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

[ggr]

Weekend OT options question:

Not a genius with options, but was lucky enough to buy a few Jan 2021 500 calls on a whim that have now appreciated 11,244% (pretty wild to need a thousands separator in your % gain!). So I'm looking for some not-an-advices about what to do now that the dog has caught up with the car. Am I right that the only way to postpone paying taxes would be to exercise the option? If I rolled it, I'd still have to pay taxes on the gain, right?

What might be a good next move? I don't need the cash - would rather keep this pot growing.

Yes, if you roll them you owe taxes on the sale. However if you just keep them for a year and a day they become long term in their own right. They are deep enough in the money that you won't lose very much value holding them for another six months or whatever.
Edit: I hadn't looked at the actual spread. They still have significant time value, as pointed out by @Fact Checking. That changes things a bit.

You say "a few"... maybe a bit of everything. Selling two should be enough money to exercise another and pay the taxes. All this depends on your own situation... maybe game it out with a spreadsheet.

 

[Zero CO2]

Elon is evil I tell ya. He is going to force me to upgrade my 2017 Model S to the longer range one.

390 miles!!

I don't need it...( Never felt range anxiety with current car)...but boy do I want it!

That's his evil plan...make the product so compelling you have no choice but buy.

What a wonderful world we live in.

To the future

Edit....And free unlimited super charging

feeling the same way with My MS 2017 ... must resist the temptation
much better to buy shares with the upgrade $$$ in a few years you can buy the Roadster

not advice

 

[Swampgator]

I’m in the same situation. My 2016 90D seems so old fashioned now. It is really itching to upgrade to the latest 100D. Not that I need the extra range.

Good luck with that. They don't make the 100D

 

[Fact Checking]

Are you suggesting that updating the website to reflect actual ranges, something he already discussed on the earnings call and was extensively reported on, is some out-of-the-blue pump attempt? Are you suggesting that Elon should wait until Q2 to announce changes that are already in production? Why? Are you saying that you expect Q2 to be weak and that Tesla should "hide" in-production changes until then?

For months Tesla did exactly this: physical range was increasing, yet they software locked it, to be unlocked and announced in a single event.

And yes, they could have delayed announcing it, there's nothing nefarious about having range reserves to be unlocked via OTA.

What is weird is your insistence that this clear demand lever cannot possibly have been pulled as a first step to boost S/X demand. That defies logic.

Where are the price cuts? No, seriously. By early February of last year we'd already had two price cuts. It's mid-February.... where are they? We had price increases late last year, and they've not even undone those. In what sort of "demand problem" scenario would there be no change in pricing whatsoever? Margins are superb and could easily support it.

Demand levers as a whole aren't binary, there's a whole range of measures Tesla can use to manage end of quarter demand spikes, and this is one of them.

Price cuts are one of the strongest demand levers, and that they have so far only pulled that lever in China in Q1 is encouraging.

The past, say, 20 days of shipping (same number of ships, 6) has 15,67 loading days, vs 16,95 for the same period last quarter. A 7,6% difference, not a 15% difference, and it's exclusively due to a single ship (Viking Bravery). Asian King is currently loading and looks to be a long load-time ship (only 0,69 days idle at the pier before arrival, doesn't leave for 4 days after arrival), which will lower the difference. Q3 only had 4 ships during this timeperiod because shipping was slower. But if we want to give Q3 more time, and add an extra ship in each direction (Glovis Cosmos and Glovis Tengfei), its total would be 15,86 loading days

Well, you were plotting individual ships, which mixed in small loads like Viking Bravery as well. I offered the "loading days" metric, which has its own imperfections as well.

There are also other metrics that can be used apart from load times (an imperfect metric - as loading delays actually make the metric look better) to estimate the number of vehicles - for example, ship sizes (another imperfect metric, since you never know how full they're loading a ship, or whether the ship was contracted more out of convenience than need). Of the six matching ships this quarter, they're all ~200m long, 4 are 32m wide, one is 36m wide, and one an unusually large 38m wide (one of the largest ships Tesla has ever contracted). We have no gross tonnage figures from either of the larger ships and one of the midsize (~200m x ~32m) ships; the other 3 midsize ships were 50,3kt, 58,3kt, and 59,4kt.

Ship size is a very interesting metric indeed.

Another metric will be the day the last ship is sent: in Q4 this was a record early day, leaving a lot of production capacity for end of quarter U.S. deliveries. We'll see when they are going to send the last ship to Europe.

 

[ggr]

I am also interested and ignorant, so asking questions for a friend:
Would selling a higher priced, say 520 calls with same expiration would postpone USA tax obligation for year 2021?
In the unlikely case the answer is yes, would it remain long term gain or it would turn into short term?
What are the relevant tax laws?

LEAPS (that is, option contracts with expiry more than a year away) can become capital gains in their own right, just like stocks.

However, my understanding is that selling ITM calls against "similar stock" stops the clock on long term capital gains. Definitely consult a tax lawyer about that.

 

[AMN]

Renaissance is the greatest quant trading fund in history. They are not long term holders. They essentially identify mispricings. For them to put on such a huge position indicates TSLA was massively underpriced in Q4.

Agreed. I bet them and Susquehanna are responsible for 50+% of the retirements and call-in-riches on TMC.

 

[Fact Checking]

Renaissance is the greatest quant trading fund in history. They are not long term holders. They essentially identify mispricings. For them to put on such a huge position indicates TSLA was massively underpriced in Q4.

Another possibility is that they mispriced their own option writing strategy, and the hedge of the calls they were writing has now ballooned to a substantial stake in Tesla.

(Famous last word of the quant trader: "oops.")

 

[printf42]

Agreed. I bet them and Susquehanna are responsible for 50+% of the retirements and call-in-riches on TMC.

So you are saying those are hedges for sold calls?

Good thing is many of these calls would have been OTM LEAPs now deep ITM, would likely be held to expiration then exercised into a true long hand.

Hilarious to see naked call sellers became big holders, since they are the true un-fearful bears.

 

[Christine69420]

I imagine there are not many SEK SEK jokes in Sweden; that would be quite dry humour. (SEC SEC even worse of course)

Not sure - the Swedes have a SEK sense of humour!

 

[gerebgraus]

LEAPS (that is, option contracts with expiry more than a year away) can become capital gains in their own right, just like stocks.

However, my understanding is that selling ITM calls against "similar stock" stops the clock on long term capital gains. Definitely consult a tax lawyer about that.

My impression is that indeed selling ITM calls against similar stock stops the clock on long term capital gain. It is not clear to me though whether you need to report the gain same year or you can postpone and reporting the tax for next year.
Logic would indicate that the same applies for options against options but logic and laws do not necessarily work together, so I would be curious to see the actual law.

I will definitely need to consult with a tax attorney, but I would like to prepare before that. I have had experiences with highly rated experts who were BSing. If the expert tells me "I have not encountered this but I will research it for you" I am happy with that. If they tell me they know exactly and they tell something inaccurate then I should look for another expert.

 

[Right_Said_Fred]

Karen and Fact Checking, please don’t kill each other. We need you both, badly.

 

[sundaymorning]

Every car company looks for subsidies, the OEMs are no different:

BMW said to drop plans for Russia factory

FRANKFURT -- BMW has dropped plans to open a factory in Russia after talks with authorities broke down over government subsidies for the facility, a report said.

 

[transpondster]

Or Freemont when talking Tesla.

IIRC it's Freemont in Silicone Valley where Tesla produces electronic cars...

 

[adiggs]

I’m in the same situation. My 2016 90D seems so old fashioned now. It is really itching to upgrade to the latest 100D. Not that I need the extra range.

My 90D Model X has begun thinking it wants to be a 100D. Considering how much technology has advanced in these few years, my counter is to pay off the car loan (3 or 4 more years) AND THEN look at what a new Model X will do. Plaid will be so last year by then

 

[Cosmacelf]

Since it’s the weekend and @transpondster started it.

 

[Artful Dodger]

[400-mile Model S] Possibly even via on OTA Update. GF1/Sparks switched to a new rev. of bty chemisty last fall, so no reason not to do so in Japan at the same time.

TL;dr S/X cars sold since Fall 2019 may already HAVE the larger capacity pack, running in S/W limited mode to avoid Osborning existing S/X inventory. When that's all cleared out, look for a "sale price" on extra range for the S/X already parked in your garage the last few months...

Cheers!

As I predicted here on Jan 29, Tesla Models S/X produced over the last few months use the same updated bty cell chemisty as GF1 2170s (Sep 2019 Rev. C bty pack).

@elonmusk

"All S/X cars made in recent months have actually been above stated EPA range. Will be unlocked soon for free via software update."

9:48 PM · Feb 14, 2020·​

@Cherry Wine yes your brand new Model X (and every other recently built S/X) will have increased rge.

Further, since Tesla is releasing this OTA range increase for free rather than a paid upgrade, I take this as another sign that Tesla's 2020Q1 results are well in hand.

EDIT:

Perhaps all current Raven Long Range models will soon be offered a software upgrade to Long Range Plus for the additional miles? Pure speculation on my part!

Not all Raven LRs but the ones made over the last few month with the new bty cell chemisty. See Elon's tweet and my comment above.

EDIT2:

Interesting way to avoid Osborning. Don’t announce/unlock improvements until several months after they have been implemented.

Not just 'interesting' anymore; this is now Tesla's M.O.

Cheers!

P.S. Thx for the free range, Elon! Also, thx to the 3 TMC'ers who marked my Jan 29 comment 'Informative' or 'Helpful'. @riverFox @ABCTG @Lessmog

 

[AMN]

So you are saying those are hedges for sold calls?

Good thing is many of these calls would have been OTM LEAPs now deep ITM, would likely be held to expiration then exercised into a true long hand.

Hilarious to see naked call sellers became big holders, since they are the true un-fearful bears.

Highly likely. Those guys don’t usually lose, they are the best of the best but they sold an ungodly number of TSLA calls last fall. LEAPs were priced at pennies and then rocketed to hundreds of dollars months later. Hence their giant hedges in stock. Something went horribly wrong with their algos when LEAPs got mispriced to the tune of 10,000%!!!

A word of caution here... what happened in January of 2020 may never happen again with that kind of volatility. What we saw was 2 (or more) of the largest hedge funds in the world making big mistakes. They rarely make those kind of mistakes and rest assured, they learned from this. They employ some of the brightest minds on the planet. This blip will be easily offset by their unmatched ability to extract profit out of their vast amount of proprietary mathematical and statistical data on all markets, all types of equity, and even social sentiment. All in real time. Amazing stuff.

Buy and hold the stock. EmpIrical evidence shows that’s how true wealth is built. The options market is a casino. The house will always win. The insider joke is 90/90/90. 90% of retail traders lose 90% of their money in the first 90 days of trading. If you want to make a quick buck like them, sell options in both directions when the IV is through the roof (100+).

 

[Fred42]

Elon is evil I tell ya. He is going to force me to upgrade my 2017 Model S to the longer range one.

390 miles!!

I don't need it...( Never felt range anxiety with current car)...but boy do I want it!

That's his evil plan...make the product so compelling you have no choice but buy.

What a wonderful world we live in.

To the future

Edit....And free unlimited super charging

Still 200 kW max charging. More improvements to come (as always).

 

[Chickenlittle]

Highly likely. Those guys don’t usually lose, they are the best of the best but they sold an ungodly number of TSLA calls last fall. LEAPs were priced at pennies and then rocketed to hundreds of dollars months later. Hence their giant hedges in stock. Something went horribly wrong with their algos when LEAPs got mispriced to the tune of 10,000%!!!

I word of caution here... what happened in January of 2020 may never happen again with that kind of volatility. What we saw was 2 (or more) of the largest hedge funds in the world making big mistakes. They rarely make those kind of mistakes and rest assured, they learned from this. They employ some of the brightest minds on the planet. This blip will be easily offset by their unmatched ability to extract profit out of their vast amount of proprietary mathematical and statistical data on all markets, all types of equity, and even social sentiment. All in real time. Amazing stuff.

That’s what I told my brother in 2012-2013. This time I believe it will take another third round to make believers out of the shorts. Either believers or destroy them

 

[JRP3]

Bridgewater, Viking among big hedge funds that added Tesla in fourth quarter before rally

Billionaire Ray Dalio’s Bridgewater Associates, Viking Global Investors, and Granite Point Capital were among prominent hedge funds placing new bets on electric carmaker Tesla Inc (TSLA.O) in the fourth quarter, positioning them to gain from its nearly 100% rally over the first six weeks of the year.