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Short-Term TSLA Price Movements - 2016

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#6,501
Papafox said:
I've seen the greatest apparent manipulations for max pain during the last hour of Friday trading. You can sometimes tell because the stock will be gaining and then suddenly levels out for a prolonged period of time. There may be too much volume for max pain manipulation to take place today, but if you see TSLA level at 190 and stay there for an hour you have a pretty good idea that market-makers are at work. The other possibility is a drop to 187.50 or so in the last few minutes of trading.
Click to expand...

Let me try explaining this. For the most part, MM don't care where price goes. Most trading desks will zero their delta before end of the trading day, and this means they're indifferent to direction of the price. They make money on spreads and time-value they sell you. How they do this? If they sold many calls, they'll have to buy appropriate number of shares to counteract their own exposure

Max pain effect comes from actions of option holders. If price is going in direction that benefits particular group, say call holders, they start selling and taking profits. MM s want zero delta, they buy back options and counteract this action by selling shares, which creates negative pressure on stock. If situation is revers, and stock moves to benefit of put holders, they sell puts, which causes MM to buy shares, creating upward pressure.

So this is not intentional action of MMs, but mechanical reaction caused by option holders: anyhow, this force counteracts SP moving away from max pain. My main point re max pain, no one wakes up in the morning and decides, I think we'll push stock higher. Now, I believe that happens too, but it's unrelated to max pain.

couple other important notes.
- if max pain is flat-ish for a range of option strikes, say 160-190, there is very little force to be exerted by option holders to park it at max-pain. Actions of various option holders counteract each others effects, hence no SP moving pressure.
- max pain has more effect on monthly options than weekly ones (quarterly even more) as number of options(and money) in play is much higher than weekly ones. Next monthly exp is March 18th. Today was just a weekly expiry, very little open interest.
- max pain force is not a match for news nor momentum. It works best when it's calm and boring.
 
#6,502
Seems like we're more or less ending February (OK, so there's one more trading day left) at $190, which is about the same level we were at just prior to the month's start. So basically, if you hibernated for the last month, woke up and then looked at the current price today, you wouldn't have any idea of the rollercoaster drama that just took place.

Long-term perspective for the win.
 
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#6,503
Familial Rhino said:
Senator: "Your cars are already expensive. Why can't you mark them up some more, and create that extra layer of profit to motivate a dealer to go into business with you?"
Click to expand...

This was absolutely a double take moment. Queue the audio scratch at this point. Note that at the beginning of this hearing, they emphasized the spirit of this bill is to "Protect the Consumer". At 1:02, it devolves into this. How is that protecting the consumer? Just goes to show the true nature of this bill behind that pretentious line. This is to continue to protect the status quo, to squeeze a little bit more from the consumer to justify the existence of this model with the added guise of continuing to provide jobs and inject commerce to the local economy. Well, continuing to allow Tesla to operate will also achieve that objective. We should not legislate what natural market forces dictate.
 
#6,504
Noble Ninja said:
Seems like we're more or less ending February (OK, so there's one more trading day left) at $190, which is about the same level we were at just prior to the month's start. So basically, if you hibernated for the last month, woke up and then looked at the current price today, you wouldn't have any idea of the rollercoaster drama that just took place.

Long-term perspective for the win.
Click to expand...

Nor would I be showing an unrealized gain of 40/share purchased at 150 :)
 
#6,506
Zhelko Dimic said:
Let me try explaining this. For the most part, MM don't care where price goes. Most trading desks will zero their delta before end of the trading day, and this means they're indifferent to direction of the price. They make money on spreads and time-value they sell you. How they do this? If they sold many calls, they'll have to buy appropriate number of shares to counteract their own exposure

Max pain effect comes from actions of option holders. If price is going in direction that benefits particular group, say call holders, they start selling and taking profits. MM s want zero delta, they buy back options and counteract this action by selling shares, which creates negative pressure on stock. If situation is revers, and stock moves to benefit of put holders, they sell puts, which causes MM to buy shares, creating upward pressure.

So this is not intentional action of MMs, but mechanical reaction caused by option holders: anyhow, this force counteracts SP moving away from max pain. My main point re max pain, no one wakes up in the morning and decides, I think we'll push stock higher. Now, I believe that happens too, but it's unrelated to max pain.

couple other important notes.
- if max pain is flat-ish for a range of option strikes, say 160-190, there is very little force to be exerted by option holders to park it at max-pain. Actions of various option holders counteract each others effects, hence no SP moving pressure.
- max pain has more effect on monthly options than weekly ones (quarterly even more) as number of options(and money) in play is much higher than weekly ones. Next monthly exp is March 18th. Today was just a weekly expiry, very little open interest.
- max pain force is not a match for news nor momentum. It works best when it's calm and boring.
Click to expand...

Zhelko, Thanks for your words about the role of market makers. I'm someone coming from a position more as an observer of TSLA price behavior on max pain Fridays (particularly monthly option expiration Fridays with low volume) than someone who understands the exact mechanisms at work, and I've seen stock price action during the final hour of these Fridays that suggests that someone has something to gain from the stock closing at or near max pain. Let me wrap my brain around the what-ifs in the next few days and see if I can describe something that makes sense to both of us.
 
#6,507
jhm said:
We discussed this upstream. I estimate an investment on order of $250B to kick off 1500GWh/yr capacity. This does not need any government intervention. Rather this is a smaller investment than the oil industry makes in a typical year just to grow supply by a percent. I think Gigafactories have a much better return on investment than oil. It's a capex cost of $10 per kWh of battery produced. Oil spends about $10 capex per barrel produced. But here's the rub. An EV battery with 2000 cycle life can displace 8 barrels of oil. So if you can get $10 capital for 1 barrel, you should be able to get the same for displacing 8 barrels. Of course, there are other investments to be made as well, but the economics are favorable.
Click to expand...

You make some good points. However, other than Tesla, I don't see any catalysts for this happening for some time. Panasonic is a good example. They have the expertise and are the largest battery manufacturer in the World. Yet, half of Panasonic's stock value has been lost in the past three months (market cap now at ~20 billion). Panasonic should (with the help of those with the 250 billion dollars) be leading the construction of dozens of Gigafactories. They are not. Tesla had to persuade Panasonic to partner on Gigafactory1. Tesla can't be the only catalyst. If tesla grows 50 % a year for 10 years, we arrive at about 3 million electric cars. ICE car manufacturers will tolerate a lot of Tesla success before they finally are forced to embrace electric cars (regardless of what they say). Perhaps the Solar City solar panel gigafactory in Buffalo, New York is the correct model to accelerate battery gigafactory construction. New York State is building Solar City's Gigafactory with public funds.
 
#6,509
Zhelko Dimic said:
If price is going in direction that benefits particular group, say call holders, they start selling and taking profits. MM s want zero delta, they buy back options and counteract this action by selling shares, which creates negative pressure on stock.
Click to expand...

So, help me understand. In this example, MMs will presumably incur a loss when they buy back the options at the higher price (thus closing their short calls position), which they must do because they don't want to have to buy the shares required when they get assigned if the calls expire in the money. Is that right so far? Continuing, they then start selling shares (initiating a short position) in order to depress the price, hoping to buy them back lower before close. Is that what you're saying? IOW, are you saying they attempt a short attack in order to recover the loss on the options? This sounds implausible, but I probably misunderstood your explanation. Could you clarify?
 
#6,510
#6,511
Oil4AsphaultOnly said:
wow, electrek.co has some scoop! Tesla is now ~80% vertically integrated, says Goldman Sachs after a Tesla Factory visit | Electrek

$200/kwh pack level pricing! That's 20% cheaper than the $250/kwh pricing speculated about over 2 years ago.

That should help gross margins, no?
Click to expand...

"Goldman Sachs notes that Tesla has grown into the 5.5 million-square-foot Fremont plant, going as far as saying that it is now “fully utilizing it” and expects Tesla to move non-assembly functions to other facilities when expanding."

This is something Musk alluded to some months back and I have been looking for clarification ever since. Guys this is a 500,000 car production facility and now it's full of car making equipment and not some metaphor for full that might means something else, but actually full. We know that the Model 3 paint shop was installed but are they much further ahead with Model 3 related preparations than is generally supposed?

- - - Updated - - -

tinm said:
Elon's assessment that Autopilot is only 80-90% accurate: precisely why I would never turn AP on. Sensors galore, no problem. Let the car drive, hell no. (I know, heresy.)
Click to expand...

That's not a strictly accurate translation of the article, and that is a translation by a non-technical person of what someone else said.

Context - in hard situations.
Machine learning - 90% accurate in those hard situations
Machine trained by human - can fill in some of the 9.999% that Musk is looking for.

What are hard situations: Example. Chaotic traffic in New Delhi mixed up with children, elephants and really terrible and impatient non-rule abiding human drivers. Not US Interstate Highways.
 
#6,512
This is something Musk alluded to some months back and I have been looking for clarification ever since. Guys this is a 500,000 car production facility and now it's full of car making equipment and not some metaphor for full that might means something else, but actually full. We know that the Model 3 paint shop was installed but are they much further ahead with Model 3 related preparations than is generally supposed?
Click to expand...


Given the context, it sounded more like much of the factory is being used for the vertical integration functions, and not for building cars. I.e., they have stuff for building MX seats, stuff for building FWD, stuff for printing body panels--stuff that did not exist when it actually was churning out 500k cars a year. They did mention those functions eventually being moved elsewhere as they expand into a 500k/year facility.
 
#6,513
Julian Cox said:
That's not a strictly accurate translation of the article, and that is a translation by a non-technical person of what someone else said.

Context - in hard situations.
Machine learning - 90% accurate in those hard situations
Machine trained by human - can fill in some of the 9.999% that Musk is looking for.

What are hard situations: Example. Chaotic traffic in New Delhi mixed up with children, elephants and really terrible and impatient non-rule abiding human drivers. Not US Interstate Highways.
Click to expand...

I'm technical, and it's not obvious to me that "machine trained by a human is what Musk is looking for" as opposed to just "machine learning". Supervised learning is still machine learning (unless you meant rule-based systems, which are a poor approach to this problem because of their brittleness).

I'm also pretty sure when he says 80-90% accurate he is not thinking of elephants, but rather, say, the Interstate covered in sludge, faded or missing road markings, road signs painted by vandals to show 85mph instead of 35 mph limits, etc. There are plenty of tricky situations in day-to-day driving on North-American roadways which would make it very difficult to achieve three nines reliability.
 
#6,517
Papafox said:
Zhelko, Thanks for your words about the role of market makers. I'm someone coming from a position more as an observer of TSLA price behavior on max pain Fridays (particularly monthly option expiration Fridays with low volume) than someone who understands the exact mechanisms at work, and I've seen stock price action during the final hour of these Fridays that suggests that someone has something to gain from the stock closing at or near max pain. Let me wrap my brain around the what-ifs in the next few days and see if I can describe something that makes sense to both of us.
Click to expand...

Think of it this way. Say you buy 10 call contracts at $190 for the next week, 1 contract=100 shares, so you buy right to 1000 shares. MM will want to stay neutral! Since they sold you calls, they're effectively short, and they immediately buy shares. How many? Exactly enough to offset option pricing movement. This site says delta is 0.524 for strike above, so they BUY 524 shares: CBOE - IVolatility Services

MM is now worm and cozy - if your options gain value, so do their shares. You sell them back your options? They dump shares immediately. At no point do they lose (or gain) anything as price changes.

How do they make money? By decaying your time-value of option and on the buy/sell spread.

Example, today's closing price was over $5 for option strike $190(next week expiry), and SP closing price was $190.43.
So you pay $5 for $.43 of the real value and $4.57 of time-value. MM is neutral, they just need to wait for time value to expire and they're good $4.57. Remember, shares they hold protect them from price movement.

That was gross simplification in a sense that MM sells calls and puts, and will have overall position calculated and compensated for with the shares, not every individual trade. Also, when stock price moves aggressively, delta profile will start to change, so they will do delta adjustments by adding/removing shares. Example, if SP moves up $5, delta will become 0.664, and MM needs to add 664-524=140 shares to their position. I got this by looking at various deltas of different strike prices, i.e. looking at strike 185 is eq. of strike 190 if price rose $5, right?

And finally, MM could take side and not be neutral, but that is another topic, completely irrelevant of max pain theory. And I think these things are done mostly as a service to big customers, to facilitate big block trades, where MM takes price better than average available, but takes position, and stays exposed to the market fluctuations. This is only way for Fidelitys of this world to move million of shares

Hope this helps. I'm sure this could be explained much shorter and clearer, but that's not my forte :(
 
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#6,518
Zhelko Dimic said:
Think of it this way. Say you buy 10 call contracts at $190 for the next week, 1 contract=100 shares, so you buy right to 1000 shares. MM will want to stay neutral! Since they sold you calls, they're effectively short, and they immediately buy shares. How many? Exactly enough to offset option pricing movement. This site says delta is 0.524 for strike above, so they BUY 524 shares: CBOE - IVolatility Services MM is now worm and cozy - if your options gain value, so do their shares. You sell them back your options? They dump shares immediately. At no point do they lose (or gain) anything as price changes. How do they make money? By decaying your time-value of option and on the buy/sell spread. Example, today's closing price was over $5 for option strike $190(next week expiry), and SP closing price was $190.43. So you pay $5 for $.43 of the real value and $4.57 of time-value. MM is neutral, they just need to wait for time value to expire and they're good $4.57. Remember, shares they hold protect them from price movement. That was gross simplification in a sense that MM sells calls and puts, and will have overall position calculated and compensated for with the shares, not every individual trade. Also, when stock price moves aggressively, delta profile will start to change, so they will do delta adjustments by adding/removing shares. Example, if SP moves up $5, delta will become 0.664, and MM needs to add 664-524=140 shares to their position. I got this by looking at various deltas of different strike prices, i.e. looking at strike 185 is eq. of strike 190 if price rose $5, right? And finally, MM could take side and not be neutral, but that is another topic, completely irrelevant of max pain theory. And I think these things are done mostly as a service to big customers, to facilitate big block trades, where MM takes price better than average available, but takes position, and stays exposed to the market fluctuations. This is only way for Fidelitys of this world to move million of shares Hope this helps. I'm sure this could be explained much shorter and clearer, but that's not my forte :(
Click to expand...
To add to this. Some market makers have come out or (legally obligated to declare) over the years after 2008 that their net balancing act is sometimes not 100%. So at some point, small discrepancies bring them to a slight bullish and bearish position. Over trillion dollar derivatives assets, that blows up fast. Then at one point, the derivatives all went kaput and some end up with the 524 shares while the 10 contract they sold is unenforceable. Then you get 2009.
 
#6,519
Black Swan Event looming?

Folks, I am a first-time poster but long-time lurker here since 2013. Apologies for this rather long post, but I am a minimal social media user at best, and have no other way of informing this investment community to which I owe a lot.

I am giving you advance notice of a possible black swan event mid-late March that could have a material impact on Tesla. Read on and you may appreciate the understatement there.

A development has been progressing that has received zero mainstream media attention, due to the media's blanket automated filter/rejection of any mention of the terms cold fusion or LENR (low energy nuclear reaction). Skeptopaths, cryptodenialsts (google them) and very powerful vested interests totally rule this space. If you are reading this post then hats off to TMC.

On or around 17 March a report will be released by a major US certification body that has been independently monitoring the year-long trial of a 1 MW reactor that has been producing real heat (steam) for a real but as-yet-unknown commercial customer. The trial concluded on 17 Feb, and the word from those-in-the-know is that the trial was very successful.
Historic event: One-year 1 megawatt E-Cat trial completed | AN IMPOSSIBLE INVENTION

The problem for the fossil fuel industry is that the reactor uses cold fusion technology, latterly known as LENR or Low Energy Nuclear Reaction after cold fusion got so roundly rubbished in 1989 when the Pons & Fleischman experiment couldn't be replicated by MIT etc. This reactor is the brainchild of Andrea Rossi, an Italian scientist who claims to have perfected a 10 kW heat device about the size of a hammer handle that he calls the E-Cat (Energy Catalyser). He has installed 100 E-Cats in a shipping container, along with requisite plumbing and control systems. He is funded and supported technically by Cherokee Investment Fund trading as Industrial Heat LLC, led by Tom Darden.
This Investor is Chasing a New Kind of Fusion Technology - Fortune

Rossi is a fascinating character, with many of the personal attributes of Elon Musk - super smart, amazingly single-focused, amazing energy etc. He is also very secretive, as he intends to fully commercialise his invention. After multiple attempts he was awarded a patent last year, primarily by avoiding using the aforementioned naughty words in his patent. Rossi has been granted US patent on the E-Cat fuel mix specified | AN IMPOSSIBLE INVENTION

He has not told anyone HOW his invention works, only that it DOES work. A group of respected scientists tested his E-Cat in Feb-Mar 2014 in a lab in Lugano Switzerland, and reported that "yes it does work, but we have no idea how". Fans have been immensely frustrated, and skeptics and critics have had a field day.

HOWEVER this past week on Feb 24 the MFMP (Martin Fleischman Memorial Project) announced that they had performed a true replication of the Rossi effect and his device the E-Cat. The background to MFMP is here
QuantumHeat.org

The group also published a full recipe so that anyone who is smart and CAREFUL enough can replicate the effect. Not to be attempted by amateurs, but any self-respecting Chem Professor or Post-Grad should manage it with a week or 2. Mats Lewan summarises and explains the significance well
BREAKING: The E-Cat has been replicated—heres the recipe! | AN IMPOSSIBLE INVENTION

The recipe shows exactly how to prepare the fuel which comprises nickel, lithium, hydrogen and aluminium, plus explains how to trigger the effect - they were getting continuous excess heat and x-rays for over 20 hours. While they were only getting COP (ratio of energy-out to energy-in) of 1.2 - 6.0, they know how to get way higher, and say it is only engineering from here on. Importantly, they are adamant that Rossi has to have been telling the truth the past 5 years, as they now know his secret - the reactor produces x-rays which are safely thermalised by a lead or tungsten shell, which is of course the source of the excess heat. This effect has been sitting under humankind's noses all along, it just needed the correct ingredients and preparation.

The MFMP have achieved all this after 12 months of intense efforts and while holding down day jobs, and have been supported all along and very openly by a large group of donors and technical/science advisors, i.e. the open science community. Ironically their funding and resources are miniscule in comparison to the hot fusion projects. They ended an open letter to all their donors a few days ago with "We did it, we lit the New Fire Together!"

Meanwhile Rossi is on fire and obviously very confident that the 17 March report will be excellent. His 1 MW reactor ran at COP range of 20~80 and has apparently consumed a few grams of fuel over 12 months (Ni, H, Li and Al), and now needs refueling. He has worked out how to produce electricity directly, early results are very promising/exciting, and he has formed a hot team to develop and produce the E-Cat X. The open science community think he will use Photo Voltaic tech to absorb the bulk of the x-rays and use lead (or tungsten etc) to mop up and thermalise any left over (my interpretation anyway). The view is that while the MFMP is at version 1.0, Rossi is at least at version 5.0 and accelerating. He has stated he wants to be demonstrating E-Cat X during 2016 and that the best defense of his intellectual property will be the speed and scale with which he will produce E-Cat X's. ABB are supplying the robots and automation. You can keep tabs on Rossi here
Following the LENR/Cold Fusion Revolution |

If the independent certification report on the one-year 1 MW trial is positive as expected, then the implications are somewhat far-reaching:

  • This will be Bill Gates' energy miracle
  • Rossi will charge on with bringing his E-Cat X to market ASAP at a massive scale and rock-bottom price, backed up by his now-approved patent
    • others will grab and try out the MFMP recipe, but Rossi has a huge head start
  • It is all-over-Rover for fossil fuels and dependent industries including ICE
  • Only good news for Tesla
    • a very public and permanent disconnect of oil price from $TSLA - oil is going to die anyway, and quickly
    • the prospect of very cheap if not free electrical energy forever
    • Tesla can change out a couple of modules in their battery pack for an E-Cat X or 3, meaning self-charging cars
    • Tesla Energy + E-Cat X = permanently off-grid
  • Only good news for NASA, SpaceX etc
  • Not so good news for Solar City, anything fossil fuel or ICE etc
  • The last 2 weeks of March could be VERY interesting for $TSLA

If the independent certification report is a fizzer then I will retreat back to my lurking ways, safe in my anonymity :)


I trust this information is useful or at least interesting to some of you.

Thanks for reading this far. Peace from New Zealand.[FONT=&quot]
[/FONT]
 
#6,520
Zhelko Dimic said:
Think of it this way. Say you buy 10 call contracts at $190 for the next week, 1 contract=100 shares, so you buy right to 1000 shares. MM will want to stay neutral! Since they sold you calls, they're effectively short, and they immediately buy shares. How many? Exactly enough to offset option pricing movement. This site says delta is 0.524 for strike above, so they BUY 524 shares: CBOE - IVolatility Services

MM is now worm and cozy - if your options gain value, so do their shares. You sell them back your options? They dump shares immediately. At no point do they lose (or gain) anything as price changes.
Click to expand...
Your explanation to Papafox answered my question as well.
 
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