Conservative option strategies, what did you buy or sell today?

[fenders53]

It's entirely possible you could find yourself up a nice percentage a few months from now even if it gets nowhere near your strike. Take your money and wait for a new entry. Folks that got greedy on the short side of tsla got schooled on the power of the true believers and the momo gang. I shorted it long ago but it was hard on my blood pressure lol.

[NilesMike]

Looks like the price was $2300 +/- per contract?
Why so far OTM?
Why an outright Put buy instead of a bear put spread?

A spread of 460/410 also cost 2,300 per and would give you a MUCH wider area (time and price) in which to profit.

I hope the bottom falls out for you!

[fenders53]

(01-11-2020, 12:04 PM)NilesMike Wrote: Looks like the price was $2300 +/- per contract?
Why so far OTM?
Why an outright Put buy instead of a bear put spread?

A spread of 460/410 also cost 2,300 per and would give you a MUCH wider area (time and price) in which to profit.

I hope the bottom falls out for you!

Otter,

Hope you stick around and don't take our comments in a negative way.  We are glad you are here.  We also chat some off the threads.  

A straight put or call purchase is a good way to get a feel for the way the option will run vs SP.  300 is way out of the money but TSLA option prices are pretty crazy.  I won't be surprised if TSLA revisits sub 300.  If China goes well at all it may not be through running though.  We'll know soon.  The option is long enough that he will have time to adjust it if he wishes. (provided it doesn't launch to 750 soon of course).

Back to boring, I mean conservative lol....  I continue to sell 10-15 puts every 4-6wks on my UTEs and Big Pharma.  I try to diversify some so I have another 10 in defense stocks, healthcare REITS, MET, ADM, CSCO, LEVI etc.  I am already long most of these stocks but this game is working well.  My dividend stream is nice, but most months I make a lot more income from expired puts and calls.  The boring stocks stuck in trading ranges work best.  The premiums aren't huge, but the success rate is very high.  Little chance the stocks runs away from me.  Don't try this with AAPL or MSFT    Some of my boring stocks have moved only 10% the past year, but it's pretty stress free to double that in total return while actually only owning half the shares.  I have no intention of stopping until the market drops hard for six months and completely forces me in with all my stock money.  As long as I am OK with owning the underlying stocks, and don't put myself in a position to be extremely over weighted in anything, I don't think I will regret it.  It forces me to remain a little cashy.  If there is anything that surprises me, it;s how many attempts it can take to get forced into a stock through a put exercise.  Sometimes they just run away, and it takes some discipline to wait for them to come back to me, or just move on.

[NilesMike]

I wasn't knocking the trade, I just wanted to see the reasons behind the option selection and provoke some thoughts.

[fenders53]

(01-11-2020, 11:04 PM)NilesMike Wrote: I wasn't knocking the trade, I just wanted to see the reasons behind the option selection and provoke some thoughts.

I knew that Mike.  You give me some friction on some of my trades and I thank you for that.  I suspect it has something to do with insane TSLA option premiums?  It's not a trade I would ever make, but Otter can take it.   

Here are the biggest reasons I would not short TSLA right now.

-It's a cult stock with huge momentum so fundamentals do not matter like they do to us.  Do they matter some day?  Of course, but what year?  I learned some shorting lessons shorting AOL.  I was right in the end, they were replaced.  TSLA was in deep financial trouble in 2019.  How long did it stay down before the next launch?  Half the small investors don't know what a balance sheet is, and the other half don't seem to care about fundamentals as long as units and sales grow.     

-First mover in a growing industry.  First by a mile, and EVs aren't going away.
  
-The China wildcard.  China has incentive to reward a US company as others are leaving.  They can subsidize if they wish to make sure TSLA does well enough in China.  They may or may not do that.   

-Did I mention it's a cult stock? 

[Otter]

(01-11-2020, 12:04 PM)NilesMike Wrote: Looks like the price was $2300 +/- per contract?
Why so far OTM?
Why an outright Put buy instead of a bear put spread?

A spread of 460/410 also cost 2,300 per and would give you a MUCH wider area (time and price) in which to profit.

I hope the bottom falls out for you!

Yep. $2366.67 all in.

I couldn't tell a bear put spread from a hole in the ground. This is literally the first option purchase I've ever made.

Although "far OTM" at the moment, it's not like $300 is ancient history for TSLA. It has been well below that in just the past quarter. It's really just me betting on black at the roulette table, that TSLA will be back under that within the next 14 months. I think an earnings report or two may do it. 

I may be wrong, but I don't view this as an investment like I do my DGI holdings. It is an entertainment expenditure for the year. I was willing to risk the entire stake when I purchased the option.

[fenders53]

You use TD right? We can show you how to do some only slightly more complicated trades with much smaller wagers and much better odds. This is not a good first option trade whether it works out or not. I realize you can afford the loss but winning is more fun.

[Otter]

(01-13-2020, 12:11 PM)fenders53 Wrote: You use TD right?  We can show you how to do some only slightly more complicated trades with much smaller wagers and much better odds. This is not a good first option trade whether it works out or not.  I realize you can afford the loss but winning is more fun.

I am always willing to learn. That said, this is not going to be a regular occurrence. More a "once per year take one short bet and see where it goes" experiment. So, the next option trade will either be after I manage to close this one out in the green in 2020/1, or it expires worthless in March, 2021.

[crimsonghost747]

(01-11-2020, 11:28 PM)fenders53 Wrote: -It's a cult stock with huge momentum so fundamentals do not matter like they do to us.  Do they matter some day?  Of course, but what year?  I learned some shorting lessons shorting AOL.  I was right in the end, they were replaced.  TSLA was in deep financial trouble in 2019.  How long did it stay down before the next launch?  Half the small investors don't know what a balance sheet is, and the other half don't seem to care about fundamentals as long as units and sales grow.     

Sure you could argue that it's a cult stock because there are a lot of small investors who believe this company is the next coming of Jesus Christ and Tesla is probably a double digit percentage of their whole portfolio.

But, in my opinion, those small investors may be loud on social media etc but they simply do not have the cash to move the stock price. Those times are long gone, this is a company with a current market cap around 90 billion. That is massive and it'll take a fanboy or two to make these 7% moves if they have $500 per month to invest. Also, if you look at the ownership charts, at least according to the data that I have, pretty much everyone that has a position large enough the appear on the charts is a big time investment fund and tesla is often less than 0.50% of their total portfolio. This is nothing with a wow factor, it's the same with most companies. But it does show who has the cards in their hands and who are just watching from the sidelines.

Sure, tesla has a strong fan base and plenty of small investors are part of that. And you are probably right that half of them don't know what a balance sheet is. But I'd argue that it has almost no effect on the stock price, this stock is large enough to only be moved by the big investment funds.

[Otter]

I will say that the volatility on a TSLA put makes for an entertaining ride. Can't really tell what caused the 10% spike in TSLA shares today, but good for them.

[fenders53]

(01-13-2020, 02:16 PM)crimsonghost747 Wrote:

(01-11-2020, 11:28 PM)fenders53 Wrote: -It's a cult stock with huge momentum so fundamentals do not matter like they do to us.  Do they matter some day?  Of course, but what year?  I learned some shorting lessons shorting AOL.  I was right in the end, they were replaced.  TSLA was in deep financial trouble in 2019.  How long did it stay down before the next launch?  Half the small investors don't know what a balance sheet is, and the other half don't seem to care about fundamentals as long as units and sales grow.     

Sure you could argue that it's a cult stock because there are a lot of small investors who believe this company is the next coming of Jesus Christ and Tesla is probably a double digit percentage of their whole portfolio.

But, in my opinion, those small investors may be loud on social media etc but they simply do not have the cash to move the stock price. Those times are long gone, this is a company with a current market cap around 90 billion. That is massive and it'll take a fanboy or two to make these 7% moves if they have $500 per month to invest. Also, if you look at the ownership charts, at least according to the data that I have, pretty much everyone that has a position large enough the appear on the charts is a big time investment fund and tesla is often less than 0.50% of their total portfolio. This is nothing with a wow factor, it's the same with most companies. But it does show who has the cards in their hands and who are just watching from the sidelines.

Sure, tesla has a strong fan base and plenty of small investors are part of that. And you are probably right that half of them don't know what a balance sheet is. But I'd argue that it has almost no effect on the stock price, this stock is large enough to only be moved by the big investment funds.

Ron Barron has a $4,000 price tag on TSLA last I heard.  This stock is just nuts.  I do understand the big money moves it.  A million 15yr olds with two shares doesn't hurt either.  It does remind me of AOL around 1998    Everybody's cleaning lady owned ten shares and I got killed on a straight up short position.  I was right but I had to bail.  I still have PTSD from that one lol.  I did short TSLA some years later, but it wasn't nearly so crazy, and I was just skimming $500 and running.  I like spreads a lot better.  100% control of my max loss potential is nice.  I haven't lost one yet but it will happen.

[fenders53]

(01-13-2020, 06:09 PM)Otter Wrote: I will say that the volatility on a TSLA put makes for an entertaining ride. Can't really tell what caused the 10% spike in TSLA shares today, but good for them.

This isn't volatity, this is parabolic!  An analyst upgrade and algos, add some sheep later in the day.  The rubber band snaps both ways though.  You'll get your chance Otter.  I think it may drift higher until earnings though.  The market is just encouraging this TSLA euphoria.  Reminds me of the dot.com bubble.  Back then you could sell a concept.  Now you have to at least bother to actually lose some real money (TSLA, UBER, weed stocks etc.)    

Time to do some more boring stuff while I wait for a correction.  I think I am going to sell a few more BP puts.  I'm over XOM, but oil looks ready for a trade.  I think I can grab 10%+ in divs, option premiums and a couple buck of SP raise.  It's really the only sector that hasn't popped other than some bottom bouncer stocks.