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Tempted to buy some deep OTM puts on Nikola. Think they’re a fraud and their projections are BS, only depends on when SEC/DOJ gives them the hammer. Thoughts?

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I like the thesis and the positioning is solid. Trade execution is going to be tough for three reasons: 1) The NKLA options aren’t very liquid so the bid asks look fairly wide relative to the price of the option position. You’ll probably get a bad price on the buy and another bad price on the sale. 2) The options are very expensive. Ideally close to the money positions for expiries under ~30 days are trading less than 3-5% of the underlying. I’m seeing Nov puts in the $20s trading at 8% of the stock price. The ATM positions are at 25% of the stock price. My broker isn’t showing IV right now but I’m guessing it’s well over 100%. 3) The timing is uncertain of when these events will unfold. It could be tomorrow or it could be in six months. Theranos took more than a year to implode once allegations like this surfaced. All that means is this will be an expensive position to get in, you’re likely going to get haircut on gains when you sell, and if you have to roll to a later expiry date, it will be expensive all over again. You might be able to make it work - and can probably make a little money, but trade execution is going to be hard. Easier to short GM if you think they’ll take a hit when this mess implodes. Won’t pay as well, but it’s probably a higher chance of success.

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How do you make money on OTM puts on a stock? Still learning...

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Deep OTM tend to be low cost and you’re only paying for time in terms of what the market expects in terms of volatility. As volatility picks up + strike gets closer to ATM the value of the options will go up.

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Always inverse the obvious move. If it’s obvious, it’s probably because you are late to the game. Puts on NKLA was the move when they hit 90 not while the have fallen to 30.

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Price goes down options value goes up. Hypothetically if op owned the stock and it went down past the strike price the option writer would have to buy at the excise price

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I thought about this as well. However, there are numerous cases of fraud in public companies which took months and years to play out in the stock price, even after that fraud was detected.

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Similarly, there’s a lot of anti Tesla themes out there (e.g. channel stuffing, off balance sheet entities, quality issues, options market manipulation). A lot of $$ burned shorting in that. If IV is high, be a net seller

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We’ll get to see how good that put theory works...

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I haven’t looked through those 52 accusations...if they’re as bad as they sound then yea. Depends on SEC timeline but between them rendering a decision and potential stock turbulence around the election I think it’s a well placed bet

Looked at this for a minute. IV percentile is 44 and recent trend is falling. Looking at the chart, see strength at $30. Near-term probably retests $38, particularly with market likely up this week (this was my overall market opinion Friday, avoided news all weekend). I’d be a buyer around $30 & overall expectations at least short-term upward move.

I missed that was the percentile. I agree with you. On this, you are better off selling options. I can’t find the short interest on NKLA but I am sure it’s high, so I would rather sell puts than buy them.

TSLA IV%tile is 98% on the other hand, maybe some high probability call spreads. $495/510 weekly nets $405 now with 76% win probability.

Actually, given what is known so far, I would be tempted to buy ATM puts and let get deeper in the money . . . or short shares outright . . . .

Why not just short shares and sell a put at your target then use the credit to buy a call to make sure you dont get squeezed out.

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