DD: MVIS go BRRRR and I don’t care which way.
My medium-term bull case for MVIS.
TLDR: Buy MVIS shares, sell way OTM monthly covered calls for absurd premiums.
Disclaimer – I wrote this Sunday night after I decided on my course of action. I did not post until now because I wanted to actually do the trades before posting the DD. The numbers herein reflect prices at that time and they have since changed slightly.
I’m fucking new at this. I got in with GME, I admit it. I’m probably completely fucked on this thesis, and I encourage you all to shit all over it so that I don’t lose all my tendies on some batshit weed-induced fantasy. I don’t know what I’m doing, and if you follow me you’re literally retarded. That being said…
I yolo’d my entire net worth on MVIS today. I’m poor, so this was only 500 shares, but fuck you. We all start somewhere. I just started late… and waited some more. And then missed the bus.
3 GME @ 238
500 MVIS @ 11.49 avg
-5 MVIS 521 18c (0.70 premium realized)
The most important factor in my thesis is the high IV of MVIS. Looking back at the last year, the IV and HV have been consistently high, which given the incredibly swingy nature of this WSB stock is not unexpected.
In my research, which was probably half-assed and woefully inadequate, a high IV is a stock with above 60% or so, and the top few are above 100. MVIS is at 160%. Historically for the last year, this is not abnormal for MVIS. GME is also around 160% right now.
High IV means that the options chain is often very expensive. Lots of people are gambling on this stock moving quickly, so you can sell covered calls for inflated premiums.
Lets do some quick and dirty math.
For our purposes we will use May 21 exp.
GME: current 155. 521 300c is 8.35 (strike = ~193% current price)
MVIS: current 11. 521 20c is 0.80 (strike = ~182% current price)
RKT current 22 521 30c is 0.26 (strike = ~136% current price)
So, lets look at a metric that probably has a name I don’t know: (premium / stock price). This tells me that for every dollar I have invested into a stock, I can earn that amount for the option. This lets me rate options based on what I expect returns to be for selling covered calls.
RKT: 1.182% (IV is ~60%)
At 7.27% returns on a monthly option, if MVIS were to magically trade sideways and also keep its high IV for a year, you would have nearly doubled your money even if the stock ended the year at the exact same price.
If MVIS drops, it will retain its high IV and you can continue to add shares and sell more monthlies until it rebounds. (Or you can trade the high IV to be much riskier with your pricing until it eventually catches you, hopefully turning a profit in the end – you’re a paper handed bitch too)
If MVIS spikes, you have a lot of opportunity to cash in because you are holding shares. Sure you could have *bought* calls instead of selling them, but I want to sell the lottery tickets not buy them.
MVIS is currently dirt cheap at $11, and has been red all month. I think it’s close to its bottom and is about to pop right back up a few bucks.
Ok, so let’s talk potential gains and losses.
Because my position is shares, my losses are fairly limited as I believe based on absolutely no evidence except a couple charts I saw once that there is a fairly hard floor of about $7 that it’ll just never drop past again ever. Therefore my maximum loss is maybe $5/share. If I can get 0.80 premiums every month, then in six months I’ve basically covered my loss and can exit a slightly wiser ape. Or double down and keep selling the IV (This. I’ll do this. It’s just a dip. Buy more!)
If the stock trades sideways for months and sheds its IV, then I continue to sell calls until I think I can get higher gains elsewhere, and I exit the position with less profit than I had hoped, but no losses.
If the stock spikes but does not pass my strike, I roll the options out (and possibly up) and try to capitalize on the short term spike in IV and premiums. I keep holding until either the IV or stock price drops below levels I am happy with.
If the stock spikes past my strike (currently $20) then I am assigned and exit the trade +$4,500 plus any premiums I got.
In summary: I don’t care if this stock moons, plunges, or charts a path like the fucking Evergiven as long as its IV stays high. I’m just gonna build my position and sell lotto tickets to people even dumber than me.
I’m pretty confident in this, so I’m probably fucked. Please teach me. If you want charts and graphs, fuck you do your own DD. If you want rocket emojis, this thread is accepting donations.
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April 19, 2021 at 11:43AM