If ever there was a time to buy calls on Tesla and buy puts on Nikola, it is right now. In 90 days, both companies are going to be in completely different places: one making history and the other in the dust bin.
In the interest of revealing my own hypocrisy, I think I'm going to end up with a Tesla trade. I said I wasn't going to buy more Tesla but our numbers are getting big and I'm forced to adjust the maximum hold of our core companies. Also, one of our core holdings has been bought out and will turn to cash in December. Lastly, we are expecting a large inflow of cash from a commercial property sale that will close in 2021. The point being, I need to learn to be comfortable with even bigger numbers in the market. I liked the diversification but we are forced to increase our market exposure in order to make retirement possible. A few days ago, I picked up a rather large quantity of Tesla at $400.00. When I entered the order, I had no idea Tesla was joining the S&P 500. The idea was to hold it long term. A few minutes ago, I entered a sell order that is open for the rest of this week. If the order fills, most of the settlement will be diverted into a long term value hold that has come up on the radar. If it doesn't fill, I will be carrying a whole lot more Tesla going forward. I'm not sure which I hope for.
It's just a confession. I'm trying to keep it real. I expanded our Tesla position significantly and it would seem I can make over 25% in a few days. Even at that, I wouldn't sell except we have another vessel to put our money into that is equally desirable. I have zero interest in trading. What's more, I've come to learn the companies I like that are well run, modest debt, high return on assets, are prime buy-out targets. We've been subject to buy out several times in the last eight years. I'm working hard to find new core companies. I don't want to keep this level of work up for much longer. Soon, I will just push our money into an index.
Further to this, when we are expanding our holdings (the vast majority of the time), I will sell put contracts at our target price, when the market price is above this target. I would buy the stock at that price, if it was available, so there is no risk to us. In these cases, I hope for the contracts to execute but they rarely do. Some might see that as trading. I do not. Still, I am fully disclosing this so people can judge for themselves if they take an interest in my approach.
Could you elaborate on the last text? I am confused. lets say u sell a put of abc at $100 strike. Whats the move from there?
When you sell a put, you get the money. How much you get will vary with the current price of abc. Of abc is quoting at $150, no one will buy your contracts. If abc is quoting at $102.50, you will get a decent amount of money (few hundred per contract). From there, the contract will fill, if it's to the advantage of the owner (the person who bought it). If the contract fills, you will discover a bunch of shares in your account and a lot less cash.
Speaking of Tesla, I still have the shares from 10 days ago. Currently up more than 25% but we are not at home and I try to not log into my investment accounts when we are travelling. That was set up with a buy and sell before we left. The buy hit. The sell did not.
So u are banking on it getting put to you, but not deep enough in the money that it absorbs the contract value?
That's how option players might see it but that is not my thought process. If I would buy at $12.50 but the price is currently $13.05, I might see if I can sell put contracts at $12.50. The point is, I would buy at $12.50, anyway. Because of this, I don't see it as gambling. I get the money from the contracts plus I might get the stock at the price I want. If the contracts don't execute, the money is diverted elsewhere. I primarily do this when there is more than one stock we want to own and none are priced in a way that I would pull the trigger on. Also, I will point out, we own plenty of stock so it wouldn't be a big deal if we never purchased another share. Because of this, I only buy when stock is on sale. Unfortunately, our portfolio is going to shrink in December when one of our core holdings converts to cash. Even at that, I think we're OK. We've made a couple of buys that have kept our portfolio nicely sized for our place in life. I should point out, this strategy works because I have very specific price targets for several companies and I also have specific risk limits so I know when I don't want any more of a certain company. These numbers are somewhat arbitrary, in that I created a formula to tabulate these values, but I mostly stick to them and it has worked out. Mostly, I just buy the company that I see as the best value but sometimes there aren't any companies I'm familiar with showing value so I start thinking of selling puts. Also, this strategy is enabled because most of our companies distribute cash. Plus, we have some fixed income from what I'm going to call "other sources".
Were I a trader, I would buy NTM put contracts on Tesla. Current $TSLA quote = $878. The CATL explosion has the potential to impact Tesla sufficiently to provide an arbitrage opportunity. I don't believe Tesla can ramp in-house 2170 cells quickly enough to meet the demand, or they would have done it already.
I probably won't short NIO but I am seriously considering it. Current $NIO quote = $59.92. After watching NIO day, I am long term optimistic on NIO and short term pessimistic. The presentation was very impressive but also fraught with misrepresentations based on their effort to look better than Tesla. The lies are not sustainable. For example: .N range of 559 miles (150KWh). They would have to have similar efficiency as Tesla. Consider me extremely skeptical. I would not believe them if they claimed to be within 15% efficiency. Let's assume the range is true. They are going to have a hard time building a lot of cars with 150KWh, particularly with the explosion that happened at CATL's largest plant, yesterday. Nobody seems to know about that explosion, yet. Very odd. I would buy and own NIO but not at the current price. The current multiple is higher than Tesla. There will surely be a reckoning when they are discovered to have vastly over-stated their platform's abilities. At least they are backing off from the phrase "full self driving" and using "advanced driver assist".
If every I were to short Tesla, it would be right now. They are about to head into an earning's call that is likely to feature a profit but it will be based on BTC and environmental credit income. Further, with the global semiconductor shortage, this stock seems ripe for a correction. There are a few minor things I won't crab about but I can see an opportunity for a dip in the near future. I know "don't bet against Elon" but a value correction seems overdue to me. On the other hand, by late summer we should be seeing cars drive out the end of Giga Berlin and by fall we may even see something happening at Giga Texas. Great things are happening at Giga Shanghai but people seem to disregard that a non-event when the Chinese do something amazing. So, I'm not saying a TSLA put is a slam dunk, by any means, but I suspect there will be a dip before the next surge.
As a general observation BORSON has great results. Personally I dont take short positions in shares. Puts are the name of my down game. I have never had 100% accuracy but tend to win more times than lose. I would love to see TSLA in the 500s, help a brother out.
If Tesla gets close to $500, I will re-enter that position while wearing a diamond tie clip and monocle.
Tesla was at $674, when I posted this yesterday. It popped a little over night but I expect a much larger pop in the next few weeks.
