TSLA Trading Strategies

[neroden]

There's a lot of evidence that most people aren't just incapable of handling self-directed investments, but frankly can't handle defined contribution plans at all. They would have been best off with a traditional pension... if it was fully funded and properly managed, that is. Since most of the traditional pension plans weren't (sigh), there's one major reason we need Social Security.

 

[Jonathan Hewitt]

Jealous of your HSA. I max that as well, but as far as I can tell, I only have index fund options there as well. Am I able to switch to a different HSA account or am I locked in there as well? Would love to own TSLA there.

My company plan has us set up with HSA Bank, which is partnered with TDameritrade for brokerage services. Legally it does not matter who administers your HSA but if your HSA is set up through your employer then your hands are probably tied? You would have to talk to HR if that's the case and we probably both already know the answer there. If you set up your HSA on your own then you should probably be able to switch custodians to someone like HSA Bank without too much difficulty.

 

[Jonathan Hewitt]

Exactly, me too! I am disappointed at the cash requirement of a self directed IRA when dealing with selling naked options for income. I wish I could do that, leveraging the assets already in $TSLA, as I do in my post-tax brokerage account. I've been on the phone with fidelity a few times trying to get them to let me do this, but they won't. If any of you know a way, please let me know. Selling options for income is a great double-leverage opportunity to generate additional cash.

Edit: sorry, I see now that the thread got moved to Trading Strategies.

If you mean that your puts have to be cash secured then that's not Fidelity's fault, that's a problem of all IRAs as far as I know. You can reduce the amount of buying power selling puts in an IRA uses up by buying a cheap OTM put around the 5 delta area. This put should reduce the buying power reduction to the spread width instead of the full $37,500 and will somewhat approximate margin buying power. Sucks to have to buy the extra put as this money is 95% of the time wasted money but that's the cost of working in an IRA. Just think of all the taxes you are saving?

If you can't do this with Fidelity then time to switch brokerages! I had a problem with Fidelity not letting me do spreads so I opened up a Roth IRA with TastyWorks. That gives me half a dozen brokerage accounts now, haha, so if you need a new one I have some experience with several.

 

[MitchJi]

I am funding 90%+ of my expenses with a 0% APR credit card for 21 months that allows for this flexibility.

Great move and timing. We used $30k from a home equity loan to buy LEAPS in November. So far they are a nine bagger (after bumping up the strike prices three times) !

I think that the SP closes today at $379-$384.

 

[Crowded Mind]

Great move and timing. We used $30k from a home equity loan to buy LEAPS in November. So far they are a nine bagger (after bumping up the strike prices three times) !

I think that the SP closes today at $379-$384.

Thanks. I wish I would have leveraged more in hindsight (such as you did), but at least I did some.

 

[steve3]

Great move and timing. We used $30k from a home equity loan to buy LEAPS in November. So far they are a nine bagger (after bumping up the strike prices three times) !

I think that the SP closes today at $379-$384.

Mitch, big congratulations on your decisiveness, your timing, and your success!

And thanks for sharing here; I continue to learn a lot here, thanks to all sincere posters.

 

[MitchJi]

Mitch, big congratulations on your decisiveness, your timing, and your success!

And thanks for sharing here; I continue to learn a lot here, thanks to all sincere posters.

Thanks for your kind thoughts. It seemed like a slam dunk to me, but I thought it would be February-May before it paid off like this, although I expected $400-$450 by then.

Looking forward I think every ER through next June has the potential to be good. I believe that the February ER could be huge. If Tesla hits 25-80k for 2017 that will be a big catalyst, plus Elon said that TE will ramp exponentially starting in Q3 and fully in Q4, plus the cross country drive. It's all lining up!

I'm concerned about the macro but not concerned about Tesla at all. On the Tesla side of the equation I think the next about 12 months are an historic or epic opportunity.

 

[Crowded Mind]

Thanks for your kind thoughts. It seemed like a slam dunk to me, but I thought it would be February-May before it paid off like this, although I expected $400-$450 by then.

Looking forward I think every ER through next June has the potential to be good. I believe that the February ER could be huge. If Tesla hits 25-80k for 2017 that will be a big catalyst, plus Elon said that TE will ramp exponentially starting in Q3 and fully in Q4, plus the cross country drive. It's all lining up!

I'm concerned about the macro but not concerned about Tesla at all. On the Tesla side of the equation I think the next about 12 months are an historic or epic opportunity.

I feel similarly, which is why I am maintaining leverage and asking about 401k optimization. I think there is a reasonable amount of execution risk, but even with a delay, the market knows this stuff is coming soon and FOMO is a heck of a drug.

 

[everman]

Thanks for your kind thoughts. It seemed like a slam dunk to me, but I thought it would be February-May before it paid off like this, although I expected $400-$450 by then.

Looking forward I think every ER through next June has the potential to be good. I believe that the February ER could be huge. If Tesla hits 25-80k for 2017 that will be a big catalyst, plus Elon said that TE will ramp exponentially starting in Q3 and fully in Q4, plus the cross country drive. It's all lining up!

I'm concerned about the macro but not concerned about Tesla at all. On the Tesla side of the equation I think the next about 12 months are an historic or epic opportunity.

Congrats on your nine-bagger LEAPs Mitch! I also agree about the epic opportunity in the next twelve months, and would like to continue to discuss opportunities to take advantage of them. It seems '19 OTM LEAPs are one good way, as you would still have significant time value remaining, but would have captured a relatively larger portion of the SP rise. I am also a big fan of selling puts for income, and TSLA puts pay quite well, while providing opportunity to purchase shares at a lower point in the worst case.

Do you all have other opportunities you're considering for the M3 launch and ramp?

 

[Starno]

Thanks for your kind thoughts. It seemed like a slam dunk to me, but I thought it would be February-May before it paid off like this, although I expected $400-$450 by then.

Looking forward I think every ER through next June has the potential to be good. I believe that the February ER could be huge. If Tesla hits 25-80k for 2017 that will be a big catalyst, plus Elon said that TE will ramp exponentially starting in Q3 and fully in Q4, plus the cross country drive. It's all lining up!

I'm concerned about the macro but not concerned about Tesla at all. On the Tesla side of the equation I think the next about 12 months are an historic or epic opportunity.

Don't worry about the macros for the next 12 months .
We're in mid cycle now. The economic machine is far from overheating.

 

[MitchJi]

Congrats on your nine-bagger LEAPs Mitch! I also agree about the epic opportunity in the next twelve months, and would like to continue to discuss opportunities to take advantage of them. It seems '19 OTM LEAPs are one good way, as you would still have significant time value remaining, but would have captured a relatively larger portion of the SP rise. I am also a big fan of selling puts for income, and TSLA puts pay quite well, while providing opportunity to purchase shares at a lower point in the worst case.

Do you all have other opportunities you're considering for the M3 launch and ramp?

I'm planning on buying some short term (quarterlies) around most of the upcoming ER's, quantities to be determined later. If I believe that a parabolic increase in the SP has started, or is highly likely to start I'm planning to buy some J19 $680's. I think that the potential risk could be relatively low, but it has the potential for a huge payoff.

I don't believe that a true squeeze will happen.

 

[neroden]

Great move and timing. We used $30k from a home equity loan to buy LEAPS in November. So far they are a nine bagger (after bumping up the strike prices three times) !

Cool! Personally I don't borrow against my home. This is a form of insurance against really long-tail black swan events -- if *everything* goes south financially, I still own my home outright, and short of war actually reaching my doorstep, I should be able to hang onto it (they usually let you keep it even in bankruptcy).

 

[Jayjs20]

Umm, quick question. Normally I just throw my paycheck at tsla stock, but I figure I'll throw some at options. I have a roth ira that I can transfer new money to, so I can use that to buy options for now. It looks like what I want to buy are calls with an expiration date of January 2019. What strike price should be looking at? Does it really matter?

 

[Crowded Mind]

Umm, quick question. Normally I just throw my paycheck at tsla stock, but I figure I'll throw some at options. I have a roth ira that I can transfer new money to, so I can use that to buy options for now. It looks like what I want to buy are calls with an expiration date of January 2019. What strike price should be looking at? Does it really matter?

Yes, it matters a lot. Since you are already highly leveraged on margin (IIRC) you should learn a lot more about options before trading them. Check the two threads on this forum about trading options. If you are looking it from an investment perspective rather than a trading perspective, I think I would personally reduce my margin and leverage through DITM or ATM options if I was trying to get as much leverage as you.

 

[GoTslaGo]

Umm, quick question. Normally I just throw my paycheck at tsla stock, but I figure I'll throw some at options. I have a roth ira that I can transfer new money to, so I can use that to buy options for now. It looks like what I want to buy are calls with an expiration date of January 2019. What strike price should be looking at? Does it really matter?

IIRC, when I read through my margin agreement, if you do not or cannot maintain your margin requirements the brokerage has the rights to take and sell any shares you own out-right to fulfill that margin requirement. So by being as leveraged as you are, you are risking not just the margined shares, but your hard earned cash secured shares as well. One reason we haven't used our margin for that purpose.

Which is why I suspect @TrendTrader007 has to put up such a large amount to maintain his account (because he's 100% TSLA, without other shares that the brokerage could take should TSLA crash and he can't meet his margin requirement).

So, the crux of my response is that maybe your new funds should be used to de-leverage your existing margined shares so if the SP drops, you won't risk your core shares too.

Or you could sell the Margined shares (assuming SP goes up), book a profit on them, and then look into getting into LEAPS with the proceeds.

I would recommend getting McMillan's: "Options as a Strategic Investment" for a really comprehensive discussion of options.

 

[MitchJi]

Umm, quick question. Normally I just throw my paycheck at tsla stock, but I figure I'll throw some at options. I have a roth ira that I can transfer new money to, so I can use that to buy options for now. It looks like what I want to buy are calls with an expiration date of January 2019. What strike price should be looking at? Does it really matter?

I think that now is a pretty good time to buy J19's. The strike price makes a huge difference. Check out this post (some brief excerpts here), and please be sure to post any questions:
TSLA Trading Strategies

LEAPS's buying decisions should depend mainly understanding the SP, not on in depth understanding of options:

<snip>
OTOH if the SP rises to exactly $240 in J19 and I hold it until expiration I would lose 100% of my investment! (Which is one reason that I would never hold LEAPS's until the expiration date. It's an extremely bad idea.) So the main thing when buying expensive options is being extremely confident (impossible to overstate that point!) that at some point before they expire the SP will be high enough that they are profitable. In other words understanding TSLA's SP is the crucial thing to understand when buying LEAPS's, understanding all of the variables involved in trading options is not.

Which strike price to buy:
The main decision (if you are confident that the SP will rise) is which strike price to buy.
You pay for two things when buying options time value, and a lower strike price gains you more time for the option to make a profit at a given level.

Lower strike prices equals less risk, due to the fact that a lower SP is required to make a profit and allows more time for that to happen (essentially another way of gaining more time value)....

 

[moe.salih]

I'm planning to buy some J19 $680's.

Be careful, the delta drop at high strikes is not consistent with the increased strike, which means leverage might not necessarily increase with a higher strike. For example, currently:



So you're much better off with 650 (7.15x leverage) than 680 (5.56x leverage).

It seems the major strikes (600, 650) have much higher deltas. Does anyone actually know why this is the case?

 

[bdy0627]

Great move and timing. We used $30k from a home equity loan to buy LEAPS in November. So far they are a nine bagger (after bumping up the strike prices three times) !

I think that the SP closes today at $379-$384.

So, by increasing your strike price as the stock rises, you are using your profits to increase your leverage then, right? A more conservative approach would be to use your profits to lower your strike price, thereby deleveraging as the risk for a correction becomes greater.

 

[neroden]

Be careful, the delta drop at high strikes is not consistent with the increased strike, which means leverage might not necessarily increase with a higher strike. For example, currently:

View attachment 231754 View attachment 231753

So you're much better off with 650 (7.15x leverage) than 680 (5.56x leverage).

It seems the major strikes (600, 650) have much higher deltas. Does anyone actually know why this is the case?

My guess? More heavily traded. The non-major strikes have a sort of embedded loss created by the market makers as their price for providing liquidity, so that makes all the greeks look weird.

 

[moe.salih]

So, by increasing your strike price as the stock rises, you are using your profits to increase your leverage then, right? A more conservative approach would be to use your profits to lower your strike price, thereby deleveraging as the risk for a correction becomes greater.

Leverage automatically decreases as the stock price increases, because your strike is getting deeper and deeper in the money. So to maintain the same desired leverage, you have to increase your strike accordingly.

Leverage = option delta * stock price / option price