How about $325 by May 16?
How about $480 by September 19?
The new selector at work. 
The Captain
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The only way Tesla will hit $325 by May 16 is if Elon can override NHTSA and get FSD approved for interstate highway use in the next 60 days.
I bet you could make that happen with a $200 million gift to the Dear Leader.
intercst
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Of course. The stated objective of the administration is to make the ādeep stateā more responsive to the interests of TPTB.
Steve
And is immunized by an EO from all wrongful death lawsuits.
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Itās a darn shame that politics poisoned the thread.
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Iām really interested in your covered call selector. How does it work?
I could see buying stocks that I would like to hold anyway and writing covered calls on them. How do you choose?
Thanks,
Wendy
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The title of your thread is what are the chances of Tesla price reaching $325 by May 16.
Does your code calculate this probability using an option pricing model?
No! It does not calculate the probability in any which way.
The Black-Scholes option pricing model assumes that the price depends on volatility but what traders see is the bid-ask spread and trade accordingly. After the trade executes you have the āIMPLIEDā volatility.
My model use four metrics to rate options,
-
Cash = Net premium
-
Discount = Net premium / Stock price
-
SSS per day = Net premium / Days to expiration
-
CAGR = (Net premium + Capital gain) should the option be assigned vs. the price of the stock when downloading the option chain using the CAGR formula
The Captain
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I was thinking that because you titled your thread with a question about this that you are interested in this probability.
Would your strategy be helped by estimating the probability that Tesla reaches $325 by May 16?
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Actually currently the probability of $TSLA reaching $325 is about 9% based on current volatility. Of course as price changes, and volatility changes this changes. If you start incorporating the probability then you get into constant adjustments.
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Then one could calculate return under the two cases:
9% chance of $325
91% chance of not $325
The more interesting case is to have your own pricing model and compare it to the prices in the market. If you believe in your model, then when your model substantially deviates from the market model, then invest accordingly. Thatās a lot of work, but thatās why hedge funds exist.
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Most options are a waste of money.
That is why covered calls would make an income.
Fools and money are easily parted. Welcome to the new reality. Same as the old.
But you will lose your shirt in TSLA. Not worth the cost of doing business.
You can have an idea of what is the worth of a stock, and apply a discount to it, a margin of safety and sell a put. You could be wrong and the margin of safety may not be sufficient. But the damage is mostly limited. Trying to use Option probability to trade is not a viable option for individual investors. They are mostly for the big players. Even delta hedging is not viable for individual investors.
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My gut tells me that thereās a 70% chance it sees $325 sometime between now and May 16th.
Iād say thereās a 20% chance of seeing $480 sometime between now and Sep 19th.
I think the story is that if Tesla launches a robotaxi service (in Austin?) before May 16th, the stock could pop, even briefly, but easily over $325.
The numbers do not make sense. The shares are not worth anything like that. Place a lot more doubt in the current market pricing.
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The thinking is that the robotaxi in Austin will look more like a Waymo with the spinning LIDAR sensors ā sealing the case that Elon isnāt going to make FSD work with cameras alone.
intercst
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Here is but one reason the camera-only approach of Tesla isnāt going to be reliable.
āPeter
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Hereās the longer version of the video. Iāve jumped ahead past a lot of explanation (and a bit of side quest at Disneyland with a LIDAR) to the car testing.
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I was going to answer but I decided to read the rest of the thread before doing so. Road Runner Ran Right (<- sound of motor car) off a cliiiiā¦
There was a man who wished he could read the stock market news a day ahead of time to make his trades. His wish came true! He was ecstatic! Next he read an obituary. His own!
What Did Mark Twain Say About The Stock Market?
Mark Twain had many observations about human behavior, society, and various aspects of life, including investing and the stock market.
What did Mark Twain say about the stock market? Here are a few of his most famous ones:
āOctober: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.ā
More fun stuff in the link below!
Click links at the link at your own peri!!
You have been warned!
The Captain
loves
- Road Runner
- Mark Twain
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Glad to hear. It started out as simple spreadsheets to calculate options. In time it became too much work and too error prone so I wrote code to add it to my portfolio web app.
Indicators
I had to figure out the most significant indicators for my purposes, namely generating income.
The column on the left is about the premium
- cash: Cash = Net option premium
- day: Dollars per day = cash / days to expiration
- disc: Discount = Cash / stock price when the option chain was downloaded
The blue column is about the option being assigned at expiration
- cash: Total cash = option premium + shares capital gain/loss
- day: Dollars per day = Total cash / days to expiration
- cagr = (Net premium + Capital gain) should the option be assigned vs. the price of the stock 15 minutes before the option chain was downloaded using the CAGR formula
- days: days to expiration from today
- Sel: Transfer the option data to another screen to compare against options on other stocks
Selectors
Option chains have hundreds and even thousands of options. The selectors are used to mute the ones of no interest to then personally focus on the best ones.
The drop down menu can pick one or all the option chains.
Easy to upgrade to pick a few choice ones.
Once you pare down the number of options to a manageable number the rest is old fashioned manual option picking.
If you really want to learn about options I recommend, but only after learning the basics,
There are many trading strategies some of which have names like Catch as Catch Can holds. āIron Condor?ā Sounds painful! Ouch! Leave that to professionals. Simple covered calls can be very productive.
Notice the word volatility in the title! The higher the volatility of an underlying stock the higher the premiums will be. This is one of the reasons I like technology growth stocks to write covered calls on. Less volatile stocks will fetch lower premiums but will have a lower risk of capital loss. Also, with high volatility stocks there is a higher probability of the option being assigned and losing the stock PLUS paying capital gain taxes to boot. Being a non-resident alien has its advantages, no capital gain taxes!
Your option strategy has to match your investing objectives. Covered calls are the least risky options. When people tell you that calls and puts are essentially the same, donāt believe it. In theory they are. In practice selling puts is riskier than selling covered calls. Itās not the options themselves but the cash management they require. Puts give the buyer the option to put, to sell you the stock and the put is āCASH SECUREDā and that usually means margin.
I divide my portfolio into LTBH and income from covered calls, they require different option strategies.
LTBH
You donāt want to lose these stocks which means out of the money (OTM) options, way OTM if the stock is volatile. Generally you donāt want to use them for covered calls. The exception is after a top like TSLA had this past December. While the stock is falling the options are less likely to be assigned. TSLA yielded over 7% from late December to mid February.
Income
Here you want stocks that yield lots of premium, volatile stocks. Stocks not likely to crash and stocks likely to bounce back. I experimented with a large number of stocks picked by Cathie Wood. That did not work out well. Now I have half a dozen candidates, solid high growth tech stocks (AMD, ARM, NVDA, PLTR, SMCI, etc.) The option picks tend to be somewhat OTM. If they crash you either sell them or roll the options higher OTM.
Learn to interpret stock price charts. Traders favor six month charts.
The Captain
6 Likes