2017 Investor Roundtable: TSLA Market Action

[winfield100]

did my part, added (tiny) "uptick"
pebble voted (again) {WhooHooo!!}
Bought 1 share @ $304.2222 @ 11:26 AM 04/21/2017

 

[Crowded Mind]

1,137,361 shares at 1% at Fidelity now, so about half a million returned or made additionally available to borrow.

 

[vgrinshpun]

Looks like there were 496k shares covered at Fidelity...

 

[Irishjugg]

FWIW, Max Pain is at either 300, 297.50, or 295 for every single maturity out to 6/2/17. (For the later maturities this year, max pain is at 270.... and it's way down at 230 for the 1/19/2018 maturities.) I'm not sure what this indicates but it's remarkably *flat* -- the magnetic power of round numbers, I guess.

Market makers don't like being exposed across news and earnings reports, since they're fundamentally trying to collect spread and time value and not be exposed to the actual stock movement. The technicals say that staying in this tight tight band near 300 seems quite unlikely, but they have strong reason to keep it there through as many expirations as they can. It puts them in an invidious position though: even if you don't understand Tesla at all, you can probably guess that it's more likely to go down or up than to stay flat... and yet the implied volatility in the options pricing is still fairly low by TSLA historical standards, so they're not getting paid that much for the risk...

I wonder what they're hedging with.

Almost all market makers trade delta hedged, so we trade on changes to volatility. A few firms do make delta bets but that isn't the norm for market makers. We don't care about ranges, just vol changes. You can bet that the "large buyers" were prop shops doing ~60-80% of that volume trying to get in front of the Vega spike. My old firm used to be counterparty on something like 18-25% of TSLA trades daily and was always doing so delta hedged.

 

[vgrinshpun]

1,137,361 shares at 1% at Fidelity now, so about half a million returned or made additionally available to borrow.

I doubt they made additional shares available - there was very little demand for borrowing after the open, and there was still 640k+ shares available. This looks like covering to me.

 

[racer26]

Looks like there were 496k shares covered at Fidelity...

View attachment 223829

Seems oddly similar in size to the premarket borrow - perhaps they thought better of the idea?

 

[Crowded Mind]

I doubt they made additional shares available - there was very little demand for borrowing after the open, and there was still 640k+ shares available. This looks like covering to me.

I considered the possibility that they intend to keep around 1M shares available based on those four other 1M+ data points you presented. On those days, did we show similar changes in availability by chance?

 

[luvb2b]

Almost all market makers trade delta hedged, so we trade on changes to volatility. A few firms do make delta bets but that isn't the norm for market makers. We don't care about ranges, just vol changes. You can bet that the "large buyers" were prop shops doing ~60-80% of that volume trying to get in front of the Vega spike. My old firm used to be counterparty on something like 18-25% of TSLA trades daily and was always doing so delta hedged.

what firm were you with? what do you think of my interpretation of action around the 305 strike? the big blocks just started hitting the tape the last few minutes, which is suspect are some hedging related to crossing the fat open interest at the 305 strike.

 

[DurandalAI]

As I noted previously, TSLA is somewhat decoupling from trends in oil prices and energy stocks. I believe this is due to Tesla's ongoing disruption of the energy sector - i.e. making oil obsolete, so no need for further oil E&P etc while Tesla Energy products replace it. Although there will always be some correlation between TSLA and oil prices, I would expect it to decline going forward, and the decoupling to accelerate in the next several years.

OPEC has an upcoming meeting in which they will decide to extend production cuts or not. If they do extend, I expect a rise in oil prices in 2Q17/2H17, and this could positively affect TSLA. If they don't extend, oil prices would likely take a hit, and TSLA may sell-off in the near term. Given how undervalued I think the stock is, I will hold TSLA in either case, even through a potential short squeeze.

I don't know anyone's specific financial situation, so none of this is advice. Just informative.

OPEC production cuts.. Are these real production cuts, or just the typical pretend production cuts that OPEC engages in? That's the problem with OPEC is that they'll say they're going to cut production by X target, but being the greedy types they are, don't cut it as much, trying to keep their revenue stream as high as possible. Keeping the prices low does a number of things, it reduces the profitability of the higher extraction cost oils such as tar sands, reduces exploration here in the US, and also puts stress on Russia. All of these items are ironically positive consequences of low oil prices. My hope is that the expansion of BEVs will continue to drive up the average fleet efficiency, and continue to place a damper on demand growth for oil.

In the near short term it's an unrealistic expectation on my part, but I think when we hit 2022, it will start to have a material impact as China sets the standard for transport electrification.

 

[vgrinshpun]

I considered the possibility that they intend to keep around 1M shares available based on those four other 1M+ data points you presented. On those days, did we show similar changes in availability by chance?

I do not think so:

 

[DurandalAI]

did my part, added (tiny) "uptick"
pebble voted (again) {WhooHooo!!}
Bought 1 share @ $304.2222 @ 11:26 AM 04/21/2017

Payday for you as well? I try to lump my purchases in together and not buy any less than 3 shares at a time to limit the impact of the trade fee, but as the SP climbs, that's a lower and lower percentage. Speaking of payday, probably better to buy on a day that's not payday, and instead sometime in the middle of the week when it dips.

 

[Irishjugg]

what firm were you with? what do you think of my interpretation of action around the 305 strike? the big blocks just started hitting the tape the last few minutes, which is suspect are some hedging related to crossing the fat open interest at the 305 strike.

I'm not convinced I should say due to privacy and certain non-disclosure clauses when I left there, but it was one of the 4 or 5 leading proprietary market making firms with an office in Chicago. Heavy emphasis on automated trading.

Can't speak to your interpretation, in a software guy not a trader, though I will say that buying a ton of options all at once would cause some large hedges, and most firms like this don't always hedge immediately. If we see a situation that suggest Vols going up we buy options to catch those gains and our hedgers would see the continued rise and delay the hedge since we might get back out of those to a more neutral position anticipating vol to come back down.

 

[ValueAnalyst]

OPEC production cuts.. Are these real production cuts, or just the typical pretend production cuts that OPEC engages in? That's the problem with OPEC is that they'll say they're going to cut production by X target, but being the greedy types they are, don't cut it as much, trying to keep their revenue stream as high as possible. Keeping the prices low does a number of things, it reduces the profitability of the higher extraction cost oils such as tar sands, reduces exploration here in the US, and also puts stress on Russia. All of these items are ironically positive consequences of low oil prices. My hope is that the expansion of BEVs will continue to drive up the average fleet efficiency, and continue to place a damper on demand growth for oil.

In the near short term it's an unrealistic expectation on my part, but I think when we hit 2022, it will start to have a material impact as China sets the standard for transport electrification.

They are real production cuts as can be seen by loading documents, declining global inventories, and spreads between product types. I won't go into further detail here as it does not directly affect TSLA.

I get the sense that Tesla fans want oil prices to decline, but this is not helpful to Tesla. Tesla would benefit from higher oil prices, not lower, as higher oil prices would accelerate world's transition to sustainable energy.

Readers should note that higher oil prices do not mean oil companies will survive. There are many structural issues within the energy sector beyond low oil prices. Although higher prices may help these companies' stock prices in the short-term, transition to sustainable energy is already in motion. I think it's too late for the fossil fuel industry.

 

[winfield100]

Payday for you as well? I try to lump my purchases in together and not buy any less than 3 shares at a time to limit the impact of the trade fee, but as the SP climbs, that's a lower and lower percentage. Speaking of payday, probably better to buy on a day that's not payday, and instead sometime in the middle of the week when it dips.

retired, paydays rare, sold 380 shares LACDF and transferred ~$60, slippage is $4.95/transaction fee/trade, eh

 

[esk8mw]

retired, paydays rare, sold 380 shares LACDF and transferred ~$60, slippage is $4.95/transaction fee/trade, eh

If you switched to Interactive Brokers you could trade pebbles at about 1-2 pennies/share. Literally, your commission due on a 1 share trade would be $0.01, as opposed to $4.95 or $7.99 or whatever. It's intended for more active traders (and thus there's monthly market data charges for whatever data packages you select, if any) so it might not be your thing...but wanted to let you know since you seem to make a lot of smaller trades.

 

[Waiting4M3]

They are real production cuts as can be seen by loading documents, declining global inventories, and spreads between product types. I won't go into further detail here as it does not directly affect TSLA.

I get the sense that Tesla fans want oil prices to decline, but this is not helpful to Tesla. Tesla would benefit from higher oil prices, not lower, as higher oil prices would accelerate world's transition to sustainable energy.

Readers should note that higher oil prices do not mean oil companies will survive. There are many structural issues within the energy sector beyond low oil prices. Although higher prices may help these companies' stock prices in the short-term, transition to sustainable energy is already in motion. I think it's too late for the fossil fuel industry.

Average gas price in US was $2.11 a year ago but still 400K reserved the M3. Now the average gas price is $2.42, so nothing to worry about, even if gas price comes down 15% to 2016 April level.

Also IMO lower oil price is not a cause, it's an effect. It's driven down by the renewable energy source. Higher oil price is not the goal, but a mean to an end to accelerate renewables growth. If we can grow the renewables while keeping oil price low, and prevent fracking industry from even thinking about coming back, that's even better.

 

[FredTMC]

Solar Roof order launch and pricing is due next week... I think I recall that only the "flat slate" will be available at first. French Provincial will be the last

Should be very interesting and will certainly keep Tesla in the news

Price action next week won't be boring.

 

[geneclean55]

Solar Roof order launch and pricing is due next week... I think I recall that only the "flat slate" will be available at first. French Provincial will be the last

Should be very interesting and will certainly keep Tesla in the news

Price action next week won't be boring.

Speaking of French Provincial.... French elections next week.... oh and Trump just announced tax plans unveiled next week.

 

[esk8mw]

Solar Roof order launch and pricing is due next week... I think I recall that only the "flat slate" will be available at first. French Provincial will be the last

Should be very interesting and will certainly keep Tesla in the news

Price action next week won't be boring.

I thought they said the first product will be based on popularity, TBD? Has that changed?

If pricing is somewhat in the ballpark I'm buying this on day 1. I think I want the glass or textured glass, though.

 

[FredTMC]

Speaking of French Provincial.... French elections next week.... oh and Trump just announced tax plans unveiled next week.

Coin flip on macro impact...