Tesla, the investment

[BCBiker]

https://forum.whitecoatinvestor.com/the-lounge/248861-update

I apologize for my short peacock post. I guess with this new forum it is impossible to find old threads on my phone.

since some people asked I still hold many deep itm call options most that I still own were bought in March 2020 for about $80,000 and are now worth over $5.5M. I also have 1000 shares from exercising options and $1M for taxes and exercising calls. As of close today I’m just under $8M in last 12 months gains on options. I plan to exercise the remaining contracts to avoid taxable events and will carry around 10,000 shares for next decade. After taxes I will need a bit of margin that I will pay off by selling short term deep otm calls so should be free and clear in next year or two.

I have evolved on my strategy over time. At one point I just wanted to take gains after taxes and go back to index funds but battery day really changed my attitude on Tesla and their potential to be by far the largest and most valuable company in the world. I do think stock is absolutely insanely valued by all standard metrics now but the risk adjusted return on invested capital is lower than any company on the market. They are executing the most enormous change in energy market we have seen since standard oil and are integrating the entire business under one company while also selling expensive consumer products, software and have a legitimate shot at taking the entire mobility market.

with planned battery product by 2030 thru will have around $1-2T in revenue on cars and grid stability solutions alone. They also can realize recurring revenue on software sales, semi trucks and electricity arbitrage. My 2030 price target for TSLA is $7-18T which means 10,000 shares will have market value of $70-180M.

Obviously “risky” but this investment started with about $3000 and I have standard practices for all wci readers. How do I justify this? Well it is my conviction and almost a business of options so I will stayed invested and if it fails I have my standard plan for FIRE in 10-15 years.

[fatlittlepig]

Seems foolish. Sell the calls and declare victory.

[xraygoggles]

https://forum.whitecoatinvestor.com/.../248861-update

I apologize for my short peacock post. I guess with this new forum it is impossible to find old threads on my phone.

since some people asked I still hold many deep itm call options most that I still own were bought in March 2020 for about $80,000 and are now worth over $5.5M. I also have 1000 shares from exercising options and $1M for taxes and exercising calls. As of close today I’m just under $8M in last 12 months gains on options. I plan to exercise the remaining contracts to avoid taxable events and will carry around 10,000 shares for next decade. After taxes I will need a bit of margin that I will pay off by selling short term deep otm calls so should be free and clear in next year or two.

I have evolved on my strategy over time. At one point I just wanted to take gains after taxes and go back to index funds but battery day really changed my attitude on Tesla and their potential to be by far the largest and most valuable company in the world. I do think stock is absolutely insanely valued by all standard metrics now but the risk adjusted return on invested capital is lower than any company on the market. They are executing the most enormous change in energy market we have seen since standard oil and are integrating the entire business under one company while also selling expensive consumer products, software and have a legitimate shot at taking the entire mobility market.

with planned battery product by 2030 thru will have around $1-2T in revenue on cars and grid stability solutions alone. They also can realize recurring revenue on software sales, semi trucks and electricity arbitrage. My 2030 price target for TSLA is $7-18T which means 10,000 shares will have market value of $70-180M.

Obviously “risky” but this investment started with about $3000 and I have standard practices for all wci readers. How do I justify this? Well it is my conviction and almost a business of options so I will stayed invested and if it fails I have my standard plan for FIRE in 10-15 years.

Why not at least take some risk off the table, at this valuation? Even selling say 1M of Tesla equity for any ARK fund that has 10% Tesla exposure is a very reasonable option, IMO.

At these numbers, any incremental increases will not reasonably change your life at all, will it? But a big drop certainly will...

[BCBiker]

Why not at least take some risk off the table, at this valuation? Even selling say 1M of Tesla equity for any ARK fund that has 10% Tesla exposure is a very reasonable option, IMO.

At these numbers, any incremental increases will not reasonably change your life at all, will it? But a big drop certainly will...

I don’t need this money. A big drop makes basically no difference to me. $7M versus $3M is not a change to me. I have $1M out of it already on the side in other investments ( not including retirement). I fully anticipate a pullback. Probably in the next 3 weeks actually. What I want long term is major exposure to Tesla’s cash flows and no more taxes on the millions in gains.

[CordMcNally]

I don’t need this money.

Want my Venmo?

[burritos]

Why not at least take some risk off the table, at this valuation? Even selling say 1M of Tesla equity for any ARK fund that has 10% Tesla exposure is a very reasonable option, IMO.

At these numbers, any incremental increases will not reasonably change your life at all, will it? But a big drop certainly will...

Because

[fatlittlepig]

Your reasoning makes no sense but I’m glad you’re doing it. It will make for a good story someday when your shares are worth 1/10th of current valuation, then again maybe not.

[Tim]

BCBiker
It is not peacocking nor trash talking, just stating facts.

https://youtu.be/9NIKK_OFvFY

You called your shot and played it well. Not sure of the 10 year plan, but thank you for the update. You got a backup plan.

[BCBiker]

Your reasoning makes no sense but I’m glad you’re doing it. It will make for a good story someday when your shares are worth 1/10th of current valuation, then again maybe not.

Love this comment. I put this scenario at very low probability but sure. People do not understand TSLA which is why it was such a good small bet in first place.

[xraygoggles]

I don’t need this money. A big drop makes basically no difference to me. $7M versus $3M is not a change to me. I have $1M out of it already on the side in other investments ( not including retirement). I fully anticipate a pullback. Probably in the next 3 weeks actually. What I want long term is major exposure to Tesla’s cash flows and no more taxes on the millions in gains.

Okay, then, if you are willing to roll the dice with a huge Tesla position, that's great too. I like risk-taking, and tbh, it gets much easier to take risk the larger your portfolio gets, assuming the risk has some underlying reason. After all, Elon didn't become the world's richest man yesterday by diversifying his stock in VTI.

[Kamban]

I don’t need this money. A big drop makes basically no difference to me. $7M versus $3M is not a change to me. I have $1M out of it already on the side in other investments ( not including retirement). I fully anticipate a pullback. Probably in the next 3 weeks actually. What I want long term is major exposure to Tesla’s cash flows and no more taxes on the millions in gains.

Actually I get your stance. If you have other sources of continuing income and have a decent retirement plan that will make you live comfortably, there is no harm in riding these investments you believe in. Provided you have no "what if" regrets then there is no harm in letting those shares be held till 2030. Maybe it will be only $10M or it might be $200M. I would do the same thing as you.

[BCBiker]

Okay, then, if you are willing to roll the dice with a huge Tesla position, that's great too. I like risk-taking, and tbh, it gets much easier to take risk the larger your portfolio gets, assuming the risk has some underlying reason. After all, Elon didn't become the world's richest man yesterday by diversifying his stock in VTI.

This is why 2nd $1M is easier than the first. My most recent came in the last 48 hours...

[burritos]

BCBiker
It is not peacocking nor trash talking, just stating facts.

Both can occur at the same time.

[Nysoz]

Concentration builds wealth, diversification preserves it.

If you really don't need the money after winning the game then continue plugging away. I've won my game so I'm starting to diversify a bit to help preserve some wealth needed for FIRE, but keeping a good exposure to try and continue building wealth past my FI number.

I do like your plan of exercising as many shares as you can (sometimes using margin) and selling covered calls to cover margin interest and cash flow to reduce margin use. That's essentially what I do as well.

The next step is planning your exit and taxes. Exercising your calls loses any extrinsic value of the options so it matters a bit how much that is depending how far they are to expiration/volatility. If you have any leaps held long enough for LTCG, it might be better to sell the options and buy the shares rather than exercising if there's still a decent amount of extrinsic value left.

If you do plan on exercising and using margin, depending on how much margin you use, the rate can be negotiable.

[Lordosis]

Concentration builds wealth, diversification preserves it.

Only if you are concentrated in the right thing at the right time.