Stocks and Trading Thread - Channeling your inner Mono

[Tonitrus]

Also...just for a timely anti-Trump inspired stock buy update...my holdings in Goodyear are so far up 20% since purchase. 

[Admiral Yi]

ruh roh.  Etrade just went down.

[Admiral Yi]

My Tesla got called, so this morning I sold a cash covered put.  1/11 expiry, @740.  This is the opposite of a call.  It gives the buyer the option to sell me 100 shares of Tesla at $740.

Premium was fatter than I expected for put so far out of the money and such a short expiry.

This alternate selling of stock covered calls and cash covered puts is called the wheel strategy.

woops, 1/15 expiry

[HVC]

The stock market is weird. Wrong company gets a price boost after a a comment by Elon.

https://www.msn.com/en-ca/autos/news/elon-musk-said-use-signal-and-confused-investors-sent-the-wrong-stock-up-438-on-monday/ar-BB1cF6Zo?ocid=entnewsntp

[Tonitrus]

Credit Suisse?

That's great.  Do a hypothetical trade and see how it pans out.  Choose a strike price and expiry date.

So I got approved, and am looking at the mechanics.

TSLA has some calls at 1000, expiring on 22 Jan with a $6/share premium.  So if I bet that TSLA won't hit 1000 by that date, I'll pocket 600 bucks and likely keep my stock?  Seems like a too easy $600.

[Admiral Yi]

So I got approved, and am looking at the mechanics.

TSLA has some calls at 1000, expiring on 22 Jan with a $6/share premium.  So if I bet that TSLA won't hit 1000 by that date, I'll pocket 600 bucks and likely keep my stock?  Seems like a too easy $600.

That's what I thought when I sold 8 Jan calls @750, when the price was around $660.  Then the price jumped 200 bucks and my shares got assigned. 

There's no such thing as risk free profit in the market, but yeah, I think Tesla premiums are pretty juicy.  You do, however, have to be aware of the possibility, however remote, that you'll have to sell off at $1000.  Remember this whole discussion started when you were thinking about just dumping your shares.

Another upside to consider is that once you sell that call you get to feel like Gordon Gecko. 

[Tonitrus]

That's why it sounds too good. 

If it doesn't hit 1000 in a bit over a week (I think it's fairly unlikely), then I pocket an easy $600.  If it does...I pocket $100,600.  It seems like there is no major downside unless it shoots to something like 1200-2000/share.  And even then, that's just potential regret dollars.

[Admiral Yi]

Exactly.  The only way you lose is if it zooms way past your strike price.

[Tonitrus]

At this point, my only major worry feels like it is having to account for it all come tax time. 

(I am guessing option premium income inside a Roth IRA might not be covered by the Roth tax advantage)

[Admiral Yi]

Didn't you say you hold Tesla in your Roth?  Tax free options and capital gains baby.

[DGuller]

That's why it sounds too good. 

If it doesn't hit 1000 in a bit over a week (I think it's fairly unlikely), then I pocket an easy $600.  If it does...I pocket $100,600.  It seems like there is no major downside unless it shoots to something like 1200-2000/share.  And even then, that's just potential regret dollars.

What is it about the concept of "paper gains" that make people think that gains and losses don't matter?  The downside is when you have to sell the asset that is worth $1050 for $1000.  That's a $5000 loss right there. 

[DGuller]

Let's say you're selling your house.  One buyer offers you $1,000,000.  Another buyer offers you $1,100,000.  If you take the first offer, should you go "ka-ching, I bought that house for $600,000 five years ago", or should you go "did I just give away $100,000?"

[Tonitrus]

It's hard to see it as a "loss" when the cost basis is somewhere down around $100. 

[Tonitrus]

Though I know it is not exactly along the lines of what you are saying, but it is pretty close to the mindset of thinking that I could agonize, as a "loss", over every stock that I've ever sold that is now worth far more than I sold it for. 

That's a lot of agony/loss that one could do without.

[Tonitrus]

Also, you analogy sucks.