2017 Investor Roundtable: TSLA Market Action

[RobStark]

Indeed. Other than friends' cars, I imagine that Tesla service centers eventually will be the place for test drives. Questions can be answered there,

If a Tesla location offers Test drives and answers questions from potential customers then it is a Retail location. And the people answering questions are salespeople.

The idea that a car can be sold like a vacuum cleaner and Tesla will become the Shark/irobot of the automotive world is patently ridiculous.

Telling people spending $42k-$50k on average to go watch online videos instead being walked through the features and how to use a Model 3 is also ridiculous. This may fly with early adopters but once you get to the heart of the market conquering premium Camry-Accord-Fusion buyers it will be a non-starter.

 

[bdy0627]

Generally speaking, how long does it take for LEAP premiums to drop after a stock moves and then consolidates? Will they go down a lot within a week or does it take longer than that?

 

[elasalle]

my 2c.
Regarding stores, Tesla cannot get enough of them .. thats why we have mobile vans on tour all over the place.
The stores are there because there is still a very large % of the population that have not heard of Tesla products and sustainable options.

With SolarCity Acquisition, the store is a one stop shop to showcase all the products - Cars, Powerwalls, Solar Roofs etc etc.

 

[Richgoogol]

If a Tesla location offers Test drives and answers questions from potential customers then it is a Retail location. And the people answering questions are salespeople.

The idea that a car can be sold like a vacuum cleaner and Tesla will become the Shark/irobot of the automotive world is patently ridiculous.

Telling people spending $42k-$50k on average to go watch online videos instead being walked through the features and how to use a Model 3 is also ridiculous. This may fly with early adopters but once you get to the heart of the market conquering premium Camry-Accord-Fusion buyers it will be a non-starter.

But I feel like this is the future of all sales..physical locations are just a store front and if you like the product, you research online when you get home and learn about it, check out the reviews and etc. Currently most people still feel like they need someone there to guide then through the process, because that's the way it's always been done and people are just used to it. I bet a lot of the younger generations are more comfortable shopping online, reading reviews, researching themselves rather than talking to people in the store.

This is like what Steve Jobs have said, people don't know what they want until you show it to them.

 

[MitchJi]

Also bought some Jan2019 call options with a strike price of 330 at the price of 54.90. Sure am hoping that wasn't a mistake; don't think it was.

Congratulations!

I believe that's an excellent move, barring two potential mistakes:
Don't panic sell at a loss.

Don't hold them longer than about mid 2018 because as we've just seen huge abrupt dips can be triggered by positive news.

 

[1kEE]

Generally speaking, how long does it take for LEAP premiums to drop after a stock moves and then consolidates? Will they go down a lot within a week or does it take longer than that?

I can not say for sure due to lack of experience under these conditions (first time I've enjoyed a $60 / 15% in 3 days drop).

However, some wild speculation here.... if we trade sideways with no massive swings for like 2-3 weeks, I'd expect the 330 2018s to go from 30ish to 20ish. I'm basing that on gut feel from LEAPs pricing at the 180 bottom, but that was after a very long steady drop. Anyone with more experience in Vega and IV on ops care to educate us?

Edit, the price change on 330 calls speculated above is based on the SP price being exactly the same as now... obviously if SP is up $10 that will more than make up for the decay in volatility.

All this thinking is caused by my "gut feel" prediction of us consolidating in a narrow range for a few weeks, and reality is that may not be what happens. Sharp bounce or continuation of downtrend are all things to consider.

 

[Intl Professor]

Secondly, they do need stores in some places they don't have them. Geographic coverage, remember? It's probably worth having one in Alaska. Definitely need one in Perth. And one in Tasmania. One in Maritime Canada. And then there are the new markets which were allowed to make reservations, like Brazil, and India...

You left one out near Cornell.

 

[schonelucht]

Not sure why it just got picked up now since it was released around noon, but CNBC believes this is the reason SP is up aftermarket.
Tesla shares rise after company releases key stat it didn't include in quarterly report
Tesla shares rise after company releases key stat it didn't include in quarterly report

Weird, because the number itself is another disappointment. Not sure how that would raise the stock.

 

[Mkorpal]

Added more common at 310 today. While the future is never set, I feel that there is a good chance this is the bottom of this sell-off. I'm happy with it.

 

[Richgoogol]

Well not bad if you add that number to what they announced, which would exceed the higher end of the forecast. But I wonder whether this is some sort of "financial engineering" that would make their Q3 delivery number higher since they might feel like with the starting of M3 delivery, Q3 delivery rate would get hit the hardest? They might have think they could get away announcing a lower number now at Q2. But unfortunately they did not.

 

[MitchJi]

Generally speaking, how long does it take for LEAP premiums to drop after a stock moves and then consolidates? Will they go down a lot within a week or does it take longer than that?

You should not even think about buying J19 LEAPS, other than cheap very high strike price lottery tickets, unless you are extremely confident that the SP will increase substantially by mid 2018 at the latest.

If that happens that will dwarf the relative iv related options price changes. Example, despite suggestions that they were overpriced I bought J19 $240's for $19.50, in November, the second day that they were available with the SP at about $180. Currently at $99.80. Still a five bagger, after the huge dip.

If you enjoy ridiculous levels of exposure, here's a fun options combo known as "synthetic stock". Sell a 330 put, to pair with your 330 call. What that will do is hedge out the time value decay and volatility decay of the long call. Also the sum of the deltas will always be 1. So it's like having 100 shares of stock without having to pay $31300. And there is no margin interest to pay. There is a price (no free lunch)! This will remove the long call's downside risk protection. Instead of the call slowly going to 0 in a worst case scenario, the call will go to zero, and the short put will go very negative. Please use with caution!

Bad idea, if you are extremely confident that the SP will increase substantially by mid 2018 at the latest.

Beyond that maintaining a position in which the delta's will cancel out is very complex. If you blow it you could lose a lot.

Summary: a very risky strategy ill suited for traders who are not options experts.

 

[Wenche]

Ugh.. I have a feeling this week's plunge could have been largely avoided if they had included the 3500 in transit vehicles in the Sunday press release, and, if they hadn't mentioned any shortage of battery packs during the last quarter (as the issue has been resolved already).

Any excuse will be taken as a negative. Why bring it up?

To let me buy J19 calls at a bargain price. Bought 1 each; 100, 150, 200

 

[MitchJi]

Weird, because the number itself is another disappointment. Not sure how that would raise the stock.

How is that a disappointment?

It's consistent with the drop in production due to pack production issues in April and May.

 

[1kEE]

If that happens that will dwarf the relative iv related options price changes. Example, despite suggestions that they were overpriced I bought J19 $240's for $19.50, in November, the second day that they were available with the SP at about $180. Currently at $99.80. Still a five bagger, after the huge dip.

MitchJi, you and one other individual here are the reason I bought those and 200 LEAPs that day. My only complaint I went 90% stock, 10% LEAPs. I was too conservative, but it was my first options trade.

I overdid options. I went from too conservative to trying all sorts of different strategies. Lost and made 10% of my net worth, in days, on probably 10 different occasions. I learned a lot in the process. I now know that the less I play with them, the more money I make. The occasional LEAPs trade, with days of thought put into it, will make a buck more often then not. Short term and compulsive options trades will blow money in ridiculously rapid fashion.

I confess to being addicted. I would like to say I have broken even on options trading, but today isn't the day to make that clam, especially not after this week (I had sold 360 puts).

Those J19 LEAPS at 180 were great, tho.

 

[Wenche]

More than 626k shares traded after hours', price up about $2 more than close price.

 

[Ameliorate]

'bout the SP. Mostly my fault, I bought a handful of 315 calls for today, sorry team. That model 3 tweet would've been nice

Just wanted to note some additional similarities between now and feb 2016. While the drop was much steeper this time around, and way more oversold. I suspect it will return and then some by Sept as just like in 2016 following the dip the market had the model 3 reveal to look forward to - about 2 months after the dip.
Today we have the semi reveal also in approx 2 months, model 3 production and reveal in 1 month AND the February 2016 dip had a bit of logic behind it. This bear raid should not have any lasting effect. I Was planning on lightening up before the ER, expecting it to be weak before the dip, now I'll hold through while the SP is in my opinion very undervalued. A weak ER was priced in at 340. Just my opinion.

Holding mostly LEAPS, my target for july'18 is 450. I'm sure most I bought in the 240's will do very well unless of course war/crisis/market crash, if that's the case I've probably got bigger things to worry about. If a 2013 style gap up occurs I'm going to have to agree with those saying 2nd half of 2018 if it's going to happen at all.

I held through this whole dip, saw no rational reason to sell, if anything the news was all positive to me. Up leveraged a bit at 310. Goodluck.

 

[mmd]

So the big battery down under sounds like a big sale, but it is only about $33M in revenue (129MWh @ $250/kWh). Yet it is a big deal because it primes a large international market. I'm sure utilities around the world are taking note that this system will get installed in about 100 days at a cost of $0.33/W. That is an incredibly low cost for backup and peak power. And the fuel is cheap too, excess power when wholesale prices are depressed.

How cheap is this? Consider that some gas peakers have cost more than $1B for 900MW. That is $1.11/W. That's not too bad, until you consider that some of these facilities have sat idle for year, sometimes never used. So even if this 100MW battery system only discharged 100MWh in a year, it would be a far better ROI than a 100MW gas peaker that only generates 100MWh in a year.

My point here is not that such limited stand-by use is the best use for this system, but simply that $0.33/W is really cheap and immediately makes sense as stand-by power. Maybe more energy capacity will be added over time. But it may be that some fraction of stack capacity will always be reserved for stand-by.

It all sounds great when you choose this mythical gas peaker that only runs for an hour a year as your comp. But the gas peaker can keep running for days, and keep generating power for weeks when there is a sweltering heat wave and there is no wind energy for weeks (case in point: SA's power crisis last year). The battery storage, OTOH, doesn't supply any power beyond the 129 MWh, and loses 10% in RT efficiency losses. It has some use in reducing routine peaks or very short periods of power outages, but is of little use for prolonged periods of high power demand.

The bigger question for investors is, how much is the margin on this battery supply contract for Tesla? Between paying Panasonic an agreed upon price and having to outbid 90 bidders for this project, I wonder if this even pays for the cost of the round trip Gulfstream flight to Australia.

 

[Krugerrand]

The bigger question for investors is, how much is the margin on this battery supply contract for Tesla?

Nope. Not my bigger question. At all. All I care about is that they kill this puppy in under 100 days because if it takes 101 days you and your brother will never let us hear the end of 'Tesla just took a $50 million dollar bath - that's the end of them' ramble.

 

[Ameliorate]

It all sounds great when you choose this mythical gas peaker that only runs for an hour a year as your comp. But the gas peaker can keep running for days, and keep generating power for weeks when there is a sweltering heat wave and there is no wind energy for weeks (case in point: SA's power crisis last year). The battery storage, OTOH, doesn't supply any power beyond the 129 MWh, and loses 10% in RT efficiency losses. It has some use in reducing routine peaks or very short periods of power outages, but is of little use for prolonged periods of high power demand.

The bigger question for investors is, how much is the margin on this battery supply contract for Tesla? Between paying Panasonic an agreed upon price and having to outbid 90 bidders for this project, I wonder if this even pays for the cost of the round trip Gulfstream flight to Australia.

Huh. Sweltering heat waves sound good for solar. Weird.

Outbid? More like, Tesla asking price with 30% margins is below the competitions cost not including profits.

You're slacking MMD, this isn't even fun anymore.

 

[Plotinus]

How is that a disappointment?

It's consistent with the drop in production due to pack production issues in April and May.

It's a "disappointment" because 1) it's a number significantly lower than in previous quarters (which looked at in isolation doesn't need to be negative - could be explained by quicker delivery process, however this would be reflected in overall delivery numbers) and 2) it gives the complete picture of deliveries during the 2nd quarter and 1st half of 2017 and it isn't a very good one.

During the first half of 2017 Tesla produced around 51 000 cars, however it only sold/delivered (including deliveries in transit) 44 000 cars during the same time span. That is 7000 cars Tesla produced that it didn't sell. This is not a supply constrained situation.

The math: 25k deliveries in Q1 minus 6500 deliveries in transit from Q4 plus 22k deliveries in Q2 plus 3500 deliveres in transit = 44k cars delivered or in transit.

It's also unfortunate that the company omitted the delivery in transit numbers from the quarterly report while at the same time heavily emphasizing how they would upgrade the service and loaner floats with new cars. Unfortunately, whether it was intended or not, this is not an example of clear, honest and accurate communication to the market.