2017 Investor Roundtable: TSLA Market Action

[TMSE]

On Monday, TSLA might actually move up, just like it did right after M3 numbers for Q3 were revealed.

The short interest as of 9/15 is nearly 30 mil. Stock went down precipitously since then, significantly adding to short interest is highly likely. It could be as high as 33 to 35 mil by 9/30. It looks like every short out there has already shorted their max.

 

[Causalien]

@Causalien Can you clarify above?

When adjusted porportionally to the % of money you spent. Rent, car, medicare etc. Represent a bigger portion of spending than what cpi tracks.

7% is using my own spending. And another source that I trusted also mentioned a similar #. I forgot where I read that while researching, but they found it to be 10%.

Someone with a different spending pattern might disagree though. Say a computer builder who keeps buying the same 2gb ram will find his world spiraling in deflation according to cpi.

 

[ZenMan]

I'll be buying as SP rises all the way up o $1,000 to keep my margin at "moderate," because rising SP lowers my leverage as margin becomes equity... then I'll stop chasing at $1,000.

How does margin turn into equity unless you sell margined shares?

 

[AlMc]

J20 LEAP will be available mid Nov. Now the Semi unveil is lined up with it. Not good for us who plan to buy the LEAP. I feel TT007 is right regarding the price movement.

In late 2016 I was planning to buy 2019 LEAPs, I was so worried if the stock would rally before November. Turned out the stock went to $180 twice in Nov. It was a rare gift for us LEAP buyers and share buyers.

I think at this time anything negative (like production delay) is actually good. Let's load up 2020 LEAPs and then let the party start.

If someone can convince the bears to short more...

So, will it be a good or bad time to buy J20s in mid/late November?

 

[everman]

Couldn't one buy the J19 and roll over if worried about an SP rise into semi event?

Or even buy the same strike next monthly at fraction of the cost to lock in a purchase price for J20?

Can you lay out a hypothetical example with strikes?

 

[TradingInvest]

So, will it be a good or bad time to buy J20s in mid/late November?

I plan to buy J20 Calls in November. I like deep in the money Calls. Buying how many at what strike price will depend on the stock price and premium. If the stock rallied to a high point at that time, I will buy small amount Call spreads. If the stock is low, I will be more aggressive - buy more and Call only, not spread. I don't touch my long term shares.

I think the latest $500 target will not help the LEAP buyers. It made a lot of shorts think. Also large shareholders are reluctant to sell covered Calls.

 

[Navin]

https://jalopnik.com/tesla-model-3-production-is-jammed-up-because-parts-are-1819197180
Back from the cave. Today’s news isn’t that bad. We already knew there were bottlenecks. Nothing new really.

Tesla truck is going to be awesome
Tesla has some bromance with Puerto Rico

Plus wsj sucks balls. Read Tesla’s statement in the attached link

 

[geneclean55]

Do power walls use the same cells as those that go into the M3? Might as well make use of them while they pile up.

 

[D-egg-O]

Do power walls use the same cells as those that go into the M3? Might as well make use of them while they pile up.

If I remember correctly, energy storage applications use NMC chemistry and auto uses NCA. Same form factor though (2170).

 

[22522]

If I remember correctly, energy storage applications use NMC chemistry and auto uses NCA. Same form factor though (2170).

I have a belief that it is all NMC in the 2170 based on pure speculation. No real basis whatsoever.

 

[TradingInvest]

Can you lay out a hypothetical example with strikes?

Not sure what you are asking ... I will explain my thought process, a few people on this board are very knowledgeable about how to handle Options. I just write it down and hope all Tesla supporters do well, don't get hurt.

Lets say I have $40,000 cash that I can afford to lose. The stock is at $400. I buy 100 shares and sit on it for many years. End of the story. But if I want more exposure because I am convinced the stock will rally a lot:

Case 1:
I can buy two $190 Jan20 LEAPs which probably will cost $40,000. This gives me 200% exposure but no margin.

Or I can buy 200 shares using 100% margin, (don't laugh, many people do this when they are so sure about a stock's direction). I think Wall Street invented margin to wipeout investors.

The risk for the above two cases are very different. For the LEAP case, if there is a big drop, I can hold or move my Jan20 to Jan21. For the margin case, I might lose it all if there is a big drop.

There are tax implications between the above three approaches: share, LEAP, and margin share.

Case 2:
If the stock is at $400, the $400 Jan20 LEAP would cost around $100. So I could buy 4 LEAPs with more exposure if the stock rally a lot. But in this case I will get time decay, and if there is a big drop, my account becomes very small, I can't do anything about it. I really don't like this approach unless I am 99% sure about a big rally.

In Nov 2016, I bought $190 Jan19 LEAPs, in stead of looking for DITM LEAPs. That's because the stock was very depressed.

The approach I like is mostly buy shares with cash, hold for years. If I think there is a good winning chance, add some DITM LEAPs. I buy out of money Calls only when all the conditions are right, and be ready to sell. I don't hold out of money options for long term. Also, I generally like spreads better than pure options.

Another thought, I feel "Buy Low" is extremely important. We all know this.

 

[T34ME]

Isn't it about time Mueller got this orange buffoon removed from office?

Don't you mean Cut it out - Mod

 

[dmckinstry]

Another thought, I feel "Buy Low" is extremely important. We all know this.

And I'd add to that "unless there's absolutely no way to avoid it, never sell for less than what you paid."

 

[Lessmog]

They need no convincing; bear:bull ratio in Seeking Alpha comments section is about 20:1, and I no longer think even half of those are paid FUDsters. People just blindly believe what a handful of FUDsters put out and keep regurgiating them among each other. It's really odd to watch.

Having said that, I'm a bit concerned about recession chances in 2019, even though it's tough to see that far out. I don't expect a recession in 2018, so I may still go with J19s if SP drops some and just keep the strike price a bit more conservative.

What!? You mean SA is like ... an echo chamber? I'm shocked, shocked to hear that. Thanks for telling us, I would never know otherwise.

 

[Waiting4M3]

Six to eight weeks is mid November to the beginning of December. That is for the configurator going live. Mid November your 15-20k might be feasible. If they produce 3k per week from mid November that's 18k.

But regardless it looks like the odds of us getting a good entry point to buy J20 just improved !

OTOH If I had a significant number of J18's I'd be looking for a good chance to unload them before the Q3 ER, because it doesn't look like we can count on good news.

Not an advice. I decided to strike out the not an advice because I decided that it's hard to make a mistake being too cautious with expiring options.

Keep in mind, by the time the non-employee configurator opens, employees will probably already have taken delivery of thousands of cars.

My understanding on Elon's tweets is that they are targeting to get the bottlenecks fixed by late Oct, they will start cranking out cars and fill the employee orders then. And in late Nov or early Dec, they will get to the non-employee orders. Current owners at the head of the line who have Oct-Dec estimate can still get their cars in Dec.

 

[ValueAnalyst]

How does margin turn into equity unless you sell margined shares?

Say you bought 10 shares with your cash and 5 on margin at $300 per share.

In other words, the net liquidation value of your portfolios is $3,000, and you borrowed $1,500 to buy 5 more shares, so total portfolio value is $4,500.

If the stock goes up to $400, now your total portfolio value is $6,000, but the amount you borrowed remains constant at $1,500, so your equity has increased to $4,500.

At the beginning your leverage was 150%, but because of the SP rise, it's now declined to 133%.

I can then buy 2 more shares at $400 to bring my leverage back up to ~150%. At this point my net liquidation value is $4,500, margin (borrowed amount) is $2,300, and total portfolio value is $6,800.

I have predetermined leverage levels for different SP levels for the next several quarters depending on Tesla's fundamentals.

Right now, at $350 and given Tesla's current fundamentals, I'm in "moderate leverage" mode, which is a subjective term on purpose, as the definition of "moderate leverage" can be different for everyone.

I intend to keep my leverage constant for some time, so I'll be buying shares as SP rises.

This is only one factor in my portfolio management strategy, so other factors may come into play at times and what I explained above is subject to change, but I hope that was generally helpful. Let me know if you have any other questions.

 

[ValueAnalyst]

Anybody else want in on this 2018 deliveries bet?

Bet ValueAnalyst at your own risk

 

[22522]

I have a belief that it is all NMC in the 2170 based on pure speculation. No real basis whatsoever.

Figuring I should probabaly list a few reasons:

1) because that is what I would do
2) lower cost
3) focused effort -experience curve concentration
4) longer cycle life
5) inventory flexibility-see PR Model 3
6) better tolerance of infrequent charging supports urban applications
7) stability
8) might be more forgiving/ easier to control during high rate charging. Danger of plating out the lithium is more observable. Engineered to be less brittle to high rate charging.

Made up stuff based on an imperative to, "figure out how to make the low cost stuff work."

And a quest for simple inventory.

 

[ValueAnalyst]

Can you lay out a hypothetical example with strikes?

Not sure if we'll need this, because I guarantee you that we'll read the phrase "assume the worst" many times in the next few weeks, but sure...

I think sophisticated modeling is necessary to calculate the exact hedge ratio, but here's a general layout for what I think is possible:

Let's say you want to buy 1 contract of $400 strike Jan20, which would likely price at ~$75 when it comes out at 40% implied vol and $355 SP...

... but you're worried that SP may surge above $400 in the next month, driving $400 strike Jan20 price way above ~$100.

You could now buy 1 contract of $400 strike Dec17 for $10, so for one-tenth the price of what Jan20 would be with SP at $400 on November 13.

Then:

1. if SP falls from here, you lose the $10 premium you paid, but get to buy Jan20 for less than $75... not too shabby;
2. if SP surges above $400 before Jan20 comes out, then you now have an island and will be sipping your piña colada;
3. if SP rises to exactly $400, then you lose the $10 premium you paid, you'll buy the Jan20 at $100, and you probably should never play lottery.

Hope that helps... Cheers!

 

[MitchJi]

I would consider sitting on 100% cash right now much too risky! I hope you're referring to your trading position and that you have a core position as well.

If not, then that's the classic market timing error, and if the stock skyrockets straight up without going down first, you'll miss the entire runup. This is specifically how market timers do worse than buy-and-hold investors and indexers. They did studies on this. Market timers do worse by being out of the market during the big runups, since most of the rise in a stock will happen in a few big runups with stagnation in between. I can't remember the details, but it was something like, for most stocks which gained a lot, the gains over 5 years are typically concentrated in three specific one-month periods, so being out during one of those periods wrecks your gains.

Of course I kept our core position. Do you think I'm crazy enough to risk our core share (one share) ?

You could be partially correct, this could be a large blunder. But I don't believe that it will cause us to miss a huge percentage of the increase to $2-3k per share.