Tesla, the investment

[GIMD]

Stop loss is fundamentally the dumbest thing for anyone with a time horizon greater than 20 mins. Why would you program in to sell at a loss?

Not selling at a loss, just taking in profits early. My overall trading strategy is that I will rather give up some gains if I can minimize the losses so some time after a stock purchase, I usually follow with a % trailing stop order if the stock accelerates. This will allow the stock to fly but when it starts pulling back from its peak, I will being taking in profits. I don't use stop order for truly losing stock since I have a low threshold to sell losing stocks. I periodically adjusted the stop order limit based on the status of the stock. I forgot to do this for Tesla since I never expect it to soar this high this quick as I would have easily tolerated a 50% pull back from its peak at the time and avoided having to pay tax on short-term gains. Those early days of high flying Tesla stock were fun. I missed out on the recent rally. Sounds like you are still having alot of fun.

[mgchan]

Not selling at a loss, just taking in profits early. My overall trading strategy is that I will rather give up some gains if I can minimize the losses so some time after a stock purchase, I usually follow with a % trailing stop order if the stock accelerates. This will allow the stock to fly but when it starts pulling back from its peak, I will being taking in profits. I don't use stop order for truly losing stock since I have a low threshold to sell losing stocks. I periodically adjusted the stop order limit based on the status of the stock. I forgot to do this for Tesla since I never expect it to soar this high this quick as I would have easily tolerated a 50% pull back from its peak at the time and avoided having to pay tax on short-term gains. Those early days of high flying Tesla stock were fun. I missed out on the recent rally. Sounds like you are still having alot of fun.

Do what’s comfortable, but personally stop loss orders are a good way to get taken out of a great stock unnecessarily. It’s either too small such that you sell out on normal volatility or too large where it doesn’t really protect from anything. But I am an investor and not a trader, and am more likely to see a sudden unexpected drop as a buying opportunity rather than a reason to sell.

[BCBiker]

4M

[Nysoz]

I forget if you mentioned it, but are you turning your calls into spreads at all? Defines a top for you, but also can provide additional cash flow/money. I only have 8 calls deep ITM, but selling weekly 50% otm calls gets me another 2k a week or so. Pennies in front of a steam roller and all, but if it jumps 50% in a week then you've won the game.

[BCBiker]

I forget if you mentioned it, but are you turning your calls into spreads at all? Defines a top for you, but also can provide additional cash flow/money. I only have 8 calls deep ITM, but selling weekly 50% otm calls gets me another 2k a week or so. Pennies in front of a steam roller and all, but if it jumps 50% in a week then you've won the game.

No spreads. Thought about it. Been doing spreads with non-Tesla options picked up in March which have annoyingly went itm.

Maybe post split when stakes are lower might play with it a bit on 10%. Mainly holding to ensure l hold for a year before taking profits and rolling forward. Once past that I might sell weeklies closer to strike and close out both positions if a run up put those iTm. Regardless it is just indescribable.

[hightower]

4M

If it’s not too much trouble, could you (or anyone else) explain what you actually did here? I tried to read back through various posts and saw something about a $2500 initial investment? Are you saying you somehow got to 4 million with just $2500?
My only understanding of investing in equities is to buy shares, wait for them to rise in value, then sell. Clearly that’s not what you are talking about. So I’m interested in learning what it is you did instead.

At one point I owned 26 shares of TSLA back when it was trading at 188/share. This was when I was first starting out. I spent 5k on those shares. After a few months I couldn’t hack the volatility with what seemed like a large investment at the time. So I sold my shares and got my money back. Lol, if I still owned them today they’d be worth over 50k. So, needless to say, I’ve been following TSLA pretty close ever since. I doubt I would have ever been able to hold on until now anyway, but it’s fun to think about.

[Nysoz]

If it’s not too much trouble, could you (or anyone else) explain what you actually did here? I tried to read back through various posts and saw something about a $2500 initial investment? Are you saying you somehow got to 4 million with just $2500?
My only understanding of investing in equities is to buy shares, wait for them to rise in value, then sell. Clearly that’s not what you are talking about. So I’m interested in learning what it is you did instead.

At one point I owned 26 shares of TSLA back when it was trading at 188/share. This was when I was first starting out. I spent 5k on those shares. After a few months I couldn’t hack the volatility with what seemed like a large investment at the time. So I sold my shares and got my money back. Lol, if I still owned them today they’d be worth over 50k. So, needless to say, I’ve been following TSLA pretty close ever since. I doubt I would have ever been able to hold on until now anyway, but it’s fun to think about.

not sure if their actual values but back in may/june 2019, tsla dipped to 170s and 'everyone' was expecting the company to go bankrupt. since everyone was expecting the company to go bankrupt, call options were dirt cheap. a call option is a contract to buy 100 shares of a stock at a certain date and price. so say, they bought contracts for the ability to buy 100 shares of TSLA at $500 on aug 2020. since no one was thinking that would happen, they bought the contract for like $500. people selling the contract thought it was free money because the odds of a company going bankrupt that would triple their share price was nil.

fast forward to today where the share price is now $2200. the owner of the contract still has the ability to buy 100 shares of TSLA at $500 on aug 2020. So instead of being worth $500 per contract, it's now worth $170k each (contract cost is 100 shares of TSLA @$500 = $50k where the market value is 100 shares @$2200 is $220k)

with these theoretical prices, 10 contracts @ $500 or $5000 back then now turned into $1.7M

[hightower]

not sure if their actual values but back in may/june 2019, tsla dipped to 170s and 'everyone' was expecting the company to go bankrupt. since everyone was expecting the company to go bankrupt, call options were dirt cheap. a call option is a contract to buy 100 shares of a stock at a certain date and price. so say, they bought contracts for the ability to buy 100 shares of TSLA at $500 on aug 2020. since no one was thinking that would happen, they bought the contract for like $500. people selling the contract thought it was free money because the odds of a company going bankrupt that would triple their share price was nil.

fast forward to today where the share price is now $2200. the owner of the contract still has the ability to buy 100 shares of TSLA at $500 on aug 2020. So instead of being worth $500 per contract, it's now worth $170k each (contract cost is 100 shares of TSLA @$500 = $50k where the market value is 100 shares @$2200 is $220k)

with these theoretical prices, 10 contracts @ $500 or $5000 back then now turned into $1.7M

Thank you! Now I get it. Congratulations to those with the foresight and balls it took to buy contracts back then. Wowzers!

Second stupid question, so does that mean in order to rake in profits, you would first have to come up with $500k to buy those shares? Or is there some other trick he’s using to cash in?

[xraygoggles]

My only understanding of investing in equities is to buy shares, wait for them to rise in value, then sell. Clearly that’s not what you are talking about. So I’m interested in learning what it is you did instead.

The only way to get exponential returns in a short period of time is to use options. Basically what Nysoz said above applies to anyone who made bank recently with Tesla options. What makes the returns even more unbelievable for Tesla, specifically, is that not only did the price skyrocket in a short period of time, but because the stock is so volatile in general (like you mentioned too), the option contracts have much higher implied volatility (IV), meaning that if there is a move in the stock (in either direction), it will juice the returns even further.

So it's like adding gasoline to the fire: you already have leverage with the call contracts, then betting on a stock with very high IV makes the gains (or losses) even more leveraged. Ends up being a grand slam if things turn your way.

[Nysoz]

Thank you! Now I get it. Congratulations to those with the foresight and balls it took to buy contracts back then. Wowzers!

Second stupid question, so does that mean in order to rake in profits, you would first have to come up with $500k to buy those shares? Or is there some other trick he’s using to cash in?

since you own the contract you can do whatever you want with it. you can exercise the contract and spend $50k to buy 100 shares of TSLA, or sell it to the "market makers". those are the people/banks/institutions that buy and write these options.

if the inherent value of each of these theoretical contracts are worth $170k, they might offer $165k or something for it so you don't have to exercise the contract and they don't have to sell you lots of shares for dirt cheap.

[Zaphod]

No spreads. Thought about it. Been doing spreads with non-Tesla options picked up in March which have annoyingly went itm.

Maybe post split when stakes are lower might play with it a bit on 10%. Mainly holding to ensure l hold for a year before taking profits and rolling forward. Once past that I might sell weeklies closer to strike and close out both positions if a run up put those iTm. Regardless it is just indescribable.

Do you have plans to maybe do this, I was wondering as well. While it would define a top, you could do this weekly super far otm and with the IV premium now, really make a killing even at 3k strikes. Further out is a different risk of course but it would definitely take some risk off the table and some would be basically free money. Yes, you will kick yourself if it goes to 3k, but you get the gains up til your strike of course and with tsla the iv is still great.

Again, kudos to holding when you've already won and amidst volatility, that is impressive.

Ive actually bought my own covered calls back in short order when the market was moving even.

[Zaphod]

The only way to get exponential returns in a short period of time is to use options. Basically what Nysoz said above applies to anyone who made bank recently with Tesla options. What makes the returns even more unbelievable for Tesla, specifically, is that not only did the price skyrocket in a short period of time, but because the stock is so volatile in general (like you mentioned too), the option contracts have much higher implied volatility (IV), meaning that if there is a move in the stock (in either direction), it will juice the returns even further.

So it's like adding gasoline to the fire: you already have leverage with the call contracts, then betting on a stock with very high IV makes the gains (or losses) even more leveraged. Ends up being a grand slam if things turn your way.

Actually the high IV makes the options more expensive and less likely to pay. What pays is if the delta moves more than the IV, and if the IV also rises further.

If IV collapses, option price decreases even if stock priced the same.

What you want to make a mint and what BCBiker essentially did, was buy when much lower and basically free option, and have it move massively to you, thats exceedingly rare, and even more rare to hold on.

[BCBiker]

Do you have plans to maybe do this, I was wondering as well. While it would define a top, you could do this weekly super far otm and with the IV premium now, really make a killing even at 3k strikes. Further out is a different risk of course but it would definitely take some risk off the table and some would be basically free money. Yes, you will kick yourself if it goes to 3k, but you get the gains up til your strike of course and with tsla the iv is still great.

Again, kudos to holding when you've already won and amidst volatility, that is impressive.

Ive actually bought my own covered calls back in short order when the market was moving even.

ya. Testing my tolerance and understanding good way to do this. I think the upside is going to be fairly significant up until end of September. I agree $3000 seems crazy in short term but it wouldn’t surprise me if it gets there in the last gasp of this crazy run before the short term catalysts run their course. It is possible the S&P buy in could lead to something completely crazy. There is some point I would just sell spreads to close position. Somewhere in the upper $2000s I think I might write some of these short term ones.

[A nony mous]

If it’s not too much trouble, could you (or anyone else) explain what you actually did here? I tried to read back through various posts and saw something about a $2500 initial investment? Are you saying you somehow got to 4 million with just $2500?
My only understanding of investing in equities is to buy shares, wait for them to rise in value, then sell. Clearly that’s not what you are talking about. So I’m interested in learning what it is you did instead.

At one point I owned 26 shares of TSLA back when it was trading at 188/share. This was when I was first starting out. I spent 5k on those shares. After a few months I couldn’t hack the volatility with what seemed like a large investment at the time. So I sold my shares and got my money back. Lol, if I still owned them today they’d be worth over 50k. So, needless to say, I’ve been following TSLA pretty close ever since. I doubt I would have ever been able to hold on until now anyway, but it’s fun to think about.

When did you buy? Makes a huge difference in mindset!

[xraygoggles]

Actually the high IV makes the options more expensive and less likely to pay. What pays is if the delta moves more than the IV, and if the IV also rises further.

If IV collapses, option price decreases even if stock priced the same.

What you want to make a mint and what BCBiker essentially did, was buy when much lower and basically free option, and have it move massively to you, thats exceedingly rare, and even more rare to hold on.

Yeah, you're right. IV can really burn you if not careful.

During the last earnings, I bet on the correct direction for Tesla, but the IV crush was so large the next day, I ended up losing most of the gains I should have had... At least my shares made up for that loss.