Tesla – Yes, I went there

by JDH on March 13, 2021

Gold is fading, cryptos are doing well buy not exploding upward, so what does one do for fun?

Buy TSLA – Tesla Inc.

As readers of this blog will know, I am NOT a Tesla fanboy.  Quite the opposite, in fact.  I don’t think their cars are anything special and without massive government funding, they would have ceased to exist long ago.

But, here we are.  After peaking at just over $900 in the third week of January, Tesla “corrected” all the way down to $537 on March 5.  I’ve kept an eye on it, and decided on March to gamble and buy 100 shares, which I did, for $644.

But, being the cautious person that I am,

I immediately sold a March 12 call, strike $650, for $20.80.  That was a bad move because Tesla kept going up, so the same day I bought it back for $36.40 (for a loss of $15.60), and immediately sold a March 12 call, strike $670, for $25.80.  That worked out slightly better, but on March 11 I bought it back for $27.75 for a loss of $1.95

I then sold the $685 strike for $18.00, and just before the close on March 12 I bought it back for $5.70, for a profit of $12.30

Net loss on the covered options: $5.25 (x 100, since options are for lots of 100 shares).

But the reason I lost money on selling the options is because Tesla went up, and it closed on Friday at $693.73, for a profit on the shares of $49.73.

So, had I just bought the shares, I would be up $49.73 (x 100 shares).

Instead, I am up $44.48 (x 100 shares).

However, I’m fine with that, because I mitigated my risk.  Had Tesla crashed, I would have had a big profit on the options, mitigating my loss on the shares, so I’m fine with that.

(And yes, I realize I could have bought the $650s and sold the $660s, or whatever, and had less cash invested with more upside, but I’m not a genius; I just wanted to buy something, so I did).

It’s likely that next week I’ll either cover again, or sell the shares and take the profit and move on.  We’ll see.

Gold is under pressure, cryptos are still looking good, so we’ll see what mood I am in next week.