Articles/megaposts by sleepyhead

[CyberDutchie]

Sleepy, I think I read that you still have Dec 21 $160 calls you are keeping till expiration, as you already wrote them off in your mind as a complete loss. (Or maybe it was someone else.) I'm in the same boat, hanging onto the slightest chance of a turn-around that will recover some of the money put in (I paid 21.5 average).

But I'm watching how they have been trading the last few days and noticed they're not moving much, still hovering under 3 dollars. What's a good strategy, selling now for 3 bucks, wait for the miracle, or buying more to average down (I did buy more last week at 3.1 for the heck of it but even at that price, it added to my loss, so a little reluctant).

 

[sleepyhead]

Sleepy, I think I read that you still have Dec 21 $160 calls you are keeping till expiration, as you already wrote them off in your mind as a complete loss. (Or maybe it was someone else.) I'm in the same boat, hanging onto the slightest chance of a turn-around that will recover some of the money put in (I paid 21.5 average).

But I'm watching how they have been trading the last few days and noticed they're not moving much, still hovering under 3 dollars. What's a good strategy, selling now for 3 bucks, wait for the miracle, or buying more to average down (I did buy more last week at 3.1 for the heck of it but even at that price, it added to my loss, so a little reluctant).

I have bull call spreads and they need a steep climb to make me some money. I can cash them out at pennies on the dollar, but at this point the bid/ask and transaction costs would eat half the sale price. So I just let them run and they will probably expire worthless.

In your case though the $160s still have some value so it is a tough call. I don't ever like giving people my opinion on when to sell, because there is a 99% chance that I will be wrong. With options everyone has to make their own decisions.

If TSLA goes up 10% tomorrow then those options will double or even triple in value. If it goes down 10% they will lose 50% or more. You are at the mercy of the market right now.

One thing you can look at is to roll the options by putting in an order for a calendar spread to try to roll the Dec $160's into March $180's. You will probably have to pay more out of pocket to do this and then TSLA would have to go up even more, albeit you would get a lot more time. Do you really want to through more money at it?

Playing options is really tough, and you will never make the correct decisions. It is hard to say, it all depends on what you think TSLA will do in the next five weeks. I bought some TSLA today and I am already regretting it. I probably should have waited, but since I had very minimal TSLA exposure I thought that $139 sounds a lot better than $194. I will be buying more if it goes to $120.

 

[sleepyhead]

After taking some profits on CSIQ (still holding a ton of CSIQ, because it is only getting started), I started dabbling at TSLA once again today in the $139's. Bought a few June calls, J15s, J16s, and stock. I don't think the worst is over, but there is a chance that we had our double bottom yesterday (although it did not hit $133 like I think it should) and don't want to miss out. I bought longer term calls, because I actually hope that TSLA goes down lower so that I can buy more next month. If it doesn't go down then I will make money on what I bought. It is a win-win situation and that is how I invest: put myself in win-win situations.

Bought even more TSLA today since it hit $134 and bounced back. This could be our double bottom before it recovers a little bit into the $140s. The support at the $133 area has been very strong, but there still are significant risks that the stock goes lower (in which case I am ready to buy more).

Catalysts for the stock to go lower:
1. General market sell-off
2. Negative news story with a material impact, such as another fire by running over road debris.

The stock will not go much higher than $150 without any positive catalysts, such as indications that Tesla is producing 700 cars/week. But there is a real chance for a technical bounce out of the $130s in a short period of time.

Without any news, positive or negative, it seems that TSLA will be stuck in the $120 - $140 range, and the risk is to the downside. If we don't get any positive catalysts the stock will probably continue its slow and painful decline.

The risk is to the downside, but I like to get greedy when others are fearful.

Still vast majority of my money is in solar, but I now have a substantial TSLA position as well. Yesterday's news on CSIQ is just the beginning. JKS will step up to the plate on Monday and crush one out of the park. The market is taking profits on solar today, because it is confused and doesn't know what to do. The problem is that nobody cared about solar for the past 3 years, and nobody on Wall St. understands solar. Wall St. is basically clueless and only now starting to play catch up. It takes weeks or even months to study an industry, so it will take time for these stocks to start trading on fair value. In the mean time, there are plenty of cheap stocks out there and plenty of opportunities to get in before it is too late.

 

[kenliles]

Bought even more TSLA today since it hit $134 and bounced back....
The risk is to the downside, but I like to get greedy when others are fearful....

Buy and hold

 

[sleepyhead]

Buy and hold

That's the plan. That is why I hope that TSLA goes down even more, so I can dollar cost average on the way down.

 

[spacekadet]

Hi Sleepy,

Which solar stocks do you hold currently? Which are you most excited about? I've done very well with CSIQ thanks to you!

 

[smorgasbord]

nobody on Wall St. understands solar.

I think Wall St. got burned on solar stocks years ago. It had its bubble.

Now the risks are the elimination of net metering and subsidies. Without net metering, most home owners can't recover their costs in a < 10 year time period. Loss of subsidies will hurt, too.


As for Tesla, I'm expecting a strong Q4 and good predictions for 2014. A bonus would be the service announcement Musk mentioned in the last CC, and especially, tangible progress on Model S (Alphas, test rides, etc.).

The negative is a third road debris fire. Does anyone have any statistics on when to expect the next one? (and yes, there will be another) It's really too bad Musk doesn't yet appear to have learned the lessons of how to handle this kind of recall-ish situation from other companies that have gone through it.

 

[ckessel]

The negative is a third road debris fire. Does anyone have any statistics on when to expect the next one? (and yes, there will be another) It's really too bad Musk doesn't yet appear to have learned the lessons of how to handle this kind of recall-ish situation from other companies that have gone through it.

Within a couple months, but small sample sets can skew badly (like how many flips does it take to get heads).

After the first fire, Elon said ICE have fires every 20 million miles driven and Tesla had 1 in 100 million. So, after 3 fires, you're looking at 3 in maybe 110 million driven. Call that 1 in 35-40 million.

20,000 S on the road * 1000 miles/month = 20 million miles/month. So, if we're seeing fires 1 every 35-40M miles, then another fire within a couple months.

Like I said though, sample sets are so small any values are going to suffer from a wide standard deviation.

 

[fjm9898]

Sleepy, i just wanted to get your thoughts on overall Market Sentiment.
The Market has been on a run for the past 5 days (assuming we finish green today) and i am leery of a small pull back to be coming.

EDIT:
Looks like my worry fulfilled itself.

 

[fjm9898]

Whats your take on the HSOL's sale of American Depositary shares and pullback today? This is playing out much like the SOL one is and i could be a good buying opportunity. Their ER didnt see all that bad and they could make a nice recovery. Also, despite the huge pull back here late in the day, it held $3.60 like a concrete floor.

 

[sleepyhead]

I think Wall St. got burned on solar stocks years ago. It had its bubble.

Now the risks are the elimination of net metering and subsidies. Without net metering, most home owners can't recover their costs in a < 10 year time period. Loss of subsidies will hurt, too.


As for Tesla, I'm expecting a strong Q4 and good predictions for 2014. A bonus would be the service announcement Musk mentioned in the last CC, and especially, tangible progress on Model S (Alphas, test rides, etc.).

The negative is a third road debris fire. Does anyone have any statistics on when to expect the next one? (and yes, there will be another) It's really too bad Musk doesn't yet appear to have learned the lessons of how to handle this kind of recall-ish situation from other companies that have gone through it.

Net metering is a risk specific to SCTY and RSOL, and to a very tiny degree SPWR. All of the Chinese solars don't need net metering one iota.

Subsidies are not going away. In my opinion, they are only getting started. For every one country that takes away subsidies there will be five more that increase subsidies. Solar is only getting started. Actually subsidies might go away for oil and gas, and then solar will win without any subsidies, because it is cheaper.

Sleepy, i just wanted to get your thoughts on overall Market Sentiment.
The Market has been on a run for the past 5 days (assuming we finish green today) and i am leery of a small pull back to be coming.

EDIT:
Looks like my worry fulfilled itself.

Market will pullback eventually. The decline today was because Carl Icahn opened his mouth, which I find ridiculous. It was perpetuated by algos selling off, which should be illegal. Algos are supposed to create liquidity, but all they do is steal money from the little guy and create volatility. This is just my opinion, and there is no way to prove that I am right or wrong. Therefore, algos are here to stay.

I have made some of my biggest gains during a market pullback, so I stay invested. IMO we are still in the middle of a long-term bull market, so I see no reason to sell. Buy and hold, because you will never time things perfectly.

Whats your take on the HSOL's sale of American Depositary shares and pullback today? This is playing out much like the SOL one is and i could be a good buying opportunity. Their ER didnt see all that bad and they could make a nice recovery. Also, despite the huge pull back here late in the day, it held $3.60 like a concrete floor.

SOL has yet to break above its offering price. HSOL is a loser and I would not recommend it since there are so many high quality stocks to choose from. HSOL is part of a holding company, and because it is not a stand alone company it can't make decisions that are in the best interest of the company and its shareholders. It might yield a great return to shareholders, but the risk is way too high.

JKS just proved that it is a winner and so did CSIQ. I would be buying JKS right now, it is potentially a $100 stock in the near/mid future.

Tesla: As far as TSLA goes, nothing has changed. Please refer to my latest megaposts on TSLA. The stock might bounce back 5% or it might decline 5%, but there is no reason for a sustained rally until we get a catalyst.

I have been buying up TSLA every day for the past week. I have been taking profits from my solar plays to buy some TSLA. Probably a little too early, but I am ready to buy more if it goes to $100.

Fires are probably the biggest risk to TSLA, even though they are an unwarranted risk; but still real due to public perception. If we don't have any fires over the next year (probably impossible), or just a very small amount of fires (by the public's perception standards) then I still see TSLA going to $300-$400 by spring 2015, IF:

- Tesla is able to execute and deliver 40K - 50K Model S in 2014; and ~5K Model X in 2014 without any bugs.
- Tesla guides towards 80k+ Model S and X deliveries in 2015.
- Model E still on track to debut in 2016-17 time frame.
- No other major setbacks

You can call this perfect execution if you want, but there is still a clear path towards a $400 share price within 18 months. We just can't have anymore fires, because they might scare away potential buyers and that affects demand.

I am a buyer of TSLA, but solar is still has a significantly better risk/reward profile for the buy and hold investor and that is where the vast majority of my money is. I just couldn't ignore TSLA at these valuations.

Bonus tip: JKS is a gold mine with its business model. If you invest though, research is a must to make sure there aren't any adverse developments that affect their business model. $1.44 non-GAAP EPS on an annual basis would be enough to justify its current share price at $33. They had $1.44 in Q3 alone. I put 50% of my 401k in JKS as a pure ER play, but I am going to keep it there for the time being. CSIQ is still my bigger holding, but both stocks are equal in my eyes.

 

[kenliles]

Fires are probably the biggest risk to TSLA, even though they are an unwarranted risk; but still real due to public perception. If we don't have any fires over the next year (probably impossible), or just a very small amount of fires (by the public's perception standards) then I still see TSLA going to $300-$400 by spring 2015, IF:

- Tesla is able to execute and deliver 40K - 50K Model S in 2014; and ~5K Model X in 2014 without any bugs.
- Tesla guides towards 80k+ Model S and X deliveries in 2015.
- Model E still on track to debut in 2016-17 time frame.
- No other major setbacks

You can call this perfect execution if you want, but there is still a clear path towards a $400 share price within 18 months. We just can't have anymore fires, because they might scare away potential buyers and that affects demand.

I am a buyer of TSLA, but solar is still has a significantly better risk/reward profile for the buy and hold investor and that is where the vast majority of my money is. I just couldn't ignore TSLA at these valuations.

I agree the odds of no more fires for a year are less than zero (you'd have to remove ModelSs from current customers to achieve). If fires is something an investor believes cannot be overcome, I would suggest not investing at all or even shorting. We'll be seeing more and more fires with more Ss on the road, in fact as people learn they can survive a concrete wall in a modelS, the more we'll see of it.

Thanks for the synopsis sleepy.

 

[CyberDutchie]

Sleepy, I sold my CSIQ Jan '14 and Apr '14 calls for a lofty profit to offset the expected painful loss of TSLA 160 Dec '13 calls. (I don't have a tax free account and also don't want to risk a repeat of expiring worthlessly with CSIQ.)

I put half of the proceeds in TSLA 150 Jan '16 @ 31 cost, and the remaining I will hold in case TSLA goes down further. What are your thoughts on CSIQ OTM calls right now, e.g. Jan '15 or '16 at 35 or 40 strike? CSIQ still near ATH so better to wait and see?

 

[hoang51]

I'm also interested on CSIQ OTM calls play from your perspective sleepy. It seems like the chart is saying CSIQ will continue to rise for a while. TSLA is just tanking and I don't know when it would recover. Playing puts with TSLA is looking like a winner, but the up/down/sideways trading is crazy.

 

[Jonathan Hewitt]

What are your thoughts on CSIQ OTM calls right now, e.g. Jan '15 or '16 at 35 or 40 strike? CSIQ still near ATH so better to wait and see?

CSIQ is due to go much much higher. When? Once the street wakes up. Could be this week, next month, or later next year. It's always safer to wait for a drop before buying options on solar but who knows when the next drop is. It's too hard to time solar.

Buy and hold!

 

[sleepyhead]

Sleepy, I sold my CSIQ Jan '14 and Apr '14 calls for a lofty profit to offset the expected painful loss of TSLA 160 Dec '13 calls. (I don't have a tax free account and also don't want to risk a repeat of expiring worthlessly with CSIQ.)

I put half of the proceeds in TSLA 150 Jan '16 @ 31 cost, and the remaining I will hold in case TSLA goes down further. What are your thoughts on CSIQ OTM calls right now, e.g. Jan '15 or '16 at 35 or 40 strike? CSIQ still near ATH so better to wait and see?

First of all good job on taking profits on CSIQ. I take profits differently than simply selling, I sell a higher strike call to create a delayed construct bull call spread.

Maybe someone can confirm or correct me, but since you sold your Jan and Apr options today you will be taxed in 2013 (this part I know for sure). I on the other hand actually sold some Apr higher strike calls today against my open long position to create such bull call spread, and I will not get taxed until next year (if profit is still there). Anybody know if this is correct? This is my understanding of tax law. BTW I have undergraduate and graduate degree in accounting (and my wife is a CPA) and I still can't figure out options taxation.

This is how I value options: You bought Jan' 16 TSLA options that are 25% OTM for 25% of underlying share price. In order to buy CSIQ J16 options 25% OTM, you are looking at $38, but only $37's are available (so they should be cheaper). But they will cost you about $11.50, which is about 37% of underlying share price. So the $38's would cost ~40%. IMO it makes no sense to spend that much on an OTM option.

I think it would make more sense to buy the $12 options at $21.5, but then you aren't really getting any leverage; so it kind of defeats the purpose. I really don't see any value in buying LEAPS for CSIQ or JKS; their IV's are way too high and there is not enough reward for the risk you are taking. Unfortunately the best way to play solar is with stock. If you want to gamble a tiny amount of money then buy some short term options when these stocks pull back 20%-30%, but be ready to lose 100% of investment so make it very small. Shares are the best way to play solar stocks. The easy money has been made already and it might be difficult to make money in options in the future.

TSLA on the other hand is a better candidate due to slightly, albeit still high IV. If TSLA could consolidate and stay around $120 for another month then these options should become a lot cheaper. I have been buying up TSLA a little bit every day, but I am waiting for this consolidation and hope to buy a lot more options a lot cheaper in December. Maybe wishful thinking on my part, but I see no catalysts to propel TSLA a lot higher in the short run; unless Tesla issues 2014 guidance out of the blue, but that will not happen until Q4 ER IMO.

- - - Updated - - -

AMZN, another high flying stock has 25% OTM J16 options that cost 10% of underlying share price vs. 25% for TSLA. So TSLA options are still expensive right now.

 

[hoang51]

Good reply. I noticed that the options available for CSIQ and JKS are far out, and that's asking for manipulation to make some options worthless. That's definitely risky. Thanks for your valuable input.

 

[sleepyhead]

TSLA Final Capitulation

In my opinion TSLA will experience final capitulation in the very near future when it hits strong support at ~$109, which happens to coincide with the 200 day moving average. If TSLA were to cross the $110 mark, it will be very short-lived and will lead to a very strong technical bounce. That will be the last time we see $110.

This is just my speculative prediction, because there are so many things that can change on a daily basis based on news that comes out. It is possible that we hit our bottom already today, and there is a chance that another car runs over debris and starts on fire causing TSLA to drop to $80.

But at this moment the odds imo favor a $109 bottom and it will later be proven to be the buying opportunity of a lifetime.

I have been accumulating TSLA every single day over the past seven trading days. I am ready to buy a lot more at $110. If it goes down to $80, I will buy even more.

It is amazing that I see so many bearish posts on TSLA on TMC lately: I see people considering to go short TSLA or buying puts now that it is at $120. I am doing the exact opposite and accumulating. Even though I started buying in the high $130s, as it goes lower I am buying higher volumes, so my avg. cost basis is on the low end of my purchases. If it goes to $80, I might have to go all-in. The story on TSLA has not changed. Remember what the near future will bring: 40k cars in 2014, 80k in 2015. Think how the market is going to react when this happens.

Demand might be smaller due to fires, which means that demand is now 200% of supply instead of 250% of supply if I had to guess. Once demand starts dropping off towards 100% of supply Tesla can begin advertising. As long as we are not seeing any Tesla ads on TV, internet, or radio; there is nothing to worry about.

Warranty covering fires is brilliant. Now customers don't have to worry about insurance rates going up. How much demand will this create you might ask? I don't know but if demand created is more than 4x the amount of fires then Tesla is making out financially (in the long run, because short run constraints do not help here). So even if there are 100 fires next year, then all you need is an extra 400 units of demand to cover the costs. There is really no downside in offering fire protection.

NHTSA investigation will come back with a report that Model S is the safest car in the world and that no changes are necessary (unless there is a few more debris fires prior to conclusion of investigation). This will be a big catalyst for TSLA, but by the time they announce the results the stock could already be a lot higher, depending on how long the investigation takes. On the other hand if the investigation drags for months and takes the stock price down with it, I will be very happy and buying more; especially if there are no new fires.

This is a buyers market and I am taking advantage every single day. The deals keep getting better and I am not stopping any time soon. Keep on selling, keep on shorting, because there will be at least one buyer every single day.

Happy investing to all.

 

[MikeC]

Happy to see you bullish again, sleepy. Is it worth selling some solars to buy TSLA?

 

[AlMc]

In my opinion TSLA will experience final capitulation in the very near future when it hits strong support at ~$109, which happens to coincide with the 200 day moving average. If TSLA were to cross the $110 mark, it will be very short-lived and will lead to a very strong technical bounce. That will be the last time we see $110.

This is just my speculative prediction, because there are so many things that can change on a daily basis based on news that comes out. It is possible that we hit our bottom already today, and there is a chance that another car runs over debris and starts on fire causing TSLA to drop to $80.

But at this moment the odds imo favor a $109 bottom and it will later be proven to be the buying opportunity of a lifetime.

I have been accumulating TSLA every single day over the past seven trading days. I am ready to buy a lot more at $110. If it goes down to $80, I will buy even more.

It is amazing that I see so many bearish posts on TSLA on TMC lately: I see people considering to go short TSLA or buying puts now that it is at $120. I am doing the exact opposite and accumulating. Even though I started buying in the high $130s, as it goes lower I am buying higher volumes, so my avg. cost basis is on the low end of my purchases. If it goes to $80, I might have to go all-in. The story on TSLA has not changed. Remember what the near future will bring: 40k cars in 2014, 80k in 2015. Think how the market is going to react when this happens.

Demand might be smaller due to fires, which means that demand is now 200% of supply instead of 250% of supply if I had to guess. Once demand starts dropping off towards 100% of supply Tesla can begin advertising. As long as we are not seeing any Tesla ads on TV, internet, or radio; there is nothing to worry about.

Warranty covering fires is brilliant. Now customers don't have to worry about insurance rates going up. How much demand will this create you might ask? I don't know but if demand created is more than 4x the amount of fires then Tesla is making out financially (in the long run, because short run constraints do not help here). So even if there are 100 fires next year, then all you need is an extra 400 units of demand to cover the costs. There is really no downside in offering fire protection.

NHTSA investigation will come back with a report that Model S is the safest car in the world and that no changes are necessary (unless there is a few more debris fires prior to conclusion of investigation). This will be a big catalyst for TSLA, but by the time they announce the results the stock could already be a lot higher, depending on how long the investigation takes. On the other hand if the investigation drags for months and takes the stock price down with it, I will be very happy and buying more; especially if there are no new fires.

This is a buyers market and I am taking advantage every single day. The deals keep getting better and I am not stopping any time soon. Keep on selling, keep on shorting, because there will be at least one buyer every single day.

Happy investing to all.

Sleepy. Thanks for your insight. My feeling is that we linger in the 109-122 range but probably much closer top of that range until another positive or negative (hopefully not) catalyst arises. If nothing happens until Q4ER, then that will be the catalyst.

Recently you were of the opinion that there was a better risk/reward ratio with many of the solar companies compared to TSLA. Given TSLAs recent drop and your prediction above do you feel that new money going into the market would be better placed in solars or TSLA?