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

[Artful Dodger]

SP at 'half-time' (12:45 ET) is within a buck of the 10-day Moving Average: $622.18 (but there's no manipulation...)

 

[TheTalkingMule]

This S&P inclusion is not going the way many of us expected, but we may get some help from big macro tailwinds if the stimulus package goes though by Friday.

I was expecting TSLA to be at $650 going into the actual buying. We've spiked at times over the last couple weeks and it's seemed that may have been conservative, now it seems about right that we'll end Friday around there.

Were people thinking we'd spike to $850 before the actual buying began?

 

[M|S|M MYP]

Have we all forgotten that $623 = $3115 pre split? If anyone told me $TSLA would be over $3k/share in March of this year, i would have probably bet you my next unborn

 

[lafrisbee]

Someone that knows (and won't type in acronyms).
Closing Cross.
I have tried very hard to understand it and can't. Financially I don't see how it benefits both sides so why would both sides agree to such a thing.
And therefore I can't even wrap my head around what it does, nor what function it serves.

here's what it sounds like to a dumbazz like me.
For some reason on Friday after hours all the front runners are going to be willing to sell the shares to the index funds at a price that will be determined by the previous price(s) of the stock. The price will be one price for everyone(?). And the selling ends at that "closing cross price" when either all the shares are purchased that the sellers have, or all the shares the buyers need have exchanged hands.
If there were too many stocks bought by the front runners then to bad for them. If there weren't enough shares available for the Index funds then they will have to buy more later.

How does that solve a problem? Why does either side agree beforehand that they will do this? One side is going to get screwed. Or at the very least some traders on one side are going to get their feelings hurt.

What does a closing cross purchase event really solve that would not be solved by regular trading?

 

[dl003]

Don't get me wrong, I do think there was front running and there will be sell side volume from that. But if you read through my other posts, considering how much of Tesla's available float is held by insiders and investors that won't sell at these share prices, there simply isn't enough float available to come close to front running this thing.

One thing to keep in mind is that we make a lot of assumptions here and neither you, me, or anyone on earth can tell exactly what the total TSLA float looks like. We can't assume that everyone outside of this forum is a perma bull who will not sell at any price. We don't know exactly when SP 500 front running started. It could very well have started in January when it became apparent that TSLA was going to be consistently profitable going forward.
I'm not saying the peak is behind us, but I don't take the counter argument as fact either. The situation is very fluid. The accumulators CAN still be accumulating today on the cheap. Christmas is coming up and people are going to take money off the table. As we go into Friday without any big spike, selling pressure will ramp up as people lose patience. You listed the fact that volume has not picked up as an argument for another big spike. Yet, there are a lot of people out there waiting to take profit and their window is shrinking. What do you think those people are going to do as that window disappears toward Friday close? History shows that the bulk of the buying will NOT be done during market hours.
One trick I have learned for myself is that the moment I start saying "just you wait, x is going to happen and the price will pick back up," from that moment on the price will not pick back up in any major way. It worked during Q3 ER, post split crash, BD, Q4 P&D & ER, etc... if you start worrying about the share price, many others are worried, too.

 

[lafrisbee]

Have we all forgotten that $623 = $3115 pre split? If anyone told me $TSLA would be over $3k/share in March of this year, i would have probably bet you my next unborn

I'm still hoping someone's Momma is right.

 

[Knightshade]

The funds cannot wait until the Fri close to buy, because they will not know whether these benevolent, infamous front-runners show up with enough sell orders until 5-10 minutes before. For sure it will be a big close, but it will also be a big up day.

Sure they can.

If there's not enough then they can buy in AHs.

Or PM Monday.

Or after open Monday.

But if there IS enough at any step along that path it's likely going to induce less Index error than if they buy days earlier than inclusion.


Because again, they do not care what they pay for the stock

They care that their results mirror the index as closely as possible.

So the further away from inclusion they buy the more likely they are to fail at their one job

 

[Johan]

You all acting like there are back room deals for funds that are meant to mimic the S&P 500 as if they are competing with each other to eek out .001% more profit than the other S&P 500 funds. THESE S&P 500 FUNDS DO NOT CARE. THEIR BUSINESS ISN'T ABOUT BRAGGING TO THE PUBLIC ABOUT THEIR RETURNS. Their business is about practically no management fees to mirror the S&P 500.

I was one of those people who mentioned back room deals. And it's not that I'm saying that's how it works, but my thinking has nothing to do with price - I agree with you that the index funds are price agnostic - but more to do with availability of shares. In other words they could make a deal to buy a certain number of shares at whatever the closing price is on Friday (for example) but not to buy them on the open market but instead from a pre defined "partner in crime"? This to ensure shares available to them and not get caught up in possible open market chaos - again they are price agnostic - but much harder to match the index well if the price swings wildly in a trading day and in AH trading?

 

[Robertj]

No matter how you spread your buys , it will not hide $75b to be spent on share purchases
That must effect volume and price

 

[StarFoxisDown!]

So here's what I can not understand in this theory: they probably could start seriously buying only after Dec 11, correct? And the price since Dec 11 did not go substantially lower than $610, correct? So what's the deal with buying for $610, then skipping $640, $650 and then selling on a pre-arranged trade for let's say $615?

No, today was the day that some, not all, index funds could even start to buy. It was impossible for index funds to be buying before this week

 

[StarFoxisDown!]

Some of these conviction levels in this post are a bit exaggerated, but on the whole I feel it's accurate. I've seen nothing so far that tells me this buying demand can be absorbed at close Friday. Not even remotely. Does that mean we see some mega-spike to $1200, I highly highly(like 99.5%) doubt it. But that doesn't mean buyers won't be scrambling on Monday after the supply at close Friday is exhausted.

And the biggest thing not being mentioned enough here is these shares ARE NO LONGER ON THE MARKET after being bought by an indexer. That impact alone squeezes us up the week of the 21st so long as literally all the longs don't sell at $675.

I think longs are willing to start selling around $800, and not significantly below something like $950. Personally, I don't think Tesla should be worth anything close to $1T right now, but I know for a fact that it'll be valued at least $1.5T in 3-5 years. Why would I sell for under $700B market cap if I had that level of recession proof certainty?

I guess we'll find out soon enough! I'm gonna keep buying 12/24 $700's if and when they get cheaper.

I'm definitely not putting a number on how high the stock could rally through till Wed of next week....but I definitely think any selloff and how much of a sell off would be directly contributed to how high the stock goes. If we're still at upper 600's, even lower 700's by next Mon/Tues, I don't really see any sell off. I simply don't think there would be enough investors willing to sell at just 5-10% above todays share price. If it goes into 800's, 900's, etc... the corresponding sell off is going to increase somewhat.

 

[woodisgood]

You all acting like there are back room deals for funds that are meant to mimic the S&P 500 as if they are competing with each other to eek out .001% more profit than the other S&P 500 funds. THESE S&P 500 FUNDS DO NOT CARE. THEIR BUSINESS ISN'T ABOUT BRAGGING TO THE PUBLIC ABOUT THEIR RETURNS. Their business is about practically no management fees to mirror the S&P 500.

That is true. But what is also true is they wish to avoid buying during an infinity spike, which all the data suggests would absolutely happen if the buying had to take place on the open market.

This is literally the only thing S&P and its tracking funds care about.

 

[FrankSG]

Macros tanking (SPY is even now for the day), but TSLA is holding up relatively well. Earlier in the day it was getting dragged down alongside drops in the overall market.

 

[dl003]

I was expecting TSLA to be at $650 going into the actual buying. We've spiked at times over the last couple weeks and it's seemed that may have been conservative, now it seems about right that we'll end Friday around there.

Were people thinking we'd spike to $850 before the actual buying began?

I actually expected 700 and looked like we were getting there before the secondary put a brake on momentum.
I don't blame Tesla. I think it's great. It's just that, as I mentioned before, once a momentum is halted, or worse, reversed, it will be tremendously more difficult to go back to where it would have been.

 

[capster]

Ah.. yes.

So all the action we see, is just MM milking the option buyers.. I guess you are correct.

How to best profit from this.. I should have sold options instead of buying I guess. :-D

Edit:

Then, we can assume there wont be a SP dip after friday, not until wednesday next week. Any dip should be bought by the index funds, as they can buy and push SP up to fridays close, and get them shares at the correct price.

Let me see if I have this straight.

If certain institutional investors’ MM arms keep the price low, they will make money off the unwary options trader.

However, that means they might help cause a spike when their index fund arms buy.

This spike would effectively reduce the potential gains of the retail buyers of said index funds.

Would these institutions really line their own pockets at the expense of their retail customers? Rhetorical question obviously.

 

[M|S|M MYP]

I actually expected 700 and looked like we were getting there before the secondary put a brake on momentum.
I don't blame Tesla. I think it's great. It's just that, as I mentioned before, once a momentum is halted, or worse, reversed, it will be tremendously more difficult to go back to where it would have been.

Agreed...but we all know "The longer a stock bases......" the rest is history

 

[TheTalkingMule]

I'm definitely not putting a number on how high the stock could rally through till Wed of next week....but I definitely think any selloff and how much of a sell off would be directly contributed to how high the stock goes. If we're still at upper 600's, even lower 700's by next Mon/Tues, I don't really see any sell off. If it goes into 800's, 900's, etc... the corresponding sell off is going to increase somewhat.

Agreed. We should probably settle back to maybe $50 above Friday's close regardless.

But we have to remember a whole bunch of positive news event are gonna hit by the end of January. Another $1200 stimulus is soon headed to all the Robinhood bros. 500k deliveries will be confirmed within 2 weeks. 1M 2021 guidance will be issued within 2-4 weeks. Then there's earnings.

There will be a bit of natural buying pressure after this inclusion from the 97% of retail investors who don't even know this inclusion is happening or what it means. That buying pressure will run into a market that will now have 120M+ fewer shares available for sale.

I'm starting to think I have enough 12/24 calls to play this inclusion. Already sitting on a few deep ITM 1/15 calls. Maybe I'll shift to cheap YOLO 12/31s rather than 12/24, in case buying stretches out beyond the 24th for some crazy reason.

 

[dl003]

No matter how you spread your buys , it will not hide $75b to be spent on share purchases
That must effect volume and price

How do you account for an unknown $xB of shares waiting to be unloaded into what could be the last major rally in TSLA for a long while? There are 2 sides to this equation.

 

[enzo]

Someone that knows (and won't type in acronyms).
Closing Cross.
I have tried very hard to understand it and can't. Financially I don't see how it benefits both sides so why would both sides agree to such a thing.
And therefore I can't even wrap my head around what it does, nor what function it serves.

here's what it sounds like to a dumbazz like me.
For some reason on Friday after hours all the front runners are going to be willing to sell the shares to the index funds at a price that will be determined by the previous price(s) of the stock. The price will be one price for everyone(?). And the selling ends at that "closing cross price" when either all the shares are purchased that the sellers have, or all the shares the buyers need have exchanged hands.
If there were too many stocks bought by the front runners then to bad for them. If there weren't enough shares available for the Index funds then they will have to buy more later.

How does that solve a problem? Why does either side agree beforehand that they will do this? One side is going to get screwed. Or at the very least some traders on one side are going to get their feelings hurt.

What does a closing cross purchase event really solve that would not be solved by regular trading?

It allows higher volume trades to be done without causing major volatility or having to deal with the intraday shenanigans.

Sure they can.

If there's not enough then they can buy in AHs.

Or PM Monday.

Or after open Monday.

But if there IS enough at any step along that path it's likely going to induce less Index error than if they buy days earlier than inclusion.


Because again, they do not care what they pay for the stock

They care that their results mirror the index as closely as possible.

So the further away from inclusion they buy the more likely they are to fail at their one job

They care what they pay if they are unable to obtain an average cost basis that is acceptable in terms of tracking error. They can't buy any significant portion after hours, or it would cause a massive spike and their earlier purchases would be way off. They can buy Monday, but that is unpredictable and again they could end up way off. To do their job they will want it to happen fast and simple. The market will find a zone for that to happen, and then it will be done and resume its usual extreme volatility, and they won't care.

 

[jeewee3000]

Long time lurker here.


After reading a lot here and elsewhere it becomes clear to me that this scenario becomes more and more likely:

1. The inclusion spike is already behind us ($150+ rise since the announcement)

2. Front runners have had enough time during the spike to accumulate shares (eventually partly by exercising call options) and will be happy to sell them at a profit to the index funds.

3. Bench mark funds don’t have to buy Tsla to beat the S&P 500. But if they want to, they can wait for a post inclusion dip.

4. As a result there won't be a further spike

5. Short term call option players (like me) are caught like a deer in the headlights.


I hope I’m wrong but I’m afraid not.

I disagree since the S&P tracking funds have not yet bought TSLA. Hence: they still have to buy TSLA. When they will do this is the big question.

Over the last couple of weeks this board has been all over the place. By now the daily TMCers (i.e. people that check it everyday) know who's on what side of the argument.

Some possibilities mentioned:

1) tracking funds will have to buy from the market (1/3 of the float) and therefore we will see a spike. Most people that are whining this week were/are betting on this.
2) tracking funds made shady deals with "front runners". Who these front runners are and why they would help the tracking funds is a big mystery. I don't buy it since (and this has all been repeated tens of times) tracking funds don't care if they get in TSLA at a peak or a trough. They just want to get in when all other tracking funds get in.
3) THEY are behind it. Market makers, voodoo witch doctors and other evil forces preventing a spike.
4) tracking funds loaded up on calls to be sure to get TSLA at a decent price weeks ago. I disagree with this theory since A) I don't believe they are allowed to buy options and B) there are not enough call options expiring this Friday (at similar pricing). I.e. the tracking funds would be all over the place in their tracking errors.
5) dark pool trades, don't forget about dark pool trades. I follow @FrankSG on this one: these trades have to show up sooner or later. This could still happen Friday AH but just because the trades are made out of the open market it doesn't mean there is no incentive for the seller(s) to maximize gains on the trade.

Basically it's comical to see so many theories, which were optimistic at first (shortly after the inclusion announcment) and pessimistic this week (since all short term option gamblers are being flushed out. Respect to those that stick with stone cold logic like @TheTalkingMule if I remember correctly.).

Personally out of all the options above I think the most level headed theory is n° 1: friday/monday we'll see buying. Now there is no reason to yet. I haven't made a bet on this so I really don't care if we go to $700 or $500 from here. I'll still be here looking out for Q4 2020 which is way more exciting to me. And don't get me started on Giga Berlin/Texas and project Dojo in 2021.

TL;DR Enjoy the ride, boys and girls!