Wiki Selling TSLA Options - Be the House

[vikings123]

Can we get back on track? LOL. I had a morning like other. Miraculously, i am able to express my thoughts... effectively I get a second chance. I owe big thanks to the one closest to me for noticing and taking action and the medical professionals that urgently treated me. Thanks you, whoever is watching. Through the thick of the day, i managed to roll -c162.5/+c167.5 at midpoint to 5/5 -c165/+c170 for a debit, giving up a third of the credit. I'll early manage next week, holding on to the remainder or to recapture the debit. There you have it, i shared my position. Have a nice weekend all.

Oh my… glad to hear you are OK.

We have a couple of days to get back on track

 

[vikings123]

To the specific quote I started with - since the topic is technical analysis, its up to you to prove to yourself that TA is or is not valuable to you. It doesn't matter if people are, or are not, making a fortune with it. It doesn't matter if people are, or are not, making a living use it.

Well said. I don’t think we should mock others who believe in TA.

To put it simply TA is based on data and much more prevalent in today’s trading. You are trading against bots so wouldn’t you want to know what these bots are likely to do at key levels?

It is not an absolute science otherwise we would all be billionaires by now .

 

[EVNow]

Well said. I don’t think we should mock others who believe in TA.

Absolutely- we are not here to convince anyone of anything.

If someone wants a debate on whether TA is voodoo or not, a separate thread can be started.

 

[Right_Said_Fred]

I’m a bit hesitant to intervene as this thread has a great capacity to self-regulate, which the posts of the last hours have shown. But yes, let’s do as suggested: get back on track, remain respectful and learn from each other’s theories and trades.

 

[Max Plaid]

Maybe its the other way around. Maybe its the rapid call selling that is causing the drop in SP. If a lot of people was holding out on selling CC until after the ER and it turned out to be a non event, they would race to sell those calls first thing the next day, causing massive downward pressure and even lower call premiums. This is different from a true panic. I dont think this boring ER was cause for a panic.

I have nothing to prove to anyone.

@ All, I think I started all this when I suggested that Youtube creators like Rob was counterproductive to us as traders. That may have brought unintenteded consequnces. Rob is a good guy and I respect him. In the old days when the stock was down days after days, I’d go on to see what Rob gotta say to cheer me up, even when if I had losing positions that needed to be dealt with.

I was constantly thinking “if only I can hold out till next ER, surely Elon is going to save me”, or some other variations of that. Then one day I just stopped as it just seemed no matter how positive they sounded the stock just wouldnt stop dropping. Then I began to look at the chart and save myself. I thought if I could help people to wean off these feel good channels itd be a good thing. But, in the end, do whatever works for you.

There's a valid point here and I think it's necessary to separate Tesla from TSLA as the two don't always correlate, and even when the fundamentals are good, they're somehow not good-enough for whomever decides these things. So yes, if you base all your trading decision on YouTube commentary and hopium then you're going to get burned for sure, been there, still have the scars. Nevertheless, they are a another input to the decision-making process, as are the current TSLAQ themes, it all helps

 

[Vova]

I apologize for my posts on this thread yesterday. It was not my intention to disturb the discussion but I realize I did. I very much regret that. I will take this into account as far as my future reactions are concerned.

@Right_Said_Fred thanks for your sensible response. Appreciate and respect that.

Once again, apologies and keep up the good work posting here.

 

[EVNow]

I dont think this boring ER was cause for a panic.

I think this is the fundamental disagreement. I suggest you come to the Finance thread and we can discuss. The fact that Tesla missed the guidance of 20% GM was very troubling. Zach's credibility is now in question among large investors. Not only that - the executives made no effort to explain how they will increase GM or even give guidance. That they will make money of FSD later on the cars sold at lower margins now is weak sauce.

 

[bkp_duke]

I think this is the fundamental disagreement. I suggest you come to the Finance thread and we can discuss. The fact that Tesla missed the guidance of 20% GM was very troubling. Zach's credibility is now in question among large investors. Not only that - the executives made no effort to explain how they will increase GM or even give guidance. That they will make money of FSD later on the cars sold at lower margins now is weak sauce.

I think dropping prices was exactly the right move, even if margins were 1.7% below the 20% mark. Exhibit A - sales of BEVs from TSLA, BYD, and VW in Q1. One of these is not like the other.

 

[EVNow]

I think dropping prices was exactly the right move, even if margins were 1.7% below the 20% mark. Exhibit A - sales of BEVs from TSLA, BYD, and VW in Q1. One of these is not like the other.

I don't know why we need to keep repeating this. TSLA is not valued like VW. Tesla is not valued like a traditional auto company. It is valued like a growth stock. VW PE is 4. TSLA PE is 47.

Just imagine - the GM in Q1 came in at 20%. There would have been a significant beat and the SP would be $50+ higher and we wouldn't be talking about it. Yes, that 130 basis points makes a big difference.

 

[bkp_duke]

I don't know why we need to keep repeating this. TSLA is not valued like VW. Tesla is not valued like a traditional auto company. It is valued like a growth stock. VW PE is 4. TSLA PE is 47.

Just imagine - the GM in Q1 came in at 20%. There would have been a significant beat and the SP would be $50+ higher and we wouldn't be talking about it. Yes, that 130 basis points makes a big difference.

I wasn't talking about valuation.

The simple fact was deliveries. They grew them QoQ, no one else did.

 

[Hiline]

I wasn't talking about valuation.

The simple fact was deliveries. They grew them QoQ, no one else did.

I think what he meant to say is that the reason the earnings report caused the sell-off was the financial implications of the gross margin miss. TSLA is valued like a growth stock and therefore Tesla is expected to grow gross and net profit aggressively to support this perception and valuation multiple. Absent of the constant growth, the stock needs to be valued at a lower P/E.

There is a distinction between Tesla and TSLA. Tesla the company didn’t miss deliveries. But TSLA the stock showed worrying signs from a valuation perspective.

 

[Max Plaid]

I think this is the fundamental disagreement. I suggest you come to the Finance thread and we can discuss. The fact that Tesla missed the guidance of 20% GM was very troubling. Zach's credibility is now in question among large investors. Not only that - the executives made no effort to explain how they will increase GM or even give guidance. That they will make money of FSD later on the cars sold at lower margins now is weak sauce.

The miss on margins was a miss because Zach proffered the 20% number in the first place, and then they kept cutting prices seeming endlessly, almost recklessly without any obvious strategy. And then for Elon amplified that with his "we'll sell cars for zero margin if we have to", just not what WS wants to hear, and the share price suffers as a result

 

[dl003]

The miss on margins was a miss because Zach proffered the 20% number in the first place, and then they kept cutting prices seeming endlessly, almost recklessly without any obvious strategy. And then for Elon amplified that with his "we'll sell cars for zero margin if we have to", just not what WS wants to hear, and the share price suffers as a result

Something interesting going on. Inventories of Japanese brand vehicles are dwindling due to supply and part shortages while GM and Ford doesnt have that problem. Thats why GM was able to grow their deliveries miraculously. Toyota, Honda and Subaru is leaving a vacuum that needs to be filled. My thesis is Tesla wants to capture those customers with aggressive pricing. Has anyone examined how F and GM are able to offer 2.9% financing on their cars? The fact remains monthly car payment is higher than ever and prices need to drop to entice buyers. I dont think its smart or reckless, just neccessary. I just cant make “Zach is a liar” or “Elon is losing his mind” out from the call.

 

[mongo]

The miss on margins was a miss because Zach proffered the 20% number in the first place, and then they kept cutting prices seeming endlessly, almost recklessly without any obvious strategy. And then for Elon amplified that with his "we'll sell cars for zero margin if we have to", just not what WS wants to hear, and the share price suffers as a result

Zach was proffered the 20% number on the Q4 call. He didn't raise it unpropmted.

Martin Viecha
Thank you very much. The next question from investors is, after recent price cuts, analysts released expectations that Tesla automotive gross margin, excluding leasing and credits, will drop below 20% and average selling price around $47,000 across all models. Where do you see average selling price and gross margins after the price cuts?

Elon Musk -- Chief Executive Officer and Product Architect Yes, go ahead, Zach.
Zach Kirkhorn -- Chief Financial Officer
Yes, I'll jump in on this. So there is certainly a lot of uncertainty about how the year will unfold, but I'll share what's in our current forecast for a moment. So based upon these metrics here, we believe that we'll be above both of the metrics that are stated in the question, so 20% automotive gross margin, excluding leases and credits, and then $47,000 ASP across all models. And so, two other comments I want to make on this, just tactically on sequential ASP changes from Q4 to Q1.

As to the why
Q1:

about the other half of the Miss in q1 was attributed to things that are not non-recurring so I mentioned these in my opening remarks it's a warranty adjustment for cars that were previously produced but not part of the pedigree of cars we're building now and um and some autopilot related deferrals as we make some technology changes here that this referral should get recognized once some of the software catches up so those two things are non-repeating so hopefully that helps answer your question

So half the underperformance (to Tesla's internal number, not 20%) were one time things, and the deferred portion will get recognized in the future.

Elon said on the Q1 call: technically/ hypothetically, if they sold cars for 0 margin, they could still make money on them later. He was not saying 0 was the plan.
Exactly wording from Q1 call (well as close as YouTube autocaption gets)

actually we do have this you uh unique strategic advantage that that we haven't we're making a a car that uh important autonomy pans out and we think it will um where that that asset is actually will be worth a hell of a lot more in the future than it is now so it is technically possible to sell it at zero profit but still have the net present value of future cash flows associated with that asset basic very significant yeah and service and charging and insurance and all these other ongoing revenue streams that other companies don't have

know going back to something that was alluded to a moment ago um or mentioned a moment ago that Tesla is in a uniquely strong strategic position because we're the only ones making cars that technically we could sell for zero profit for now and then yield actually tremendous economics in the future but no through autonomy no one else can do that I I'm not sure how many people will appreciate the profundity of what I've just said but it is extremely significant.

 

[adiggs]

I think dropping prices was exactly the right move, even if margins were 1.7% below the 20% mark. Exhibit A - sales of BEVs from TSLA, BYD, and VW in Q1. One of these is not like the other.

I don't know why we need to keep repeating this. TSLA is not valued like VW. Tesla is not valued like a traditional auto company. It is valued like a growth stock. VW PE is 4. TSLA PE is 47.

Just imagine - the GM in Q1 came in at 20%. There would have been a significant beat and the SP would be $50+ higher and we wouldn't be talking about it. Yes, that 130 basis points makes a big difference.

What's interesting to me is that you're both right, and can easily continue to be.

The chart that @bkp_duke posted has my Tesla hat excited, and represents exactly the dynamic I have expected to play out in the market. It's a dynamic that I expect to continue to play out as Tesla can drop another 500 basis points off the price of the car to keep volumes and volume manufacturing economics going in its favor, and still be profitable. I just expected it to take another quarter to be that readily visible.

Meanwhile competitors can't match this first round of price drops in order to keep their own volumes growing alongside Tesla in the current economic environment, much less compete on EV price if Tesla continues to lower prices. And at some point here, a point I think we're already starting to see, the EV price goes low enough that its no longer the EVs that are losing on price - its ICEv that starts losing on price. Tesla has a LOT of room to use price as a demand driver.

As well as all the trivial stuff they stopped doing over the last year or two. Like test drives for people considering a purchase, or even a look-but-don't-drive showroom display model. Inventory for people with a need-it-now purchase dynamic to get what they want.


Meanwhile my TSLA hat is growing increasingly synced with the Wall Street "OMG-gross-margin-low" short term valuation.


I don't know how long it will take, but the TSLA valuation will sync with the Tesla valuation off and on over time. For short term trading on the scale of days to a couple of weeks that we are mostly doing around here, "eventually" is just a different word for "irrelevant". It's unlikely to happen in the 1 day to 2 weeks that most of us operate in, and might not happen for the 2 year call options many of us are buying.


I don't know how long it will take, but the dynamic represented in that chart is (I predict and expect) going to become increasingly apparent over time. I expect that to be this year, and closer to 3 months than 9 months as monthly and then quarterly units and financials get reported. Maybe as a recession becomes increasingly viewed as either here or inevitable, and thus auto sales to shrink, one company that just keeps growing (profitably) 30-50% yoy will get some bonus points for that.

I personally look to Amazon at a similar revenue size for my sense of a reasonable valuation for this level of growth applied to this scale of business. The problem is that Amazon wasn't growing revenue as fast at a similar revenue size, but at least its semi-comparable.

 

[EVNow]

I wasn't talking about valuation.

The simple fact was deliveries. They grew them QoQ, no one else did.

Apparently WS doesn’t care about that.

BTW, just to be clear I fully support dropping prices to increase volume. I’ve argued in the past that they will have to drop prices to move cars, infact.

But to claim it was a boring ER is obviously not very accurate - to put it mildly.

 

[bkp_duke]

Apparently WS doesn’t care about that.

BTW, just to be clear I fully support dropping prices to increase volume. I’ve argued in the past that they will have to drop prices to move cars, infact.

But to claim it was a boring ER is obviously not very accurate - to put it mildly.

Meh, "boring" is subjective. @dl003 is entitled to find it boring. I found it interesting, but not super exciting. I also was not surprised by the 18.3% AGM. I view it is simply a reason for the shorts to attack TSLA that has enough weight to pull in the bobble-heads.

Volume growth (and establishing the supply chains for future high volume) is the right long-term move right now, even if it impacts margins for a while.

 

[EVNow]

Zach was proffered the 20% number on the Q4 call. He didn't raise it unpropmted.

The question was first answered by Elon. Then, Zach added that Tesla will have 20% margin and$47k asp. I was surprised by the specificity of the reply. It was unlike Tesla’s usual answers. That made everyone think 20% was a sure thing … and then they missed it !

As I noted above 20% would have resulted in a big beat and a SP gap up.

 

[EVNow]

Meh, "boring" is subjective. @dl003 is entitled to find it boring. I found it interesting, but not super exciting. I also was not surprised by the 18.3% AGM.

Easy to say now … but almost everyone was predicting higher GM before ER.

BTW, it really doesn’t matter whether someone found it subjectively boring or not. The investor community surely didn’t- they found it disappointing. That’s what matters.

 

[mongo]

The question was first answered by Elon. Then, Zach added that Tesla will have 20% margin and$47k asp. I was surprised by the specificity of the reply. It was unlike Tesla’s usual answers. That made everyone think 20% was a sure thing … and then they missed it !

As I noted above 20% would have resulted in a big beat and a SP gap up.

It wasn't answered by Elon. He said "yeah, go ahead" to Zach. Motley Fool transcript loses some nuance.
The numbers were from the question Martin read and I don't see anyone else mentioning them before that.