The TSLA Saga Jan 21

It’s getting harder to cover everything that’s happening everyday now as the mess accelerates events that happens and need to analyze. So I will just stick to one at a time with the 1 hours per day I have to do this.

The conservative Straddle

I cannot stress how important it is to analyze your options risks before you send them off to be executed. So many times I caught myself from executing the wrong trade after verifying with the risk reward graph. If you play around with it enough, you’ll understand that there are combinations of options where if you do in fact execute the trade, you will be 100% sure to lose money at all possible prices. But if you do find these, make sure you double check by flipping all the trades around to see if the reverse is ones where you are 100% sure to make money at any price.

So before you go ahead and play more with options, go and download Think Or Swim and open up a simulated account which is only 15 minutes delayed. Then follow the next part.

Step 1

The important parts are highlighted in red.

Click the options you want to buy and sell so that they enter into Order Entry. Right click on the order and click Analyze Trade. Do this for each option you are interested in.

Step 2

Once that’s done, go to the top where the tabs are and click on Analyze.

Step 3

Analyze. The X axis here are stock prices, the Y axis here are net capital based on the options you have inputted into analysis.

This is the snapshot of Jan 14 when I recommended a conservative approach to straddle. The bottom  of the graph where a bunch of number are highlighted in green and red are the options I have selected to be analyzed. The exact structure is:

Buy 2 $200 Put at $24.70 for June 16
Sell 1 $250 Call at $2.81 for March 16
Buy 100 stock at $202.71

Purple line is the current probability for profitability at each stock price, the blue line is the profitability at March 19th at each stock price.

I use this to target $250 for a potential gap close while protecting a potential for a real market collapse due to oil. What I am betting on is that the stock price will NOT stay around $200. There’s also a Call that’s sold to squeeze out more monthly income. For this structure, I will revisit the call option I sold a week before March to see if I should let it expire or close it before selling a new one for April.