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What am I Doing with My LEAPS? - YouTube
Channel: Tesla Economist
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welcome to the tesla economist please
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hit the thumbs up and remember to
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subscribe you can also follow me on
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twitter and talk to me on patreon
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as many of you know i also like buying
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tesla leaps check out some of my earlier
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leaps videos if you don't know what they
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are all my investing strategies for them
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but for those of you already in the know
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who are also investing in leaps then i
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thought i would just give an update on
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where i am now as we've seen a sizeable
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movement in the stock price as of recent
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my leaps i bought earlier this year some
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are now well over 100 return so before
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when i was showing all of you how and
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why i was buying them when the stock
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price was in the five to six hundreds
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well now you can actually see the end
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result and the power of leverage except
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this is the start of it my leaps are now
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in the money the stock price only has to
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increase about 20 percent for me to gain
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another 100 return this is when it
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starts to get much more fun if the stock
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price goes up another 50 percent then i
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might have something like four to five
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times return on some of my leaps for
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those of you who would buy a margin you
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would have had to have some serious
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leverage to receive those returns which
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would have been highly risky i'm not
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sure how many trading accounts even let
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you buy or margin that high i don't buy
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a margin it's never been my strategy as
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it's a way you can lose everything and
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be wiped out of tesla i have a rule
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never risk being out of tesla so i
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double my money in the space of a few
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months what now do i sell and wait for a
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dip and then rebuy cheaper taking
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profits well as a lot of you know i
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bought these leaps to hedge today's
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price in a couple of years when i can
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afford to exercise the leaps and buy the
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shares my strategy was not to trade i
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don't offer any trading advice the
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statistics clearly point to your chances
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of getting the best return are from
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investing long term not trading human
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psychology may fight against you but
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resist the urge to sell and take profits
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if you want the best chances of getting
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the highest return this is not financial
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advice this is me just stating
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statistical facts again the saying time
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in the market beats timing the market
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will always ring true compounded returns
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oh except it's tesla so exponential
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compounding returns don't risk missing
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out on that i've seen it happen plenty
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of times anyway what now so i'll explain
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some strategies of what you can do now
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if you're holding leaps and what you can
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do to buy more leaps or get into leaps
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for the first time and i'll tell you
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what i plan on doing but please leave
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your comments and tell me your leap
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strategy too leaps are not covered much
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this might even be the largest tested
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leaps community in the entire world so
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please share your stories and strategies
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so we can learn too now for most people
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when you sell your leaps you are subject
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to tax i said sell not exercise but not
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everyone is depending on what tax you're
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subjected to or what type of retirement
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account you might have now if you still
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have a year or so or even more left on
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your leaps and you plan on exercising
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your leaps when the expiration date
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comes and you're not subjected to tax
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and if you have sufficient capital
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available to exercise them then one
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strategy that may be better for you
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rather than exercising them will be to
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sell your leaps and buy shares you see
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there is still a premium on your leaps
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due to the expiry date being so far out
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there is value in that as you get closer
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to your expiration date this value will
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continue to diminish for example if you
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have 700 strike price for your leaps and
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i'm just using basic numbers in this
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example not actual market numbers to
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keep it simple well right now your leaps
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are about 200 in the money yet you could
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possibly sell them for 300 if you were
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to exercise these leaps right now it
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would cost you seventy thousand dollars
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and if you bought the equipment in
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shares it would cost you ninety thousand
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dollars let's just say the stock price
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is nine hundred dollars well if you sold
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your leaps you would get thirty thousand
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dollars as we said they had a market
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value three hundred dollars and every
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leaps contract comes with a hundred
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shares despite only an intrinsic value
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of two hundred dollars so you have
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thirty thousand dollars and then you
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only need an extra sixty thousand
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dollars to buy a hundred shares i.e this
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means you pay one hundred dollars less
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per share even if you do have some tax
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to pay on leaps purchasing shares might
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still be cheaper for you than exercising
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however in that scenario you've run into
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the opportunity cost which is why i
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clearly said if you have sufficient
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capital to purchase the shares anyway in
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the above example yes opportunity cost
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if you're buying shares or exercising
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now then that means you have less
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capital to invest in more leaps rather
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than purchase 100 shares you could
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always buy three or four more leaps
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contracts and control three or four
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times as many shares anyway i'm back in
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the market for more leaps despite this
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latest stock price increase we have new
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information that's come to light it's
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mainly two things that have made me more
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bullish right now this insane ramp up
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happening in china i'm surprised
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investors are not making a bigger deal
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over it the chinese october numbers are
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going to be very telling if they're as
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good as i'm hoping then i'm going to
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have to find some more strategies of
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accumulating more leaps and i bet when
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they are announced even if they are as
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good as i hope that the stock price will
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barely move the market won't understand
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what it really means the other main
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factor is these automotive margins it
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won't take long until we're up to 40
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percent whether it takes a year or three
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it doesn't matter there is a clear path
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to achieve that tesla has no demand
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issue whatsoever the prices are still
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increasing across all models and there
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is no competition coming to squeeze
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margins and then the fact that ramping
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up will start to see more economies of
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scale finally kick in means operating
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margins will reach unbelievable levels
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and bear in mind as high as these
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margins are that we have now they're
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still including stop-based compensation
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and depreciation yeah i know the price
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has risen 20 or so lately or more but so
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has my confidence conviction and faith
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in the potential of this company in fact
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i'm thinking tesla can be a lot more of
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a company now than i thought just a few
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months ago and this might be a theme
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with tesla continually blowing my mind
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just wait until we see what comes off
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the production lines of these new
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factories and how fast and low cost too
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we haven't even got 46 eddy batteries in
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the cars yet let alone tesla's lfp
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batteries wake up we're still at the
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start of the s curve every cent i make
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ends up in tesla and bitcoin it's
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frustrating not having enough money to
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invest when you know it's going to go up
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tenfold in the near future well that's
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the reason i have no money as i keep
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putting it all in but i think i need to
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start selling shares again to buy leaps
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i usually wait for a dip to buy leaps
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but what if this is a dip how can the
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stock price increase in a dip because
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dips are relative relative to the value
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of the company that the market has
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assigned this might actually be a dip in
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other words i'm still going to buy at
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the all-time high i'm sure these prices
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will look cheap in two years time anyway
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however i think this time i might dole a
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cost average i think i'll buy one or two
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contracts and leave some funds available
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for one or two more if the stock price
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dips back into the 800s 800 is the new
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600 i think but how am i gonna find the
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money to exercise all these leaps well i
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have about a year or two to scrape
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enough funds together to exercise these
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leaps i'm not sure this youtube channel
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will be successful enough to cover that
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cost however my house has gained a lot
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of equity as a recent too if i can earn
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enough from this channel to increase my
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income enough to apply for a larger
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mortgage then i can cover the cost of
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exercising them now hold on that is
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sounding highly risky right well just
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think for a second why would i exercise
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them in the first place because the
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stock price is probably two thousand
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dollars and i can buy the stock still at
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seven or eight hundred dollars i'll
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borrow perhaps an average of seventy
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five thousand dollars for each contract
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but have an asset worth two hundred
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thousand dollars not to mention the rest
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of my tesla portfolio is doing pretty
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well by that stage in fact my entire
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house at this stage would be looking
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like a relatively small asset against my
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shares so i'm comfortable doing this i
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also have income aside from this channel
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to help me but this is my financial
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position yours is different i just like
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to talk about what i'm doing and share
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with you i never suggest you do it i
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mean you never know i might have a
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wealthy father who would still look
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after me even if i lost everything to
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fall back on well we all have different
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situations and levels of risk we're
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comfortable with and like i said i'm not
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comfortable with the risk of buying on
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margins but this is tesla and we haven't
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had much fun lately surely there might
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be some on the way yes most likely and i
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think if anything major hits the fan
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then i'm quite possibly going to change
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my tesla portfolio and have a higher
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percentage of my portfolio in leaps
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rather than shares this company is going
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to be big the biggest ever on top of
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that there are plenty of macroeconomic
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factors that could come into play china
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is starting to show signs of cracks with
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their despotic growth yes despotic
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growth it starts out good until it
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doesn't just like we saw with soviet
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russia but who knows i guess we'll have
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to see it's crazy how the economies of
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sub-nation survive just like japan but
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these macro factors are affecting the
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implied volatility implied volatility is
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the other element that affects the price
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of options and leaps if there is less
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confidence in the market outlook and we
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see events like evergrand unfold then
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the implied volatility will get worse
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which means the price of options will
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come down anyway exciting times as
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always with this company i just want to
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own as much of it as i can like most of
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you thanks for listening please hit the
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thumbs up and subscribe you can follow
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me on twitter and talk to me on patreon
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