Well you're half right. My number to get out was 365, but I would have been happy getting out anywhere between 360 to 365. I'm pretty skeptical of it going above 370.
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Well you're half right. My number to get out was 365, but I would have been happy getting out anywhere between 360 to 365. I'm pretty skeptical of it going above 370.
Just sold 3/5 of my TSLA shares. Just seems like an obvious poor ramp right now. Waiting to re-enter at lower price.
I don't see evidence that Tesla is even at 1000 / wk right now...
I don't see evidence that Tesla is even at 1000 / wk right now...
johnnybgood888
Member
I am also looking to deleverage around the prices you're looking at, possibly a bit higher even between 370-380. If nothing else, I will probably get out of all my Jan 19s (but hold on to my Jan 20s) if it looks like we are heading back towards the $340s. That should at least stave off margin calls for me until the $250s share price.
My initial reaction when the Q4 ER came out was that we will probably test the ATH again this quarter, maybe even kiss $400 before Q1 ER. I still think this may happen, especially if we get confirmation that we are definitely hitting 2500/wk by quarter end. The company fundamentals I believe are better now then when the share price first hit $389, especially with all the glowing Model 3 reviews, cash balance on hand, Roadster 2.0, Semi reviews, etc.
However, if 2500/wk is delayed again, I think the market will be less forgiving this time and $290 or lower maybe tested again. The other wildcard would be macros and the Russia investigation, which can also dampen a bull run even if 2500/wk is confirmed.
johnnybgood888
Member
Hi Nico, not sure I understand your question. As far as I am aware with my brokerage, margin interest is the same for any kind of equity. Unless there is a different form of leverage for DITM LEAPs I am unaware of. Please enlighten!
johnnybgood888
Member
Curt, has TSLA share price correlated with GM and F closely, or at all, in the past couple of years? Whenever I see TSLA up or down, I usually check the FANG stocks as well as SPY and QQQ for comparison, has never occurred to me to look at GM or F.
I mean, to increase your exposure without adding a high amount of additional funds, you can either go 100% margin and double your exposure, with a couple of % interest cost in the form of margin cost,
Or e.g sell your shares, and use the proceeds to buy DITM leaps at a strike price of 60% of the current share price. With the proceeds you can double your exposure by buying double the amount of contracts compared to your original shares. These leaps only have a couple of % time value, so it is in effect an interest rate of a couple of percentages.
With the leaps you don’t have the problem that you will have to sell them (but they can go to zero) at an incovenient time.
johnnybgood888
Member
Gotcha, yup, you're absolutely right. That is another way to go.
Can you tell me if I'm calculating the interest rate effect from the DITM LEAPS correctly as follows: For example, taking a $200 strike price for Jan 19, the premium is $161, which at the current share price of $351, gives about a $10 time value, which works out to about 2.85% (10/351*100%). I'm currently paying margin interest of 7% (I'm using Questrade), which I think is exorbitant, but we don't have a lot of options in Canada.
Sold my position into weakness, something I've been trying not to do anymore. Already knew the stock was on thin ice, given how long the bull run has lasted this cycle, but too many voices hyping it up last Friday and yesterday, now too many voices doom posting today. I'm ok with missing the min and max of any given cycle, so I'll probably try to hop back in around 335-340, if we get to that point; no need to be too greedy and miss the train.
Yes that’s how I’d calculate it too. Actually there are only 11 months untill expiration so you need to corret the % by 12/11 to get a full year percentage. 2020 leaps are even cheaper given that you have to correct by 12/23 to get a yearly rate.
jhm
Well-Known Member
FWIW, I only use margin to allow some “day trading”. Having a margin account allows me to sell one equity and immediately buy another equity the same day. I do not have to wait for the accounts to settle.
I do not borrow to buy shares. So the margin account provides flexibility for me to quickly move into and out of shares without waiting for the settlement dates. BUT, I make it a point to never exceed whatever cash I am expecting to collect from the sell.
That being said, there is an SEC limit on how much one can do this without being labeled a Pattern Day trader. So heed those requirements, otherwise you’ll be forced to keep 25k in your account as per rules.
Words of HABIT
Active Member
I've been saying for months $350 for TSLA is a tough nut to crack and here we are today at $350. The problem with selling is determining when to jump back in. My timing is horrible which is why I stay long. Tesla is on the cusp of achieving their mission statement, mass production of an affordable EV. Once the ramp up with the German line is successful the increase in production will be substantial. With this happen next week, next month or longer, no one at TMC will be able to accurately predict. Here's to the longs.
Menifeer
Member
My strategy re: TSLA is to milk its option premiums. They're very generous since the stock is volatile and expensive.
I buy DITM LEAPS ($100-$150 strike) that have little time value. I then sell Calls at strikes $10-$20 above the current price expiring in a week or two. Typically, they expire worthless. Rinse and repeat.
When the trade goes against me (stock price spikes upward), I buy the Calls back (typically on the expiration date) and write ones that expire at a later date, either at the same strike price (for more than the buy-back cost) or for one with a higher strike (for about the same price).
Nothing out-of-the-ordinary here. Many people do this with good success.
The people purchasing the options I sell can benefit only if the price goes up a good bit in a short amount of time. As many people here can attest, that strategy doesn't always work.
In addition to the short-term "dividends", I expect to benefit from the long-term appreciation of the underlying LEAPS.
And I sleep soundly.
I buy DITM LEAPS ($100-$150 strike) that have little time value. I then sell Calls at strikes $10-$20 above the current price expiring in a week or two. Typically, they expire worthless. Rinse and repeat.
When the trade goes against me (stock price spikes upward), I buy the Calls back (typically on the expiration date) and write ones that expire at a later date, either at the same strike price (for more than the buy-back cost) or for one with a higher strike (for about the same price).
Nothing out-of-the-ordinary here. Many people do this with good success.
The people purchasing the options I sell can benefit only if the price goes up a good bit in a short amount of time. As many people here can attest, that strategy doesn't always work.
In addition to the short-term "dividends", I expect to benefit from the long-term appreciation of the underlying LEAPS.
And I sleep soundly.
I don’t see a problem with margin in moderation.
Pretend you have $80k and borrow $20k to buy more TSLA shares. You now have a debt of 20% (or 80% equity).
Assume 3% margin interest (Interactive brokers has this rate and others sometimes match) and your broker only requires 60% equity.
As long as TSLA doesn’t drop to 1/2 and it appreciates > 3% / year, you will come out ahead. If it does appreciate a good deal greater than the 3% (as we all expect), then your returns will be almost 25% greater.
Unless I’m missing something?
Pretend you have $80k and borrow $20k to buy more TSLA shares. You now have a debt of 20% (or 80% equity).
Assume 3% margin interest (Interactive brokers has this rate and others sometimes match) and your broker only requires 60% equity.
As long as TSLA doesn’t drop to 1/2 and it appreciates > 3% / year, you will come out ahead. If it does appreciate a good deal greater than the 3% (as we all expect), then your returns will be almost 25% greater.
Unless I’m missing something?
Nah, you got it. Different people are just comfortable being at different degrees of risk and reward.
Speaking of risks, IB doesn't seem to allow me to buy options on margin. What broker are people using that would allow me to do so?
HG Wells
Martian Embassy
Does your brokerage consider the LEAPS + some cash as covering the call you are selling or do you also have stock in tesla that covers the call ?
Zhelko Dimic
Careful bull
If you buy DITM option, you spend less money and don't have to use margin, and instead you pay time-value premium.
Example, let's look at Jan '19, 3 strikes at $100, $150, $180. They'd have around $1($100), $2-$3($150), $5-$7($180) of time value built in.
So instead of paying $351, you pay $351-$100, $351-$150 or $351-$180, i.e. you're saving good chunk of purchase price.
You can calculate if this is more advantageous for you or not, interest vs. time value, but also keep in mind:
- DITM can be bought only in lots that correspond to 100 shares
- They are less liquid, and it may be had to get close to the mid price on the spread
- You are not actually shareholder, you don't get to vote
- in RRSP and TFSA accounts, you can't sell covered calls on DITM, while you can do it if you owed shares
- DITM offer modest capital protection, i.e. your loss is limited to the price_paid=sp_price-strike_price+time_value, so in the case of catastrophic event, you do save close to $100, $150 or $180...
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