trading

[vikings123]

Hypothetical question:

What happens after the squeeze? If the float is now in S&P funds and long term investors I’m not seeing a precipitous drop like many are thinking. What do people think our new base will be? 700?

The VW squeeze was brought about by shorts getting squeezed. This is pure index/funds buying and technically will result in a reduction of free float. Man this will be so exciting. I almost want to take the rest of the year off just to watch this play out

 

[FrankSG]

Hypothetical question:

What happens after the squeeze? If the float is now in S&P funds and long term investors I’m not seeing a precipitous drop like many are thinking. What do people think our new base will be? 700?

The VW squeeze was brought about by shorts getting squeezed. This is pure index/funds buying and technically will result in a reduction of free float. Man this will be so exciting. I almost want to take the rest of the year off just to watch this play out

Yeah, I don't think it will be as dramatic as some are thinking, but I do think there will be some drop, simply because some people are speculating on this event and where the top will be. But we should see a significant permanent price increase, to what I'd think is at least $600+, perhaps higher.

 

[Ocelot]

Does anybody know if the funds that need to buy can work out deals beforehand? In essence, tell another fund to buy the stock for them, then sell it directly to them for a certain guaranteed percentage mark up?

 

[FrankSG]

Does anybody know if the funds that need to buy can work out deals beforehand? In essence, tell another fund to buy the stock for them, then sell it directly to them for a certain guaranteed percentage mark up?

I'm a bit skeptical of this. It'd require off-market transactions, at non-market prices. I doubt this is legal, and am not sure this is possible, even in dark pools.

Even if you say Vanguard would go overweight with one fund, promising to move it to another fund at a certain rate, I don't know that they are allowed to do things like that. It'd likely mean moving stock between funds at non-market prices, which disadvantages investors of one fund.

 

[mongo]

Does anybody know if the funds that need to buy can work out deals beforehand? In essence, tell another fund to buy the stock for them, then sell it directly to them for a certain guaranteed percentage mark up?

I'm a bit skeptical of this. It'd require off-market transactions, at non-market prices. I doubt this is legal, and am not sure this is possible, even in dark pools.

Even if you say Vanguard would go overweight with one fund, promising to move it to another fund at a certain rate, I don't know that they are allowed to do things like that. It'd likely mean moving stock between funds at non-market prices, which disadvantages investors of one fund.

I think it's legal, since one can always go old school and trade paper stock certificates.

However, it seems like trading options would be simpler and achieve a similar effect. Markup = time value of ATM call.

 

[Robertj]

Just bought some 580/600

Just bought some 580/600

These 24 Dec expiry up from $6 to $40 in a week, holding

 

[jeewee3000]

Thought I'd share my current "trade":

Entered a LEAP position on september 2nd (SEP22 $1000C) since TSLA had just dipped hugely that day and I thought I was smart.
Calls were priced at $107.

TSLA SP and IV dropped hugely since then, so I dollar cost averaged by adding:

on september 8th @ $5,xx
on october 22nd @ 4,xx

Average buying price was around $7,5 by then.

I was looking for that sudden rally that happens once in a while with Tesla, and here we are.

Those LEAPS now trade @120 at the time of writing this. I exited 2/3 of the position @117 which covers the entire cost of entry (including transaction costs, around 0,5% to 1% in Belgium).

With 50% of the cash I added to my core share holding. The other 50% cash is dry powder in case of another opportunity.

The other 1/3 of the LEAPS are now "free" (I know, StealthP3D, they're not really free, but I did acquire them without extra cash influx) so I'll have a lot more guts to let them ride until around december 21st. (Trying to catch the december 18th peak like all call surfers I guess).

Note: I know the above was not that risky of a trade since I had huge amounts of time for it to work out, but a $1000 strike price in 2022 only meant break-even around $1100-$1200, a far from certainty IMO. So from the getgo these were "trading LEAPS" not to be ridden until expiration.

Note 2: I hear you asking: why do you trade with LEAPS? Well, because everytime I trade short term I get my a** handed to me. I'm like the rat in the test-maze that got electrocuted too many times . With LEAPS I seem to manage better (and I have more patience in holding winning positions).

 

[EV forever]

Not exactly in the spirit of this thread (which is about selling options and applying the wheel), but I wanted to share what I’m doing with long call options.

Made some pretty big moves today: Liquidated my rollover IRA and transferred the long option positions into the taxable account. Sold a few thousand TSLA shares and re-invested funds into short term call options and LEAPs. My current long call positions are now:

12/18/2020 520 C
12/24/2020 550 C
12/24/2020 600 C
12/31/2020 600 C
1/15/2021 650 C
2/19/2021 600 C
3/19/2021 500 C
3/19/2021 600 C
7/16/2021 600 C
9/17/2021 500 C
6/17/2022 400 C
1/21/2022 300 C
1/21/2022 500 C
3/18/2022 500 C
1/20/2023 200 C

I was planning on holding the shares and LEAPs long term to avoid a huge taxable event this year, but since inclusion announcement my plan has changed to take advantage of what seems to be a once in a lifetime opportunity to lever up prior to a rally, and i will just have to settle up with the tax man after the dust settles. I’m spreading the risk out by choosing different strike prices and mixing in a good portion of ITM calls and LEAPs, so even if I’m wrong about the expected share price movement timing, I’m not going to blow up my account.

Quoting your post here @Tathagata as the other thread is more focussed on "Applying the wheel strategy" than on call options or LEAPS buying and selling trading.

I have been doing the same as you did, planning to convert about 40% of my TSLA shares into options. The last 500 shares will be sold and options bought on Friday - hoping that the premiums remain where they are with the low volume expected after Thanksgiving. These are large numbers and transactions for me, so have been doing them slowly over the last week and half. I will post my final list of options purchased here afterwards.

There are several others here following similar strategy as well. So, I am hoping we can continue the discussion here, since the next question on my mind, when would be the best time to sell these.

 

[mickificki]

Quoting your post here @Tathagata as the other thread is more focussed on "Applying the wheel strategy" than on call options or LEAPS buying and selling trading.

I have been doing the same as you did, planning to convert about 40% of my TSLA shares into options. The last 500 shares will be sold and options bought on Friday - hoping that the premiums remain where they are with the low volume expected after Thanksgiving. These are large numbers and transactions for me, so have been doing them slowly over the last week and half. I will post my final list of options purchased here afterwards.

There are several others here following similar strategy as well. So, I am hoping we can continue the discussion here, since the next question on my mind, when would be the best time to sell these.

Looking forward to hearing which options you purchased. Also curious as to people’s thoughts on when to sell.

 

[ggr]

Quoting your post here @Tathagata as the other thread is more focussed on "Applying the wheel strategy" than on call options or LEAPS buying and selling trading.

I have been doing the same as you did, planning to convert about 40% of my TSLA shares into options. The last 500 shares will be sold and options bought on Friday - hoping that the premiums remain where they are with the low volume expected after Thanksgiving. These are large numbers and transactions for me, so have been doing them slowly over the last week and half. I will post my final list of options purchased here afterwards.

There are several others here following similar strategy as well. So, I am hoping we can continue the discussion here, since the next question on my mind, when would be the best time to sell these.

I'm doing the opposite. I have 5x $400 calls expiring tomorrow, which I will allow to be exercised (bought for $17.10 two weeks ago), to add to my core HODL stock. Then, whatever cash I have leftover, I will buy another 5 calls, probably for end of December expiry, to replace the ones that expired.

 

[juanmedina]

Quoting your post here @Tathagata as the other thread is more focussed on "Applying the wheel strategy" than on call options or LEAPS buying and selling trading.

I have been doing the same as you did, planning to convert about 40% of my TSLA shares into options. The last 500 shares will be sold and options bought on Friday - hoping that the premiums remain where they are with the low volume expected after Thanksgiving. These are large numbers and transactions for me, so have been doing them slowly over the last week and half. I will post my final list of options purchased here afterwards.

There are several others here following similar strategy as well. So, I am hoping we can continue the discussion here, since the next question on my mind, when would be the best time to sell these.

How high are you expecting the stock to go? What contracts are you looking at? And what returns do you think you can get on those options?

 

[EV forever]

How high are you expecting the stock to go? What contracts are you looking at? And what returns do you think you can get on those options?

Jan 15 expiration likely 2 strikes. The lower strike close to ATM probably 550ish. The higher would be riskier 100 - 150 OTM. I saw that there are 1000 and 1050 strike calls available- might do a few of those as lottery tickets if I can get them for ~$5 premium.

These will be the last conversions from shares to options for now. IV is steadily increasing, so window of opportunity on buying options is closing. I still have significant number of shares, so later in a week or so, may start selling OTM covered calls on those. I will not have much cash, so can’t sell cash covered puts.

 

[EV forever]

Looking forward to hearing which options you purchased. Also curious as to people’s thoughts on when to sell.

Today's buying was a tremendous amount of FOMO! Woke up to the SP seeming to be running away at 596, hence the FOMO. Disadvantages of living in sunny CA I guess.
I had already sold 500 shares on Wednesday and wanted to buy the options today, not wait till Monday. I did load up completely, but paid much more than expected. Many of them ended the day in the red
Will post the positions later tonight.

 

[Criscmt]

Quoting your post here @Tathagata as the other thread is more focussed on "Applying the wheel strategy" than on call options or LEAPS buying and selling trading.

I have been doing the same as you did, planning to convert about 40% of my TSLA shares into options. The last 500 shares will be sold and options bought on Friday - hoping that the premiums remain where they are with the low volume expected after Thanksgiving. These are large numbers and transactions for me, so have been doing them slowly over the last week and half. I will post my final list of options purchased here afterwards.

There are several others here following similar strategy as well. So, I am hoping we can continue the discussion here, since the next question on my mind, when would be the best time to sell these.

@EV forever @Tathagata Does your plan include dealing with the possibility of surprises by S&P, say, increasing the weightage over several quarters rather than all of it in December?

 

[Criscmt]

How to interpret the drop in IV of LEAPS?

 

[pz1975]

How to interpret the drop in IV of LEAPS?

View attachment 612519 View attachment 612520

I believe it is because as an option moves from out of the money to in the money, its IV will naturally go down a bit. I liked at the TSLA option chain for Jan 2022, and it shows ITM calls with an IV of 68 and then trending to OTM calls with an IV of 71.

 

[Criscmt]

I believe it is because as an option moves from out of the money to in the money, its IV will naturally go down a bit. I liked at the TSLA option chain for Jan 2022, and it shows ITM calls with an IV of 68 and then trending to OTM calls with an IV of 71.

IV generally seems to be high for ITM, going by option chain?

 

[pz1975]

Jan 2022 ITM calls have IV 68-69, OTM 71. I am talking near the money like 400-500 vs. 600-700.

 

[EV forever]

@EV forever @Tathagata Does your plan include dealing with the possibility of surprises by S&P, say, increasing the weightage over several quarters rather than all of it in December?

My first rule of options trading - be prepared to lose 100% of the money invested in options. In this case, S&P could do whatever they want, so yes, need to be prepared to accept losses if they suddenly surprised us by phasing in the inclusion over a few quarters. However, I personally think that the possibility of that happening is very low - the only possibilities are the survey they had sent out which was single tranche or two tranches. In either of these two cases, the stock price will go up simply due to the massive amounts of stock that the index funds and benchmarked funds are required or expected to buy.

From 2013 to 2019, I mostly just lost the small amounts of money I put into options on TSLA, till things suddenly flipped in 2019 September. Over the last 1 year 2 months, I have strictly followed my own plan of buying shares from all the profits made on options. Sometimes this involved actually buying shares, sometimes involved allowing ITM options to be assigned as shares. My portfolio has grown 20X thanks to this strategy. More than 90% of this is TSLA shares or call options.

Worst case scenario - there is a huge surprise or black swan event for TSLA - the options would lose all value. Since I sold about 40% of my shares to buy options, that is how much I would lose. Hopefully, the remaining shares don't lose all value. Whatever happens, i doubt that would destroy all remaining value in my portfolio and take it lower than where it was last September. (i.e. I doubt it goes down to 1/20th of the current value)

 

[EV forever]

Today's buying was a tremendous amount of FOMO! Woke up to the SP seeming to be running away at 596, hence the FOMO. Disadvantages of living in sunny CA I guess.
I had already sold 500 shares on Wednesday and wanted to buy the options today, not wait till Monday. I did load up completely, but paid much more than expected. Many of them ended the day in the red
Will post the positions later tonight.

As promised, here is the list of options purchased over the last 5-6 days since the S&P inclusion announcement. Cannot figure out how to post as a table here, so the image and pdf

Edit: All these are in a traditional IRA account, so I can buy and sell without immediate tax consequences. I also have significant stock and June 2022 LEAPS holdings in an investment account, which will not be touched. After calculating the tax consequences (which will take almost 50% of any short term gains if sold before Feb2021), my decision is to simply hold these through next year.