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

Dancing Lemur

Hoopy Frood
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Aug 14, 2020
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Lets just say the price is set to be 650. With over 100 million shares being bought at this price level, does this act like a strong support when it comes to technical or it doesn't matter?

640-650 is already a support point based on the shares traded at this level. Whatever the closing price tomorrow is will not matter much technically, unless you’re a robot. If it’s, let’s say, 720, a smart chartist will discount the volume at that level because it’s a forced trade that takes shares out of play. Those buyers are not looking to sell higher, or recoup losses if it goes lower, so I wouldn’t consider 720 support in that scenario.

I see 640 as good support, but the actual closing price tomorrow to be very strangely meaningless because of the nature of the trade.

As everyone has figured, the unmet demand after the closing cross is where it’s at. With this much buying needed, an imbalance of a few million shares either way could tip things substantially come Monday. I think there’s a 60-40 chance that the imbalance is to the buy side, hence the price will increase. But I’m pretty well hedged in case that’s not the outcome.

That pop at the close was too much to ignore, and I sold tranches of 680-700-720 12/18 calls from a mark of 654-658 to cover all my positions (entirely calls in the trading acct). If we end up over 720 tomorrow, I’ll basically liquidate my entire trading port and buy shares. If we end up at 750 and I’ve left a (very) substantial sum on the table, I’ll try to console myself with my reasoning in this post.

As always, not an advice, but I’m starting to transition out of highly leveraged <1 year positions into non-margined shares.
 

Dancing Lemur

Hoopy Frood
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Aug 14, 2020
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A strategy I am adding on for tomorrow is to maximize my buying power in my margin account by closing most of my sold puts before close. Then I will buy as many as possible just OTM calls that are cheap - $0.25 or less each just before close that I could possibly exercise after hours in the case of a big spike. I anticipate this trade will be a complete loss but if the SP does spike ($25+) in the first hour in after hours trading I will exercise the calls and immediately sell them for the after hours price. This could give me profit in the range of $50-200K. I see that as worth it for a $400-600 lottery ticket.

Those “just OTM” calls will be more expensive because of that. We saw that in the Aug-Sep non-inclusion period, as apparent zero-value calls still had bid prices at the close on Friday. But I like the cut of your jib. Let us know how it goes.
 

Artful Dodger

"Ducimus, lit"
Aug 9, 2018
9,705
126,359
Canada
Close was $655.90, no?
EDGAR data source doesn't retroactively update their downloadable 'per-minute' data. There's also usually a few thousand share discrepancy between their total shares traded number and the final number reported in NASDAQ History.

It all averages out though, it's the trend we're trying to capture. And that trend is UP! :D

Cheers!
 
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generalenthu

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Jun 10, 2015
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A strategy I am adding on for tomorrow is to maximize my buying power in my margin account by closing most of my sold puts before close. Then I will buy as many as possible just OTM calls that are cheap - $0.25 or less each just before close that I could possibly exercise after hours in the case of a big spike. I anticipate this trade will be a complete loss but if the SP does spike ($25+) in the first hour in after hours trading I will exercise the calls and immediately sell them for the after hours price. This could give me profit in the range of $50-200K. I see that as worth it for a $400-600 lottery ticket.
Can't find anything wrong but I suspect calls won't be cheap. Even those expiring tomorrow evening.

I distinctly remember the day when rebalancing was announced in Q3 on the opex Friday, the calls and puts for strikes that were about 10 bucks out were still trading above $2. Of course Etsy made the cut, and Tesla dropped, but 5:15 pm when the news came was too late for retail investors to do anything with their calls or puts.

Professional investors like trading desks and market makers could still make up their mind till 530 pm and decide to exercise or not exercise their options.

That said these options were still somewhat mispriced, and you'll likely again see mispricing tomorrow evening. Of course everyone can see the news by 4 PM unlike the 515pm S&P missive.
 
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Dancing Lemur

Hoopy Frood
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I am setting up a limit on close order with a ridiculous 4 figure price on it. If it executes I'll be buying a new Roadster. If it doesn't I will continue to happily hold my shares into the future.

My closing cross knowledge isn’t any more extensive than anyone else’s here, but the price can’t move by more than 10%, right?

So, if it’s at 650 at 3:55, it can’t go to more than 715 for the crossing price. Do I have this right, or did I make it up?

I would set a LOC order at 9.5% higher than the price at 3:55 in that case, if that was a price you wanted to sell at. The index funds are going to enter many millions of MOC orders, so it may take it up to your limit. I think that’s a fine strategy if you’re trying to play the closing cross, but I await corrections to my ”facts”.
 

Paul_SF

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Feb 12, 2020
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Aside from that.... wouldn't someone keeping 120M shares in their back pocket have to be announced somewhere? I mean the purchase of this would have to be spread out since the announcement (or before.... so rumor) and at some point the amount would have to be at a level requiring a report.


Starting to sound plausible.

What are the profits of 120M shares bought at say an average price of $600 then all being sold for $675.... a LOT! I can see a few entities front running this to split up the billions in easy profits. Do you get a bonus check at Christmas for that?

What if he bought to keep them?

edit: Buffet I meant.
 

generalenthu

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This was perhaps posted earlier, but worth reviewing on the inclusion eve. H/t fact checking.
20201217_233959.png
 

FrankSG

Active Member
Jun 27, 2019
1,615
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Singapore
My closing cross knowledge isn’t any more extensive than anyone else’s here, but the price can’t move by more than 10%, right?

So, if it’s at 650 at 3:55, it can’t go to more than 715 for the crossing price. Do I have this right, or did I make it up?

I would set a LOC order at 9.5% higher than the price at 3:55 in that case, if that was a price you wanted to sell at. The index funds are going to enter many millions of MOC orders, so it may take it up to your limit. I think that’s a fine strategy if you’re trying to play the closing cross, but I await corrections to my ”facts”.

The way I understand it is that the market can move more than 10% in the final 5 minutes, it's just that the closing cross price is guaranteed to be within 10% of the market price upon close no matter what.

It's complex, so I could be wrong, but that's how I understand it.
 

Dancing Lemur

Hoopy Frood
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Aug 14, 2020
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The way I understand it is that the market can move more than 10% in the final 5 minutes, it's just that the closing cross price is guaranteed to be within 10% of the market price upon close no matter what.

It's complex, so I could be wrong, but that's how I understand it.

So 10% of the 4:00:00 price, not the 3:55:00 price as I had posited. Still, there’s a limited upside at the cross, but who knows what AH will look like. Or Monday.

#KnowledgeIsPower
 

mulder1231

Active Member
Jan 1, 2012
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The way I understand it is that the market can move more than 10% in the final 5 minutes, it's just that the closing cross price is guaranteed to be within 10% of the market price upon close no matter what.

It's complex, so I could be wrong, but that's how I understand it.

The market can move TSLA to any level in the last 5 minutes of trading. It all depends on the asking price the last second before close. We know the demand (roughly 120 million shares), we don’t know the supply and the various levels they are willing to sell at. There won’t be an imbalance at closing, though. The whole reason S&P announced the date of inclusion more than four weeks in advance is to allow ample time to ensure enough liquidity. This is not a squeeze situation.
 
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Dancing Lemur

Hoopy Frood
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Aug 14, 2020
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The market can move TSLA to any level in the last 5 minutes of trading. It all depends on the asking price the last second before close. We know the demand (roughly 130 million shares), we don’t know the supply and their asking price. There won’t be an imbalance at closing, the whole reason S&P announced the date of inclusion more than four weeks in advance is to allow ample time to ensure enough liquidity. This is not a squeeze situation.

Well, that’s the part we don’t know: at what price is there enough supply? Any arbitrary price, because they’ll all be 17a-7 intra-institution sales, or satisfied by the cross? Or will the hedgies hold on and try to squeeze top dollar because their intel says the demand won’t be met?

Yes, the long run-up has lined up a lot of sellers. But the numbers are large enough that I don’t think anyone involved is confident about whether the initial demand will be met. The drama at the trading desks tomorrow will, for once, be greater than on this thread. :)
 

pz1975

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Aug 30, 2013
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Those “just OTM” calls will be more expensive because of that. We saw that in the Aug-Sep non-inclusion period, as apparent zero-value calls still had bid prices at the close on Friday. But I like the cut of your jib. Let us know how it goes.
Agree. That’s why I will probably go $10-$20 OTM if needed. I only plan to capitalize if there is a major spike. I’m considering adding some OTM puts as well but just don’t see why the SP would drop significantly after hours unless there is a big spike just before close.
 

dakh

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My closing cross knowledge isn’t any more extensive than anyone else’s here, but the price can’t move by more than 10%, right?

From what I can tell, no that's not how I expect this to go down. At 355 Nasdaq starts publishing closing cross related data every second. This will include buy/sell imbalance. This then allows for closing price discovery, so if the imbalance is huge, the price will move very quickly. This article titled "How much does the MOC imbalance matter?" explains this. (MOC I think means "Market On Close" order type). From what I can tell, this partially happens just from the traders simply buying shares (in case there's a sell side deficit) on open market into the close, so that they can then place "imbalance limit sell orders" to make a profit during the closing cross.

So basically we'll probably know the rough closing price at 3:55 plus 300ms or so :) Unless the imbalance is so unusually high that it will take some time to iterate on this to complete the price discovery. Quote from the article
We see that when a buy (or sell) imbalance is announced the stock gapped up (or down) by roughly the right amount. In fact we see that about 80% of the ultimate price move into the close was priced in within 300ms (see grey box in chart 1).


To me this also means I'm going to be sitting there with a trigger finger to sell some calls expiring on the 18th since there's a chance they will go from OTM to ITM about 5 min before close.

This also means it is not strictly necessary to place LOC orders, one can just use the last 5 min to decide if and how much they want to sell or buy and place an order during that timeframe.
 
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Paul_SF

Member
Feb 12, 2020
498
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I would think if a position that large was for holding that entity would be asking for a place on the board.

Did they asked for one at Apple? If they did, maybe they will at Tesla also. If they actually hold a position that large.

Best intro ever for the clip at TeraFactory! :))
 

dakh

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The main impression I get from Rich is that the market basically leaves these things up to other market participants, and is simply hoping that enough front-running has happened. I personally feel strongly that it hasn't, and I believe Fact Checking talked on Twitter about the fact that Hedge Funds only have so much money available for plays like this. This inclusion is truly of unprecedented size. I wonder if front runners that wanted to play the TSLA inclusion put all the money they wanted to dedicate to this play into TSLA in the first 2-3 weeks after inclusion, and whether the pool of HF money might just simply not be enough to provide adequate liquidity for an inclusion of TSLA's size.

Based on my prediction model, I really think that at this level a lot of large TSLA shareholders have to be willing to dump a Cybertruck-load of shares in order to satisfy demand from indexers. I continue to believe there's more likely than not significant upside from $650. If not this week, then during the next week or two. I could be wrong, but we'll find out very soon.

If I read this right, the way it'll work is regular limit orders are also considered in the closing cross, so say if there's a bunch of sell orders at $1K limit, the price discovery that starts at 3:55 will keep bumping the price up until those are triggered as well. It might get ugly in how high it'll have to jump but hopefully "liquidity providers" are prepared with adequate amount of shares and we'll just see the final smaller adjustments to the closing price.

So overall I see a few scenarios playing out with fairly distinct action items:

1. Adequate liquidity is sitting there waiting to be deployed, there will be a slight adjustment to the stock price in the last 5 min for the final fine-tuning of the balance, huge volume at close and it is all over. Nothing to do here.

2. Substantial sell side deficit, but still adequate liquidity available. Price spikes 5 min before close, enough shares change hands at that price to satisfy index funds, and price returns roughly back to pre-3:55 levels on Monday. This means one would need to participate via on close order or within ~4 min of close time to take advantage of the price spike.

3. Inadequate liquidity, price spikes last 5 min, but also stays high on Monday opening cross and possibly through Monday with big volume. This means there will be a substantial time frame to participate in an elevated stock price, at least both Fri close and Mon open.

4. You say it's not very likely, but listing it here for completeness: buy side deficit, price drops into close. Probably stays down on Monday? Not sure.

Personally I don't see how #3 is likely, price will simply have to keep going up coming into close since it's a simple arbitrage, even if the price is $10K at 3:57 it still makes sense to buy if Nasdaq cross data still says there's not enough sellers. You can then be sure that if you turn around and place a sell MOC order on those shares it'll settle at higher than $10K. The only way I see #3 happening is that entities with a lot of shares that would be willing to sell at a certain outrageously high price simply aren't set up to participate in the closing cross.

EDIT: now that I think about it, we can easily tell which scenario is it going to be at maybe 3:56. If it stayed the same/ went up/went down and stabilized, it is respectively scenarios 1, 2, 4. If it went up and kept going up all the way to 4PM, we're in #3 since that means the closing cross is still out of balance. There's of course also the opposite of #3 where it goes down and keeps going down, which would indicate a gross oversupply on the sell side.
 
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vikings123

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May 27, 2019
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A strategy I am adding on for tomorrow is to maximize my buying power in my margin account by closing most of my sold puts before close. Then I will buy as many as possible just OTM calls that are cheap - $0.25 or less each just before close that I could possibly exercise after hours in the case of a big spike. I anticipate this trade will be a complete loss but if the SP does spike ($25+) in the first hour in after hours trading I will exercise the calls and immediately sell them for the after hours price. This could give me profit in the range of $50-200K. I see that as worth it for a $400-600 lottery ticket.

I expect the market to price this scenario into the call premiums. They might not be .25$. Cheers
 

StealthP3D

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Dec 12, 2018
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please read what I wrote again. if there is a liquidity issue, it gets less exposed in Friday's MOC. it seems quite clear to me that there are advantages to the index funds to keep out of public view the scale of any shortfall of shares available to them on Friday's closing cross.

If the index funds don't want to expose the imbalance, they will simply not post buy orders for all the shares they need. They will batch them and only post the next buy order after the previous one has filled. It looks like you are thinking that the index funds MUST trade only at the end of the day on Friday. But trading between Fridays close and Mondays open doesn't guarantee them the inclusion price anymore than buying shares on Thursday or Monday. You still need a willing seller and that seller can go wherever they want and ask the price they want or look for a suitable bid. And I don't see how trading in a dark pool in the middle of the night gets the funds anything as liquidity during those hours tends to be very low. The trades still need to be reported before Monday's open.
 
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