trading

[vikings123]

After the stock split announcement there was heavy buying for three weeks straight though. In this case, most of the buying will likely take place closer to the actual inclusion.

Furthermore, these options are all time-value right now, which will decay quite rapidly. If stock price and IV stay flat, these options will lose nearly half their value by the end of the month.

The stock actually behaved very much like today’s trading. Huge gap up and then choppy for the rest of the session with n Aug 12th.

For the rest of the week the stock traded mostly flat and really took off the following week.

 

[FrankSG]

Started positions in 24 Dec call options at $500 and $600 strikes.

I wasn't the only one with that idea right at open. Had to compete with many others it felt like.

Currently the price is on the high side, but I'll likely buy more if the options market cools down a bit.

I can't decided whether I'm happy to be up so much so early, or sad that I didn't get to buy more yet, and banked on option expirations to keep it down this week.

Now I have to decide whether I want to keep my position as is, or buy more in spite of the stock being up significantly already. In any other case I'd pass on buying after the stock already went up this much, but if my research and the community's research on the S&P inclusion is correct, this would just be the beginning of the beginning of the buying. Indexers buying 125M shares would be A LOT.

 

[juanmedina]

I can't decided whether I'm happy to be up so much so early, or sad that I didn't get to buy more yet, and banked on option expirations to keep it down this week.

Now I have to decide whether I want to keep my position as is, or buy more in spite of the stock being up significantly already. In any other case I'd pass on buying after the stock already went up this much, but if my research and the community's research on the S&P inclusion is correct, this would just be the beginning of the beginning of the buying. Indexers buying 125M shares would be A LOT.

According to this insider of the S&P the buying is suppose to be 53M FYI... you probably know better. I cannot find the original video he talks about they buying at the 4:50 mark:

With that heavy buying, how high do you think the stock can get?

I ended getting a few Jun 24th 600 this morning. About 20% of my Tesla holding are in options I wonder if I should get more. FOMO is getting to me .

 

[FrankSG]

According to this insider of the S&P the buying is suppose to be 53M FYI... you probably know better. I cannot find the original video he talks about they buying at the 4:50 mark:

With that heavy buying, how high do you think the stock can get?

I ended getting a few Jun 24th 600 this morning. About 20% of my Tesla holding are in options I wonder if I should get more. FOMO is getting to me .

He says $53B, not 53M shares. Number of shares should really be a little over 125M. The main question is if all of these really still have to be bought, or if some portion was bought before the announcement.

I think it could go so high that it's hard to put an upper limit on it. However, although possible, it's probably not very likely we'll see $1,000.

I think ~$600 with (much) higher peaks is quite likely over the next 5 weeks, but a lot of things can happen in the short term. Betting on the short term remains a risky thing, which I am well aware of.

 

[EV forever]

I posted this in the main investment thread - but want to discuss further here in trading where it belongs

Last week, after seeing Elon's tweets about his Covid tests, I freaked out a little bit. First time ever to get that sudden hollow feeling in the pit of my stomach regarding Elon - and I have been a firm HODL person since 2013. Never panicked through the entire mess of 2018, (well having my model 3 in April 2018 gave me the conviction to hodl through all that). But, I decided that if the Covid results bothered me, then it was time to take some money off the table (I was about 80% in TSLA stock and 10% in TSLA LEAPS, remaining 10% in other investments). Plus, I have been thinking of buying more calls anyways, to take advantage of the super low IV.

So, on Friday, I sold about 15% of my TSLA stock in my IRA, with the intent of keeping the cash over the weekend and buying calls this week. But, later in the day, as the SP dropped further and IV dropped even further, FOMO hit, and I pulled the trigger to buy some ITM Jan'23 LEAPS - strike of $350, then just before close bought Jan'22 LEAPS at same strike price (Premium was 176 and 136 respectively on Friday).

Honestly, I had no expectation of S&P500 inclusion. It was entirely due to the flat stock price and super low IV, I was willing to gamble with a portion of my long term HODL shares. On Tuesday, feeling extremely bullish, I used up the rest of the cash from Friday to buy more speculative calls. 15Jan21@590, 19Mar21 @ 460, 20Jan23 @690 (Premium $17, $65 and $120).

No more cash left, and enough excitement for now. My plan is to hold these till about Dec 22 or 23 and then sell. Worst case scenario, the S&P inclusion doesn't spike the stock price - well I still have the time to wait for 2020 P&D report in Jan.

These are the new calls bought, the price at closing today and the cost basis. Will be tracking closely now to see how things shape up till the inclusion date. Let the games begin!

Last Price Cost Basis
-TSLA210115C590 26.20 17.01
-TSLA210319C460 94.00 65.00
-TSLA220121C350 204.58 135.71
-TSLA230120C350 243.00 176.00
-TSLA230120C690 128.95 120.01

 

[jeewee3000]

Did you panick because of Elon's contested views regarding Covid or because you feared for his life?

 

[ammulder]

So, y'all keep talking about LEAPs but they're just too pricey for me. I'm unwilling to part with shares and unwilling to risk $5K or $10K on a single bet. I had hoped the split might change this, but going from $37K per contract to $7.5K per contract didn't turn out to sway me.

Part of the problem, I think, is that I always want multiple contracts. If the price goes up as predicted, I want to be able to sell some early to cover costs, sell some after a better rise to lock in some profits, and hang on to some longer in case there's a further pop. This comes from the time I sold after a 10x gain with time running out, only to miss out on further substantial gains when the stock price just kept running up for no particular reason. So if you figure I need a minimum of three contracts for that to work, then LEAPs get really costly.

Instead, the morning after the S&P announcement, in the first minute of trading, I bought some Jan 15 '21 $800 calls for $290 per contract. They were cheap, significantly off their past trading high, yet far enough out to capture all the S&P action without immediately dying due to time decay (December expiration seemed too likely to collapse before the real S&P spike hit, though actual events didn't necessarily bear this out). After two days those Jan 15 '21 $800 are at $700 (+147%).

Of course, I tried the same around Q3 earnings and battery day with Nov 20 '20 $800, and those are about to expire worthless. The stock just never really popped and the IV sank like a stone and I wasn't willing to sell for a fraction of what I paid just in case the pop still arrived... and it HAS arrived... only not yet enough to matter. It would take a spectacular three days and I don't anticipate that happening.

So there's not the fallback of a LEAP ("it'll always be worth something"), but the ones that do pop tend to make up for the ones that don't. I guess it's just a question of... ugg... whether you can predict the stock price. Fortunately on this board we're pretty tuned in to the things that MIGHT matter to the stock price, and fortunately getting in during the first minute the morning after the unexpected S&P announcement turned out to be good enough, so on the whole this has been profitable for me. Taxable, sadly, but profitable.

In closing, I was pretty attentive to the IV (it was quite low preceding the current S&P action) but I never looked at the Greeks. I'm not sure whether this means I'm a bad but fortunate options trader, or that some strategies just don't require them. What I don't yet know is, if the stock price now levels off around $500 but the IV cruises up a bit more, what will happen to these options? I guess that's why I should be reading Greek.

 

[EV forever]

Did you panick because of Elon's contested views regarding Covid or because you feared for his life?

Well, my reaction was more selfish than anything else - primarily the later: concern about Elon's health and how it would affect the TSLA price. My worry was that if he did get sick and took some time to recover, the media would blow it out of proportion. With the weekend coming up, it worried me that things could go crazy.

But by Friday afternoon it was obvious that Elon was recovering well, the media was quiet about him getting infected, and Elon remained reasonable on twitter. So all in all, I was comfortable to buy back in.

 

[jeewee3000]

What I don't yet know is, if the stock price now levels off around $500 but the IV cruises up a bit more, what will happen to these options? I guess that's why I should be reading Greek.

If the stock price levels off the IV should stay the same or drop.

To find out how IV's impact a given option value, I use Long call calculator: Purchase call options

Be sure to change input to manual so you can adjust the IV up and down. It works as a coefficient (or multiplier) for the SP.

 

[FrankSG]

I spent literally 15 hours since I woke up this morning modelling a ton of things that could happen over the next 4 weeks.

Ended up buying quite a few 24'Dec $580s and 18'Dec $760s at open, for $25.16 and $4.49 avg.

Will likely make a blog post about it all over the next week or two, when I have time.

 

[juanmedina]

I spent literally 15 hours since I woke up this morning modelling a ton of things that could happen over the next 4 weeks.

Ended up buying quite a few 24'Dec $580s and 18'Dec $760s at open, for $25.16 and $4.49 avg.

Will likely make a blog post about it all over the next week or two, when I have time.

what kind of profit are shooting for on those contracts?

 

[ammulder]

the morning after the S&P announcement, in the first minute of trading, I bought some Jan 15 '21 $800 calls for $290 per contract.

My sell order on the first third triggered this morning for $875. So they're paid for, with 2/3 outstanding. Happy face.

 

[FrankSG]

what kind of profit are shooting for on those contracts?

I'll be keeping a close eye on everything over the coming weeks, to determine when to sell. Likely won't be all at once. If things go well, it'll become such a large position that I'll want to deleverage at least some earlier than might be optimal.

Basically what I worked on for the past 15 hours was trying to create a model to estimate buying pressure from S&P 500 inclusion and delta hedging as the SP rises, and at the same time selling pressure from likely sellers, and then see around what SP they even each other out.

Take this with a grain of salt of course, because there are a lot of assumptions in the model, and I could've made a ton of errors, but my conclusions were that, barring bad macros, $650+ is highly likely by inclusion time, and crazy things like $800+ are certainly possible. Therefore, I bought more calls.

I'll be very busy this week, with a ton of appointments basically every day, but maybe during the weekend I'll have some time to write up a blog post. It'll probably take me 15-20 hours to write though, so I'm not sure when I'll have time.

 

[Ocelot]

Bought 2, 500 calls for this friday, at the close before the weekend, with the plan to sell monday. just sold , and doubled. small potatoes, but have no dry powder to buy more than two. finally a trade though that went as planned.

 

[EV forever]

I spent literally 15 hours since I woke up this morning modelling a ton of things that could happen over the next 4 weeks.

Ended up buying quite a few 24'Dec $580s and 18'Dec $760s at open, for $25.16 and $4.49 avg.

Will likely make a blog post about it all over the next week or two, when I have time.

Those are some gutsy moves - I am really looking forward to reading your blog post about it. With S&P inclusion date planned for 21'Dec I am surprised by your 18'Dec $760s. Wouldn't the index funds still have 3 days afterwards to buy up the stock they need, keeping the upward pressure on SP till about 22-23'Dec. Are you expecting most of the heavy buying to occur earlier? Hope you really publish the blog post soon, would love to see your reasoning behind these moves.

Since selling off the 15% of stock and buying LEAPS on 11/14 that I posted about previously, I have been slowly trimming shares and buying Calls - but more in the Jan'21 to March'21 timeframe. Yes, I am paying more for the time premium, since my plan is to sell in December as well, but just feel it is slightly lower risk than Dec calls. I am thinking by Friday to bring my account to 50% stock and remaining in call options. These are pretty big numbers for me (few thousand shares), so it is a bit nerve racking. But I am also convinced this is a once in lifetime type of opportunity, so willing to take more risk. Plus, I gained all these shares by trading options - so it is all TSLA gains that I am gambling.

Regarding timing, I think this week is the last opportunity to get in at reasonable prices. Next week, S&P500 committee will likely announce the tranches in which the shares are to be purchased - so the buying pressure will really start then. Again, this is just my gut feeling, not that I have any great insights or financial savy.

 

[mickificki]

I spent literally 15 hours since I woke up this morning modelling a ton of things that could happen over the next 4 weeks.

Ended up buying quite a few 24'Dec $580s and 18'Dec $760s at open, for $25.16 and $4.49 avg.

Will likely make a blog post about it all over the next week or two, when I have time.

Thanks Frank, looking forward to reading your blog post.

 

[FrankSG]

Those are some gutsy moves - I am really looking forward to reading your blog post about it. With S&P inclusion date planned for 21'Dec I am surprised by your 18'Dec $760s. Wouldn't the index funds still have 3 days afterwards to buy up the stock they need, keeping the upward pressure on SP till about 22-23'Dec. Are you expecting most of the heavy buying to occur earlier? Hope you really publish the blog post soon, would love to see your reasoning behind these moves.

Inclusion happens before market open on the 21st. If you look at other inclusions, like TWTR and FB, the highest volume day is the day before inclusion. 20th for FB, because inclusion happened after market close on the 20th, and the day before in the case of TWTR, because inclusion happened before market open.

One of the risks of these options is that somehow inclusion does not happen on the 21st, but I think the 21st is also likely because they want to get it done before the holiday season. I don't think they'd want to do this massive TSLA inclusion right before christmas, or around new year. And I'm also doubtful they would postpone it by a month to January after already making this announcement. It remains a small risk embedded in these option purchases though.

 

[EV forever]

Inclusion happens before market open on the 21st. If you look at other inclusions, like TWTR and FB, the highest volume day is the day before inclusion. 20th for FB, because inclusion happened after market close on the 20th, and the day before in the case of TWTR, because inclusion happened before market open.

One of the risks of these options is that somehow inclusion does not happen on the 21st, but I think the 21st is also likely because they want to get it done before the holiday season. I don't think they'd want to do this massive TSLA inclusion right before christmas, or around new year. And I'm also doubtful they would postpone it by a month to January after already making this announcement. It remains a small risk embedded in these option purchases though.

Please let me know if my understanding is correct -

The inclusion in S&P500 would be on Dec 21st (either after close the previous day or before market open on the same day), but the index funds will have a window before and after this date for buying the shares they need. Currently, this is expected to be 7 days before and 3 days after - So maximum buying pressure on the stock, which is expected to increase the SP will be about Dec 14 through Dec 24.

If S&P decides to do this in two tranches, then the index funds will have an additional 7 days before this window - So approximately Dec 7 to Dec 24.

In addition, there will be the funds that are benchmarked to S&P500 who may be buying as well. It will be this buying by index funds and other funds, which will be at whatever price the stock is at during that window, that is expected to spike up the stock price. So, wouldn't it be expected that this will continue till about Dec 24th?

 

[FrankSG]

Please let me know if my understanding is correct -

The inclusion in S&P500 would be on Dec 21st (either after close the previous day or before market open on the same day), but the index funds will have a window before and after this date for buying the shares they need. Currently, this is expected to be 7 days before and 3 days after - So maximum buying pressure on the stock, which is expected to increase the SP will be about Dec 14 through Dec 24.

If S&P decides to do this in two tranches, then the index funds will have an additional 7 days before this window - So approximately Dec 7 to Dec 24.

In addition, there will be the funds that are benchmarked to S&P500 who may be buying as well. It will be this buying by index funds and other funds, which will be at whatever price the stock is at during that window, that is expected to spike up the stock price. So, wouldn't it be expected that this will continue till about Dec 24th?

I think the 7 days before and 3 days after is a bit too strict. I think it also depends on the fund, and some likely have more flexibility than others.

However, based on looking at past inclusions, it looks to me like the vast majority of buying is done in the 3 days (and especially the last day) before actual inclusion. I don't think funds usually risk being significantly underweight upon inclusion. The safest thing to do for a fund whose job it is to be indexed to the S&P 500, is to be equal-weight when inclusion happens. Maybe some funds are okay with buying 10-20% of the shares they need in the days after, but I don't think they'd leave too much of the buying until after inclusion.

It's hard to predict what will happen exactly though. TSLA is very unique, and everybody who understands this will be scrambling to not be last to buy. But at the same time, the fact that some entities know this and are likely speculating on this, could mean there'll be a peak and dip at some point, which might also become a point of speculation by some.

All in all, i should be very interesting to watch unfold.

 

[pz1975]

I like the concept of the infinity squeeze. If everyone out there decided to just keep buying and buying and holding massive numbers of TSLA calls all through this period, the MMs would have to delta hedge for them at the same time the S&P funds had to buy and shorts had to buy. Something like this would force the mother of all squeezes (to maybe $2,000-5,000) and we'd all be billionaires! I know this wont happen but I'm expecting that a smaller version will. Hence I still hold all my calls bought last Tuesday and Friday.