Tesla short Put exit

 14 Jun

in the interest of full disclosure unlike most gurus on twitter that only post their winners. made a tactical decision today about the short puts ive been defending on TESLA at strikes near 1000 from earlier in the year. I am at risk of marking the bottom with my actions. as i review my twitter stream both on tesla specific commentary and general market, there are many that i follow that i respect still seeing further downside for general market in raw SPY points and/or a VIX blowoff. many continue to say that they still have not seen that panic/desperation point the will mark the bottom / and or a VIX above 40. will that happen i cant say..

as far as tesla, multiple technical analysis guys are targeting sub 600 and low 500s. i broke out the calculator so see if can withstand a drop to 500 with my short puts and came to the conclusion that i likely will get maintenance calls and be put in the situation of closing the puts, depositing more funds, or selling off other positions to meet any maintenance calls.

Since entering the short puts months ago i have sold numerous call credit spreads against (ie at higher strikes than the short puts) and have rolled week to week or to next month for credits, and have bought debit put spreads on the way down as hedges. so the actual "loss" is about half but the paper loss is a nice kick in the balls. i still have credit spreads working now and long Leaps and short some near dated calls but the defense of the short puts is consuming more and more of the buying power available. also that buying power set aside for the short puts is not really making me more than chump change now since the strikes are way higher, so rolling even from month to month is only a few hundred bucks. 

So point being, i closed out some short puts today leaving only a couple that are cash secured. now if stock returns to near 1000 without that next leg down i will be an idiot but right now in the near term its protect the account. the account value is unchanged after closing the puts, just have less cash now

on the subject of cash secured, ive been doing some math in my head and coming to the conclusion that since the short puts are 900+ strikes that it might be better to be "put the stock" come opex time.. looking at it like this. currently expires July monthly, last i looked, rolling out to August monthly same strike only nets me about $400.. thats for an entire month.. vs just being Put the stock (yes for that $900+ stock price), but with owning the shares im able to sell covered calls nearer dated, say every 2 weeks out for premium far in excess of that $400 monthly(such as the 800calls). will have to revisit this right before opex and bounce some numbers around.

TESLA trade idea

 

4 Jun

Stock just pulled back 10 percent, most blaming Elon latest comment about laying off 10% of the workforce later clarified to 10% of salaried workers and worrisome feeling about economy. regardless of reasons the stock is at 700 now.

-heres the scenario im assuming: that you have at least 100 shares or long a Leap at 700strike or lower and you expect stock to rebound from here. not a big surprise but the trade will be a call ratio spread.

-also of note that the big down move on friday caused a 30 point gap from about 743-775ish give or take. 

a call ratio spread is buying one call and selling two higher calls. that second call is not naked, it is paired with either the 100 shares or the leap you already have. so no added buying power is needed by your broker. i want to target the 775 area with the presumption that the gap will get filled. no guarantee that the gap gets filled during this opex, could happen next trading day, or week after. Gaps almost always fill at some point. its just a matter of time. but you have to make a call at some point.

Buy the JUN 730 call, sell two 775 calls - currently after hours quote is for a small credit. profit range at opex  is 730-820 on just THIS spread. but your stock/leap is gaining as well so you are pretty much gaining 2x on the up move. yes, if stock is above 820 at opex you start to technically lose money on this spread but your stock has gained 120 points, your stock is gaining as the spread is losing if it continues higher.. there is a breakeven way above 1000 but its not really practical to consider. easier to just to say that your profits are capped at 820 at opex.

you can widen the strikes if you want and pay a debit but i select my strikes in order to have tiny credit. the credit is not important, i just dont want to pay for the trade in case im wrong or timing is off. Historically i undershoot the strikes, ie the stock goes higher than i expect

the two 775 short calls have to decay away so initially if stock rebounds the trade will be a mark to market loss, the closer to opex the more the trade will move in your favor. just plan on holding till thursday / friday of opex week

Best case the stock is near 775 on friday opex , youve gained maybe $4000 on this spread. i referenced that gap earlier.. thats whats driving the strike selection for me on this trade. you may have other levels that you see, maybe other technical indicators, or you want to use a different time frame. the further out in time you go the wider you can make the strikes and still get a credit.. but of course you have to wait longer. just an idea . here is the gap from friday, 5min chart