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Quote:

Originally Posted by Trip7 (Post 3252332)

Good discussion indeed. How do you come up with $6100 of stock would be better? One just has to look at the beautiful job famed Reddit investor DFV did with GME turning $50k into $20+
Million with GME LEAPS calls

If you get the direction and velocity(strike price selection) right you are always better off with LEAPS. A little more optimistic valuation of BABA is $400. If BABA hits $400:

$6100 in shares turns into $11,600 of total value

1 LEAP:

$40,000 of value(100 shares)
-$6100 (Premium)
-$17000($170x100)

$16900 of total value

That's a difference of $5300 or 45%

The key of course is getting the trade right. That why it helps tremendously to find a company that you have conviction is undervalued. If Delta Pilot staffing was a stock price I would have have bought a LEAP Call last October with a strike price of 9,000 pilots. Sheer outrageous value like that is the tenent of my investment process.

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If if if.... Yeah, if BABA hits $400. It could also hit $150. That does not change the fact that you are starting $6100 down, and tying it up for 18 months. The only good there is that that is your maximum loss. But again that is a $6100 hole that you must first dig out of before you make penny 1 in profit. Out of curiosity, how long do you think it will take for the option to recover that? I guess perhaps I prefer to be more liquid in this environment. When money starts to get expensive again,(2022 or 2023?) I think the bull run will become at best more of a bull walk. Different discussion however for another thread perhaps.

And I have to say that using GME as ANY kind of litmus test... well.... lulz.... If that is the windmill you are tilting at I wish you all the luck in the world. But I will reiterate that you are in love with a company... a Chinese company at that, and imho, that is not a wise idea no matter what your interpretation of their fundamentals is. I would wager that the next Republican president is going to see that Mr Trump was right in his economic attack on them and start it back up again. Remember, they need us, we don't need them.

So let me ax you this then... being that you are confident that BABA is going up, why don't you sell some puts against that call to recoup some of your premium? The Jan 23 $180 puts go for about $21... so the money you are ponying up is only $40. In every post that you have mentioned BABA, you have exuded extreme confidence that it is going up. No doubt. So why pay more for something that is going up anyway? For that matter, sell the $255 OTM puts and your cost is (essentially) zero. You might even collect some premium. Now you have ponied up nothing and when the stock goes up, your call becomes more valuable and the put declines to zero and you win bigly. I get the impression that you would not want to do that because your confidence in the stock really isn't what you say it is. If it is, this kind of trade is a no brainer.

Like I alluded to earlier, this kind of spread/condor/whatever stuff is too Mickey Mouse for me and I prefer to just go for the throat and sell the put outright and do something else with the premium collected.

Oh, and I would have sold the 9000 Delta pilot puts every week.

Not intended as investment advice, dyodd, ymmv, past performance, yada yada yada

Quote:

Originally Posted by mispoken (Post 3252349)

Time, technology, founder.

Seem over simplistic? That’s because it is. Investing for the long haul super simple.

Since you like complicated and metrics how about this;

On a trailing basis TSLA is 40x EV/EBITDA. Operating earnings are growing faster than sales. This is as of May of this year, last time I looked at any of that. Of course this metric is basically useless now, since the stock price has gone up. Regardless, If this continues, by that metric, Tesla is dirt cheap. They’re not even operating at scale yet. This also doesn’t take into account optionality such as subscription revenue.

That’s the problem with metrics, and why I largely ignore them. You can find one to fit your thesis any day. They sound smart but they’re mostly created to make people feel that way.

Last time TSLA was 40x trailing EBITDA was 2019. Its currently trading at 127 times EV/EBITDA.

Time, technology and founder is not an investment strategy. It's Hope and Dreams. It's sounds like you are willing to pay any price without regard to the return on your capital. I own a Tesla. It's a nice car. Would I pay 400k for a car that worth 100k brand new? Absolutely not.

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Quote:

Originally Posted by JamesBond (Post 3252369)

Yes it could theoretically hit $150. But by buying at a large discount to Intrinsic Value(30%+) initially you protect your downside. I call it my margin of safety. Moreover, buying at least 20% ITM, the stock does not have to move much to breakeven. My $6100 premium leverages me to control $21,200 worth of options. The stock only needs to move 8-9% to breakeven at a $170 strike price. If I'm buying an option on a stock that 30%+ undervalued, growing earning at 30%+ a year and have a 1 yr+ time Horizon on the expiration date I say that's sheer outrageous value with a large margin of interest.

Buy writing Puts I'm taking equity downside risk and not getting paid nearly enough to do it.

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Sounds like Trip is just using a stock replacement strategy. Less outlay, more leverage, they can be rolled forward, and no chance of margin calls. Not sure why he’s taking so much heat.

Happy Fathers Day!

Quote:

Originally Posted by Hawaii50 (Post 3252415)

I wouldn't call it 'heat'. I'd rather call it a discussion. I am not so sure I really agree with the 'leverage' aspect of it. He has monies tied up for 18 months. Might as well be long the stock without the hole to dig out of. I dunno. I hope it works for him. I couldn't see doing that without getting some offset via sold puts, and if I were doing that with the 'confidence' he has in the underlying, why bother with the calls?

Quote:

Originally Posted by Trip7 (Post 3252374)

I’ll go check my spreadsheet when I get to my computer. It may have been based on forward projections.

I’ll break this down for you;

Time-the greatest asset in investing. Time smooths all things out. The longer the time frame the greater chance of profiting. The longer the time the less relevant a number divided by another number. The longer the time frame the larger the compounding effect. For those with an ultra long investing mindset, ratios are irrelevant. For those who see things as black and white, and must try to prove you’re smarter than the market and do some basic arithmetic, you’re going to miss out on a lot.

Technology-The closest EV is about a decade behind. The technology is one of the main advantages that Tesla has. It’s why their sales continue to grow exponentially. It’s why they’re sold out for the next 2 quarters. It’s why they’re one of the safest cars on the road. The technology in the cars continues to get better by magnitudes compared to the competition.

Founder-Investing in a founder led company with a huge amount of skin in the game is an important part of an investing thesis. I’d take that any day over an arithmetic problem.

Then there’s you. You divided historical numbers by another historical number and decide if the result meets your criteria based on some conventional wisdom derived in academia.

It’s two different ways of investing although, I think your way is not long term oriented at all and therefore not investing. My way is why I’ve produced 30% annualized for a decade. I ignore all arithmetic when investing. It’s irrelevant.

im actually pretty tired of the back and fourth on this. We just have two different ways of doing this. My methods have proven to me, my way works. Maybe yours does too, we are just waiting on the data. I’d like to continue the investing discussion going forward. If people choose the use the ratios to guide them, good on em. If not, I’m happy to discuss my methods going forward.

Quote:

Originally Posted by JamesBond (Post 3252369)

Remember, they need us, we don't need them.

I know a few Walmart shoppers (maybe all of them?) who would disagree. China is a problem because there’s no easy fix.

Quote:

Originally Posted by TED74 (Post 3252470)

I know a few Walmart shoppers (maybe all of them?) who would disagree. China is a problem because there’s no easy fix.

Trump had the right idea. But people want their cheap Chinese ****.

This thread makes me very happy to be dollar cost averaging into index funds. I’ll report back in 25 years.

Quote:

Originally Posted by JamesBond (Post 3252472)

Trump had the right idea. But people want their cheap Chinese ****.

Ask the US farmer about that idea. They were the sacrificial lambs.