Why The **** Didn't You Buy TSLA Puts?

[Magic]

Funny thread guys. Myself and a few other guys played TSLA heavily to the short side all Monday and Tuesday. I also held puts o/n and into Wed midday. For those saying puts were too expensive, it really didn't matter although the trade would have been much better on Wed/Th. I was buying $650's nearly $300 out for about a buck when it cracked late Tuesday.

Nice to hear from a veteran. I've only been actively trading a decent block of capital for 1.5 years now. This is the first time I've seen something I know enough to understand is blatantly wrong and had some clue of what to do about it. Was hard to really press the edge amidst the volatility and uncertainty. Hope there's more to come like this.

 

[Pekelo]

Don’t strain your shoulder whilst patting

Too late, but I am OK, thanks for asking.

 

[Times]

Puts were extremely expensive, Like you would need the stock to drop hundreds of dollars in a short period of time to break even let alone profit.

I did sell call credit spreads tho which are working out.

Its only seemingly obvious because its hindsight.

 

[S2007S]

Puts were priced way toooo high. UnLike the calls which were trading below a dollar that spiked to $10-$20 in a matter of hours/days before tsla made its run to nearly 1000.

 

[Bekim]

I did the exact thing, I was about to pull the trigger on a long put spread when it was at 800 and I chickened out.

 

[SanMiguel]

My modesty. Posted on Tuesday at 3:12 pm:



30 minutes later the stock topped and dropped a 100 bucks. No, I didn't buy puts, I sold vertical calls. Why? Because I can be wrong by 2 days and still make money. It is almost impossible to call the exact top of a stock going vertical, but I think my call was pretty damn good.

Out of interest what was the credit spread you used?
I assume this is buying a put and pairing it with a credit spread above the highs?

 

[Pekelo]

Out of interest what was the credit spread you used?

I am usually early, so I sold the 925 calls and bought the 930 calls. No puts involved.

 

[Times]

I am usually early, so I sold the 925 calls and bought the 930 calls. No puts involved.

what expiration? and why did you choose that expiration if you dont mind

 

[Pekelo]

what expiration? and why did you choose that expiration if you dont mind

Friday, the closest. I figured even if I am wrong with the exact timing, the top had to be really close. Also I tend to think I can leg out of a vertical if it goes against me.

 

[qwerty11]

Agree 100% with the psychological considerations. Although I don't think $1200 is likely in the near-term. Such a large, rapid dislocation from previous valuations on no obvious paradigm shift has got to be driven by liquidity factors imo. And now that the whole world is watching closely I don't think that will happen again immediately.

Maybe if we had mass retail participation it could, and although I haven't seen reliable data, it seems like there is enough institutional money and bots to dilute retail euphoria from moving big names so rapidly once everyone is paying attention. In fact I think the low $1000's were / are a great backstop to trade against because the valuation is not realistic; although the premium for such a trade is rapidly bleeding out of the name.

--

Specifics aside, agree with Specter on the main point that OP is being naive to view hindsight as so obvious. I traded this thing myself; mainly shorting ITM vega when the middle of the curve started to blend in more vol than I thought was realistic for the timeframe. And in the aftermath; fading the residual steep call skew bid up by retails against the down & out gamma that was trading at atm vols all the way down to sub 20delta until recently??

Even then with some pretty obvious dislocations; I sized quite small because how do you know the exact price this will collapse at? Could be anywhere when things are this unstable. What if another major block hit the pain point at $950? I was really confident in the fade but I felt I had to be ready to eat another $500 / share in worst case or give away all the edge buying massively expensive risk control.

So the turning point was extremely uncertain, and the timing was as well. What if we stalled for a few days at $900 before the next wave came in? You're just going to sit tight and shell out $1000's per day on your thetas waiting for a drop? For how long until you reconsider? Even then if you're right on direction but the move is too gradual you won't ever recoup that. Sure we could have all made a fortune buying puts but an immediate 15% rip off the highs was in no way the obvious next step.

Next time you have an idea put on a tester 1 lot or something, talk through what you're doing and your assumptions with someone in real-time each day. You'll realize this stuff is far from being obvious even though it sure looks that way in hindsight. It's a cognitive bias.

1 important difference with other recent "big shorts" (like TLRY, Beyond, etc.) is that borrowing costs for TSLA are almost 0. That is a mayor advantage (also the knowledge that this aspect will not push up the stock further)...