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

[Sudre]

we're starting to hit short burn of the century territory again. lol

776.00 +30.79 (4.13%)
After hours: 6:19PM EDT

How many times can you burn toast before it is simply no longer toast and just a charcoal briquette?

 

[Sudre]

Smells like 800+ tomorrow guys... be ready for lift off

Wasn't there a point last time when we just skipped an entire $100s section in a day?

I'd say be ready for one of those contact the SEC moments to see how useless they are. You know one of those headlines at 5 minutes before close that quickly gets taken down after the signal has been sent.

 

[LJS22]

Wasn't there a point last time when we just skipped an entire $100s section in a day?

I'd say be ready for one of those contact the SEC moments to see how useless they are. You know one of those headlines at 5 minutes before close that quickly gets taken down after the signal has been sent.

We skipped 800. It went from 790 to 900 or something insane. Then went to 969 and plummeted to 880’s in the last 15 min of trading.

 

[Words of HABIT]

Omg all those sweet keyfobs... Looking great!

View attachment 532657

That's nothing. My neighbourhood GM, Ford, Chrysler, BMW, Volvo, Mercedes and VW dealers have far more on their lots, each.

EDIT /s

 

[FrankSG]

paging @FrankSG I like your description of how delta hedging by MMs of large swings in Options contracts affects the no. of shares bought/sold by those same MMs. (while claiming no understand of the process )

What makes this mechanism so powerful in TSLA right now is that not enough people are willing to sell TSLA when it goes up by $10, $50, or even $100. Too many shares are locked up in the hands of long term super bulls, and the TSLA options market is enormous (relative to market cap far and away biggest out of any large company).

So what happens is:

1. Every $10 move up requires MMs to buy a ton of shares in order to hedge risk.
2. Because often too few people are willing to sell TSLA for a $10 move up, these shares bought by MMs drive up the price even further.
3. The further price increase forces MMs to buy even more shares to hedge risk, and the loop starts all over again.

This is why TSLA can move up $100 in a day two days in a row on Feb 3rd and 4th on almost no news, and now again at the start of this week.

I don't know exactly when and to what extent each option forces MMs to delta hedge, we'd have to get @ReflexFunds 's input for that. So I don't know whether these $800 call contracts influence the SP as soon as the trades are executed, or upon the first $10 move up, or not until SP gets close to $800, or not at all until MMs decide the battle to hold $800 is lost.

I wouldn't be surprised though to see them intensify any move up beyond $800 tomorrow if macros hold and if the stock breaks through. However, because they expire tomorrow, they're also likely to put a damper on any run up at some point when the owners take profits on them and MMs unload the shares they held as a delta hedge.

 

[Artful Dodger]

Yeah, it's $1.2 Million bucks worth (vs SP @ $676):

View attachment 532096

Options can be executed After-hrs, upon instruction of the broker by the Options owner. This is a good move if TSLA's SP continues back to its fair value price (currently around $750 according to Wall.St)

Somebody's sorry they sold those Calls...

@mongo I think we can guess now why somebody wanted those shares of TSLA during the After-hrs session on Monday evening... if we were to value those shares at today's After-hrs High ($891), then those 'called' shares have increased in value by $1.89M since they traded hands on Monday evening. Should go up from here too, this run shows no sign of petering out.

Haha, now I know why folks drink...

Cheers!

 

[Words of HABIT]

Interesting. Many of the companies that have been benefiting from "stay at home" orders due to CV, such as ZOOM and Amazon are well in the red after hours, while those companies that benefit from a healthy back to work economy are well in the green. What is going to happen when we get over this CV? Glad I chose Tesla. Vote for good. Vote for green.

 

[StealthP3D]

Ford starting to experiment with high-tech manufacturing techniques in the age of Coronavirus:

Ford Tests Buzzing Wristbands to Keep Workers at Safe Distances

 

[FrankSG]

Ford starting to experiment with high-tech manufacturing techniques in the age of Coronavirus:

Ford Tests Buzzing Wristbands to Keep Workers at Safe Distances

WTF

None of our post ratings apply to this... need shocked/astonished.

 

[InDaClub]

AH OT:

Your after-hours off-topic entertainment brought to you by Bark Viggo and Jim Hall.

Bark Viggo on Twitter

 

[Artful Dodger]

I wouldn't be surprised though to see them intensify any move up beyond $800 tomorrow if macros hold and if the stock breaks through. However, because they expire tomorrow, they're also likely to put a damper on any run up at some point when the owners take profits on them and MMs unload the shares they held as a delta hedge.

Yeah, did you see the Call Options volume at the $800 Strike today? There were 14K open contracts at 12:45 pm (that's a million shares of trading power)

EDIT: There were still 7.65K open contracts at the $800 Strike at end-of-day. There's also 7.5K at the $1,000 Strike, and another 11.5K call contracts open at $1,880

So I don't see the MM buying interest due to delta hedging going away when we break $800 tomorrow. That may happen at the Open, followed by a zoom climb as Options holders try to 'buy themselves into the money'...

Question is, how is NEXT weeks options market going to affect the SP, so we know how to position ourselves at the Close on Friday.

GLTA.

 

[adiggs]

What makes this mechanism so powerful in TSLA right now is that not enough people are willing to sell TSLA when it goes up by $10, $50, or even $100. Too many shares are locked up in the hands of long term super bulls, and the TSLA options market is enormous (relative to market cap far and away biggest out of any large company).

So what happens is:

1. Every $10 move up requires MMs to buy a ton of shares in order to hedge risk.
2. Because often too few people are willing to sell TSLA for a $10 move up, these shares bought by MMs drive up the price even further.
3. The further price increase forces MMs to buy even more shares to hedge risk, and the loop starts all over again.

This is why TSLA can move up $100 in a day two days in a row on Feb 3rd and 4th on almost no news, and now again at the start of this week.

I don't know exactly when and to what extent each option forces MMs to delta hedge, we'd have to get @ReflexFunds 's input for that. So I don't know whether these $800 call contracts influence the SP as soon as the trades are executed, or upon the first $10 move up, or not until SP gets close to $800, or not at all until MMs decide the battle to hold $800 is lost.

I wouldn't be surprised though to see them intensify any move up beyond $800 tomorrow if macros hold and if the stock breaks through. However, because they expire tomorrow, they're also likely to put a damper on any run up at some point when the owners take profits on them and MMs unload the shares they held as a delta hedge.

Each option has available, in pretty much every trading platform / website, the delta associated with that option. Delta is the size of the change in the option price for a $1 change in the underlying (TSLA in this case).

So an option with a .40 delta, that covers 100 shares, will move $0.40 / share ($40 per contract) for a $1 move in the underlying. At least in theory, a market maker will need 40 shares to stay balanced. But they probably already have 39 shares from when that same option had a .39 delta, so they really only need 1 incremental share.

This is all dynamic, and market makers have a lot of moving pieces (new short positions to balance, new long positions, options that balance other options, and probably more stuff I don't know about). My understanding is that the market maker(s) are the primary counterpart to most option buys and sells (they're making a market), so it's the net position they need to delta hedge, and the net delta of their position on either side.

My image on this is a seriously sophisticated program running at each market maker, analyzing each available trade on the market maker's overall portfolio in that underlying, for every underlying (hurts or helps the delta position), and what change needs to be made to maintain neutrality with every change in the share price. Because if you don't adjust for an hour and the share price moves $25, you could lose a lot of money. Or every half hour, or every 15 minutes - the natural limit on that is to be continuously updating as the market maker.


I think you're fundamentally right about the dynamic. More and more shares ending up in the hands of people with a very high sell price, and willing to wait to get it. Some will be happy to sell at $1000; some at $1200; some at $1500, etc.. And some of us might not sell even at $5000 (I can readily admit that while I think the stock is going way beyond, at $5000 we have a dramatically better retirement than we've been planning on, and not selling starts getting hard ). The point being, as you identified, that the number of shares that can be acquired for delta hedging is much smaller than the ~180M total shares would suggest, even after you reduce that for Elon and other institutional holding.

 

[CaliBear1]

Consider the fact that Mitchell was willing to enter a hot zone hospital in the midst of a deadly pandemic to dig up dirt on Musk. That makes him much more than despicable. That makes him willing to risk his life and health (and the health of others) to bring down one of the most innovative thinkers in the world , a man who employs tens of thousands of people in California and around the globe and builds the kind of vehicles that will allow Angelenos to continue to see the skyline this crisis has revealed.

Reporters don't make much money. Based on this high risk behavior, I have to believe this low life has an alternate source of income which is funded by any number of industries Musk is disrupting.

The fact that a LA Times auto reporter went to a hospital to ask employees about ventilators during a pandemic for the sole purpose of believing that Musk’s donation was not in good faith makes Russ a despicable person.

There’s no reason to do this outside of trying to create a bad story out of a good one. Then for a CNN employee to attack Musk on twitter for not doing their job for them (investigating a claim) is unreal.

I’m glad he’s defending himself on this one. There wasn’t anything negative about what Musk did, he’s done his homework, he checked with the hospitals and told them what he could get them. Didn’t even ask for a dime.

Anytime one thinks Tesla fans are crazy just look at the depths people go to make the company seem incompetent and fraudulent. Luckily the current stock price indicates people see the nonsense others create.

 

[FrankSG]

Yeah, did you see the Call Options volume at the $800 Strike today? There were 14K open contracts at 12:45 pm (that's a million shares of trading power)

EDIT: There were still 7.65K open contracts at the $800 Strike at end-of-day. There's also 7.5K at the $1,000 Strike, and another 11.5K call contracts open at $1,880

Yeah, we need to keep in mind that volume can mean a lot of things, and won't translate into open interest 1-on-1.

So I don't see the MM buying interest due to delta hedging going away when we break $800 tomorrow. That may happen at the Open, followed by a zoom climb as Options holders try to 'buy themselves into the money'...

Question is, how is NEXT weeks options market going to affect the SP, so we know how to position ourselves at the Close on Friday.

GLTA.

View attachment 533101

A lot of the delta hedging requirements also come from LEAPs and other expiration dates more than 1 week out.

I wonder how much of the initial $400 -> $600 run up was due to LEAPS with strike prices in that area. With the price action earlier this year, it's likely that a lot of the LEAP holders now hold strike calls with strikes $900 - $1800, so I wonder how that'll play out.

Although one would expect more sellers to appear between $1,000 and $1,800, because hey... it's a much higher valuation, it still holds true that a large portion of TSLA's investor base is looking for an exit point much higher than that.

I think that a SP of $2,000+ in the next 12 months is quite rich going off of normal valuation metrics, even for a high growth company like Tesla, but I can't rule it out given the mechanisms in play, especially when S&P 500 inclusion happens and takes another 10-20M shares out of circulation.

 

[mblakele]

China Q1 GDP growth turns negative for first time | NHK WORLD-JAPAN News

China's GDP growth turned negative in the first quarter of this year, amid the coronavirus pandemic. It's the first negative quarterly growth since 1992, when the country began releasing such data.

China's National Bureau of Statistics says the economy shrank 6.8 percent in the January-to-March period from a year ago.

China posted high economic growth until the global financial crisis. Since then, the growth has been on a downward trend, going down to 6 percent in the previous two quarters.​

This doesn't necessarily pose a problem for Tesla sales in China. But we might be able to use China as a leading indicator for how the rest of the world economy will fare under CV19 in Q2 and beyond.

 

[S3XY]

Ford keeps trolling Tesla. Charging network to be called "fastor charge" is fastor faster than super? Ford Supercharger Network Named in Trademark Filing

So the most common translation of "fastor" is:

painfully - Basque, Corsican, Galacian, Haitian Creole
annoyance - Catalan, Maltese

 

[FrankSG]

Each option has available, in pretty much every trading platform / website, the delta associated with that option. Delta is the size of the change in the option price for a $1 change in the underlying (TSLA in this case).

So an option with a .40 delta, that covers 100 shares, will move $0.40 / share ($40 per contract) for a $1 move in the underlying. At least in theory, a market maker will need 40 shares to stay balanced. But they probably already have 39 shares from when that same option had a .39 delta, so they really only need 1 incremental share.

This is all dynamic, and market makers have a lot of moving pieces (new short positions to balance, new long positions, options that balance other options, and probably more stuff I don't know about). My understanding is that the market maker(s) are the primary counterpart to most option buys and sells (they're making a market), so it's the net position they need to delta hedge, and the net delta of their position on either side.

My image on this is a seriously sophisticated program running at each market maker, analyzing each available trade on the market maker's overall portfolio in that underlying, for every underlying (hurts or helps the delta position), and what change needs to be made to maintain neutrality with every change in the share price. Because if you don't adjust for an hour and the share price moves $25, you could lose a lot of money. Or every half hour, or every 15 minutes - the natural limit on that is to be continuously updating as the market maker.


I think you're fundamentally right about the dynamic. More and more shares ending up in the hands of people with a very high sell price, and willing to wait to get it. Some will be happy to sell at $1000; some at $1200; some at $1500, etc.. And some of us might not sell even at $5000 (I can readily admit that while I think the stock is going way beyond, at $5000 we have a dramatically better retirement than we've been planning on, and not selling starts getting hard ). The point being, as you identified, that the number of shares that can be acquired for delta hedging is much smaller than the ~180M total shares would suggest, even after you reduce that for Elon and other institutional holding.

That's exactly how I understand it, minus those delta numbers being readily available. Thanks for filling in that gap in my knowledge!

Looks like the delta of the $800s was 12% @ market close, meaning that to delta hedge appropriately for the 7,647 outstanding contracts, MMs needed to hold 764,700 * .12 = 91,764 shares to be delta neutral for just these contracts. This assumes all contracts were sold by MMs, and they all delta hedge 100% all the time.

Considering the SP moved up $30 in AH trading, I'd imagine the delta would now be 27% (delta of $770s upon market close), and so the MMs will need an additional 764,700 * .15 = 114,705 shares to stay delta neutral on just these $800 CALL option contracts expiring this week.

But this is just one tiny piece of the puzzle. Their delta hedging requirements will have changed further from not just all the other CALL options they're holding, but also the PUT options. For every sold PUT option, a MM has to be short a certain # of shares to stay delta neutral, but whenever the SP goes up, it will buy shares to unload some of this short position.

Add these delta hedging needs for every single currently outstanding CALL and PUT option, and you can imagine the buying and selling MMs do when the SP moves up and down is enormous. @ReflexFunds used to calculate the exact numbers. In this post he calculated that in mid-December for every $10 TSLA SP moved up, MMs had to buy 4.3M shares to stay delta neutral, which might not be 100% accurate, but it's pretty crazy nonetheless.

 

[TheTalkingMule]

All this delta hedging stuff should apply to any security with a significant options market, no?

I think these outsized moves in TSLA are a bit of that, but mostly the ultra-rare combination of irrational short interest fueled by far more than interest in the SP and literally no one willing to sell as SP shoots up $100.

 

[Krugerrand]

Does that mean you noted it twice?

Dan

I didn’t, but spellcheck obviously did.

 

[TSLA Pilot]

LoL, their cars are not cheaper or lighter. He should have just talked about "drives like a Porsche and the quality expected from Porsche". I mean I give them that, the materials they use inside the cabin is more higher end because they don't have PETA harassing them yearly at investor meetings...

Tesla has nearly 100% vegan interiors FOR A REASON, and it aligns extremely well with why Tesla exists in the first place. (And, frankly, Porsche, is "dead men walking" when one compares a Taycant to a Model S.)

As for this specific post: When someone posts things of incredible ignorance, it might cause one to believe the that poster doesn't know very much. Don't be "that" guy . . . .

Animal agriculture is responsible for 18 percent of greenhouse gas emissions, more than the combined exhaust from all transportation.

"Livestock's Long Shadow: environmental issues and options". Food and Agriculture Organization of the United Nations. Rome 2006

Source: UN FAO via:
COWSPIRACY: The Sustainability Secret

Here's a helpful tip: When something creates more GHG's than all transport combined, and you've only got ONE friggin' planet to live on, that "something" had better go away, fast, or you'll soon find out what it's like to be on a very leaky lifeboat in a very big ocean.

Capiche?