Crazy idea to run a Tesla for free?
Discussion
First, some disclosures:
I've never driven a Tesla, but from YouTube videos etc, they're appealing. Not really looking to discuss the merits of the car here.
I usually buy used cars for cash. Buying a new car using finance is new to me.
I'm comfortable trading equity options.
So I awoke at 4am with one of those crazy ideas but wondering if this could work.
A model 3 (Performance, obviously!) will cost c.GBP50k bought new with cash. Obviously there are no used ones yet.
Leasing is c.GBP500-600 per month plus VAT (3yrs, 10k mpa, 1mth advance, for business)
GBP50k is c.USD66k.
Tesla shares (TSLA) are c.USD220 each today. c.USD66k would buy 300 shares
Given current Implied Volatility in the share price, Calendar Call Credit spreads can be sold, with c.USD2 credit per month, or c.USD1 per week. With a combination of weekly and monthly options, it is possible to earn USD600 to USD1300 per month. This is c.GBP450 to GBP900 per month.
NB it would be highly unlikely to earn the full credit for every trade, as an increase in share price could put one or both sides of the trade In-the-Money, requiring rolling forward at a higher exercise price. So this would not necessarily provide a smooth monthly income to pay the lease cost every month.
After (say) 3 years Best and Worse cases / Upsides and Downsides are:
Best Case
Tesla continues as a successful company, so the shares are worth more, AND will have earned sufficient income to cover the cost of leasing the car. USD currency moves favourably increasing the benefits.
Worst case
Tesla no longer exists, so the shares are worthless, and will not have earned sufficient income to cover the cost of leasing the car. The car is returned at the end of the lease.
By doing this through my Ltd Co, I could enjoy tax benefits of running an EV as a Company car, AND enjoy a degree of flexibility with the share price movement. Massive price increases could be sheltered with pension contributions etc, and massive losses would be deductible against Corporation Tax, so a total loss would cost c.GBP40k net, less option premiums received, plus cost of leasing the car.
Considering upside against downside, this seems too good to be true, so can some of the finance experts tell me what am I missing?
I've never driven a Tesla, but from YouTube videos etc, they're appealing. Not really looking to discuss the merits of the car here.
I usually buy used cars for cash. Buying a new car using finance is new to me.
I'm comfortable trading equity options.
So I awoke at 4am with one of those crazy ideas but wondering if this could work.
A model 3 (Performance, obviously!) will cost c.GBP50k bought new with cash. Obviously there are no used ones yet.
Leasing is c.GBP500-600 per month plus VAT (3yrs, 10k mpa, 1mth advance, for business)
GBP50k is c.USD66k.
Tesla shares (TSLA) are c.USD220 each today. c.USD66k would buy 300 shares
Given current Implied Volatility in the share price, Calendar Call Credit spreads can be sold, with c.USD2 credit per month, or c.USD1 per week. With a combination of weekly and monthly options, it is possible to earn USD600 to USD1300 per month. This is c.GBP450 to GBP900 per month.
NB it would be highly unlikely to earn the full credit for every trade, as an increase in share price could put one or both sides of the trade In-the-Money, requiring rolling forward at a higher exercise price. So this would not necessarily provide a smooth monthly income to pay the lease cost every month.
After (say) 3 years Best and Worse cases / Upsides and Downsides are:
Best Case
Tesla continues as a successful company, so the shares are worth more, AND will have earned sufficient income to cover the cost of leasing the car. USD currency moves favourably increasing the benefits.
Worst case
Tesla no longer exists, so the shares are worthless, and will not have earned sufficient income to cover the cost of leasing the car. The car is returned at the end of the lease.
By doing this through my Ltd Co, I could enjoy tax benefits of running an EV as a Company car, AND enjoy a degree of flexibility with the share price movement. Massive price increases could be sheltered with pension contributions etc, and massive losses would be deductible against Corporation Tax, so a total loss would cost c.GBP40k net, less option premiums received, plus cost of leasing the car.
Considering upside against downside, this seems too good to be true, so can some of the finance experts tell me what am I missing?
sideways sid said:
First, some disclosures:
By doing this through my Ltd Co, I could enjoy tax benefits of running an EV as a Company car, AND enjoy a degree of flexibility with the share price movement. Massive price increases could be sheltered with pension contributions etc, and massive losses would be deductible against Corporation Tax
As I understand it, the losses through investment are only off-settable against gains from the same activity. Which would exclude offsetting against profits from your normal trading activity. This therefore wouldn't get past an accountant and would likely get picked up by HMRC is my expectation (I'm no master of HMRC rules though).By doing this through my Ltd Co, I could enjoy tax benefits of running an EV as a Company car, AND enjoy a degree of flexibility with the share price movement. Massive price increases could be sheltered with pension contributions etc, and massive losses would be deductible against Corporation Tax
If you’re wealthy enough to be able to resolve the downside of betting with call and put options I think I’d rather just use the money in the bank and go direct to a Tesla dealership. There is no way I’d risk (if I’ve understood what you’re doing correctly) the potential downside and having to worry about every move In the stock just to get into a Tesla. Or a car of any type to be honest. It then I’m not a risk taker so that’s my boring advice
sideways sid said:
Yes, If and if so, when, are what I need to get my head around.
Buying either the car or the shares could result in a total loss.
I can't see the car being a total loss even if Tesla go under. Especially now independent garages are jumping on the electric car bandwagon. Buying either the car or the shares could result in a total loss.
If you mean the loss from leasing then you will be in the same boat with any car.
Triple7 said:
Yeah, not too sure on the future of Tesla, how about same idea with an Aston Martin? 
That got me thinking. For the financial side, you're looking for a listing with a highly-tradeable liquid options market. That includes BMW. Whilst option premia is lower (c.0.5% per month today) there is a 3.5% dividend yield too, to offset against the costs of leasing a car.Unlike TSLA, the total income is less likely to fully cover the lease, but BMW is less likely to go bust than TSLA too!
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