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Short-Term TSLA Price Movements - 2014

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Johann Koeber

Active Member
May 1, 2012
1,196
3,931
Hersbruck, Germany
Great idea to split the thread by Year.

Makes it much more manageable and will be a great reference in the future, like if in 2020 you want to look up what happened in the 'old days' like 2013.


Happy New Year to all!

TSLA up 344% in 2013. Lets see if we can beat that in 2014 :)

I congratulate your optimism. Personally I would be happy with doubling in 2014. This is major considering the market cap TSLA has already achieved,

Short term I am very optimistic. There should be lots of positive news in the next three months.
 

AlMc

'When the music is on...you gotta dance' (Go Elon)
Apr 23, 2013
7,354
15,644
Delaware
Dave t and Sleepy; I see you are both 'on line'. Is it time to start putting together your predictions for Q4? I was WAY too optimistic for Q3 and got caught up in the VIN discussion. It appears we are leaving 2013 at close to 600/week production. From other threads it appears most are 85s. I am trying to temper my enthusiasm for Q4 ER which I think is far less important that 2014 guidance.

I am hoping for positive catalysts: 1. Good production numbers: 6000 production, GP 24-25%
2. Guidance: Giga factory, China numbers, earlier into of model X, discussion of supercharger roll out, second assembly line
 

bonaire

Active Member
Aug 24, 2013
2,482
1,076
USA
Selling calls to hedge a long position????
He said 170 calls. This is called generating income by selling OTM covered calls. Who does it, all the big funds holding shares, usually. They will also sell OTM puts as well. Why just hold shares when you can make money selling options on your shares. This can add 5% to someone's portfolio while also "buying" protection against some loss. Example is, if you left Q3 and had shares and were not selling covered calls when it hit 190 (whether ITM or OTM) then you left money on the table through October and November. This is 2014 and people need to now look at portfolio protection. Check into it, not hard to do. And you can sell them all the way out to 2016 now if you wish. But learn before you burn (your money). Dedicated longs can do this and still feel dedicated. It is not really going short "per-se". The big money does this and that is why so many options are out there with open interest. Traders and many funds also just trade options and not shares. They buy the options from those who hold the shares.

example of a trade is:
you own 200 shares with pps of 151.
you sell 1 call at 170 and 1 put at 130. One against the other. You want them both to expire worthless with a closing price above 130 and below 170. If it trades down to 140 your exit strategy is to consider buying back the put. If it trades to 160 consider buying back the call. A fund may hold 100k shares and do nothing but trade options on the holding. Imagine fidelity or trowe holding all those shares from 2011 bought at $25-30. They don't need to trade shares but rather trade options. They may buy or sell additional shares here and there to affect pps if they see fit but use the long term holdings to base option trading on. That is why buying shares at IPO prices is so lucrative. Think Daimler with their recent hedge done with options. I guess they don't trade options generally but only when they want to announce a hedge?
 
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DaveT

Searcher of green pastures
Nov 15, 2012
3,496
11,014
Texas
Dave t and Sleepy; I see you are both 'on line'. Is it time to start putting together your predictions for Q4? I was WAY too optimistic for Q3 and got caught up in the VIN discussion. It appears we are leaving 2013 at close to 600/week production. From other threads it appears most are 85s. I am trying to temper my enthusiasm for Q4 ER which I think is far less important that 2014 guidance.

I am hoping for positive catalysts: 1. Good production numbers: 6000 production, GP 24-25%
2. Guidance: Giga factory, China numbers, earlier into of model X, discussion of supercharger roll out, second assembly line

My guess would be that Q4 ER comes in pretty close to what they guided for in the Q3 shareholder letter (6000 cars delivered, 25% GM, similar non-GAAP profit as Q3, etc). The big question is when in 2014 will they overcome battery constraints and be able to scale production. Hopefully they'll be able to shed some light on this in the Q4 ER (probably mid February, previous years were Feb 15-20).

We should be getting 2014 guidance in the Q4 ER and I'm guessing it should be at least 35k cars (ie., if they start the year at 600/week and conservatively end the year at 800/week, then the avg is 700/week x 50 weeks or so = 35k cars. If they are able to end 2014 at 900 cars/week then the avg would be 750/week x 50 weeks = 37.5k cars).

The biggest risk I'm seeing for TSLA in 2014 is the combined effect of more fires and a passive response by Tesla to those fires. Also if the NHTSA issues a recall. But overall, I'm very optimistic about 2014. My price target for end of 2014 is $250-275.
 

sleepyhead

Active Member
May 31, 2013
1,896
11
Texas
Is it time to load up on 2014 options?

I think that the time for that was a month ago :wink: At least that is when I bought mine. Now I am selling call options and not buying, since IV is back up higher and so is the price.

Selling calls to hedge a long position????

I bought a bunch of J16's as well as June'14 options last month when TSLA was around $120, which constitutes my long position. After the stock spiked up to the mid $140's I started selling January 18, 2014 call options against my LEAPS and June options, i.e. I hedged my long position by selling call options either same strike price (since all of the calls I own are still OTM) or slightly higher.

I am doing this not to protect profits, but rather to maximize profits. I like the odds of selling options a lot more than buying them. I still have significant upside potential even in the short run, but if TSLA were to go up too high too fast then I will miss out on a portion of this move. But I am ok with that, because I used the cash (generated from selling those calls) to buy other options/LEAPS in solar. Therefore, even if I miss out on TSLA I might do even better elsewhere.

Dave t and Sleepy; I see you are both 'on line'. Is it time to start putting together your predictions for Q4? I was WAY too optimistic for Q3 and got caught up in the VIN discussion. It appears we are leaving 2013 at close to 600/week production. From other threads it appears most are 85s. I am trying to temper my enthusiasm for Q4 ER which I think is far less important that 2014 guidance.

I am hoping for positive catalysts: 1. Good production numbers: 6000 production, GP 24-25%
2. Guidance: Giga factory, China numbers, earlier into of model X, discussion of supercharger roll out, second assembly line

I think that Q4 result is just as important as guidance when it comes to short term share price. I think that Q4 will be slightly better than guidance and a lot better than analyst expectations. Tesla beat analyst expectations in Q3 as well, especially on Top Line, and that didn't mean anything. I think that Tesla will beat handily, because the Euro is strengthening against the dollar, while the Yen is weakening. This is pretty much the perfect storm for Tesla's financials. Higher sales with lower COGS will lead to higher GM.

Another thing to keep in mind is that EU deliveries started last quarter, so whatever was in transit at end of Q3 should pretty much offset what was in transit at end of Q4, and same goes for US. Therefore, Tesla should be able to sell almost every car it produces in Q4. 600/week at 12 weeks is 7200. No, they will not hit 7200, but Q1 should be easily above 7,000 cars. Q4 is more like 580x11weeks = 6380 minus 100-200 for loaners, new store showroom models, in transit, etc. = 6200 cars delivered. With ASP's well above $100k that will easily beat analyst consensus of $615m in revenue.

I actually don't focus on exact numbers, because they don't matter as far as post ER stock price goes. What matters more is the sentiment, and that is more of an art than science. DaveT hit the numbers on the head for Q3 and nobody would have guessed that the stock would go down after that (remember the stock started tanking immediately in AH, as soon as shareholder letter was issued).

2014 guidance is important, but not that important. What really matters is how TSLA the stock performs leading up to Q4 ER. If the stock falls below $100, then a small beat and somewhat optimistic guidance could cause a 20% pop. But if TSLA goes to $180 before Q4 ER than a big beat and good guidance might not move the stock up one iota. I am finally starting to realize that sentiment around the stock are a lot more important than what actual results are: Trina Solar (TSL) had a blowout Q3 ER and the stock initially went up 10% in premarket and started regular trading strong only to reverse and end the day really weak. Then it tanked almost 40% over the following month. Same thing happened to TSLA in Q3 (and the opposite happened in Q2).

I don't get caught up in actual numbers too much. I look at the big picture, especially macro-economic trends, and then do all of the financials in my head. I think that focusing on the qualitative aspects of investing/trading is a lot more important than the quantitative; especially for a stock like TSLA.
 
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Norse

Active Member
May 8, 2013
1,128
4
Bergen, Norway
Great post. However there is one thing regarding Europe. Norwegian cars are sold in fixed prices in NOK. And NOK has weakened a lot against the dollar. So much that the P85 with options is up over $10k. That increase in price will only apply for those who are getting their cars from April, so Tesla will probably have a big jump in GM in Norway, but not until Q2 2014.
And remember that Norway almost is 50% of the European market for Q4.

http://finance.yahoo.com/echarts?s=...on;ohlcvalues=0;logscale=off;source=undefined;
 

sleepyhead

Active Member
May 31, 2013
1,896
11
Texas
Great post. However there is one thing regarding Europe. Norwegian cars are sold in fixed prices in NOK. And NOK has weakened a lot against the dollar. So much that the P85 with options is up over $10k. That increase in price will only apply for those who are getting their cars from April, so Tesla will probably have a big jump in GM in Norway, but not until Q2 2014.
And remember that Norway almost is 50% of the European market for Q4.

http://finance.yahoo.com/echarts?s=...on;ohlcvalues=0;logscale=off;source=undefined;

I understand that the price in Norway is fixed in NOK, correct?

A weaker NOK is actually bad for Tesla's income statement, since it will translate into less USD per sale. Also as far as profits go, it doesn't matter when you paid for the car: If you paid for the car in Q2 but got it delivered in Q4, then Q2 currency has nothing to do with this sale on the income statement side for either quarter; it is the Q4 currency that matters. It is the opposite for cash on balance sheet though, but not the opposite for some other items on balance sheet (such as retained earnings). All of these things are sorted through a FOREX gain/loss account on IS. This topic is way too complicated to discuss, and it is really not that important to worry about unless currency movements are big. It is the average currency rate for the quarter that matters anyway for IS, and the difference in currency rate from first to last day that matters for BS.

The NOK only weakened 1% against the USD in Q4, so that will not be that big of an issue in Q4. The NOK has been pretty flat since deliveries started in Norway, and that is the important part as far as IS goes.


The important thing is that a weaker NOK is a negative for Tesla unless they are perfectly hedged (which is impossible to do), and as far as profits go it doesn't matter when you paid for the car - only when it was delivered.
 
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