The Tesla Wheel vs the Managed Wheel

 

18 Nov - updated after doing some thinking about this, im going to alter the "managed wheel" and actually manage it as if i was trading it vs waiting till opex day .. which in hindsight is not realistic if im going to claim that a managed wheel is superior. therefore, in addition to the Short Dec240 Put , will Sell 2x Dec260/270 credit call spreads at $1.45 credit per for $2.90 ($290) added credit. note the this account is still all cash with the Short Put sold. in accordance to the Tastytrade mechanics i will adjust positions near 21 DTE vs opex now.. a bit late for this month buy might as well start now since monthly opex just happenend. 

18 Nov

-The Wheel - coming into month with 100 shares and a Nov 242.50 covered call. stock closed at 235ish on opex day so the covered call would expire at full value. the new cost basis is $240.35 , being generous and using todays (Saturday) prices, will sell a DEC245 covered call at $7.60 credit. Summary thus far, started with $27,500 cash in order to be able to sell a cash secured put.. now hold 100 shares and $4235cash. based on closing stock price of $235.. the account is valued at $27735 for a mark to market gain of $235 since inception.

-The Managed Wheel - coming into month with Nov250 short Put. stock closed at 235ish, so adjustment would have been to roll from Nov250 to Dec240, looks like for about .50 debit. third month in a row to roll out the short put and as a result it will show a mark to mark loss of -$700ish . The Dec240 is valued at about $14.50 so to reach break even need it to decay at least that $700ish. best case stock is above 240 at opex and short put expires at full value. Summary thus far started with $27,500 cash in order to be able to sell a cash secured put. had a gain of $485 before latest Put sale 3 months ago. include the mark to market loss from rolling puts and i come up with a mark to market $300 loss while holding the Dec short put. for further actions i would sell credit call spreads higher than the short put (Jade Lizard), such as the Dec 260/270 for $1.45 credit if i actually had this position. note that this Managed Wheel is still all cash.

so this month The Wheel moves into the lead.. not huge but better than nothing.. but also since i started this in July, neither method has resulted in satisfactory gains IMO for 5months, but also not significant losses. given the wide swings in the stock price that in itself is notable

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21 Oct

Big selloff by TSLA after earnings closing on opex day at 212.

The Wheel - last month the trade was selling the Oct250 put, thus you were "put the stock" again. forced to buy the shares at 250. minus the $7.15 in premium from the Put sale for the net cost of $242.85. for simplicity will now sell a covered call using saturdays prices. looks like the $2.50 strikes are coming on the boards on monday so no actual quote for the $242.50 calls, will be generous and split the difference between 240/245.. so selling the NOV 242.50 covered call at $2.75 credit against the new shares.

The Managed Wheel - the stock dropped so much that adjusting the Oct250 short put for credit was not possible. so using todays weekend pricing. Rolling the Oct250 short put to the Nov250 short put for flat . if stock recovers above 250 at opex of course this Nov put will expire at full profit and that original $715 credit from the Oct put sale then gets booked as a profit. that would be best case. if i wanted to really manage this position if the stock popped a little i would look to sell some credit call spreads above 250 strike for added premium. but will keep it simple on here.note this "account" is still 100% cash plus the short put.

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15 Sep 

for SEP 

The Wheel - last month TSLA dropped so much that in order to get at least $1.00 in credit ($100) for a monthly covered call i dropped the strike price down below the true breakeven. you could say i screwed it up, maybe, but would an actual investor sell a covered call 30days out for 30 cents. not likely. regardless, TSLA made a huge comeback these last 30 days closing at 274.. thus the no action Wheel strategy would have the covered call assigned and be forced to sell the shares at 260. net with the paltry $1.00 covered call the credit is $26100. under Aug comments you see the cost basis was $26215. thus $26215 - todays credit of $26100 gives the wheel a loss or i guess cost basis of negative $115. for simplicity will use todays closing prices and sell a new Put for Oct to start this circus again

new short Put sale is the OCT 250 put at $7.15 credit (35DTE and 25 delta)

The Adjusted Wheel - coming into this opex the position was holding the SEP265 short put. remarkedly TSLA stock rallied huge this cycle to close at 274 this the short put will expire at max profit. max profit above and beyond needed from previous rolling to now have a credit. with the short put expired the position positive $485. so vs the standard wheel +600 difference. since it was a short put the account is all cash still and will enter in a new Put sale for OCT. same as above

new short Put sale is the OCT 250 put at $7.15 credit (35DTE and 25 delta)

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19Aug

For Aug:

The Wheel - the july275 put was exercised (Put the stock) at $27500 and an AUG 270 covered call was sold at $8.00 which expired at full value as TSLA stock closed at 215 or so on 18Aug. average price for shares including the credit from puts and covered calls thus far is $26215 ($262.15) - though not the published methodology im going to drop a few strikes and Sell the SEP260 call at $1.00 credit. proper wheel mechanics are to sell covered call at breakeven which is near 270 but that call is for crumbs. this is the shortcoming of the wheel IMO. when the stock keeps dropping and dropping.

Adjusted Wheel - previously rolled the July 275 put to Aug 265 for flat.. now with stock at 215 its so far out of the money a roll for credit is not possible from month to month so rolled the Aug265 put to the SEP 265 for flat.. net net the adjusted wheel is down $4500 mark to market(but still in all cash in account) .. but better than The Wheel's loss of near $5000 (stock at $215 and shares cost basis at $267)

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mark lexus

@Mark_Lexus

·

Jul 17

$TSLA entry #1 into the paper trade comparison of The Wheel vs a Managed Wheel Sell the JULY 275 put at $4.85 credit .stock at 290, delta 27 , 5 DTE The Wheel - above 275 at opex and Put expires max profit, below 275 gets Put the Stock Managed Wheel - adjust Put based on price

22July

above was the entry for "The Wheel".. the wheel implies a take it to expiration methodology with no adjustments despite in the last portion there may be hardly any decay. so i will emulate. outside of special events (earnings / deliveries) i will use monthly options for ease of tracking. i will let option go to expiration and use the after hours pricing to be consistent for the "managed wheel" and use the monday opening price for the next entry for the standard wheel. example.. if i was "put the stock" that would happen on a saturday, so the monday opening is when the wheel would dictate to sell a covered call.

Summary of the week:

-sold the July monthly 275 put shown above. stock closed at 260 on friday 21july.

-for the "managed wheel" that 275put would be at $15 near closing and my management of the position would be to roll the July 275 put to the Aug 265 put which was at $15.50.. for ease of tracking will just call it flat.. no debit no credit .. now the position is holding the Aug 265 short put , adding in the credit from the entry the account is down $1015 (the Put now needs to decay or move higher for at least $10.15 to get back to break even). beyond the scope of this simple simon exercise you could factor in how much buying power you have by continuing to hold a short put vs being Put the stock and could potentially enter into other trades with that buying power vs committing all your cash by being "put the stock"

- for the "standard wheel" you ended up being "put the stock" , you bought the shares at 275. your net price is 275 minus the $4.85 credit from Put entry... just call it 270 for easy math.. per the Wheel methodology you are now to sell a covered call at 270 or higher. i will review monday morning depending on where stock opens, right now the Aug270 is about $9.50 credit.. if stock gaps higher, then the covered call price will improve.. will update on monday

24July update- a few minutes after opening i noted the Aug270 call at $8.00 so will use that price for the paper trade

update - Gym Bro middle east intell and trade

 

21 oct - had another bullshit session with the same gym bro. again retired Special Forces and is independent contractor advising on security issues. no particular order, review the conversation below from 10 Oct first:

- asked again about the possible attacks on the homeland and thanksgiving. he referenced that the timing might be in conjunction with the expiration of the latest budget continuing resolution which expires early Dec. explaining that federal anti terror agencies and task forces will have no money to conduct operations. gave example that if government shutdown happens that FBI will not be able to use their accounts to fly anywhere or even fuel their vehicles since they are GSA accounts. i said this isnt the first shutdown weve had, isnt there some type of IOU system to keep those agencies functioning... said something about "they" are trying to transfer some funds from something to something else to fund some anti terror taskforce. he seems to be current on whats happening. even referencing something i just read on my twitter stream while sitting in the truck in the parking lot prior.

-mentioned the brief hubbub about Biden meeting Delta Force operators while in Israel and their faces were not blurred. i said im sure this guys knew press would be there.. meaning it wasnt a meeting in a secure room, for your eyes only shit. he agreed.. the point i was making is everyone was all moist about not blurring the faces but had no issue with Delta Force actually being on the ground in Israel.. ie "no boots on the ground" ... he said that "the FBI HRT is also there (Hostage Rescue)

-forget the country but said some of the "protesters" that were arrested confessed that they were paid to protest in support of the Palestinians .. paid by Iran .. europe i believe it was.. makes sense

-i switched subjects to an internet podcast show i catch often .. The Shawn Ryan Show... guy taught John Wick his skills and ex SEAL.. has alot of tier 1 operators on show, recently a retired Delta operator from black hawk down days.. i found the segment very moving and felt for him as he struggled to cope even now.. personally i was at Fort Bliss at the time and missed the initial deployment into somalia by about 6weeks for a small armored task force.. i believe 24th infantry division (3d infantry division) sent some units.. asked gym bro where he was during black hawk down .. said he was "in country" .. started getting into specifics about how the administration mid op called the guys to say that the somali enemy are now our allies, so therefore all the support guys like spectre gun ships, more SF guys were grounded and the actual relief columns from 10th mountain and more Delta guys came to near shooting it out with the base security that would not let them leave. now ive read multiple books that included black hawk down.. the actual book, a book from a SEAL Sniper that was on overwatch.. i forget the name (not chris kyle) and thats the first ive heard anything like that.. but it makes perfect sense given how U.S. foreign policy works. my gym bro loves to talk so i let him ramble on about how when he was training forces in central america he would get a call to stop training these guys since now they are the enemy, they will begin training the old enemy to defeat the new enemy that just learned tactics from his team... seems typical

-i made a wiseass comment that too bad we couldnt  have brought all that gear back from Afghanistan. would come in handy for ukraine.. said he expects another Blackwater private security company to stand up and much of their weapons sourcing will come from paying the taliban for the gear and weapons.

-tried again to get a stock suggestion from him, again noting he is not a trader but he brought one on his phone. again in the semiconductor space.. which i dont see the appeal if the regional conflict blows up.. stock is SNPS , never heard of... my 10minutes of twitter searching made it seam like they do the software for new chips.. options look illiquid and only monthly so dont see an entry for me. has had a good run though

if i drank id offer to get a beer with the guy and let him ramble on about some places hes been. Told me previously that while deployed to Bosnia during the ethnic fighting his guys would routinely have firefights with Russian Spectnaz teams.. hes a good dude, im just not able to put in the time to get the detailed responses since we are both about to get a workout in.. told him i expect some updates next time i see him

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10oct - couldnt think of a catchier title.. i had a conversation with a gym bro today. he is retired Special Forces and has done some "contract work" as well.. he currently is a consultant for Homeland Defense / FBI / and Intelligence agencies / businesses.. he basically talks to them about risks and compliances. ive always kept the conversations casual and general, not wanting to be super nosy but had a lengthier conversation today.. some topics in no particular order:

-main one first.. he said he expects some significant attacks on the U.S. homeland by Thanksgiving, essentially from Iran sponsored  sleeper cells that have utilized the open border in the south. targets would be a mass shooting of some type to create mass chaos and media coverage. i specifically asked if the targets would be larger like power grids, etc.. said no .. asked him is sources.. "do you have a FBI buddy feeding you this or he just running his mouth"... implied that he still has "sources" from where he served during his "contract work" .. i left it at that

-said his phone "has been ringing off the hook" this weekend with the israel / Palestinian war going on. said months ago they blew him off and said they had intel about an attack happening months ago. i saw that on twitter myself already so i dont know if he was just rephrasing the same reports i read or he/his group had proprietary intel

- said those same guys calling from Homeland / Assistant secretary to the something something in the FBI want him to come talk. said you guys still owe me payments for the last four sessions.. something about payments super slow with the government shutdown nearly happening.

-for israel he said you will see the propaganda machine from israel kick in now reference the hostages.. to shape the information that they are martyrs to the fighting. bringing on families / parents to talk about how their loved one would fight , blah blah... intent is to dull the media outrage (ie the western support) if hostages are killed in the bombings. 

-back to the coming attacks.. i said "by thanksgiving" sure is specific and not too far away.. he referenced some incidents recently that i never heard of..granted im not a news junkie.. i asked where would the targets be.. said look to the cities where the defund the police movements were popular... also said "just look whats happening in New york and Chicago"

-as far as Iran he said the key is if Syria will go along with anything, maybe ties to Hezbollah ? something something about Israel might attack Iran , which i dont agree with. i said i always heard that a limitation Israel had was a lack of / or a sufficient number of tanker refueling planes for the long flight and back unless some allies helped.. plus the obvious overflight of Syria/Jordan/Saudi Arabia/Iraq depending on their routes and i had thought that given previous Israeli air strikes on other arab countries (the strike on Iraq nuk site years ago) that iran as alot of their nuclear program underground. even the bunker buster type bombs might not be sufficient... didnt respond to that directly but said Iranian air defense is poor and they would rely on Syria for alot of it. seems like if thats the case then dont overfly syria, regardless.. i cant speak to Iranian air defense but id have to assume tactically to be on par with U.S. for planning purposes.. S-300/S-400 type stuff

- he acknowledged that Iran assisted with Hamas planning of the attacks. which shouldnt come as a big shock, flip it around.. the U.S. collaborates with its allies on regional issues.. same thing.. for discussion i asked what would the "regions" reaction be if Israel attacked Iran.. .i threw out some possibilities.. like Egypt/Jordan/Iraq/Lebanon/saudi arabia and others joining into an anti-israel coalition.. attacking tankers in the persian gulf again.. shia/sunni not withstanding... not a real response but said the timing of the Hamas attacks was to prevent the soon to be approved treaty/agreement between Israel / Saudi Arabia to more normalize relations and as part of that was a stipulation on Saudi Arabia that they could not assist any other arab neighbor against israel.. also the timing of the Hamas attack coincided with a somewhat paralyzed U.S. government with no speaker of the house. i didnt see the relevance.. regardless

-my preworkout was starting to kick in and wanted to wrap up the bullshit session so i transitioned to "knowing what you know and what you think will happen.. what would you be investing in or shorting" ... i couldnt follow his logic but the name he came up with was Marvel Tech (MRVL) because they had alot of military contracts for their semiconductors. i threw out NVDA , Intel, AMD ... he said he was impressed with MRVL with the amount of military work "when he visited them" to do security compliance checks.. dont know what exactly he would be looking at. 

-also said if anything to sell airlines. .not really a no brainer given the reactions after 9/11 but he said travel will be down after the "attacks" .. could have just asked Bobby Axelrod for same answer really.

-he specifically said he didnt think anything for over the December holidays because Biden this or that.. seems backwards to me

Summary: this guy has stacked some bodies in several countries and has worked with Homeland and Law Enforcement agencies .. still is. so i will give him the benefit of the doubt... the timing of any attacks is the magic bullet for all counter intel types. I am going to do some work on MRVL and likely do a small position.. thinking at least a 6month out LEAP with some covered calls / spreads against along the way to lower the cost basis. as far as airlines, they have been dog shit for a while but will look for an entry for possibly Put spreads.. not betting the house. just some exposure.. might profit from general market direction anyway without a mass casualty event.

$TSLA bearish trade idea 28 feb

 

28 feb

investor day happening on 28feb after market.. a trade idea the market reacts poorly.. 

stock is 207ish after hours on 27th.. the stock hit a low of about 187 on the 13th of Feb so will go with the assumption that stock works its way lower to test that level. Going to use a 1x2 Put Ratio Spread. buy 1 Put, sell 2 Puts lower.. will need buying power for that 2nd Put... 

MAR 200/185 1x2 Put spread for .50 debit - buy one 200, sell two 185s

profit range at MAR monthly opex is 200-160. Consider it like selling a 185 Put but buying a Put spread to profit on the move to 185 .. a perfect on the nuts pin at 185 at opex is $1500 profit per 1x2. the two 185's will need to decay away to see the profits so plan on holding to the last day or two. If the stock takes off, monitor this position because you may be able to close for a credit as the 185s decay quicker.. you can then reestablish this trade higher for a hedge or just move on.

if stock is under 185 at opex you will be "put the stock" at 185.. you will buy 100shares at 185.. but you should close this trade out regardless on opex day.

i will be reviewing this to put on myself before market close on 28th prior to investor day.. i like that $40 range for a hedge to downside (in addition to my weekly short calls). my intent is to enter ratio spreads for near zero or slight credit, so you can make the ratio wider.. say the 200/150 but it will cost more. close to zero is just my method. chose strikes youre comfortable with. if you use weekly options you will not be able to have an as wide spread (and be near zero cost) , which why i went to MAR monthly .. again since its March, you will need to wait till near opex to see those profits, will likely be mark to market loss till then. patience, let the hedge work for you

Homebuilding Rant 18jan 2023

 18 jun

ok meow, i have to make some comments about the current situation with new home construction thru the eyes of an ex-construction manager with 20 year's experience (retired at new years 2021). these views are from what ive observed as a construction guy and may or may not jive with a sales guy or a non homebuilding guy that makes charts and trendlines for a living that keeps telling me for the last 20 years that there has been a shortage of new homes.

the two big issues right now as i see it are interest rates and the price of a home .. a new build.... this is a typical size home i built from our competition.

$600k now, was low $400s last year ... $600k gets you alot of house in texas. First off, interest rates, you see the twitter comments or CNBC hits about 7%+ interest rates .. ok , maybe.. .but if youve bought a house before or flip side if you've been in the business, you know rates are flexible and may be negotiable. likely a better deal is available if you use the in house lender from the homebuilder. each builder has either a partnership with a lender or its actually part of the homebuilder umbrella of services. Lennar for instance has a developer portion, have their own lender, their own title company. KB home is similar. so there is an inherent efficiency for the customer by staying in house.. some customers, maybe based on a realtors recommendation, will say no im using my own lender, Bank of America or whatever.. ok your choice, but in hindsight you are at a disadvantage using an outside lender. with in house lender, EVERYONE is working together to get you closed, lender talks to my sales lady, who talks to me, etc. everyone knows each other. heres the point.. i just pulled this off a builder website that i will cut and paste: 

Up to $12k in closing costs & 4.750% (4.963% APR) interest rate* for quick move in homes.

thats today 18 june.. but.. but.. cnbc said 7%...  unless you walk in with a briefcase of cash, it will best case still take about 2-3 weeks to get you to closing. approvals, appraisals, paperwork, etc.. all that behind the scenes stuff i dont see but hear about in conversation from my sales ladies. 

    so this builder that advertised this buy down incentive has some homes that are not sold, either finished, or about to be finished likely by end of July.. getting to be too late for June.. and the carrot for the customer is they will get $12K off of closing costs (thats about 3%) and 4.75% interest IF THEY USE THE IN HOUSE LENDER.. want Bank of America.. you get full price and whatever interest rate BOA has.. But builders can also say NO OUTSIDE LENDERS... at all.. that happened last year. by far the most pain in the ass (unprepared) customers are via outside lenders. Via in house there is a somewhat pre approval process.

    so no outside lenders somewhat culls out the less qualified customers that might not get the home anyway during that time when it could have been sold to a legit customer. Customer is at the mercy of whats available of course during the time frame, but its an example of how the headlines online and CNBC are not necessarily accurate. but if you walk in a sales office and want to buy that cul-de-sac lot that has not started yet, i will bet you a Coke Zero you will be paying full price.. plus a juicy lot premium and will have to wait a year till i can get it finished and then pay the prevailing interest rate a year from now.. no quick move in discount for you.

    secondly with rising interest rates, there starts to be a fear of missing out feeling start to build up. if you really think about it, what drove that huge increase in home prices the last 18months.. material costs go up and down. most of the increase, IMO, was just straight up more buyers than sellers, crazy numbers, maybe covid driven once the silly lockdowns ceased.. customers working from home realize they DO need a bigger house if they are trying to work in the study, but their kids also are  home schooling being a pain in the ass in another part of the house, and your wife is home all day too, etc 

   i did an informal survey of my last 12 months worth of customers when i had my prestart meeting with them simply asking what brings them to wanting a new build right now... had zero investors, 10% relocating from another area/ another state and 90% just wanting a bigger house and or their current house is nearly 20years old now and they have had 4 kids since, ie bigger house needed. 

    the argument of Blackrock buying up all these homes at least where i was is bullshit.. maybe thats existing homes. dont get me wrong, there are those types of deals out there. whether its Blackrock or Berkshire doing the buying. my builder had a deal going that one just-started subdivision was going right to a Blackrock type company who would immediately rent out.. advantage to the builder.. easier to build since you dont have 168 customers to ass kiss, everything sold up front, no marketing needed, no customer walks, no realtors to deal with, no sketchy loan applications.  i would have volunteered for the work but was too far a drive. Back in the day, pre financial crisis, an investor would be sometimes solicited.. need 2-3 more closings to make the fiscal year.. the director of sales would call Mr. Jones, an investor who has purchased 28 already this year, and see if he can take 3 more at 25% discount. but thats the old timey days.

    the fear of missing out caused many to start over bidding, over paying and caused more sellers to hit the markets when they saw the demand. IMO the crazy demand pulled in sales just so many could get top dollar on their current house.. but then THEY would need a NEW house.. causing increased demand for new houses. now back to interest rates, the media has flooded the airwaves about rates increasing, the Fed raising rates several more times. now that gets into a situation where those on-the-fence customers either from price/availability/ just looking might get forced into making that purchase. The wise sales team will convey that to them.. waiting another 6 months might mean mortgage rates are at 7%. So rising rates starts to convey a sense of urgency with some customers. of course thats offset by those people who straight up will not be able to afford the current monthly payments. point being that customers are still there, those promotions of 4.75% will still be there. the builders will get their closings while getting decent margins still. 

    if you are savvy and are aware of when the end of quarter / end of fiscal year is for the builder you might be able to negotiate an even better price.. for example customer A cancels for an August closing, customer B has same plan down the street but his home is 5 months later in the pipeline with a tentative January closing.. sales team talks to customer B to see if he will transfer over. probably a slight discount is offered, can lock in interest rate now vs 6 months at potentially higher.. Customer B knowing that August is end of quarter might be able to negotiate that price down some.. offer 25k lower, play the "my wife really likes the other lot better", "wasnt ready to close next month" "kids are still in other school" type excuses that a $25K discount would solve. worth a try. better than a coin flip the chain of command will accept that deal in order to "make their quarterly number" and not show an unsold finished home... ie, the builders will get their closings

    Let me paraphrase a conversation between our division president and our CEO from years back as it was told to me.. the CEO has a reputation for flying off the handle and being a no bullshit abrasive guy. at end of fiscal year all the DP's will meet with CEO.. our division fell 2 closings short of the build plan goal.. DP gave some answers about some cancellations.. blah blah.. CEO essentially says (yells).. "you couldnt get 2 more closings.. 2 fucking closings... you couldnt have discounted 2 homes $100,000 each to get 2 more closings" ... again those were the old timey days when closings were the only thing that mattered, now the metrics are shifting to margins.

18jan2023 

     

   going to finish up this rant today since i just saw a cnbc clip with the talking heads tap dancing about housing.. key points that "bottom may be in" , interest rates about to tick under 6% for a 30 year, and limited supply. cnbc and most of twitter has been on the wrong side of homebuilders for 12 months, continuing to cheerlead that housing is crashing and prices are coming down and honestly being pretty happy about their forecasts despite the millions of jobs homebuilding provides. all the while some homebuilder stocks are near 52week highs.. the lack of acknowledgement of being wrong is comical as stats get thrown out there to make the easy headlines.. cancellation rates, housing shortage, prices plunging. so many "bears" i see on twitter post ad nauseum stats and charts and rates but likely have never worked in the business.. worked.. not being an analyst.. worked as in getting up at 4am for a slab pour, filling up truck gas tank every 2 days, and routinely eating lunch at Circle K or sitting with a customer until midnight to get their contract squared away to be able to turn it in to corporate the next day.

   for nearly a year ive been consistent in saying the homebuilder stocks are detached from "housing" headlines.. much of which is focused on the existing home market.. one forecast i had (keeping in mind i still have buddies that are construction mangers and sales ladies) is that demand is still strong and will pick up as 2023 passes... after 20years of doing the grind its clear that management doesnt always have the correct forecast for the next 6-9months. they try their best of course. my forecast is that as interest rates normalize and tick lower (note why is the 30 year rate down to near 6% from over 7% but the Fed has raised rates).. point being the rates float around up and down.. currently down off the peak.. that the pent up demand (up top i mentioned my customer survey i did that most needed a bigger house.. MOST of those were already living with someone else.. parents temporarily usually awaiting their house to be complete. so the vast majority of the customers were not contingent on another house selling).. so pent up demand is starting to hit, timed with some decrease in prices, timed with some available buy downs by builders to keep homes moving will cause a surge in sales and cause the builders to ramp up starts over this year. 

   if been thru that before, was maybe 2015 or so, in early part of year management redid their build plan at direction of nationwide managers and they realized there would not be enough on the ground to make the "new" numbers. so word comes down that starts would increase.. and no bullshit, they tripled.. we called it The Jungle Rush... i argued with my supervisors that my pace is one start a week/ 3-4 a month. seeing how each CM has their own crews (framers, cornice, masons, painters, cleaners, carpenters) and they only work so fast. Giving me 3 starts a week for 8 weeks straight doesnt mean 3 frames start seeing how i have one frame crew. occasionally you can get a 2nd crew or your guy as another crew he subcontracts, but that doesnt work if the whole city is doing that. so starts 2 and 3 get stacked up, then come the following weeks 3 starts. so after a month i have a whole street with poured foundations and only 3 frames complete/in progress and of course management shitting bricks that nothings happening. Oh and it piles more work on the construction managers, causing build time to increase

   Point of all this is i think this will happen this year. surge in starts because of heavier demand. will cause lower or no price incentives. will cause higher prices, will cause higher margins (even during the grim 2021-2022 days the builder margins in high 20% range. thats huge)

   now having said all that essentially im in the camp that homebuilder STOCKS outperform in 2023

   

$TSLA trade idea 16jan2023

 16 Jan2023

with earnings coming up on 25 Jan. a bullish trade idea for TSLA. Premise that you have at least 100 shares or an existing long call / LEAP and you are bullish.

with stock at 122ish today. Enter the FEB 130 / 145 call ratio spread (buy one 130 / sell two 145). can do for about .50debit per. the profit range at Feb opex for just this spread is 130-160 with optimum being $1500 for a magical 145 pin at opex closing. Your long shares or long calls are also gaining during this move higher.

No added buying power needed since your broker will treat this as a long spread and a covered call. note that earnings are next week and this trade will include those. you will see mark to market losses likely on an up move until opex gets closer as you need the TWO 145s to decay away so plan on holding till expiration day or day prior to get your max gains.

if stock sell off you AND you do not want to wait till opex it possible the 145s will decay enough that you can exit this trade for a profit. you can then move the strikes lower and redo the trade or just move on.

I dont try to get cute and leg into this ratio spread.. as in buy the 130 and then wait for an up move to be able to sell the 145s against for better pricing to make the whole trade a net credit.. the price is the price to me. youre just risking .50 to make a max $1500

you can do this for every 100 share block/long option you have

FEB 130 / 145 call ratio spread for .50 debit 

United Health trade suggestion

 

6 Aug 

on the 5Aug Options Action show, a viewer question was responded to about United Health.. here is the video clip

United Health video clip

Both Carter and Tony agree that viewer should add to the position but dont offer an actual options trade to go with the show. they mention a high from april, the stock is about $15 off that high. here is my suggestion with the assumption you have at least 100 shares and expect it to move higher:

Buy the OCT 550 / 570 1x2 Ratio Spread. for near $300 credit.. buy one 550 and sell two 570s 

The profit range for just the ratio spread is 550-590 at opex in Oct . but also the stock is increasing at same time so you are getting 2x from 550-570 .. the ratio technically doesnt start losing money until above 590 but your stock is gaining same time.. Good way to juice your returns if you are just a buy and hold investor like this caller. Plus you are entering for a credit so if stock is under 550 at opex, no harm no foul. Can do same trade if you have a Leap instead of 100 shares.. say the Jan2024 500 call for about $9900 vs $53500 for 100 shares.

APA alternative trade

 7july

on todays after market Options Action hit, Mike noted unusual options activity with APA . i dont follow the stock but looked at it after the clip. He noted a large order of the Aug 40/50 call ratio for .84cents , specifically trader bought 3000 Aug 40 calls and sold 6000 Aug 50 calls. Here is the video clip

Options Action APA Trade

i do ratio spreads on top of an existing long stock (100shares at least) so it is also called a catch up trade, i dont have (nor want) the ability to sell naked calls. Mike said he didnt think it was based on stock but never know. This trader wants the stock to return to 50 at Aug opex with max profit being at 50 but the profit range being between 40-50 (minus the .84 debit to enter trade) , "losses" happen above 50

an alternative trade with defined risk is a sell Put spread to buy call spread trade.. there probably is a cool name for it , just dont know it.. here it is using same Aug opex

Sell the Aug 30/25 put spread and use that premium to help pay for the Aug 35/42.50 call spread... mid point right now is about $1.20 debit

The street seems to be leaning that the recent energy selloff was overdone so possibly a near term bottom on friday with oil. The trade on Options Action is very aggressive for the strikes selected, needing $7 more upside just to get in the money at opex and a return to near its 52week high to get the max profit. With my alternative im using strikes that are easier to hit IMO, taking the easier first part of that move if it happens. the profit zone is the box on the chart below. the credit put spread im selling uses the 30 level which is the assumed near term low and has some support dating back to pre Russia invasion. max profit on my trade is at $42.50 or higher at opex. plan on holding to opex to see all that since you are working 2 trades at same time best case.. the decaying credit put spread is still holding value till opex as the call spread is gaining.

I will see how stock opens tomorrow and might follow, maybe have to tweek that strikes a bit

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

Credit Spread screwups $TLSA

 

Apr 24

Just wanted to share some thoughts about some recent screwups on credit spreads ive had on $TSLA

a quick recap, i generally follow the mechanics of the crew over at Tastytrade, specifically one of their guidelines is to take profits early. thru their studies somewhere between 25% - 50% of max profit. essentially you have made the easy meat of the trade now in order to get the remainder of the potential profit you have disproportionate amount of risk, ie the stock could reverse and turn your trade into a loss.

i know all that but here is the thinking i had that screwed it up... example using TSLA at 1000 stock price and arbitrary credit spread numbers.. say i have a 990 short put and to counter that i would sell the 1110-1120 credit call spreads for $1.60 credit , 10 lot ($1600 credit) ... if the stock moves down my short put loses value and credit spreads gain value... as everyone know TSLA can move rapidly in either direction and often times in same direction for many days.. so stock goes down one day, and the next , and the next and my credit spreads are worth .80 ...  50% of max profit, ie i could close trade for $800 debit after collecting $1600 credit to open.

Now here is where i screwed it up as im watching the stock go lower and lower, net net my short put is going further against me and i start to think instead of closing the credit spreads to instead hold them a day or two longer because its a hedge against further downside moves and to milk another couple hundred dollars out of the credit spreads. 

What ended up happening was stock reversed upward again, often rapidly. for this example, all the way past the credit spread strikes.. above 1120, causing the credit spreads to now be at a loss.. moving up so much that the spreads could not be rolled out in time for a credit.. and ended up having to take max loss on the credit spreads.

If i had followed the mechanics i should have just taken the 50% win on the credit spreads and waited it out for the next up move to either close the short put for profit or resell new credit call spreads at new strikes and/or different opex. instead i snatched defeat from the jaws of victory.

in hindsight after reflecting on my process, that "additional/remaining" hedge i thought i had by holding the credit spreads really didnt amount to many dollars and indeed had huge risk. This process works in both directions but ive been burned a couple times with holding the call credit spreads too long.

Solution is to remember these huge losses and just take the 25-50% win on the credit spreads and move on to the next trade.. no emotion.. just looking at numbers. I also have to keep reminding myself its VERY easy to roll short puts out in time and down before you have to take the loss.. barring margin calls of course.. may have to go out in time a few weeks if necessary. credit spreads are much harder to roll for flat/credit once the outer strike is breached.

Bottom line.. take those profits and move on.

$TSLA trade idea 22 Jan 2022

 

22 Jan 2022

earnings are this week for Tesla TSLA .... here is your thesis. you have either stock (in 100 share increments) or Long Leaps at lower strike than fridays close at 943 AND your expectation that the stock after earnings will get higher between 1000-1100 next friday.

one of my go to trades is the Call Ratio, also called a Catch-Up Trade.

Buy the Jan28 1000 call at $26ish

Sell 2 of the Jan28 1055 calls at $13ish each

with limit order id set a .10 credit to try to get a fill.

you do not need more buying power. break this down into pieces if youre new to ratio spreads. 

you are buying the 1000/1055 spread and then selling an additional 1055 short call. its not by itself. if you have the stock then your broker pairs it to the stock and its a covered call.. if you have a long Leap your broker pairs that 1055 call to the leap and its a spread / diagonal spread.. so no added buying power is needed. if your Long Leap strike is higher than 943 you will need more buying power or your broker will not allow the trade. 

so again its the Jan28 1000/1055 call ratio , profit range starts at 1000, is max at 1055 ($5500) then decreases to 1100... anywhere at opex 1000-1100 is profit. because you have 2 of the 1055s short , they will have to decay away to start showing profits, so initially the trade will likely show a mark to market loss...hold tight.. just expect to have to hold until friday at opex to see the best gains.

if stock closes below 1000 at opex then this trade just expires, no harm no foul.. just that couple cents from entry.. you could go 1000/1050 for example and it would be about a $2 credit ($200). the point isnt to get a big credit at entry, its for the multi thousand-dollar payoff if you get the direction correct. entering for credit is just gravy.. therefore, you can also go 1000/1100 strikes and PAY to enter this ratio.. your call, but i want zero downside risk.. free trade. 

the only "loss" is if you undershoot the strikes and stock is above 1110 at opex.. but remember your long stock or Leaps have been gaining from 943 to above 1110 . so the ratio might technically be a loss but the "position" has gained.... there is a true breakeven where the loss from the ratio finally overtakes the gain from the stock but its 100's higher.. not really practical to worry about

the point here is to get that leverage to the upside.. to catch up from the losses from previous days.. the ratio profits, your underlying stock or leaps profit.

the part that i struggle with is comparing what could be from a ratio trade to what i might get with just outright short call sales. right now i could sell Jan28 1100 calls for $7+ credit. compare that to what i potentially could make on a ratio. the ratio would need to get to at least 1007 at opex to equal the short call sale... if its under 1000 i get nothing and i didnt get that $7 credit so i feel like i lost $7.. im usually a one-in-the-hand-vs-two-in-the-bush type of guy.

but if you magically get that 1055 pin youve made $5500.. historically ive waited too long to take profits on ratios trying to milk those last juicy profits if it was flirting with the midpoint for max gain as the short calls decay away and it end up surging / selling off into the close and i had to settle for a few hundred bucks to close the trade.. max profit at opex is $5500, if you can exit at $2500-$3500 you should probably cash out, pat yourself on the back,  and move on to the next week for a new trade.. or at least cash out a portion if you have multiple lots.. in my case id cash out then sell a higher strike short call for the following week for more credit since thats my routine.

earnings are wednesday after close. it would be better if you wait till the day of to enter the ratio spread using the current stock price at the time since it might be up or down from today and the 1000/1055 strikes might not be appropriate on wednesday. you get the idea

when to exit short calls

 

13 jan

today was both satisfying but not profitable. satisfying that i followed my mechanics, set my alerts, took the action i wanted to after alert hit and was able to exit some positions that matched my "rules" BUT...

the frustrating thing that maybe one day i will have it dialed in is intra day closing of trades.. example.. i always say that ideal times to sell upside short calls is on an up day. you get higher premium, can choose a higher strike , etc ... so on monday after waiting and 4 down days in a row there was a decent up move and got a good fill on weekly 1100 call at $10.05 i believe off memory. the next 2 days as stock goes higher i see huge volume at same strike, i see a few on twitter mention the huge volume and they to add insult to injury it gets mentioned by Pete Najarian on cnbc who you know has front run the fuck out of it before going on air. i want to say it was in the mid 20s yesterday.. not really a problem since i could have rolled it for 50 points higher i noted in one of my tweets

over the last few weeks ive been changing my mechanics to NOT milk short calls till fridays, i figured i ended up rolling to next week for less premium or not up in strikes as much because i waited that one more day. so today ive got an order in working.. pennies away from a fill to roll the 1100 to next week 1120 for $13.50 i had it at one point.. that credit was staying pretty constant as the stock was selling off, dropping into the 12s and then its starting to look like i might not need that preemptive roll since the stock was in the 1060s i believe at the time so instead i just closed the 1100. bought back for 6.45 for about 40% win. but now towards end of day it was even under $1... so im feeling i lost $600 by not rolling at the correct time..  hindsight being 20/20

same example.. the other short call i was working this week was a 1065 .. bought a May 1025 call tuesday.. nearly at high of day and then pulled back , my fallback if my timing is off is to sell a weekly call against to lower the cost basis. im not selling the long call for a loss just for the sake of closing the position for the day. that short call was the 1065 . premium was $23..decent.. at the money.  then same thing, stock moves higher.. net net the "trade" is at a loss with the short call losing more (till decay kicks in) than the long call is gaining.. so again im looking at rolling and end up today rolling the 1065 to next week 1080 for $11.05 credit.. again decent premium for a week AND 15points higher in strikes.. looks like that best price today was near $16 so again im thinking i lost about $500 in what coulda shoulda been. natural to think that maybe i didnt need to roll to next week after all and the 1065 could go out worthless tomorrow or bought back super cheap

that next week 1080 i rolled to fell in value 30+% so per my rule i bought it back also

the overall thought was take action today because tesla will rebound today or tomorrow and i can reenter both short call slots higher.. best case for $20+each at 1130 level or higher

im starting to think on those wednesday / thursdays when i have been rolling that i tend to do that too early in the day.. off the top of my head i cant think of a time when ive said to myself "im glad i did that this morning" its always been "i would have done alot better if i would have waited till the last hour"... like today.. would have been a near $3000 difference in fills. i remain confident i dont need to wait till friday like i used to but will try to wait longer in the day on those roll days... of course if tesla reversed today into closing im a fucking genius worthy of guru status

lastly.. all this hubbub is about 2 slots for short calls.. i still have 13 short calls at 1000/1140 strikes for jan28 after earnings that have about $40000 in time value remaining to decay.. best case stock is near 1140 before earnings so i can roll those 1140 as high as possible but still take in about $10per in credit in order to give as much upside as i can assuming an earnings beat in line with the delivery numbers just reported.