Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 3
Just for fun, I'm giving very serious thought to purchasing out of the money long dated puts on Tesla? Paired with long, dated at the money call options on Alibaba.
Alibaba at six times free cash flow seems outrageously cheap. Tesla at 80 times earnings or whatever the hell it is, seems outrageously overvalued for a capital intensive business with relentless competition and vapourware that appears to be utterly worthless.
There I've said it, I realise this is not in keeping with sound investing principles as advocated by Mr Buffett. However, I have rarely seen these kind of extremes and I have a strong sense that this market is going to take a dive over the next 2 to 3 years and Tesla may be the poster boy.
I realise this is speculation on my part, and I'm therefore only allocating a tiny fraction of my net worth to it. I just don't want to miss it.
No. of Recommendations: 6
It might work.
The problem is that you have to buy enough time for the thesis to work out, which might take many years.
Even if you can find options that long dated, they might cost so much that the rate of return isn't that great...especially when weighted by the risk of failure.
Unfortunately, as I've learned, you can be absolutely right about an investment insight but still find that it isn't really worth doing ; )
The secret to this approach, I think, is very small positions with very high payouts, no matter how remote the possibility of payout.
Lottery tickets are a bad return on average, but the entry cost is very low and the payoff is very large, so it is almost rational to put a tiny fraction of your portfolio in them.
"Heads I win, tails I don't lose much" is arguably a useful bet even with terrible chances of a win, provided the loss is small enough to take in stride.
Jim
No. of Recommendations: 0
Betting short on TSLA is more risky than betting long on BABA. There're enough rich people earning over $150k a year in the world who will sustain TSLA's momentum for at least few more years, they are willing to pay a few thousands dollars more just for the Tesla name.
No. of Recommendations: 10
Betting short on TSLA is more risky than betting long on BABA.
Betting long on DG looks better than either to me : )
But I'm a chicken--I am averse to wild outcomes, unless my wager is truly cheap.
Jim
No. of Recommendations: 1
What happens to your call options when BABA breaks up in six companies?
Forget the strategy (which I think is nuts), curious about the mechanics.
No. of Recommendations: 5
What happens to your call options when BABA breaks up in six companies?
Forget the strategy (which I think is nuts), curious about the mechanics.
Normally a split-up is not an issue - your options automatically get replaced with options in each new entity, with strange strike prices.
For the rounding error, pieces smaller than a contract are generally cash settled on the breakup date.
That presupposes that the new entities are listed on a US exchange and have options listed.
If not, I imagine in-the-money options would probably get a cash settlement for the ITM value at the first market price for whichever pieces weren't listed???
For out-of-the-money, no idea what they'd do.
The Options Clearing Corporation would come up with a rule. They try to find whatever is fairest but doable.
Jim
No. of Recommendations: 2
Tesla at 80 times earnings or whatever the hell it is, seems outrageously overvalued for a capital intensive business with relentless competition and vapourware that appears to be utterly worthless.
I loaded up on $500 and $600 Jan2025 calls during Dec and Jan when TSLA took its dive down to $100.
50/50 chance Tesla solves FSD/full autonomy by then and has the new Mexican factory ramping on the $25k car .... or, the Bot in full production and replacing factory workers by the tens of thousands. If either of those happens, I'd put the value at $1,000/share ... a 50X+ return.
No. of Recommendations: 2
50/50 chance Tesla solves FSD/full autonomy by then ...
Well, I can agree there are two possible outcomes to "will they solve FSD/full autonomy?" in any timeframe but I wouldn't call the odds 50/50, and certainly not in the next couple of years.
"A Very Courageous Decision"
SA
No. of Recommendations: 3
Just for fun, I'm giving very serious thought to purchasing out of the money long dated puts on Tesla?
Tesla has increased production, sales, and top-line revenue by ~50%/year for quite a few years. With a few Gigafactories still ramping up and more Gigafactories breaking ground, and more models of cars and trucks waiting to be built, it is hard to see them stopping this any time soon.
A PE of 75 now is something like a PE of 20 on 4 year forward earnings. Unless the next 4 years are somehow wildly different than the last 10 years.
Tesla has relatively recently become the owner of the single largest selling car model in the world (Tesla Model Y). And a pile of other EV makers has recently announced agreements with Tesla to use Tesla's charging network and the charging method Tesla developed, which they are now branding as a standard.
I am long TSLA myself, but mostly with straight stock instead of leveraged options since the cost of leverage has increased and the rise of TSLA stock to track its business seems to be somewhat volatile.
But I'm not doing it "Just for fun", maybe that's the difference?
R:)
