“The Wolf of Wall Street”/Paramount Pictures
- A Reddit member named WSBgod claims to have made millions of dollars in unrealized gains from options linked to Tesla stock.
- A $125,000 investment was worth $4.3 million at the time of the user’s Tuesday screenshot, and carried a value of roughly $3.99 million by the session’s close.
- A separate $46,491 stake in longer-dated Tesla calls was worth nearly $1.4 million, according to a separate screenshot.
- If WSBgod didn’t sell the positions on Tuesday, the trader stands to lose a large portion of their profits from Tesla’s Wednesday tumble.
- Watch Tesla trade live here.
One trader claims to have enjoyed a $4.3 million gain from Tesla’s soaring shares.
A member of the WallStreetBets subreddit forum named WSBgod posted screenshots on Tuesday detailing a position in Tesla call options made through a Roth IRA account. The price of the options contracts soared over two days as the automaker’s stock tore 36% higher, swelling the trader’s $125,868 investment all the way to $4.3 million by the end of Tuesday.
Call options grant investors the right to purchase an underlying asset for a specific price by a certain date. The contracts’ prices tend to move with greater volatility than the stocks they track, as a single contract gives a holder the right to buy 100 shares at the specified price by its expiration date.
WSBgod’s screenshots reveal they spent about $126,000 on 446 call options between January 22 and January 24. The contracts carried a strike price of $1,000 – meaning they would be “in the money” if Tesla surpassed that level before expiration on March 20, 2020. Tesla traded between $555 and $595 per share over the course of the options purchases.
Twitter / WallStreetBets
WSBgod hasn’t replied to a request for comment, and hasn’t indicated online whether they sold the entire stake by Tuesday’s close. The user “originally meant to purchase 420” contracts, according to a Tuesday comment, and claims to have sold 26 of the 446 calls Tuesday morning in order to realize some gains.
Tesla stock jumped as much as 24% on Tuesday before closing up 13%. Had WSBgod sold at the call options’ peak price on Tuesday, their remaining 420 contracts would’ve netted as much as $6.3 million, although this wasn’t reflected in the screenshot.
The user’s screenshot revealed an unrealized gain of $4,334,132 on Tuesday, when each call was worth $100. By the session’s close, the calls were worth $95, or about $3,990,000.
The lucrative Tesla bet isn’t the first for WSBgod. Prior to this recent endeavor, they used their Roth IRA to buy 15 Tesla call contracts in April, betting on the automaker’s stock to hit $450 by January 15, 2021. WSBgod purchased 32 identical contracts four months later. The $46,491 investment was worth more than $1.4 million according to a Tuesday screenshot, though it’s not known whether the trader sold any of the longer-dated calls.
If WSBgod didn’t liquidate their positions on Tuesday, they stand to lose much of the profits they bragged about Tuesday afternoon. Tesla tumbled as much as 21% on Wednesday, driving the price of the March 20 calls down about 75% from their previous close. The value of WSBgod’s January 15, 2021 calls sank as much as 33%.
Twitter / WallStreetBets
The highly volatile position is par for the course among WallStreetBets members. The community thrives on risky “YOLO” trades and praises losses just as passionately as gains.
The forum gained new fame in the fall of 2019 when they discovered – and subsequently exploited – a glitch in Robinhood’s trading app. The bug allowed Robinhood Gold members to leverage seemingly limitless amounts of capital. Users raced to one-up each other with increasingly large positions, with one trader turning a $3,000 stake into a $1.7 million position.
Robinhood later closed the loophole and and called on the few traders using the glitch to pay any debts before their accounts were closed.
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