LESS THAN the loss of value of the Jan16 300 call that we would theoretically roll forward to.

Just for completeness, it's less as a absolute number, but much more as a percentage. I suspect most people are like myself and would be rolling forward a dollar amount rather than a share quantity.

More concretely, I'll be rolling my 100 Jan15 $300 strike contracts into however many Jan16 $300 strike contracts I can get for the same total $ amount. If I wait until August to roll, my 100 Jan15 contracts will lose ~20% of their value vs losing only 11% if I rolled into J16s right now.

 

[pz1975]

Just for completeness, it's less as a absolute number, but much more as a percentage. I suspect most people are like myself and would be rolling forward a dollar amount rather than a share quantity.

Yes - good point and very important. Thanks for seeing that! I forgot to include that in my calculations for that part.

So that shows that rolling a Jan15 now would buy you a greater % of a Jan16 LEAP than waiting until August...so again, it tips the scales towards rolling now(ish) being a better idea than waiting. But again, all of these are small amounts compared to if the stock price and/or IV moves in the meantime, with stock price having the most effect by far of course.

 

[Auzie]

Just for completeness, it's less as a absolute number, but much more as a percentage. I suspect most people are like myself and would be rolling forward a dollar amount rather than a share quantity.

More concretely, I'll be rolling my 100 Jan15 $300 strike contracts into however many Jan16 $300 strike contracts I can get for the same total $ amount. If I wait until August to roll, my 100 Jan15 contracts will lose ~20% of their value vs losing only 11% if I rolled into J16s right now.

I hold different strikes of J15 in blocks of 10, so I plan to roll the blocks.

Regarding different strikes, one is DITM, the rest are OTM.

I was considering rolling DITM now and the rest later, or perhaps splitting the roll as Ken suggested.

Any opinions or insights on DITM vs OTM leap rolls are appreciated.

And for those ready to roll; now is a decent time, but if I still held the option currently, I'd be targeting the upcoming ER run-up as perhaps a better roll or at least phased to include some of the J15 position for roll at that time- splitting the roll is also a good option; Either way, though do not wait beyond the results of the ER- at a gain or a loss, roll at that time or before latest - is my advice; for what it's worth
best to all...!

 

[Auzie]

The IV 'may' go up of course but that is an unknown. In essence, all things being equal, unless you feel the stock price and/or the IV will go up between now and August, it is better to roll the Jan15 calls forward now-ish (in the next month or so) to avoid loss from time decay.

IV is likely to go up before er and to drop after er.

IV measures options mis pricing in the market. IV is a measure that captures projected volatility, a value that depends on how expensive options are in the marketplace.

Theoretical option price is calculated using historical volatility (BS model). Market option price is set by market forces. This difference between the two prices (theoretical and market option price) is used to calculate IV. Thus IV tells us if options are over sold or over bought.

 

[kenliles]

Yes - good point and very important. Thanks for seeing that! I forgot to include that in my calculations for that part.

So that shows that rolling a Jan15 now would buy you a greater % of a Jan16 LEAP than waiting until August...so again, it tips the scales towards rolling now(ish) being a better idea than waiting. But again, all of these are small amounts compared to if the stock price and/or IV moves in the meantime, with stock price having the most effect by far of course.

Just for completeness, it's less as a absolute number, but much more as a percentage. I suspect most people are like myself and would be rolling forward a dollar amount rather than a share quantity.

More concretely, I'll be rolling my 100 Jan15 $300 strike contracts into however many Jan16 $300 strike contracts I can get for the same total $ amount. If I wait until August to roll, my 100 Jan15 contracts will lose ~20% of their value vs losing only 11% if I rolled into J16s right now.

quick comment on this point-
that's true; but I think you're just projecting that you believe TSLA is currently at it's proximate high- If that's true, then yes, roll now.
Consider, when you roll out in equal dollars your leverage position is reduced (to a more defensive position) significantly. Currently for example (at $300 strike), J15 you'll track TSLA at 2.7shares/$100 invested - J16 only 1.5shares/$100 invested- almost half the gains or losses for corresponding moves in TSLA. That's good if TSLA moves down, bad if TSLA moves up. You're thought is implying a belief TSLA is not moving higher into ER or certainly not worth the risk even if time value and IV are a wash. This is why holding both legs (split between J15 and J16) produces a blend of tracking- one more defensive, the other to capture gains. If you're currently holding all J15s, consider a roll of half now and half at ER. But if the thought really is that TSLA has peaked here, then rolling it all now is a good move. That's the move I made earlier on the crash around $230-$240 calculating a major retreat that wouldn't recover in time for a better roll. Looks like I was wrong by a few weeks, so I've been at a lower tracking per $ invested. Been nice going down, not so nice going up!

 

[pz1975]

Completely agree with you. My calculations were all done removing all other variables. They were done purely to analyze when to roll forward based on time decay and relative IV changes alone. Turns out there isn't much difference overall with a smallish advantage to doing it sooner.

If one thinks that TSLA will go up (or global IV will go up with stock price the same) then wait and roll at a higher stock price. If one thinks it will be flat or go down, then do it now.

The other option is the delayed version like you said where one could sell the Jan15's now and buy the Jan16's later. If stock price is flat or down then one would come out ahead rolling like that. If stock price goes up, then one would end up behind.

 

[ckessel]

that's true; but I think you're just projecting that you believe TSLA is currently at it's proximate high- If that's true, then yes, roll now.

Uh, no. I was just noting that pz1975's calculations about absolute losses in option value made the most sense only if talking about equal quantities of options. While I suspect most folks are probably dealing with a set amount of dollars where that's going to give a different quantity of J15 vs J16 options.

I wasn't stating any belief about where the stock is headed.

 

[kenliles]

Uh, no. I was just noting that pz1975's calculations about absolute losses in option value made the most sense only if talking about equal quantities of options. While I suspect most folks are probably dealing with a set amount of dollars where that's going to give a different quantity of J15 vs J16 options.

I wasn't stating any belief about where the stock is headed.

gotcha- my mistake

 

[anticitizen13.7]

I don't know if I missed this in another thread, but does anyone know when the Tesla Factory gets its new lines installed? I remember something about a temporary shutdown so that new equipment could be set up.

Anyone spy on the Fremont facility? I am curious to hear if anyone has seen unusual delivery of new stuff (maybe robots and other machines) for Model X production.

 

[vgrinshpun]

I don't know if I missed this in another thread, but does anyone know when the Tesla Factory gets its new lines installed? I remember something about a temporary shutdown so that new equipment could be set up.

Anyone spy on the Fremont facility? I am curious to hear if anyone has seen unusual delivery of new stuff (maybe robots and other machines) for Model X production.

During the Q1 ER Elon said that Fremont factroy will be shut down for first 10 days in July for final tooling of the new production line (it was not clear whether it is calendar or business days - my conjecture that he was talking about calendar days). It is my understanding that Model S production will be transferred to the new line, while modifications are done to the original final assembly line, to bring it up to the same capacity as the new line.

 

[AlMc]

I don't know if I missed this in another thread, but does anyone know when the Tesla Factory gets its new lines installed? I remember something about a temporary shutdown so that new equipment could be set up.

Anyone spy on the Fremont facility? I am curious to hear if anyone has seen unusual delivery of new stuff (maybe robots and other machines) for Model X production.

Also realize that this may not negatively affect production that much compared to last July even with the plant 'closed'. This will correspond with the week they take off each quarter to do maintenance/give the staff a break.

 

[Chickenlittle]

During the Q1 ER Elon said that Fremont factroy will be shut down for first 10 days in July for final tooling of the new production line (it was not clear whether it is calendar or business days - my conjecture that he was talking about calendar days). It is my understanding that Model S production will be transferred to the new line, while modifications are done to the original final assembly line, to bring it up to the same capacity as the new line.

Also closed to tours from july until August

 

[chickensevil]

Also realize that this may not negatively affect production that much compared to last July even with the plant 'closed'. This will correspond with the week they take off each quarter to do maintenance/give the staff a break.

Oh, that is good information thank you! I did not know that they pre-planned a weekly shutdown each quarter already. Then the only risk here is that they said it would take 10 days to get this online, so there is likely to be a bit of an impact, but not nearly as big as I originally thought it would be

 

[The Blue Owl]

What's with this brick wall at $235?

 

[DaveT]

What's with this brick wall at $235?

$235.73 is a resistance level from April 2.

 

[sleepyhead]

What's with this brick wall at $235?

I don't think that there is enough good news out there to push TSLA through $235. This is starting to look like a local top if it doesn't break through $235 in the next couple of days.

On a side note: I shorted SCTY today :scared:, but it was only a short term trade. I bought some weekly $65 puts for 0.40 and then doubled down at 0.26 on a spike. I closed them all out for avg. of 0.445 for a nice 35% gain. But I wish I had held on since it looks like SCTY might be pulling back now. Oh well, gain is gain.

I don't think that SCTY is investible right now. It is very tradeable, but I would be very weary about entering long or short positions at this point in time if you are looking at a longer term investment horizon. Just wait till the dust settles, because it is most likely going down in the short run.

 

[Chickenlittle]

I don't think that there is enough good news out there to push TSLA through $235. This is starting to look like a local top if it doesn't break through $235 in the next couple of days.

On a side note: I shorted SCTY today :scared:, but it was only a short term trade. I bought some weekly $65 puts for 0.40 and then doubled down at 0.26 on a spike. I closed them all out for avg. of 0.445 for a nice 35% gain. But I wish I had held on since it looks like SCTY might be pulling back now. Oh well, gain is gain.

I don't think that SCTY is investible right now. It is very tradeable, but I would be very weary about entering long or short positions at this point in time if you are looking at a longer term investment horizon. Just wait till the dust settles, because it is most likely going down in the short run.

I have no issue with this but admire your courage in posting it.

 

[AlMc]

Well, we pushed up to the $228-235 level on some positive catalysts. Since then, based on DaveT's post on the resistance and a couple blow backs at $235ish, my personal opinion is that we will settle in this area
until we get another catalyst (positive or negative) or Q2ER, whichever comes first. I am hoping for the positive catalyst before ER but I am thinking we will be consolidating. So, I am holding my Sept 220s and my Jan15 LEAPS.

I again wanted to thank Ken and PZ for the excellent IV discussion over the last two days. :wink:

 

[InTheShadows]

I don't think that there is enough good news out there to push TSLA through $235. This is starting to look like a local top if it doesn't break through $235 in the next couple of days.

On a side note: I shorted SCTY today :scared:, but it was only a short term trade. I bought some weekly $65 puts for 0.40 and then doubled down at 0.26 on a spike. I closed them all out for avg. of 0.445 for a nice 35% gain. But I wish I had held on since it looks like SCTY might be pulling back now. Oh well, gain is gain.

I don't think that SCTY is investible right now. It is very tradeable, but I would be very weary about entering long or short positions at this point in time if you are looking at a longer term investment horizon. Just wait till the dust settles, because it is most likely going down in the short run.

I sold some calls first thing this am then when we broke through 235 for a bit I panicked and bought them back. I really have a hard time emotionally shorting tesla even if it's just a small position.