cwah
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Post by cwah on Jul 3, 2021 0:34:41 GMT
Hello, I discovered option trading recently and was even more interested when I learn that Warren Buffett himself does that. He does long dated put in order to buy stock he loves at lower price! Isn't that great? But stock and be paid for owning it! Here's what I did: - Sold 1 Tesla put at $690 expiring in Jan 2023 with a premium of $198.89. - That means I guarantee to buy 100 Tesla shares in 19 months at $492 ($690-$198 = 30% discount of the current price). - I received $19800 in my account doing this strategy, which is about 30% discount from the stock price ($69k), and equivalent to 1.5% interest / month. (30%/19month = 1.5%/month) That sounds amazing, the big risk is of course if Tesla drop more than 30%. But apart from that, it looks like a great way to make money. Bonus is that I receive the cash from Day 1 and I can do anything I want from it. Isn't that great? I feel like it's earning too much for doing nothing, I'm going to get about $800/month just owning this option! I wonder why I invested in P2P instead of buying option earlier! |
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registerme
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Post by registerme on Jul 3, 2021 4:58:56 GMT
This is not going to end well.
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adrianc
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Post by adrianc on Jul 3, 2021 6:35:00 GMT
Here's what I did: - Sold 1 Tesla put at $690 expiring in Jan 2023 with a premium of $198.89. - That means I guarantee to buy 100 Tesla shares in 19 months at $492 ($690-$198 = 30% discount of the current price). - I received $19800 in my account doing this strategy, which is about 30% discount from the stock price ($69k), and equivalent to 1.5% interest / month. (30%/19month = 1.5%/month) That sounds amazing, the big risk is of course if Tesla drop more than 30%. What could possibly go wrong?
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corto
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Post by corto on Jul 3, 2021 7:07:44 GMT
Tesla fell twice by 170..240 in the previous 6 months. It is a frequently shorted stock, so some believe it will fall.
Your 198 seem a reasonably possible drop to happen in the next 19 months
You end up either with the premium or with Tesla shares.
Either way, if you believe Tesla is worth it on the long run and any drop will only be transient you may have a good deal.
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adrianc
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Post by adrianc on Jul 3, 2021 7:39:50 GMT
Either way, if you believe Tesla is worth it on the long run and any drop will only be transient you may have a good deal. St Elon's attention has gone elsewhere from Tesla, except insofar as it can be a useful publicity platform for things like his cryptocurrency shenanigans. The Bezos and Branson space willy-waving can hardly fail to drag him in... "Traditional" motor manufacturers are stealing Tesla's march from under them, and they simply don't seem to be responding. The range is ageing - the Model S is 9yrs old with no hint of a replacement, the Model X is 6yo, the Model 3 is 4yo - traditional rival model cycles tend to be 6/7yrs. The Model 3 had huge delays before launch, and the Y still isn't available in many markets, including Europe (the factory isn't even finished yet...). The Roadster, Cybertruck and Semi are still vapourware. There have been quality problems throughout. No wonder people are happy to take a bet that the stock will fall by a third over the next two years...
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corto
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Post by corto on Jul 3, 2021 8:00:53 GMT
I'd agree that Tesla's future depends on many things and which way it will go nobody knows.
That's why I wrote *If* cwah believes Tesla is a good bet on the long run he may have a good deal. If it falls enough he gets cheap shares (that may rise again); if it rises he can keep the premium.
He may want to buy some Tesla now, too, because if Tesla rises he looses out on that and would have to buy in at higher prices later - there goes the premium. All relative to believing Tesla will go up on the long run. For what he is doing he must believe that Tesla falls with in the next 19 months, but rises on longer terms. But maybe am getting something wrong. Never did options.
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cwah
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Post by cwah on Jul 3, 2021 13:35:22 GMT
Either way, if you believe Tesla is worth it on the long run and any drop will only be transient you may have a good deal. St Elon's attention has gone elsewhere from Tesla, except insofar as it can be a useful publicity platform for things like his cryptocurrency shenanigans. The Bezos and Branson space willy-waving can hardly fail to drag him in... "Traditional" motor manufacturers are stealing Tesla's march from under them, and they simply don't seem to be responding. The range is ageing - the Model S is 9yrs old with no hint of a replacement, the Model X is 6yo, the Model 3 is 4yo - traditional rival model cycles tend to be 6/7yrs. The Model 3 had huge delays before launch, and the Y still isn't available in many markets, including Europe (the factory isn't even finished yet...). The Roadster, Cybertruck and Semi are still vapourware. There have been quality problems throughout. No wonder people are happy to take a bet that the stock will fall by a third over the next two years... I actually follow very closely Tesla and that's why I buy it. I reckon it's quite overpriced but its grow is damn impressive. Answering some of your point: - Yes crypto will impact its treasury due to Bitcoin dropping in half. About $100M in losses will be declared next quarter - The model S has just been refreshed. It's called the Plaid. You should look at it. It's the fastest production car in history. - Delay don't really matter much as demand is off the roof. They have done massive delivery this quarter of 200k cars. 80% growth YoY. Do you know any manufacturer doing that? I missed the initial buy and would like to put a position in it, this is potentially a way to get it. Although tbh, I'd much prefer get in at 50% or more discount.
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cwah
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Post by cwah on Jul 3, 2021 13:37:07 GMT
I'd agree that Tesla's future depends on many things and which way it will go nobody knows. That's why I wrote *If* cwah believes Tesla is a good bet on the long run he may have a good deal. If it falls enough he gets cheap shares (that may rise again); if it rises he can keep the premium. He may want to buy some Tesla now, too, because if Tesla rises he looses out on that and would have to buy in at higher prices later - there goes the premium. All relative to believing Tesla will go up on the long run. For what he is doing he must believe that Tesla falls with in the next 19 months, but rises on longer terms. But maybe am getting something wrong. Never did options. Yes that's pretty much my position there. I reckon it's overpriced but future looks quite optimistic. So I'm "buying" at 30% discount.
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adrianc
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Post by adrianc on Jul 3, 2021 13:53:35 GMT
St Elon's attention has gone elsewhere from Tesla, except insofar as it can be a useful publicity platform for things like his cryptocurrency shenanigans. The Bezos and Branson space willy-waving can hardly fail to drag him in... "Traditional" motor manufacturers are stealing Tesla's march from under them, and they simply don't seem to be responding. The range is ageing - the Model S is 9yrs old with no hint of a replacement, the Model X is 6yo, the Model 3 is 4yo - traditional rival model cycles tend to be 6/7yrs. The Model 3 had huge delays before launch, and the Y still isn't available in many markets, including Europe (the factory isn't even finished yet...). The Roadster, Cybertruck and Semi are still vapourware. There have been quality problems throughout. No wonder people are happy to take a bet that the stock will fall by a third over the next two years... I actually follow very closely Tesla and that's why I buy it. I reckon it's quite overpriced but its grow is damn impressive. Answering some of your point: - Yes crypto will impact its treasury due to Bitcoin dropping in half. About $100M in losses will be declared next quarter - The model S has just been refreshed. It's called the Plaid. You should look at it. It's the fastest production car in history. - Delay don't really matter much as demand is off the roof. They have done massive delivery this quarter of 200k cars. 80% growth YoY. Do you know any manufacturer doing that? I missed the initial buy and would like to put a position in it, this is potentially a way to get it. Although tbh, I'd much prefer get in at 50% or more discount. Plaid isn't a new model. It's just an ever-more-irrelevant performance hike to the ageing Model S - woo, the kind of acceleration figures bikes have been waving around for a decade and a bit. Plaid Plus has already been dropped. The "Palladium" facelift is no more than a new shade of lipstick on an elderly pig - S and X deliveries were just 1% of the total for Q2/21, one-tenth of the number shipped in Q2/19, but an increase on the grand total of zero built in Q1/21... I can think of a lot of car manufacturers shipping a lot more than 200k units in a quarter, yes. And the Model Y starting to come out of the Shanghai factory part-way through Q1 will certainly help their Q2 delivery figures - it's the make-or-break model. Medium-size crossovers are the market, which is precisely why the delays have been such a problem. If Musk isn't careful, the biggest problem arising from his crypto-hyping pump-and-dump misadventures won't be the bottom line.
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corto
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Post by corto on Jul 3, 2021 14:05:58 GMT
I'd agree that Tesla's future depends on many things and which way it will go nobody knows. That's why I wrote *If* cwah believes Tesla is a good bet on the long run he may have a good deal. If it falls enough he gets cheap shares (that may rise again); if it rises he can keep the premium. He may want to buy some Tesla now, too, because if Tesla rises he looses out on that and would have to buy in at higher prices later - there goes the premium. All relative to believing Tesla will go up on the long run. For what he is doing he must believe that Tesla falls with in the next 19 months, but rises on longer terms. But maybe am getting something wrong. Never did options. Yes that's pretty much my position there. I reckon it's overpriced but future looks quite optimistic. So I'm "buying" at 30% discount. You only buy if the price falls enough. Otherwise the buyer of your put has no reason to call it in.
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Post by Deleted on Jul 3, 2021 14:33:34 GMT
Using short calls/puts as a substitute for buying/selling covered positions that you would otherwise be happy to buy/sell directly is a perfectly valid strategy. I use it myself.
As cwah identified, if the share price of something is £100, and you would be happy to own the shares at £80, you can sell somebody the option to sell to you at £80. If you end up owning the share, you can also do the opposite - sell somebody the option to buy from you at a higher price, like £120.
Option positions can be as risky as you want them to be. They can be used to increase *OR* decrease risk.
They are more complicated though, so you have to know what you are doing.
The horror stories occur from people over-leveraging. If you do this, shorting uncovered (naked) options is known as 'picking up pennies in front of a bulldozer' for a good reason.
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Post by Deleted on Jul 3, 2021 14:35:35 GMT
Yes that's pretty much my position there. I reckon it's overpriced but future looks quite optimistic. So I'm "buying" at 30% discount. The missing variable is - if it goes to the moon, you miss out on the upside. That is the trade-off. Oh, and one more thing occurs to me - get yourself a good accountant. The tax treatment of option positions is 'interesting' 
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cwah
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Post by cwah on Jul 3, 2021 17:06:28 GMT
Yes that's pretty much my position there. I reckon it's overpriced but future looks quite optimistic. So I'm "buying" at 30% discount. The missing variable is - if it goes to the moon, you miss out on the upside. That is the trade-off. Oh, and one more thing occurs to me - get yourself a good accountant. The tax treatment of option positions is 'interesting' Isn't it considered as capital gain on long option?
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Post by Deleted on Jul 3, 2021 17:56:09 GMT
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Greenwood2
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Post by Greenwood2 on Jul 4, 2021 7:19:00 GMT
Yes that's pretty much my position there. I reckon it's overpriced but future looks quite optimistic. So I'm "buying" at 30% discount. Oh, and one more thing occurs to me - get yourself a good accountant. The tax treatment of option positions is 'interesting' I haven't really looked at this sort of thing (I decided it was above my pay grade) and may be mis-remembering what I read, but I also thought the whole point of Put orders was to hedge against a drop in price (but you miss out on the upside), but I thought you paid a premium for that cwah seems to have been paid a premium is he on the other side of the deal? Or is the amount he received the remains of the sell price after the premium was paid. Confused I am, although that's not difficult in this sort of discussion, but I would be interested to understand.
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