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

[Fact Checking]

What I don't get is why this is supposed to even matter. What, are they implying that deliveries will be bad in Q4? We already have delivery data for Q4 data, they weren't.

I believe beyond just circulating this widely to low information investors via Reuters and the other usual suspects this is also part of the "Q1 will be bad" false narrative, which resonates with bulls as well due to the bad Q1'2019. Since California abruptly slashed state EV incentives in December the January registration numbers might be weaker - so by the time the dust settles there's another seasonal pattern to mislead about. (I'm really glad InsideEVs stopped posting monthly U.S. deliveries, that report was frequently used for disinformation campaigns and bear raids.)

Short-and-distort campaigns usually operate by trying to create fear, uncertainty and doubt, and this is the best they have for the time being. They don't really need the report to be true, they make it relevant by engineering a price move. Jim Cramer's infamous video demonstrated how little capital can be used to move prices - and right before options expiry they need even less capital.

(Not advice, obviously - I have no idea what's going to happen today, tomorrow and on Monday.)

Another factor is the apparently delayed earnings announcement - Tesla's usual modus operandi would be to announce the earnings date 2 weeks before the Wednesday, or, in some cases, on the Thursday 13 days before the earnings date. The Wednesday announcement has not happened, I'd expect the announcement to be posted end of today, after trading.

If Tesla Investor Relations wanted to mess with the shorts they'd announce the Q4 ER date later today for next week (January 22 as @ggr suggested) - which would be taken as a positive earnings indicator by the market, but then again I don't think Tesla cares about options trading investors.

Another interesting factor for today is that so far macros are post-trade-deal enthusiastic, Nasdaq futures are up nicely: in fact the nearest futures contract just broke an all time high this very minute, which bodes well for trading. So good macros, if they last into the session, might counter part of the TSLA drop, and I'm sure there will be buy-the-dip bargain hunters as well.

 

[ProfTournesol]

Is there a pre-market graph available online? Can only see the numbers, but I would like to have a graph of pre-market trading (it may be delayed)

 

[Fredneck]

Should not look at things in such a black and white view. Many years ago when Steve Jobs asked Warren Buffett what to do with the cash that Apple was generating. Buffett suggested to buyback Apple shares. Jobs didn't buy back. If he did, AAPL now would be above $2000 a share, instead of $300.

How do you know what price the stock would be at??? Someone cited another company (IBM maybe) where buying back stock was a total waste.

Eventually Apple did do large scale share buyback in recent years, but instead of buying at $8~10, they bought back at $100~$200. The late share buyback is still a good move, it would have been much better if they did earlier.

From a mathematical perspective there is not reason why buying back stock should impact the value of the stock. The money is worth $1 for each dollar spent. The stock bought back is worth $1 for each dollar spent. So the remaining stock value is still even-steven. The passage of time doesn't change that. Without the cash there can be a significant opportunity cost from not being able to do things with the money later. Then it is always useful to pay down debt. Debt is just a drain on the company's finances.

If Tesla is generating $5B free cash a year, and the stock is super cheap from long term view, spending half billion to buy back shares would do wonders. Some people may think stock price has no effect on the business. The effect is huge to the employees, business partners, investors, debt cost, and demand.

Tesla generating cash is not something that will continue without profit. They are a long way from having enough profit to burn cash on a stock buyback.

For growth, Tesla made it clear that going forward they will copy the Shanghai Gigafactory model. Which means money comes from local banks, factory is constructed in phases, cashflow from first phase will pay for the second and third phases. They will need very little cash from the company.

Sooner or later Tesla will buyback half of the shares.

You've still failed to show any advantage to buying back stock.

 

[ReflexFunds]

Do you have any insight on when market makers decide is the right time to delta hedge these options?

I always assumed that they don't delta hedge until after they 'lose their battle' trying to defend the strike price, and therefore that all these expiring options might be tailwinds this week after Monday broke through $500 so heavily, because of market makers' need to delta hedge after that?

But according to you it sounds like they may have delta hedged these options before the SP broke through $500?

Market makers should delta hedge immediately and adjust the hedge in real time as the price and delta changes.
However, they may sometimes start to unwind the hedge slightly before expiry (but probably not more than a day) - if they have sold call options and they reduce their hedge from 100% - this means they now profit from a lower share price. But to reduce the hedge requires selling shares - and this itself lowers the share price.
Market makers generally are not going to want to take underlying exposure to a stock (and are not going to be allowed to be unhedged for long periods due to their risk limits) - but on occasion they might try to both gamble on a stock move and cause the stock move itself.
So this is one of the drivers towards max pain of options expiry.

However the most powerful driver of share price towards options max pain point is people that own in the money options cashing out in the few days before expiry - either to roll into longer dated options or to take profit. When these options investors unwind their position, the market maker who sold them the option also closes their position - so if they had sold call options and owned shares to hedge it - they would sell these shares as the option was closed and this drives the price lower.

This is all why in the 10 years since IPO, Tesla stock has made more than 100% of its gains on Monday to Wednesday.

 

[Fact Checking]

Is there a pre-market graph available online? Can only see the numbers, but I would like to have a graph of pre-market trading (it may be delayed)

Real-time NASDAQ pre-market trading data is visible on Yahoo Finance, if you click on the "Extended hours" option and switch to the 1m time frame.

TSLA Interactive Stock Chart | Tesla, Inc. Stock - Yahoo Finance​

U.S. pre-market trading is going to open in 26 minutes.

European trading charts are available here:

Tesla Aktie (A1CX3T,TSLA,US88160R1014)​

But this is low liquidity and it will start following NASDAQ pre-market trading once it opens.

 

[Aeon]

Is there a pre-market graph available online? Can only see the numbers, but I would like to have a graph of pre-market trading (it may be delayed)

This is the earliest opening, reliable, German online-only-trading exchange (open from 8am to 10pm German time):
Tradegate Exchange
When Nasdaq is open the prices track extremely precisely and quickly. On the web version you can also see the recent trades.
If you use their (Android) App, you will be able to see the opening bid and ask a few mininutes before open at 8am Berlin-Time.

 

[Fact Checking]

Market makers should delta hedge immediately and adjust the hedge in real time as the price and delta hedges.
However, they may sometimes start to unwind the hedge slightly before expiry (but probably bot more than a day) - if they have sold call options and they reduce their hedge - this means they profit from a lower share price. But to reduce the hedge requires selling shares - and this itself lowers the share price.
Market makers generally are not going to want to take underlying exposure to a stock (and are not going to be allowed to be unhedged for long periods due to their risk limits) - but on occasion they might try to both gamble on a stock move and cause the stock move itself.
So this is one of the drivers towards max pain of options expiry.

However the most powerful driver of share price towards options max pain point is people that own in the money options cashing out in the few days before expiry - either to roll into longer dated options or to take profit. When these options investors unwind their position, the market maker who sold them the option also closes their position - so if they had sold call options and owned shares to hedge it - they would sell these shares as the option was closed and this drives the price lower.

This is all why in the 10 years since IPO, Tesla stock has made more than 100% of its gains on Monday to Wednesday.

I also noticed that on options expiry day there's often a "signal" that options market makers are using: return to the average price and low volume, with slow drifting down as share inventory levels go down due to roll-over and the selling of contracts back to market makers, which extinguishes open interest and delta exposure.

Last Friday was an example of that - it was the only day with less than 15 million shares traded:

Options expiry Friday was that lone low-volume day in the middle.

This is a legal price based signal and effective pricing cartel that I think options market makers learned to use as a group, within the limits of game theory participants that do not trust each other. There's a shared benefit: slowly downward drifting price reduces short term option prices so less profit can be taken and rollover to later dates gets more expensive. All market makers benefit from this, and it's obvious to them whether everyone is participating.

But if there's fundamental Tesla specific or macro news driving the price then I believe options market makers are delta hedging on Fridays too. This happened on January 18 last year, when Tesla issued a profit warning on a Friday.

 

[FrankSG]

Market makers should delta hedge immediately and adjust the hedge in real time as the price and delta hedges.
However, they may sometimes start to unwind the hedge slightly before expiry (but probably not more than a day) - if they have sold call options and they reduce their hedge - this means they profit from a lower share price. But to reduce the hedge requires selling shares - and this itself lowers the share price.
Market makers generally are not going to want to take underlying exposure to a stock (and are not going to be allowed to be unhedged for long periods due to their risk limits) - but on occasion they might try to both gamble on a stock move and cause the stock move itself.
So this is one of the drivers towards max pain of options expiry.

However the most powerful driver of share price towards options max pain point is people that own in the money options cashing out in the few days before expiry - either to roll into longer dated options or to take profit. When these options investors unwind their position, the market maker who sold them the option also closes their position - so if they had sold call options and owned shares to hedge it - they would sell these shares as the option was closed and this drives the price lower.

This is all why in the 10 years since IPO, Tesla stock has made more than 100% of its gains on Monday to Wednesday.

Thanks for this explanation! I understand much better now, and this makes way more sense than how I understood it before.

 

[Fact Checking]

This is the earliest opening, reliable, German online-only-trading exchange (open from 8am to 10pm German time):
Tradegate Exchange
When Nasdaq is open the prices track extremely precisely and quickly. On the web version you can also see the recent trades.
If you use their (Android) App, you will be able to see the opening bid and ask a few mininutes before open at 8am Berlin-Time.

For TMC members who don't read German, the last transactions log is in the "letzte Umsätze" tab.

This recent spike down to below $500:

Was caused by a small ~2,000 shares transaction that was much larger than the available (thin) liquidity, and which was probably executed dumbly not as a limit price order, but as a market order. It was either an investor who just lost ~€7,000 through inefficient execution, or a short who wanted this market artifact to influence the U.S. opening price, to whom the inefficient execution and the drop in price is a (small) business expense.

 

[RobStark]

In the manufacturers ranking, BMW (21%, up 2%) won its fourth title in a row, with Tesla (16%, up 1%) in Second Place, while Nissan (13%, down 1%) won the last place of the podium.
Interestingly, the best selling brand outside the podium was Mercedes(!), with 10% share, with the local importer seeing its efforts in the company car segment being rewarded with a #4 spot, ahead of Renault, with 8%.

EV Sales: Portugal December 2019

 

[FrankSG]

We have some action, that's for sure.

Crazy order as soon as pre-market opened. But trading back up a bit right now.

Volume is CRAZY. 17k shares in under 4 minutes.

Back up to $508 already.

 

[Aeon]

For TMC members who don't read German, the last transactions log is in the "letzte Umsätze" tab.

This recent spike down to below $500:

View attachment 500748​

Was caused by a small ~2,000 shares transaction that was much larger than the available (thin) liquidity, and which was probably executed dumbly not as a limit price order, but as a market order. It was either an investor who just lost ~€7,000 through inefficient execution, or a short who wanted this market artifact to influence the U.S. opening price, to whom the inefficient execution and the drop in price is a (small) business expense.

I am not entirely sure about the price-finding for Tradegate and the European pre-Nasdaq market in general, but while the trades shown under "letzte Umsätze" are only those executed on Tradegate (and they show up IMMEDIATELY when I execute via Tradegate through my brokerage, even with limits or stops), the prices will (eventually) reflect all trades executed no matter the exchange.
There are a few other early bird markets and XETRA (the Frankfurt electronic market) opens at 9 and most likely has the highest volumes of them all.

 

[Fact Checking]

For TMC members who don't read German, the last transactions log is in the "letzte Umsätze" tab.

This recent spike down to below $500:

View attachment 500748​

Was caused by a small ~2,000 shares transaction that was much larger than the available (thin) liquidity, and which was probably executed dumbly not as a limit price order, but as a market order. It was either an investor who just lost ~€7,000 through inefficient execution, or a short who wanted this market artifact to influence the U.S. opening price, to whom the inefficient execution and the drop in price is a (small) business expense.

Nasdaq pre-market trading just opened, and someone tried to use a ~20k sell order to drive the price below $500 but failed:

The lowest price was exactly $500.00 - which probably hosted an even larger buy order.

Note that the above European investor or short who sold 2,000 shares has already lost around €20,000 on inefficient execution:

Of course if it was a short it's simply part of the short-and-distort business expenses.

Market manipulation like this is why sunshine laws and prompt mandatory disclosure of short positions would be an important improvement to U.S. financial markets regulation.

 

[hoang51]

For TMC members who don't read German, the last transactions log is in the "letzte Umsätze" tab.

This recent spike down to below $500:

View attachment 500748​

Was caused by a small ~2,000 shares transaction that was much larger than the available (thin) liquidity, and which was probably executed dumbly not as a limit price order, but as a market order. It was either an investor who just lost ~€7,000 through inefficient execution, or a short who wanted this market artifact to influence the U.S. opening price, to whom the inefficient execution and the drop in price is a (small) business expense.

Looks like someone is playing games with TSLA in premarket in the US:

 

[Fact Checking]

Looks like someone is playing games with TSLA in premarket in the US:

Yes, they probably tried to drive it below $500 through a combination of low liquidity European and Nasdaq trading but failed (for now at least) - see this earlier post.

 

[Aeon]

Looks like someone is playing games with TSLA in premarket in the US:

View attachment 500760

Dude, whats up with that font setting on your phone?!?!
Explain yourself! ;-)

 

[hoang51]

Dude, whats up with that font setting on your phone?!?!
Explain yourself! ;-)

Because it's unique and stylish.

 

[FrankSG]

I believe somebody here recently was wondering what happened to Tencent's TSLA investment? Looks like they're still in:

 

[Aeon]

Because it's unique and stylish.

I can respect that. Carry on.

 

[KarenRei]

Back up to $508 already.

Dang it :Þ Would love a nice deep MMD for my triggers to re-buy the upper end of a few call spreads to go off.