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It’s expensive to hold a long term short position against Tesla. Options expire, leveraged ETFs decay, opportunity cost. I’m sure there are some Michael Burray

It’s expensive to hold a long term short position against Tesla. Options expire, leveraged ETFs decay, opportunity cost. I’m sure there are some Michael Burray types that are long on short positions but as a retail investor I can’t do it. The stock has show amazing resilience in face of continuous bad news. To summarise just the recent bad news: - Sales are down 15% in California - Cybertruck production has been reduced in Texas due to poor demand - Two models have been pulled from sale in China - RoboTaxi delayed again, this will probably never ship - Model Y remodel delayed

Fade_Dance 2y ago
You can write put positions against a short position to have a positive carry short. It's not an awful approach when a stock already has fear and high volatility. To step it up a notch you can check the ratio of recent implied to realized volatility, and look at option skew (often Puts are extra expensive relative to calls in times of stress) as well as volatility smile shape (far out of the money tail risks can run very expensive in times of stress). All of that is easy for a retail participant, or I should say, anyone expecting to make money from shorting should probably be able to do the "middle school" stuff like this (brokers like ThinkOrSwim will have this info a few clicks/15 seconds away from typing in the ticker). If you truly know what you are doing, short shops will do things like amplify their exposure and then use software to precisely hedge correlations (short a bank? Long a precise basket of other financials to cancel most of the broad exposure out). For others, the approach above can be nice, because in the case where you are not right about your view but not especially wrong either, the position is just harvesting risk premia which is a proven, core source of return from trading inherent to markets. Of course, if you make a bad bet you're going to get bad results. No avoiding that.
- otterley 2y ago
  At my age, my mind can’t handle that type of complexity vis-a-vis trading strategies. Options are about as complex as I can tolerate without crowding out other things from my brain. I don’t even hold any single stocks long right now except for my employer’s.
  - Fade_Dance 2y ago
    And you will almost certainly be better off for taking that approach! Tl;Dr a covered Put on a short position is just an inverse covered call though. Fairly simple.

Fade_Dance 2y ago

You can write put positions against a short position to have a positive carry short. It's not an awful approach when a stock already has fear and high volatility. To step it up a notch you can check the ratio of recent implied to realized volatility, and look at option skew (often Puts are extra expensive relative to calls in times of stress) as well as volatility smile shape (far out of the money tail risks can run very expensive in times of stress). All of that is easy for a retail participant, or I should say, anyone expecting to make money from shorting should probably be able to do the "middle school" stuff like this (brokers like ThinkOrSwim will have this info a few clicks/15 seconds away from typing in the ticker). If you truly know what you are doing, short shops will do things like amplify their exposure and then use software to precisely hedge correlations (short a bank? Long a precise basket of other financials to cancel most of the broad exposure out). For others, the approach above can be nice, because in the case where you are not right about your view but not especially wrong either, the position is just harvesting risk premia which is a proven, core source of return from trading inherent to markets. Of course, if you make a bad bet you're going to get bad results. No avoiding that.

otterley 2y ago
At my age, my mind can’t handle that type of complexity vis-a-vis trading strategies. Options are about as complex as I can tolerate without crowding out other things from my brain. I don’t even hold any single stocks long right now except for my employer’s.
- Fade_Dance 2y ago
  And you will almost certainly be better off for taking that approach! Tl;Dr a covered Put on a short position is just an inverse covered call though. Fairly simple.