$Tesla (TSLA.US)$ this is the initial consolidation. that is...
$Tesla (TSLA.US)$ this is the initial consolidation. that is quite frankly long overdue. nobody wants to see this least of all me. and it could get very volatile over the next 5 to 10 days while a base is established. Dan Ives believes that autonomous driving is a trillion dollars added to Tesla he has said it dozens of times throughout the year and has reinforced his case as recently as yesterday.
that being said Tesla stock has had a parabolic move since the election and once momentum breaks profit taking ensues and it can be very violent very fast. when everybody's running for the door you can have $45 drops extremely quickly in price.
how do you deal with this type of Market?
the first is you have to define how long do you plan on holding Tesla as a shareholder
if you bought it for a quick trade and you're not looking at the bigger picture which is years down the road that includes the release of Optimus and that might be the back end of Trump's 4 years, then you may wish to secure your profit.
you can do this by selling your initial position and I would highly encourage you to leave all of your profits in Tesla.
by leaving your profits in Tesla you're playing with the house is chips and you no longer have to deal with the emotional swings of it being down today down tomorrow down the next day just as people that don't Nvidia have had to deal with for eight of the past eight days and most of the days since earnings release.
the second method is selling calls against your position. as long as you have round lots of at least 100 shares whether it's in Tesla common stock or the leveraged ETFs. you can go out on a weekly basis and sell calls above the market and get paid a lot of money as a matter of percent because this is an extremely volatile stock so that volatility premium is built into those call options.
you need to be careful what strike price you sell because if you want to retain ownership of Tesla it needs to be high enough out of the money where it's probably not going to close above on that Friday but you can't go too far out of the money in terms of price being hired and the current market because then you won't make too much money on your option contracts.
additionally because now we have a period where Tesla is down this morning was down 15 5 minutes ago and at the beginning of this message it was down 12 so recovered a few bucks if you want to own Tesla at some point in time in the future you can sell puts.
each contracts 100 shares so it needs to be in round lots and again strategically you need to sell an out of the money put far enough away where you're going to not necessarily have the risk of it closing at that price but still far enough from the current price that you're going to make a decent premium on those puts.
if you selling at the money put where you're selling very close to the current price of the stock that puts going to be less premium than if you just buy the stock and immediately go around and sell a call. so that's why you need to be out of the money far enough that you think okay the stock could come down to me another $5 in profit taking and I'd like to put my limit order to buy it there all right well that's the strike price I'm going to sell those puts.
I've been selling calls and selling puts on Tesla from $12 pre-election all the way down to under $9.
and today will be no different I will be selling puts on tsll to leverage ETF I'll figure out at least I will do my best I should say to figure out where I think the consolidation phase will ultimately finalize and end next week as I already have 500 contracts sold for this Friday's expiration. and I will sell more puts on Tesla. I had sold calls on Tesla on Monday at a $45 and a $50 strike on tsll and those look like when something happens they'll expire worthless.
so I hope you gained a little bit of insight on Tesla at this point on how to deal with the swing when it's coming down when you have consolidation and profit taking and what your different options are
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37+ yrs in the trenches, raised 100mil for start ups, syndicate ipo's, yrs on trading desk mkt maker.
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SPACELIGHT : Maybe so. My chips are off the table.