2017 Investor Roundtable: TSLA Market Action

[neroden]

So, interesting. Opens, jumps up in "amateur hour", sharp dip at 10 AM, being pushed back up again. This is a somewhat familiar pattern. Papafox, look familiar to you? You've become the expert on intraday Tesla charts.

 

[Gerasimental]

I love crossing from below 300 to above, when all 5 digits flash up green

 

[Curt Renz]

Interesting early test to see if $300 can establish itself as a price floor. If not, the next level down will be old ATH.

It appears as though at least one entity wanted to push the price back down to $300 to trigger stop loss limits set by weak longs. If so, that worked, but the effect appeared to be minimal, which could be a good sign.

 

[Fifield]

New Jan'19 LEAPS available today through $600 strike...when new options are issued are they generally fairly priced by the market makers or is it generally best to wait for some action before buying. Thinking of buying the $600 calls. I see that as the 50/50 level by Jan'19 expiration.

 

[ggr]

Thanks for explaining all of this. Since I've never actually done short-selling, I didn't know this detail. So the short-seller has to keep 102% - 105% (depending on brokerage) in *cash* and a total of 130% - 150% (depending on brokerage) in cash + securities. The brokerage is sure protecting itself! This is pretty harsh. As the stock goes up, to hold the short position, the short has to liquidate other securities into cash, and simultaneously dedicate more securities to cover the increasing margin requirements.

When you're long on margin, you can lose everything, and the brokerage can lose what they loaned you (some percentage of your "everything"). But when you're short, the losses are potentially infinite, and certainly not bounded by what you invested in the first place. It's not surprising that the brokerages are a bit paranoid about their part in the game.

 

[TrendTrader007]

$TSLA could not resist it bought more stock and calls

 

[MitchJi]

Actionable Trading Ideas, Real Time News, Financial Insight | Benzinga

TSLA) share scaling the $300 barrier, Morgan Stanley in which it suggested the company is now more than a car company.

Analyst Adam Jonas said the sooner the investors should view the company as a transportation or infrastructure company, the more he believes the industry events to come over the next 12 to 18 months will make sense. He estimates the addressable markets within Tesla's ecosystem could include a $10 trillion light weight mobility market, a $1 trillion logistics market, a $2 trillion to $3 trillion energy market and a potential multi-trillion market captured in the 600 billion hours of consumer time spent in cars in the form of content delivery and data monetization.

"Our discussions with investors have revealed a far faster recognition of Tesla's place in the new transportation business model than we had anticipated", the analyst said.

Meanwhile, Jonas expressed surprise at the recent run up in the shares of Tesla, with technical power overriding fundamental drivers. The stock is inching towards the firm's $305 price target.

Tesla shares have been on a tear since late 2016, as it saw a precipitous ascent, which was interspersed by a pullback in February in response to its fourth quarter earnings results and comments issued on the earnings call. The most recent catalyst was a positive pre-announcement by the company made regarding first quarter deliveries, which helped the shares break above a September 2014 high and go over the $300 barrier for the first time ever.

Ahead of the production target-related bump, the stock got a shot in the arm from the news that Chinese Internet firm Tencent bought a 5 percent stake or 8.2 million shares of Tesla.

The rally has made Tesla the most valuable U.S. automaker, pipping past traditional car makers such as General Motors Company (NYSE: GM) and Ford Motor Company (NYSE: F). As compared to Tesla's market capitalization, a metric obtained by multiplying the number of outstanding shares and the market price, of $53.07 billion, General Motors has a valuation of $51.49 billion and Ford's valuation is $45 billion.

Tesla is making waves and the imminent release of the mass market Model 3 vehicle could only increase its attractiveness.

 

[T3slaTulips]

I love crossing from below 300 to above, when all 5 digits flash up green

It will look prettier when its six digits.

 

[Bobbyducati]

doubled down at 300, i hope we get back around 303+, not sure i have the heart for this today haha

 

[TheTalkingMule]

Keeps bouncing heavily off $300, that should be a good sign. Let's try it again at 12:15.

 

[MitchJi]

Remember These Three Things as Tesla Shares Roll Past $300

Remember These Three Things as Tesla Shares Roll Past $300
Gregory Morcroft
Apr 5, 2017 11:54 AM EDT
Analysts at Morgan Stanley expressed surprise on Wednesday at how fast automaker and technology firm Tesla's (TSLA) rallied past $300, opining that, "such is the power of technical factors over fundamental drivers."

With that in mind, they offered three thoughts on a future investment outlook for the firm. Here's a summary of those thoughts in the analysts' words.

1. The sooner investors view Tesla as a transportation and infrastructure company rather than as just a car company, the more we believe the industry events to come over the next 12 to 18 months will make sense...Our discussions with investors have revealed a far faster recognition of Tesla's place in the new transport business model than we had anticipated...Anyone following autos would admit that the debate has changed profoundly over the past 2.5 years.
2. Look for Tesla to keep pushing the boundaries of passenger and pedestrian safety to the highest level. The distracted driving (aka texting and driving) problem is accelerating and highlighting the very significant Our discussions with auto companies and regulators suggest a high level of lawmaker attention to the unprecedented spike in fatalities on US roads of used cars.
3. It's all about those precious miles. Tesla sits at the epicenter of the three industry mega-trends: electric, autonomous and shared. While difficult to quantify, we have long felt that one of Tesla's most important areas of value is its captive ecosystem of data-collecting transport machines with close proximity to realtime data that may have any number of adjacent purposes for monetization and/or deepening of the strategic moat.

Morgan Stanley has a $305 price target on Tesla shares. It broke that down for investors in its Wednesday note ascribing a $233 a share for the core Tesla car business, and a $72 a share for its Tesla Mobility business.

 

[adiggs]

Thanks for explaining all of this. Since I've never actually done short-selling, I didn't know this detail. So the short-seller has to keep 102% - 105% (depending on brokerage) in *cash* and a total of 130% - 150% (depending on brokerage) in cash + securities. The brokerage is sure protecting itself! This is pretty harsh. As the stock goes up, to hold the short position, the short has to liquidate other securities into cash, and simultaneously dedicate more securities to cover the increasing margin requirements.

I suspect that the margin requirement is 30-50%, rather than 130-150%. The collateral requirement is 101-105% (somewhere in that range). The key distinction between the two is that as a lender to a short seller (such as myself, when Fidelity wants to use my shares), the collateral is in an account that comes to ME (not to Fidelity, and not back to the person that established the short position) in the event of default by Fidelity (which also means default by the short seller). The collateral is out of the short seller's control, where the margin requirement represents additional liquidity that is still under the control of the short seller.

To get back the collateral, the short seller has to close out the position (I suspect that they can use the collateral to buy-to-close the position as well - that would make sense).


So the combined requirement adds up to the 150ish% you came up with, but it's broken up with a big chunk changing daily, and out of the direct control of the short seller.

 

[adiggs]

I do that on other stocks. I don't risk covered calls on Tesla, because I don't want to risk getting shares called away if the stock skyrockets.

What I do is absolutely symmetrical to covered calls: I sell out-of-the-money puts, secured by my cash, with the "risk" being that if TSLA falls I have to buy TSLA cheap. Better for me than putting the cash in CDs. It's typically more profitable to buy-to-close the position early, as Jonathan Hewitt will tell you, but honestly, I often don't (for instance, if I'm busy that week). This style works for me because any day I have other things to do and can't pay attention -- which happens a lot, my family has medical issues which can eat up a week at a time sometimes -- I'm fine, I don't have to worry about closing the position.

Do you sell closer in puts, or further out? I'm wondering if you like the dynamic of going month to month, selling puts each month, or do you go more like 3 months out? (I'm assuming you don't sell really long dated puts).

 

[neroden]

Morgan Stanley has a $305 price target on Tesla shares. It broke that down for investors in its Wednesday note ascribing a $233 a share for the core Tesla car business, and a $72 a share for its Tesla Mobility business.

I really do think that's nuts: it's valuing the hypothetical Tesla Mobility which hasn't gotten off the ground and assigning zero to the *shipping orders every month* Tesla energy.

 

[ELRev]

Hey folks. Long-time lurker, near-first-time poster. I would not call myself an investor by any means, though that's technically not a fair assessment. I'm in line for a Model 3, and I threw some money into the market around when I made the reservation to hopefully help me pay for leather seats (etc). I've had half of my modest portfolio in $TSLA over the last year, and the rest in various things. The "rest" is about even, while $TSLA is up about 50%.

A quote I've found in my research from one Warren Buffet asserts that "diversification is protection against ignorance. It makes little sense if you know what you're doing." I was certainly ignorant when I started this ride. I'm still very much so. But thanks to you fine people and a young gentleman named Musk, I feel confident enough in my knowledge and understanding of what's to come to have sold most of the "rest" of my portfolio this morning only to put more eggs in the $TSLA basket at just above $300. Here's to hoping the fun ride continues. I really want those leather seats.

Cheers.

 

[Omelek]

I got tired of lurking......

First, thanks for everyone's amazing contributions to this forum! Reading it has become part of my daily routine, so I look forward to the discussions. Now for the questions...

New Jan'19 LEAPS available today through $600 strike...when new options are issued are they generally fairly priced by the market makers or is it generally best to wait for some action before buying. Thinking of buying the $600 calls. I see that as the 50/50 level by Jan'19 expiration.

I'm glad you brought this up. At this time, I am not interested in the Jan '19 Leaps at $600 because I feel that TE needs to contribute to the bottom line more significantly to justify the SP, which I don't have enough info on to make a sound conclusion. Anyone else have thoughts as to whether TE will contribute enough in 2018 to justify the $600 call?

As we're discussing Leaps options, is anyone anxiously awaiting the 2020 Leaps that become available in September? It seems that the consensus is that Tesla is poised to breakout, but it's just a matter of when and how high it will go. My thoughts were that we would climb about 100 points from the previous consolidation high (up to 380), as we approach the release for consumer model 3, to price the model 3 rollout and expected profitability into the SP. Again, not sure when that happens yet. Maybe there is a positive earnings beat and the climb starts before the initial rollout. I'd love to add some '20 Leaps to my position, depending on where the SP is at, because I'm still anticipating TE to be the larger play. However, I want the extra 12 months to allow for TE to develop. So maybe to reword my question again, when do people think TE will start to strengthen and start to show promise?

Does anyone with more knowledge know what range of strikes are provided when the Leaps are listed? For instance, if the SP climbs to 400 by Sept. then will there be a $700 strike, or if the SP climbs to $500 can we expect a $800 strike?

 

[neroden]

Do you sell closer in puts, or further out? I'm wondering if you like the dynamic of going month to month, selling puts each month, or do you go more like 3 months out? (I'm assuming you don't sell really long dated puts).

Honestly? And this is very definitely not investment advice, because it's based on my personal psychology and personal needs and is almost certainly inappropriate for other people. I've actually done a mishmash, including some really long-dated puts.

I really have been using them as substitutes for CDs, silly though that may sound. So if I know I need a certain amount of cash in April 2018 to pay taxes... back in November I sold some $180 puts dated to Jan 2018, secured by the amount of cash I knew I would need then. (In the crazy unlikely case where Tesla drops below $180 in Jan 2018, I will borrow money to pay the taxes; I have access to substantial unused margin.) Kind of dopey but it works for me. I'm not trying to maximize profit here, I'm trying to minimize the chance of mistakes. I've been expecting a lot of large cash expenditures which keep getting delayed, so I keep selling cash-secured puts out to when I *think* I'll need the money, and then doing it again when it turns out I don't need it for another month.

Research, however, says that the optimal thing to do for making money is to sell 45 days out and close when you've made half your money (which is typically between 15 and 30 days later). So when I bother to try to make more optimal trades, that's roughly what I do.

Now, sometimes (not right now) I'm actually actively trying to get the puts executed as a way of getting a "discount" on the stock. In this case I would typically go shorter-term (the longer term it is, the more likely Tesla will be way higher) and often sell them in-the-money (when this is significantly superior to just buying the stock). I did this with SolarCity before the merger.

It's always better to sell into high implied volatility, though, so I try to do that regardless. I've sold into low IV, though, when I want to put my cash to work and expect that I won't be able to look at the market for a month. Anyway, an awful lot of my strategy is based on "might be completely distracted for long periods", which makes it unsuitable for people who pay attention more consistently.

 

[Curt Renz]

Keeps bouncing heavily off $300, that should be a good sign. Let's try it again at 12:15.

$300 support seems to have been tested successfully several times today. Now TSLA appears to have been let loose.

Please forgive me, but that reminds me that some members of this and other message boards need to learn the difference between "loose" and "lose".

 

[kenliles]

Please forgive me, but that reminds me that some members of this and other message boards need to learn the difference between "loose" and "lose".

Or in a single declarative:
TSLA let loose, so Shorts will lose

 

[neroden]

The moves today are actually really small? Let's see how the sentences look if I divide everything by 10:

"Tesla was at $27.85 on Friday close. It jumped on Monday to $28.72 on open, then ran up to $29.88. On Tuesday it went up to $30.37. Today it traded as low as $29.93 before returning to $30.32 by 1:30 PM..."

Odd, it *sounds* different, doesn't it? Even though it isn't really different.