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

[traxila]

fyi...may have market impact tomorrow.

I just received a safety update/voluntary recall email from Tesla covering early Model X's to replace power steering components (bolts).

This applies to Model X's built before October 2016.

me too.

 

[Mike Smith]

Boeing's botched Starliner test flirted with 'catastrophic' failure: NASA panel

 

[FrankSG]

Do any of the more senior members here have context for when the IV might subside? Or alternately, would we expect IV to remain relatively high (elevated above the ~45% baseline) from now through S&P inclusion? Are MMs already pricing in S&P inclusion into options prices?

1. As long as there are market makers selling options, manipulations will likely continue in some form or another.
2. As long as there's a huge options market betting on TSLA, market makers will need to delta hedge by buying and selling large amounts of shares, increasing volatility.
3. As long as the float is so small, this volatility will be further amplified, because there is a limited number of shares available for trading.

I'd say #1 is unlikely to go away.

#2 is simple supply and demand. If the market feels like option prices are too low, it will buy. But if the IV keeps increasing and at some point people think the options are overpriced, it will go down.

#3 might be fueling the high IVs right now, because it amplifies all movements. It's mostly an effect of a very large number of TSLA shares being in the hands of hyper bulls that have shown unwillingness to sell up to $950 at least. The recent increase in perceived value of TSLA shares has increased this portion of long holders even further.

If I've interpreted everything correctly, IVs should go down when more natural sellers show up and expand the float. Will more long holders be willing to sell if we get to $900-950 again, because the sharp drop from $960 instilled fear into them? I doubt there will too many. More likely, at some point above $1,000, be it $1,200, $1,500, or $2,000, there have got to be people who feel like TSLA is overvalued, and are happy to take profits, and to reduce or completely sell out of their long positions. Then the float will expand, volatility will go down, and IVs should also go down.

Before that, IV and volatility could also go down if the interest in options diminishes due to a further increase in SP. But as of right now, both the demand for options is sky high, and the float of people willing to sell appears to be small at current levels.

Of course, substantial news and/or macros could change dynamics at any time.

@Fact Checking @ReflexFunds: Any faults in my reasoning?

 

[bigsmooth125]

If there are entities that manipulate the stock price downwards by short selling in huge amounts, why aren't there entities, particularly those that are bulls, that exploit the manipulation by aggressively buying up shares thus driving the stock price back up?

 

[UnknownSoldier]

If there are entities that manipulate the stock price downwards by short selling in huge amounts, why aren't there entities, particularly those that are bulls, that exploit the manipulation by aggressively buying up shares thus driving the stock price back up?

We just had a run where the stock price tripled in a matter of weeks...I hope no one here truly believes there was nobody aggressively trying to murder shorty on the way up by trying to force them out of their positions and further amplifying the run up. A number of big-name shorts were forced out during this run: David "I love GM" Einhorn and "He-Who-Must-Not-Be-Named" (aka Bark Smeagol) are two big ones that come to mind.

I'm all for murdering shorty, I got payback with interest for the losses shorty inflicted on me last year and made a lot more besides. But I'm just a single retail investor, riding a wave that was probably being engineered by large entities to drive the share price up.

 

[Singuy]

If there are entities that manipulate the stock price downwards by short selling in huge amounts, why aren't there entities, particularly those that are bulls, that exploit the manipulation by aggressively buying up shares thus driving the stock price back up?

There are, that's why stock price is 700s and not zero. Short sellers+profit takers < shares accumulators = sp price goes up. It's kind of how this auction based stock system work that determines the price.

 

[bigsmooth125]

I understand that. For every seller, there is a buyer. But logically, if one is a bull and knows that there will be some short selling that is disconnected from one's view of the intrinsic value of the stock, wouldn't the bull or bulls always be ready to buy more stock to completely counteract the effect of the short selling? Wouldn't this occur in an efficient market? And if the market is not efficient, why isn't it in these cases?

There are, that's why stock price is 700s and not zero. Short sellers+profit takers < shares accumulators = sp price goes up. It's kind of how this auction based stock system work that determines the price.

 

[elasalle]

Anyone can confirm? has access to Motor Intelligence data?
Looking at Tesla M3 Inventory there hardly any, but deliveries must be happening directly to clients ...

 

[Green Pete]

For those risk takers and options traders here. The Jan 2021 leap calls are under a $1 for a strike of $690. If FC FSD arrives and Shanghai factory outputs good numbers by the end of next year I see no reason why the price can’t explode to at least 750 giving you a 60x return. The Tesla price is always somewhat of a mystery to me but a tripling in price with everything expected over the next year isn’t entirely unreasonable to me. Not a lot of risk for a lot of reward there.

Frankly I feel like if the right things happen there’s no reason it couldn’t explode far more than triple.

Not advice. Just an opinion.

I closed this position either 1 day later or 1 year earlier than I should have but I want to thank everyone who I interacted with individually and everyone whose contributions I have benefited from. Converted about 25% of this to a true long position.

See you at 25k

 

[FrankSG]

I understand that. For every seller, there is a buyer. But logically, if one is a bull and knows that there will be some short selling that is disconnected from one's view of the intrinsic value of the stock, wouldn't the bull or bulls always be ready to buy more stock to completely counteract the effect of the short selling? Wouldn't this occur in an efficient market? And if the market is not efficient, why isn't it in these cases?

I'm speculating here, but maybe it has something to do with these smart buyers gaining nothing from driving up the SP rapidly. They want to accumulate shares for cheap, so probably buy in small quantities spread out over time as to disguise themselves.

The large spikes up are more likely to be people desperate to buy, and shorts being forced to cover, etc.

This could be what happened last week. A lot of longs decided to buy after strong Q4 ER, but did so bit by bit, doing so in a manner that allowed MMs to keep the stock price under their target of $650.

Then on Monday, when the MMs/manipulators started to cover the short position they incurred from keeping the SP under $650, the pressure cooker burst, and the stock shot up tremendously.

 

[FrankSG]

A number of things happened this week:

The week started with a huge delta exposure to rising share price due to a huge open interest in call options (particularly relative to a limited effective free float of investors willing to sell).
People likely increased this call position on Monday triggering share price rise from market makers buying shares to hedge the new options they sold.
This created a delta hedge spiral higher.
While this was happening investors began rolling $ exposure into contracts with lower delta (to keep more leverage and upside potential).

This all continued on Tuesday, except average delta of all options got too high (above 80%) with the vast majority of options deep in the money. This meant the delta feedback from higher prices faded because delta cannot go above 1.

Put option bets increased on Monday but jumped dramatically on Tuesday. Possibly this was all timed by hedge funds (including Citron) to happen at a similar time late in trading which caused the sudden 10% drop (because option market makers who sold puts had to sell shares to delta hedge their position). Some of the increase in put options may have been longs hedging their downside however (and in the process crashing their own shares).

On Wednesday the downside feedback loop had momentum and with the large put options position there was a lot of delta hedging requirement for market makers to sell shares as the price increased.

Right now the market's exposure to the options delta hedging feedback loop is higher than ever. So there is a reasonable chance +-20% days continue. With the direction possibly started by small catalysts such as headlines or people put on or taking off call option or put option bets.


Call Option Open Interest Changes This Week:
View attachment 508500

Put Options Open Interest Changes this week:
View attachment 508501

Net Call minus Put Options Open Interest Trends this week:
View attachment 508502


All these numbers assume 100% of option sellers delta hedge their shares and 100% of option buyers do not (and no not own positions in underlying shares).

This is not the case in reality for several reasons, but these numbers should still be valid directionally whether you assume 50% or 80% of the net delta exposure of the market needs delta hedging.

Reasons why an option may not be delta hedge:

• Market maker to market maker open options for hedging do not have to be delta hedged. If one market maker open a call contract with another market maker to delta hedge some of their other open Tesla call options, then this amplifies the open interest in the market but does not increase net delta exposure of the market. However I doubt this is a huge % of open contracts as a huge book of long and short open call contracts between market makers purely for the purposes of hedging is a very inefficient market. If they did put on option hedges with other market makers they would be incentivised for it to be exactly the same contract, so they don’t end up with a huge book of open contracts with other market makers with different vega, theta exposures etc. In this case, the option market open interest would be reduced by this transaction. The liquidity of the Tesla option market actually makes this more likely given most delta exposure is in liquid contracts where it is easy for market makers to close.
• Options sold for covered calls,
• Call/put spread trades
• Unhedged options sold by investors etc.

Would it be possible to get an update on the "Net Delta Hedge Shares Demand" number after Thursday's trading? I'm quite interested to see what it's at now.

 

[Sparky4life]

Petrol, diesel car sales plummet again as drivers opt, or wait, for electric : Futurology

The comments here are great. Lots of people making that old ICE car last while they save up for a Tesla.

 

[S3XY]

Somehow when Andrew issues his opinion on TV, I have seen really huge moves in the stock right after. I don't know how he does it but he seems to be able influence collude with a lot of MMs.

FTFY

 

[Rashomon]

Model Y is more efficient than Model 3? How do they achieve that?

That’s a very good question. Aerodynamic drag is proportional to the frontal area (A) times the coefficient of drag (Cd in the US and Britain, Cx in Europe). The frontal area has probably increased by almost 15-20 percent, and it’s extremely unlikely the Cd decreased by more than 5 percent, if that — the M3 was already extremely good. So aerodynamic drag has likely increased!
Weight is probably fairly similar. But Tesla is demanding beyond state of the art tire performance from their suppliers, so perhaps the tires have record-setting rolling resistance — if so, you’ll see that on other models soon.

The other possibility is further increases in drivetrain and peripheral efficiency. If so, this should show up on updated M3s soon.

 

[PeterJA]

...If your Tesla position (or ANY position) in your portfolio is >20%, ESPECIALLY if it's massively up because of the recent run up, even more critically if it's an option position...

Thanks for your concern, "very young retail trader"... sincerely, because your post sounds sincere to me.

However, it is highly misleading to lump shares together with options. Surely you know shares don't expire like options do. If TSLA drops 90% (as AMZN did 20 years ago), I will lose zero dollars because I will sell zero shares. I will also lose zero sleep, because I know enough about Tesla to know it's a much safer longterm investment than Amazon was in 2001. Maybe that's the part you're missing.

 

[FrankSG]

Listen from 1:00

From: "Competition is coming"
To: "When it's EVs, it's Tesla. And then yeah... some other people are working on it, but nothing to match."

What a change in perception in the matter of 1-2 months.

 

[The Martian]

Stumbled upon this documentary today that get me started investing in TSLA 7 years ago. Highly recommended if you have not seen it. Smarty shorts couldn’t pick a tougher guy to mess with.

 

[Cherry Wine]

Q1 deliveries anecdotal data point...my Model X order placed earlier this week and originally quoted at 5-7 weeks has been bumped to 2-4 weeks as of today. I’m in California.

 

[generalenthu]

Relentless innovation. If Tesla struggles to keep the Model 3 up with the Y. How will the competition catch up?

I just watched Lex Fridman's interview if Jim Keller. References up thread.

He says how Moore's law has stuck around for a long time, because of a relentless number of improvements from neverending small S curves, materials science, manufacturing process, metallurgy, equipment, and so on. The S curves have run their course on ICE, and just starting on EVs.

Now we see this in action at Tesla. Truly, how can anyone compete?

This is highly recommended if you didn't see yet.

https://www.google.com/url?sa=t&sou...BMAR6BAgKEAo&usg=AOvVaw0VTJzWxrN8ZFOD4xbU2nov

 

[LJS22]

Listen from 1:00

From: "Competition is coming"
To: "When it's EVs, it's Tesla. And then yeah... some other people are working on it, but nothing to match."

What a change in perception in the matter of 1-2 months.

Elon’s last podcast made me realize the problem Tesla will cause other automakers. In one part he mentions starting the roadster and they were sent this F team of engineers to help, move along to now and he tells Gali it’s not easy just to throw money at expansion. You have to have good engineers and there’s not a lot of good engineers.

They are really the first company to use their engineering prowess to figure out these batteries and how they work. He mentioned in the earnings call how much they now know.

So while the naysayers are shouting about the competition, the competition has to either find battery specific engineers (basically an empty field), steal Tesla engineers, or just accept what they are given and continue to fall behind Tesla. I haven’t seen an automaker even look at better aerodynamics for their EV’s. They still believe it’s as simple as plug the batteries in and watch it go. Their stubbornness will leave them years behind and nearly bankrupt their companies.

At some point you have to understand that Tesla is making a $35k EV and posting profits, while it would cost you atleast $65k to do the same