Because the "last price" is updated the the option is bought or sold - if the SP has moved significantly since the last sale they can become quite mis-matched.
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Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable
- Thread starter AudubonB
- Start date
Because the "last price" is updated the the option is bought or sold - if the SP has moved significantly since the last sale they can become quite mis-matched.
Causalien
Prime 8 ball Oracle
Over a 10 year period, if your trading account outperforms your investing account then I know you are either an outstanding trader or a terrible investor!
By default, the trading account is supposed to outperform the investing account.
Investment is more conservative with a larger $$$ amount. Trading account by default is a smalller $$$ amount and hence can engage in more volatile activities. Investment account diversified, trading account concentrated.
With useful comment explaining it in simple terms:
by Kirk57
I’ll give you an example:
In June when the stock price was $180 Fred (being a very astute Tesla fan) realized, it was fundamentally very underpriced. Rather than buying more shares, he decides to buy call options at $750 / share that expire Feb. 7th. XYZ institution makes a lot of money by capitalizing on irrational dreamers like Fred. They looked at their data and realized no large company ever has stock that goes up 4X in less than a year. So they’re willing to sell Fred 10k options at $0.15 each.
Each option gives Fred the right to buy 100 shares of Tesla from XYZ at $750 any time over the next 8 months. So:
each option costs Fred $0.15 * 100 = $15.
10k options cost Fred $150k.
They give him the right to buy 1M shares of Tesla anytime on or before Feb. 7th for $750.
Fred’s breakeven point on the stock is $750.15. He would buy the 1M shares at $700, sell them at $700.15 and get his initial $150k back.
However if Tesla is at $1500 per share Friday, Fred buys the 1M shares from XYZ for $750, resells them for $1500 and makes $750M!
XYZ institution is sitting there in June feeling very happy with the $150k they got from Fred. Easy money!
In July TSLA goes back in the $200’s but XYZ is not that nervous.
Tesla releases the surprise Q3 results and Tesla soon jumps into the $300’s .
Now XYZ is a little nervous, so they buy 50k shares of Tesla stock. That way at least as Tesla rises, they’re protected a little in their bet, because they’ll have some of those shares, plus those shares appreciate, so it would mitigate their loss to Fred.
Tesla releases q4 and the stock jumps again. Now XYZ buys 200k shares of Tesla. XYZ and other institutions are now continually buying shares to hedge their bet against people like Fred, just in case they have to give him 1M shares below market value.
Ironically this is happening to such a large extent, this hedging causes the stock price to rise again and causes XYZ to buy even more shares! They’re now caught in a positive feedback loop where this call hedging, plus shorts covering, is causing TSLA to skyrocket, gaining more and more each day.
Now it’s Wednesday and TSLA is shooting up to over a $200 gain in one day following a $100 gain the day before. Poor XYZ has only bought 300k shares, but come Friday, they’re going to have to sell Fred 1M shares. They now know they are looking at a $750M loss to Fred, but maybe even worse, if the positive feed back loop accelerates.
So they decide to illegally force Tesla down. The problem is that if they do it more than 15 minutes before close, it will trigger a rule that will prevent them from continuing the next day. So 13 minutes before close they borrow 2M shares and sell them for lower prices than they’re worth to immediately stop Tesla’s momentum and drive the price down. They know lots of nervousTesla shareholders set limits in the $900’s to lock in their gains, and so they can start a reaction where those investors will automatically sell and the price will drop under $900 / share.
Now early yesterday morning they can sell more shares in the small German index and drive the price down further very easily, and spook lots of investors and cause everyone to sell and drive the price to the $700’s. Now slowly they can buy back the 2M shares at $750 that they borrowed at $950 and make a very nice profit of $400M.
On Friday, Tesla will close at $748 and Fred will get $0.00. XYZ pockets Fred’s $150k and they win again. They know there’s no risk, because the SEC never prosecutes stuff like this.
THE END
woodisgood
Optimustic Pessimist
In that thread there’s a really nice ELI5 breakdown of how delta hedging works and may have contributed to the run.
EDIT: And posted two posts above!
dc_h
Active Member
I think we lost Earl Frunkpuppy a half mile back! If that is real, they should start releasing some video clips.Cybertruck rock crawler? Well Howdy, Partner!
!
I'd also like to see some demolition derby events, sponsored by Tesla with every other truck on the market. Some serious Hulk smash video is needed to win over the heart of the truck market, not us, but old school Chevy and Ford guys.
STOP with these not only jejune but utterly off topic posts. There's a CT thread somewhere....go crawl over and find it.
Delete button awaits any more such.
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The sad thing is we know this is happening and we get to watch it real time...makes one a little jaded and cynical.
It's just like Vegas. They let you win a little because it keeps other people playing, but if you win too much they will ask you to leave.
Less than 2 months ago people were we ecstatic that the SP was 420. Now most are complaining that it's not 1000.
scubastevo80
Member
SOFI millennials piling into the TSLA in the last week...
Tesla passes Apple as No. 1 holding on SoFi as young investors rush into surging stock
Tesla passes Apple as No. 1 holding on SoFi as young investors rush into surging stock
I've got 35 @ ~225 average that I'm not selling until 10k [maybe]
I'm looking to pick up more to bring it to 50.
Based on everything I'm reading above it looks like this is not only just a dip but an artificial one at best.
Of course it's hard to time these things and I'm super long so it doesn't matter anyway, but, when should I buy this week? Before you laugh at me my more detailed question is, for the experts here, when do these things expire that we should expire the low point due to manipulation. Papafox said something about buying before the last 20 minutes on Friday. Does this make sense? I'm such a n00b but I'm slowing learnings thanks to you all.
Much appreciated!
Best,
Gene
I'm looking to pick up more to bring it to 50.
Based on everything I'm reading above it looks like this is not only just a dip but an artificial one at best.
Of course it's hard to time these things and I'm super long so it doesn't matter anyway, but, when should I buy this week? Before you laugh at me my more detailed question is, for the experts here, when do these things expire that we should expire the low point due to manipulation. Papafox said something about buying before the last 20 minutes on Friday. Does this make sense? I'm such a n00b but I'm slowing learnings thanks to you all.
Much appreciated!
Best,
Gene
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I feel like we’ve become numb to this kind of manipulation. A stock with 20% short interest is an obvious place for this kind of action and should be protected by the SEC. Just gotta keep moving along though, the more Tesla executes the more we run over these manipulators.
SageBrush
REJECT Fascism
I've made similar charts but I have changed my viewpoint since learning from the gurus here that ~ in the 10 -15 million range short stocks are part of a hedge. It also helps to set the scales to a fractional change (percent, e.g) to gain a fairer perspective how how teslaq type shorts (straight gamble that TSLA will drop in value) have responded to the share price increase.
It is a lot more rational than we usually give them credit for. Which is not saying much, I admit.
TheTalkingMule
Distributed Energy Enthusiast
Could we not simply orchestrate the inverse? Anyone up for some TMC coordinated manipulation, it's certainly not something the SEC is concerned about!
Seriously, don't we have access to enough media outlets? Cobble together $500k for a coordinated options buying attack of some sort followed by "Gigafactory 6!" and "700k guidance for 2020!" articles?
Perhaps I'll start a thread where we can brainstorm....
TheTalkingMule
Distributed Energy Enthusiast
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