To The Moon

Let's Discuss Targets for the Three Tech Giants

$Tesla Motors(TSLA)$

On Tuesday, Tesla shares continued rallying, briefly hitting a high of $265.61 and achieving the interim upside target. This triggered a slew of institutional roll trades towards higher strikes.

For example:

1. Call Roll
   Closed: $TSLA 20240712 $245 Call$ - 32,000 contracts
   Opened: $TSLA 20240719 $275 Call$ - 29,800 contracts

The key detail here is that the $245 calls showed only 23,000 contracts closed out against the roll, meaning the other side just outright bailed without a buyer. The market makers ran for the exits.

What does this signal?
The two highest call strikes for this week have become the $300 and $275 calls!

And friends, this is only mid-week with Tesla just breaching $260.

2. Naked Call Roll
   Closed: $TSLA 20240816 $225 Call$ - 32,000 contracts
   Opened: $TSLA 20240816 $260 Call$ - 29,700 contracts

While the size is similar, the $150 million in total premium traded suggests about a 50% position reduction on the roll up to $260. Still maintaining August 16th expiry, implying an upside target around $285 based on the debit paid.

The $225 calls also showed 28,300 contracts simply closed out by the other side, suggesting even an August pullback is unlikely to reach $225.

3. The Wildest of All - Naked New Upside Call Buying
   Closed: $TSLA 20240802 $275 Call$ - 10,000 contracts
   Opened: $TSLA 20240802 $325 Call$ - 10,000 contracts

Same size, but the $325 calls are cheaper than closing the $275 strikes, so effectively a reduction in exposure. But still betting on Tesla reaching $300 by late August expiry.

While institutional call buying is extraordinarily aggressive, such high risk/high reward plays are not suitable for most. For the average investor, simply holding shares is difficult enough.

Own shares first, then look to options for extra income if desired.

In my view, if you can't comfortably hold shares, you'll struggle even more with call options which have inherent leverage and higher risk.

Buying just a contract or two is one thing. But in a bull market, going for large call option size before establishing a core share position means the effective leverage may negate any perceived edge, potentially underperforming a simple 100% share allocation.

(Side note - I'm referring to multi-month or LEAPS call options here. The weekly options are different, and I would never suggest going all-in on those explosive lottery tickets.)

As for put options, I felt selling at-the-money puts yesterday was too conservative. In-the-money put sales would have been more appropriate.

Since I'll be manually closing out the short put position on Friday's roll anyway, might as well start with in-the-money strikes that still maintain extrinsic value and convexity regardless of whether we range or rally further.

$NVIDIA Corp(NVDA)$

Nvidia's trajectory is similar to Apple's - a slow, steady grind higher.

Current price of $133, with $150 as the upside target by September, potentially extending towards $180 by December.

These levels are derived from the strikes where institutions have been actively selling calls - levels that tend to get exceeded in bull markets.

$Apple(AAPL)$

Apple currently at $231, with $245 call strikes being sold for November expiries.

For those feeling Tesla has become extended and seeking a more defensive stance, Nvidia and Apple could represent alternative value plays.

Or if looking for an even lower-risk income trade, selling cash-secured puts could also be considered - e.g. Apple $220 puts or Nvidia $120 puts.

Lastly, this bull market just feels incredibly comfortable, sitting back and watching further gains accumulate daily.