Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[H Mak]

So all the buyers show up at 3:59 Friday?

"Hi, is this the queue for TSLA?"

 

[Nocturnal]

But if one was looking to minimize index error, which is a stated goal of most index funds, then buying at the very last moment before inclusion (so late Friday) would be what you want to do, assuming you believe you can get enough shares then.

Because of that I'm leaning towards most of the buying occurring late in the game.

We should think about it from the benchmark fund manager's perspective. Their success is based on how well they match the index's performance right? So let's look at some scenarios.

1. Fund manager is savvy and buys now. Pro: possibly gets a much better price than other funds, get's a pat on the back. Con: risk that the stock drops on the inclusion day and that the fund lags the index and manager gets a red check for performance. So the manager is taking a risk of being penalized for what I assume is little personal benefit. Why take the risk? That also makes it harder to sell off other stocks in the correct ratios.

2. Fund manager just waits to buy with the crowd. Pro: Ensures fund stays in line with peer funds and matches S&P 500 performance as close as possible. Con: Fund "over pays" for TSLA stock relative to fair value and perhaps loses money as the stock dips post inclusion. That happens to the entire index so the manager is not in hot water.

So why would any rational manager choose option 1? Anything I'm missing here? Obviously the tracking funds have many other options.

 

[Criscmt]

Reading your posts, it seems that you are 'extremely' concerned about the short-term movement in $TSLA SP. If you are that worried about it, why not buy some puts as insurance? The consensus is that $TSLA will dip after the inclusion....is that what you are worried about?

Likely not “extremely” concerned, sure concerned about my Jan-2021 calls
My question you quoted was from me seeing a contradiction between my then perception on @Artful Dodger’s view on SP peak Vs what appeared on the message I replied on. I was curious about the seemingly big shift. Turns out my “perception/read on earlier views” on SP peak was to be seen as incorrect.
Given I have calls, I am not sure if buying puts is the right way to insure. I need to move the money from calls to shares soon.

Thanks for your concern, advise. I appreciate it!

 

[gabeincal]

Eeerily quiet... Almost red... Weird dynamics...

Edit: Got an alert set for 15M daily volume. It usually hits around 7-7:30am (Pacific) on low volume days. It just hit at 7:50am. It's a dead day, so I'm surprised at the lack of a usual MM pushdown.

 

[Artful Dodger]

Can you share what data it is based on, and talk about what those assumptions are? You're basically just asking us to trust you that this random straight line will equal supply of TSLA shares, without explaining any of your reasoning.

All the data is public (NASDAQ Closing SP for the past 6 mths). The only addtional constant I calculate that is original art is the "price elasticity" factor of about 1.16x (this is the change in number of shares vs the change in SP). This is purely statisticly derived from NASDAQ daily SP data (mean daily %changeSP/%changeVolume).

So it's the micro-economics model that matters when trying to estimate the equilibrium SP where supply = demand.
I see that nobody else has attempted to perform such a calculation.

 

[TheTalkingMule]

SP is now up by a higher % today than my 12/24 calls. WTFIV?

12/24 $700s now in the red from purchase Friday with SP at $605. That's surprising given the level of volatility.

Paid $24, so if anyone's been waiting.....Friday's price point it back and nothing has really changed except we've run up $37.

 

[lafrisbee]

I am not the guy that should be presenting this:
But wouldn't the smart money have bought all the stock they needed in the form of calls that expire on Friday to avoid the risk of the SP being insanely high? I mean even if a call was sold for $750 SP and the stock price doesn't reach $700 couldn't the institution feel like it was in their best interest to go ahead and purchase the stock at $750? If enough of them did this...
That would change everything

 

[chrsk]

Eeerily quiet... Almost red... Weird dynamics...

And weird buying.. Or lack of buying.

Marcos is good, but we are in the red.

 

[TheTalkingMule]

Eeerily quiet... Almost red... Weird dynamics...

Would you, as a rational buyer of TSLA shares at what you feel is a good value, buy right now? Hell no!

We're probably entering the doldrums between front-runners being done buying and front-runners offloading. This is why I asked about the"+/-3 days" window yesterday. To me that says buying doesn't really begin until tomorrow(3 trading days before inclusion).

As I posted above, my 12/24 calls just dropped like 15%. Good window, if we see this continue all day, for the crazier traders here to grab YOLO calls. Not advice.

 

[Criscmt]

That would be existing ICE technology.

When I was talking about market share, I was talking about time when there’s no more ICE auto sales. My percentages were referring to such market in the future.

 

[Speedr117]

Because of that I'm leaning towards most of the buying occurring late in the game.

We should think about it from the benchmark fund manager's perspective. Their success is based on how well they match the index's performance right? So let's look at some scenarios.

1. Fund manager is savvy and buys now. Pro: possibly gets a much better price than other funds, get's a pat on the back. Con: risk that the stock drops on the inclusion day and that the fund lags the index and manager gets a red check for performance. So the manager is taking a risk of being penalized for what I assume is little personal benefit. Why take the risk? That also makes it harder to sell off other stocks in the correct ratios.

2. Fund manager just waits to buy with the crowd. Pro: Ensures fund stays in line with peer funds and matches S&P 500 performance as close as possible. Con: Fund "over pays" for TSLA stock relative to fair value and perhaps loses money as the stock dips post inclusion. That happens to the entire index so the manager is not in hot water.

So why would any rational manager choose option 1? Anything I'm missing here? Obviously the tracking funds have many other options.

When #2 can't find all the shares, and scrambles on the following days to fill them, with the price rising even though the S&P has already started counting them. This would also cause a deviation. It really boils down to if there will be enough shares at 4pm on Friday.

 

[Todd Burch]

And weird buying.. Or lack of buying.

Marcos is good, but we are in the red.

Actually, AAPL is the only FAANG stock in the green like TSLA right now.

 

[lascavarian]

I see that nobody else has attempted to perform such a calculation.

Careful everybody, don't trip over that gauntlet

 

[ZsoZso]

I have decided to help out the S&P index funds. I am willing to part with some of my TSLA holdings for four figure price per share -- entered sell orders accordingly. If the sale goes though I will diworsify my portfolio (e.g. buy some ARK and some SPYX).

 

[lafrisbee]

All the head games being played right now?
I admit, I was really going to try to TIME THE MARKET as to when to get out before the drop after inclusion. I've been trying very hard to find situations that would help me decide when.

And then I read on here about some closing call stock price magic method of getting something for something (Not really sure how it works still) this Friday after hours.
But I still envisioned a run up starting yesterday, and I figured the force of inclusion would eliminate the manipulations of the MM's, and that somehow the stock would gain momentum through the week.
It ain't happening.................................................yet(?).
Tomorrow's another day. Perhaps some by-laws will allow a few fund managers to start purchasing then, or perhaps the wisest course of action the fund managers ALL see is to see what they can get after closing Friday, and then add what they still need next week.

BTW we are negative for the day right now....I really can't see that holding up, but talk about how it is playing with my brain? Too fun.

 

[dww12]

You must really like living on the the edge!

Only 3 so no big deal, it just looks like several weeks/months of appreciation is going to be concentrated on Friday and it’s just a big game of chicken. It looks like the funds are waiting until the very end. If I were them I would be buying the crushed options (caused by the stalling), then run the price to get the shares. We will all know Friday.

 

[lafrisbee]

$634 SP.
Is this some attempt to get sold calls bought back by the MM's before the stock hits the fan?

 

[Todd Burch]

Another shake the tree event? This action just all seems so dirty to me.

Wall Street, you so dirty.

 

[Artful Dodger]

View attachment 617873
I think those lines and slopes are wrong. I think the supply curve (for this week) is an exponential, staying fairly flat but approaching infinity at a very high price. The demand is going to be independent of price and increasing all week, and there are a lot of non-normal factors feeding this.

Fair enough, we'll see shortly won't we?

My personal data point. I don’t want to sell my shares, but actually CAN’T because I’ll have too much short term capitol gains. This is because I got caught trading my shares after the March CV19 scare and have no long term shares to risk losing. The price would have to go to several thousand to make it worth the risk of selling for me. I don’t think I am alone here. Any other stock, any other time I think I would take a 30%-50% gain and move on, or hope I could trade it. I learned my lesson. I’ll lose MY shares.

You post is full of emotion and conviction. The rest of the market is not.

Further, you appear to be attempting to show an assumed transient spike in SP due to the Addtion. My model is NOT doing that, it is an attempt to estimate the equilibrium SP after hysteresis effects have played out in the market. My attempt will of course fail because the Market will move on to the 'Next Big News' for TSLA before the SP settles.

Looking back, we can see it took about 11 weeks for the SP to settle after the Aug 31 Stock Dividend and associated $5B Cap Raise.

The Market will move on to the next big news item for TSLA (there are many such items in the queue for Jan 2020 alone) long before the SP settles into a tight range again. The equilibrium SP as modeled at around $670 is an attempt to estimate a central oscillator or focus point. But again, events are likely to overrun this estimate, which is a snapshot estimating the SP equilibrium point as of Dec 18, 2020.

 

[lafrisbee]

Stock markets up. TSLA about to go through some massive required purchasing of its stock and it is red.
-2%