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2020 Investment Thread

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DesiDucati said:
Holy cow, the Tesla presentation was very positive and optimistic. Elon showed his company can increase the capacity of their battery, reduce the waste products, and there’s enough lithium in Nevada to power all the cars the USA. I really liked the chemistry lesson he gave. Why did the stockholders sell with good news like this? It makes no sense!
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It really wasn't that great. Nothing that we didn't know from before. There was also no clear timeline for production of the new pack architecture and no immediate signs for how it will impact the company.

As Elon said, making a prototype is easy, but production is 10,000 times harder.

I did make a bet on battery day and, no surprises here, lost.

Luckily Trevor Milton turned out to be a molester and my Nikola puts printed today and I'm in the green overall. But all it is for me is a gamble, no hard feelings if I lost it all. The market is too unpredictable right now.

UDRider said:
Anyone following Palantir direct listing? That is some barrel of lulz.
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I'm not following it but all I know is Palantir has had a really hard time selling their product. I'd stay away.
 
Entoptic said:
You should ask yourself what is SPI at today?

Also if you want to watch :)

https://www.twitch.tv/entoptic
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i'll tune in. been researching options and doing some paper trades to get a feel (spoiler alert: lost $1200 :laughing)

My neighbor was a partner at morgan stanley for years and basically said be very very careful because for retail it's a gamble - the banks and firms know everything you didn't even know you don't know, months ahead of you
 
asdfghwy said:
i'll tune in. been researching options and doing some paper trades to get a feel (spoiler alert: lost $1200 :laughing)

My neighbor was a partner at morgan stanley for years and basically said be very very careful because for retail it's a gamble - the banks and firms know everything you didn't even know you don't know, months ahead of you
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90% of option traders lose money. Options were never intended to be investments or for speculation. They were intended to be insurance.

Anyone who tells you they make money on options: Just ask them for their trading record for the last three years. :laughing

I often make money on options, for one reason. The only options I trade are covered calls. I may end up losing more profit by having my stock sold, but that's fine with me.
 
So by covered calls, you basically own 100 shares of the stock to begin with? Then you sell the call option. If your stock price doesn’t go up, you keep the profit right?
 
I’m just trying to get confirmation from what I’ve learned on option trading websites and videos on YouTube. I’m more cautious now because so many of those videos that say you can’t lose money seem to usually lose money and a lot of money actually.
 
DesiDucati said:
So by covered calls, you basically own 100 shares of the stock to begin with? Then you sell the call option. If your stock price doesn’t go up, you keep the profit right?
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You only keep the premium from the sale of the call, so if the stock stays the same you are good since you get the premium. But if the stock goes down a good amount you still lose, although a bit less since you made a bit of money off the premium.

If the stock price goes up or moons, you have to sell your shares at whatever the strike price is so that is the max you will make off the stock.

Generally, covered calls let you insure yourself against major losses but then also limit potential gains.

Personally, unless you are really devoted to it, I wouldn't recommend options trading as it's a really good way to lose a lot of money.
 
DesiDucati said:
So by covered calls, you basically own 100 shares of the stock to begin with? Then you sell the call option. If your stock price doesn’t go up, you keep the profit right?
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Correct. You own the stock. You sell the right to buy the stock at a given price, which can range above or below the current price.

Stocks like AT&T have very low premiums. Stocks like Tesla have insanely high premiums.
 
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So I now have a bunch of Tesla stock that are super low price now. I was expecting Battery Day was going to skyrocket. Obviously it didn’t. It’s slowing floating at 400. Can I make some money selling a put option for 450? There’s no chance on Friday it can go to that price right? So if on Friday the stock is below 450, I keep the money from selling the put option and I keep my Tesla stock still. Is that correct? If so, can I keep doing that every few weeks?
 
Yeah Tesla is significantly overvalued if you compare to both auto manufacturers, energy companies, and even established tech companies.

It's a speculative stock and nobody know what may happen.
 
DesiDucati said:
So I now have a bunch of Tesla stock that are super low price now. I was expecting Battery Day was going to skyrocket. Obviously it didn’t. It’s slowing floating at 400. Can I make some money selling a put option for 450? There’s no chance on Friday it can go to that price right? So if on Friday the stock is below 450, I keep the money from selling the put option and I keep my Tesla stock still. Is that correct? If so, can I keep doing that every few weeks?
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if they don't exercise the option then yes you keep the premium. be careful selling options for high $ stock like tesla because thats a quick way to start blowing your account up. nobody can answer yuor question about $450.. its a gamble and the markets are extremely volatile now for tech
 
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asdfghwy said:
if they don't exercise the option then yes you keep the premium. be careful selling options for high $ stock like tesla because thats a quick way to start blowing your account up. nobody can answer yuor question about $450.. its a gamble and the markets are extremely volatile now for tech
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Exactly. A 10-15% movement on TSLA wouldn't be surprising.

Selling options is a great way to get into debt.
 
DesiDucati said:
So I now have a bunch of Tesla stock that are super low price now. I was expecting Battery Day was going to skyrocket. Obviously it didn’t. It’s slowing floating at 400. Can I make some money selling a put option for 450? There’s no chance on Friday it can go to that price right? So if on Friday the stock is below 450, I keep the money from selling the put option and I keep my Tesla stock still. Is that correct? If so, can I keep doing that every few weeks?
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A. Yes, you can sell a put if you have 100 shares. There's no way it can go to 450? That's your opinion, don't ask me. Will you make money? Yes, but the premium on a fifty dollar out of the money put will be commensurate with the risk. Currently, if you own 100 shares of Tesla, at closing today, the $450 put expiring tomorrow was trading for around $62, meaning you would receive a $6200 premium for the put if you sold one.

B. You can do that ten times a week if you wish. There's no limit on the trading, only on the margin or cash you have in your account to cover the trade. BIG important. In order to write puts, you must have the ability to cover the put, should it trade. That means that your account must have $450x$100, or $45,000 cash or margin or both.

C. Remember, you need 100 shares to write one put, or cash equivalent to cover the purchase of 100 shares. And if the stock goes over $50, say to $500, you still have to buy 100 shares at $450.

D. As option trades go, this is a safer one.
 
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Oh I see, I need 100 shares just to do one 450 Out Of the money put option contract. So RobinHood would only let me do one because I don’t have enough to cover more. So what would I need to do if I see Tesla’s stock price surging up to 450 and I want to still keep my Tesla stock and am afraid of the put contract being exercised? Can I get out of the put contract and still make money?
 
DesiDucati said:
Oh I see, I need 100 shares just to do one 450 Out Of the money put option contract. So RobinHood would only let me do one because I don’t have enough to cover more. So what would I need to do if I see Tesla’s stock price surging up to 450 and I want to still keep my Tesla stock and am afraid of the put contract being exercised? Can I get out of the put contract and still make money?
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Not really, you need the amount of equity in your account that will PURCHASE 100 shares of Tesla should your put be exercised. 100 shares is shorthand for having that, if Tesla went to $500, you could sell it for $500 and buy the shares put to you.

When you sell a covered call or put, you are trading it short. If you wanted out of the option, you would just buy one put to cover at the current price. If Tesla went up to $450, the current price would be quite a bit more than the premium you paid, possibly 2-3 times it. Or more. So then you'd lose money on the trade. That's why I said it's a limited risk but limited return trade.
 
Ok see if I get this right:

1. If I have 100 shares, I can sell one covered put contact for Tesla at 450 strike price out of the money.

2. I get around 6,200 premium (it’s a rough estimate)

3a. On Friday, Tesla’s stock price doesn’t go to 450. I keep the 6,200 premium. And my one option contract is expired and the 100 Tesla shares stock is still in my RobinHood account. I can also sell one more new put option for the next Friday keep repeating the process?

Or

3b. On or before Friday, Tesla’s stock rises up to 450 or even past 450, the buyer of the one put contract exercises it. Now I must sell him my 100 Tesla shares to him at 450. So now I lose the chance to profit from a higher Tesla stock price. In order cancel out the put option contract, I need to buy a new 450 put contract, but this price will be higher than the 6,200 premium because it has gone up to maybe 8,000 by Friday?

Thanks for your expalintion of how options work. Options sound very confusing but they are tempting because I constantly get Youtube ads telling me to sign up for Options Guru courses but I don’t think they are real.
 
DesiDucati said:
Thanks for your expalintion of how options work. Options sound very confusing but they are tempting because I constantly get Youtube ads telling me to sign up for Options Guru courses but I don’t think they are real.
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Since this is the investment thread and not the day trading thread, please read the following:


Stop.







Just stop.


Close your robinhood account and hire a fiduciary before you light your money on fire. Do NOT trade options (or make any other investment decisions) after educating yourself on youtube.
 
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