Below is an excerpt from our Weekend Update for Saturday, Feb 21st. I do value your time, and appreciate your continued interest in my work, so each one of these is written to provide value over and above my soliciting new subscriptions. As an example, I've been pumping Tesla here since December, when the stock was trading under $400. It closed Friday at $900. We have been buying calls all the way up. It is because of these exponential runs in our calls that my retirement has been moved up a year, maybe two. Join now and come with me for ride of a lifetime, as this $900 game changer goes up 5-10X. Be a part of this before I say adieu. Those with me at the end will have a special surprise coming their way.
PS: What happens when you trade TSLA calls without stops right through to expiration? This is what is possible: New video.
The Big PictureThe two most important factors affecting our trading this past week has been the emergence of the coronavirus, now spreading outside of China, across Asia, into the Middle East, Europe and now America, and our trading of Tesla. The virus has yet to have a demonstrable effect on our domestic stock market, but when it does it will affect the market in two ways, (1) The eruption of fear, uncertainty and doubt, and, (2) followed by the Federal Reserve to the rescue by lowering interest rates and flooding the capital markets with liquidity. Out of these two scenarios there will be trading opportunities. If instead (and hopefully) the virus scare subsides, we will still have Tesla to keep us occupied.
Money Management: Just One Idea
As with trade management, when it comes to money management no one size fits all. Nonetheless, it comes with the territory. This particular trade and money management system evolved almost on its own out of my trading and has had the added benefit of allowing me to be flexible with stops. To each his/her own, but this is working for me:
Every time the TSLA call position doubles (at least) it is closed and the proceeds divided as follows:
(1) One-half is immediately placed in a new position at a higher strike;
(2) One-quarter is used to buy TSLA shares;
(3) One-quarter is banked (kept as cash).
The benefits of this strategy are that risk is controlled, leverage on calls maximized, shares are bought with profits (i.e., "free") and a stash of cash is built-up for taking other trades, paying any applicable capital gain taxes, and buying yourself presents; anything from the incredible new Apple Series 5 watch to the even more incredible Tesla Model 3.
The introduction of the Cybertruck late last year was at the core of my "Tesla: 2020 Stock of The Year" post from Dec 7th. At that time the Cybertruck had 250,000 preorders. Since then preorders have about doubled and that represents approximately $25 billion in new revenues for Tesla over the next 3-4 years. This 4 minute YouTube video gives a nice overview:
Tesla Power Packs
Tesla doesn't just make cars, trucks, gigafactories and solar roofs. Power Packs represent another rung toward $7,000/share. This 8 minute video describes the opportunity: