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

[JRP3]

GF5 is already going to be in Philadelphia, so you can all get in line for GF6.

We have a semi-exploded oil refinery site ready to go. Some of the demo is already complete!

No muddy field is a deal breaker.

 

[bhtooefr]

One thing that came out of the interview: Musk apparently still owns two ICE cars, one of which is a Series I Jaguar E-Type.

I hear they make those in electric nowadays: https://www.motortrend.com/news/jaguar-classic-build-sell-electric-e-type/

(AFAIK Rimac is behind the conversion, and it likely uses 21700 cells given Rimac's move to those. Or, you know, there's another company that uses 21700 cells and makes electric motors that could fit in transmission tunnels.)

 

[S3XY]

Is the award/show something mainstream/well renown in Germany? Was it just poorly produced? They mentioned that Overlord Musk had been there for the Models S and X already.

Although, if nitpicking is to nitpick; Overlord Musk's jacket was not flattering at all on him. It needed to be tailored at the waist, or something, it looked very much like he just found the jacket in a grandfather's closet.

Stop making sense of it. These awards only come once in a lifetime. Elon's jacket size was the same as it ever was.

 

[SteveG3]

1.) Elon Musk in Berlin

2.) Announcing the Gigafactory 4 in Germany

3.) The open overtures between Elon Musk on Twitter and Herbert Diess (Volkswagen CEO) lately and now on screen.

Watch (@43:28 Gigafactory announcement - @45:00 talking to H.Diess):

4.) Winnning the "Goldenes Lenkrad" - > Winning a price from the biggest "news" provider in Germany, with heavy advertising from the industry
and then in this category! Chosen over Bmw 3 series and Audi A4. That is huge!

Winner in the middle and upper class: Tesla Model 3
Google Übersetzer

5.) Maybe there is more in the works.

This needs some days to digest, but, man...

Wow, that video was extremely refreshing and encouraging. Strongly recommend watching from about 40:40 on (first 4-5 minutes is just fun, so skip to about 45 for the following...)

Elon and Herbert Diess show a respect, camaraderie, and even warmth towards each other I had no idea existed.

There was a moderator for their interaction on stage, and he asked Elon a question loaded with a heavy barb towards the German automakers in regard to their progress in comparison to Tesla. Elon, not only didn't gloat, he, actively spoke strongly walked back the moderators characterization. He went on to express empathy for the strategic difficulty of having assets invested in a previous technology. It looked like all of this meant a good deal to Diess.

As to Diess, his words were few, but, what he did say, his body language, the look on his face and in his eyes spoke volumes about genuine appreciation and respect for Elon. There, on that German auto award show stage, he did not hold back on describing Musk as a visionary.

Doesn't make obvious sense re what we know of the upcoming products from the two companies, but, this had me wondering if there might be some kind of VW tie-in coming soon. They could learn so much from Tesla about moving towards an automaker creating battery supply for itself... and I think Elon's genuine mission orientation could mean he'd happily do some battery supply together to help nurture VW on their way towards being able to build GFs on their own.

 

[Bullish_Bear]

Maybe OT a little bit, but if anyone can post the new monthly letter from stanphyl capital (and my dear mark), it will be great

 

[dgodfrey]

Last update:

Saw Elon 10 meters from us. Politely asked the security if we could take a picture, they said no. We left him alone. On the one hand super awesome to see him up close, on the other hand a bit disappointing to be so close and then not get a picture. Oh well, next time.

These are the only really crappy pictures I took when he left.

Whatcha use for a camera? A potato?
Thanks for trying though.

 

[MP3Mike]

Maybe OT a little bit, but if anyone can post the new monthly letter from stanphyl capital (and my dear mark), it will be great

He hasn't posted it to SA yet... I don't know where else to look for it.

 

[Thekiwi]

did everyone catch that Musk said GF4 will start with Model Y production?

 

[Boomer19]

Given this is such a powerful driver of Tesla stock price, I thought it worth trying to quantify all of these options delta hedging and short stock feedback mechanisms. The result is larger than i expected. I believe a +$10 increase in share price would require the purchase of 4.7 million Tesla shares worth $1.6bn. I think much of all stock volume every day is delta hedging related.

Full detail on all Tesla options value and delta exposure from calls, puts and converts below. These are approximations, but I think close enough.

Tesla Calls open interest:
There are call options on 69 million shares outstanding.
The current market value of all call options is $3.3bn with $0.8bn expiring this week and $2.1bn expiring within the next 3 months. $2.8bn of the calls are in the money and $0.5bn out of the money.
It will be interesting to see what call holders do with their profits. Take profit, buy stock or buy OTM calls?
Delta hedge requirement for these call options is 38 million Tesla shares, worth $13bn. So if all Tesla call were sold by market makers (most likely were) and are 100% delta hedged (market makers should be), then 38 million shares would have to be held to hedge the option position. In reality some of this is cancelled by Put options.

Tesla Puts:
There are put options on 144 million shares outstanding.
These have collapsed in price and current market value of all put options is now only $0.4bn with $0.1bn expiring within the next 3 months.
Delta hedge requirement for these put options is 5.5 million Tesla shares sold short, worth $1.9bn.

Convert hedges owned by Tesla:
Tesla bought call options and sold warrants to limit potential dilution from its 2021, 2022 and 2024 convert issuance. The value of the Tesla calls Tesla owns are currently worth $1.4bn and the Warrants it sold worth $0.6bn. For banks to delta hedge their net option exposure to Tesla from the calls & warrants would require purchasing 4 million Tesla shares.

Net delta exposure from options market.
The gross delta exposure from Calls, Puts and Convert Hedges can all be netted out – they are all likely held by the same market makers. So this is 38 million long from Call open interest, 5.5 million short from Put open interest and 4 million long from Tesla’s convert hedging transactions. This nets out at 36.6 million Tesla share long, currently worth $12.6bn.
Note that while individual market makers can delta hedge with other options rather than shares (but they mostly do shares), this is only passing on delta exposure to a different exposure. So this 37 million shares overall options market delta exposure is what is needed if everybody is 100% delta hedged. Some calls will be sold unhedged by people like Mark Spiegel etc, and some puts likely sold by Tesla retail longs, but I expect the vast majority of the market is delta hedged most of the time. So these means delta hedging accounts for ownership of towards 37 million Tesla shares currently. This is relative to 212 million total Tesla shares (180 million real shares outstanding, 32 million virtual/duplicated shares sold by shorts). Many of these market makers likely loan their long shares to shorts so they may not disclose ownership anywhere close to their real economic ownership of stock.

Convertible bonds:
Most convertible bonds will be held by funds who will delta hedge their exposure to Tesla equity. At current prices this would require selling 8.7 million Tesla shares short. So this is a large chunk of the 30 million Tesla short interest. These are held by different investors to the options open interest so can not be netted out.

Outright short equity:
Short interest is currently 32 million shares sold short or c.$11bn. About 23 million of these shares of c.$8bn are likely sold by real shorts and not from convert hedging. These 32 million short shares are shares that are now owned by 2 different long investors. The short borrowed a share from one long, promised to give it back eventually, then sold it to a new long. Two different long investors now have economic ownership of the same share so in effect the share has been duplicated, with a virtual share or repayment obligation now also trading in the market. This means there are now really 180 million real shares outstanding plus 32 million virtual shares owned by Tesla longs, or a total of 212 million shares.

What is the exposure of all of these positions to a +$10 move in Tesla share price?
For +$10 the net change in delta hedging requirement from the whole options market and from the convertible notes hedging is + 4.0 million shares or $1.4bn of Tesla stock purchases. This is an incredibly powerful feedback mechanism to drive the stock higher.
For +$10 share price the size of the Tesla short owned by real shorts will increase in $ terms. To maintain the same $ size of position Tesla short will have to buy Tesla shares to reduce the number of shares short. For $10 this would have to be 0.7 million shares.
So between the two, this is buying pressure for 4.7 million shares due to a $10 increase in share price.

What is the exposure of all of these positions to a -$10 move in Tesla share price?
For $10 the net change in delta hedging requirement from the whole options market and from the convertible notes hedging is - 4.7 million shares or $1.6bn of Tesla stock sales. This is again a powerful feedback mechanism to drive the stock lower. At the moment the mechanism is slightly more powerful in the downward direction – this is because the recent price increase has moved so many Tesla calls into the money and delta to its maximum of 1. There is more room for changing in delta with downward movements currently. This will likely even out as calls mature and people roll calls into more out of the money strikes.
For -$10 share price the size of the Tesla short owned by real shorts will reduced in $ terms. To maintain the same $ value, Tesla shorts will sell a further 0.7 million shares short.
So between the two, this is selling pressure for 5.4 million shares from a -$10 move in stock price.

Note: All these numbers are approximations and use a $345 share price and a fixed 45% volatility for all options/strikes/maturities. I don’t have a data source with volatility or option price for every option matched to open interest, and these approximations makes it much easier to make quick options pricing calculations.

@Fact Checking @hacer @Zhelko Dimic @EVNow @MFranc123 @Doggydogworld

mods,
pls add to posts of merit

thx rflx

 

[Boomer19]

did everyone catch that Musk said GF4 will start with Model Y production?

View attachment 476355

but what does everyone think about the batteries?

seriously, does that mean like what they’re doing at gf1?

or like china where they’re using catl?

what does it mean?

 

[RobStark]

One thing that came out of the interview: Musk apparently still owns two ICE cars, one of which is a Series I Jaguar E-Type.

I hear they make those in electric nowadays: https://www.motortrend.com/news/jaguar-classic-build-sell-electric-e-type/

(AFAIK Rimac is behind the conversion, and it likely uses 21700 cells given Rimac's move to those. Or, you know, there's another company that uses 21700 cells and makes electric motors that could fit in transmission tunnels.)

Rivian,Lucid, and Bollinger Motors are all planning on using 21700 cells.

All the Kool Kids are doing it.

I wonder if they all did extensive studies that came to the same conclusion or just cribbed off Tesla.

 

[goinfraftw]

Haven't been a huge fan of France in the past (to personally visit), but someday I'd like to visit the building where the Paris Climate Accord was drafted. After today's announcement, really cool for so many countries coming together to avert climate change and switch to sustainable transport and energy.

 

[EVNow]

Delta hedge requirement for these call options is 38 million Tesla shares, worth $13bn.

How did you find this ?

Just to be sure the way it should work is to calculate openinterest * delta for all the strikes, for all expirations.

Total delta hedge = sum across expirations (sum across strikes (OI * Delta))

10525 * 0.982 (C250)
+ 6292 * 0.9841 (C260)
+ ....
+ 7510 * 0.5052 (C350)
+ 6680 * 0..2437 (C360)
+ ....

Unless you have the data it would be difficult to calculate.

BTW, good to see more folks coming around to seeing how important options are to things that happen to SP. I've been saying this for a long time.

 

[EinSV]

Wow, that video was extremely refreshing and encouraging. Strongly recommend watching from about 40:40 on (first 4-5 minutes is just fun, so skip to about 45 for the following...)

Elon and Herbert Diess show a respect, camaraderie, and even warmth towards each other I had no idea existed.

There was a moderator for their interaction on stage, and he asked Elon a question loaded with a heavy barb towards the German automakers in regard to their progress in comparison to Tesla. Elon, not only didn't gloat, he, actively spoke strongly walked back the moderators characterization. He went on to express empathy for the strategic difficulty of having assets invested in a previous technology. It looked like all of this meant a good deal to Diess.

As to Diess, his words were few, but, what he did say, his body language, the look on his face and in his eyes spoke volumes about genuine appreciation and respect for Elon. There, on that German auto award show stage, he did not hold back on describing Musk as a visionary.

Doesn't make obvious sense re what we know of the upcoming products from the two companies, but, this had me wondering if there might be some kind of VW tie-in coming soon. They could learn so much from Tesla about moving towards an automaker creating battery supply for itself... and I think Elon's genuine mission orientation could mean he'd happily do some battery supply together to help nurture VW on their way towards being able to build GFs on their own.

It was a very encouraging and positive moment. Diess clearly recognizes that the future is electric and that the best path is to transition as quickly as possible. He is trying to pull that most difficult of magic tricks -- convincing all of his shareholders, directors, employees, suppliers and customers that despite the short term pain it is better to welcome the future and move quickly.

I'll show my age but Diess embracing Elon and Tesla reminds me of the 1970s/1980s when Toyota and Honda embarrassed US car manufacturers with vastly better quality. In response to the shock (and hit to the bottom line) US manufacturing companies embraced Deming and 3-sigma manufacturing (precurser to 6-sigma). That didn't mean they would partner with Toyota (although GM did in a small way) but that they recognized that the world had changed and that they had to make fundamental changes in how they went about their business, because sticking to the status quo would be a disaster.

Bottom line: I don't think Diess' positive comments about Elon and Tesla means VW and Tesla will do business together (although it's possible that could happen in a small way), but rather that Diess wants VW and all of its stakeholders to embrace Elon's vision and move as swiftly as possible toward EVs. It's no different than a 1970s/1980s auto exec acknowledging that Toyota and Honda were doing some things right, and signaling that it was time to follow that path rather than stick to the old ways.

Either way it seems like a strong positive for Tesla and the mission of accelerating the transition to sustainable transportation. I really enjoyed watching it.

 

[StealthP3D]

Maybe OT a little bit, but if anyone can post the new monthly letter from stanphyl capital (and my dear mark), it will be great

Word on the Street is that Mark has a terrible case of writer's block.

 

[M3Rider]

$700 next week mark it

Why would this happen if GF3 is valued at 0 and is about to start pumping out cars, but GF4 is at least 2 years away?

It's like saying truck reveal will have any impact. Hello Y?

 

[EVNow]

did everyone catch that Musk said GF4 will start with Model Y production?

View attachment 476355

Why not 3 ?

Does that also mean Y production volume in US will be lower than previously thought ? Already we know they will make Y in GF3 too.

I think we should start thinking about Y production being on 3 continents from get go - may be 4k/wk in US, 3k/wk in China and 3k/wk in EU.

 

[M3Rider]

Why not 3 ?

Because Europeans like sedans more than CUVs. That's what we've been told here. Makes sense?

 

[Dig deeper]

Maybe OT a little bit, but if anyone can post the new monthly letter from stanphyl capital (and my dear mark), it will be great

Stanphyl Capital Letter - September 2019 | Seeking Alpha

I'll give him one thing, he makes great lists. /s

 

[Joe F]

GF5 is already going to be in Philadelphia, so you can all get in line for GF6.

We have a semi-exploded oil refinery site ready to go. Some of the demo is already complete!

I wouldn’t touch that property if it were me. Talk about a major cleanup. I’m surprised it’s not a Superfund site.