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

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If you ever need a silent partner. My only condition is that we name it Tesla Joint Service Centre.

Could be a Tesla and Human body parts replacement facility.

This would be a niche business venture with no competition whatsoever, with promotion to install neuralink chip once in a while to get some new customers walk-in.

Now, we need a business case to see how many Tesla owners need their joints replaced.

Haha
 
Your insights are greatly appreciated. Looks like the 18th may be an especially wild ride during trading hours with so many options expiring that day, with declining delta hedging requirements as calls are sold to close...but still maybe not providing enough supply to satisfy demand.

In a Roth account (no margin available to exercise a bunch of calls)... If one agrees with your view of not enough short term money to satisfy index demand (I assume you’re referring to the auction at close?), does it make sense to hold onto those calls until the last couple of minutes before close?

Would seem nice if I could let them all expire ITM & ask Etrade to immediately exercise them all & sell off only enough shares at this auction price to cover the exercising funding requirements.

edit: Do you have any 12/18 calls? @FrankSG has said he has some, would love to hear any thoughts you & Frank have on them. TIA.

I broadly agree with your premise. I am using January calls for the inclusion play, but these have been purchased for the most part pre S&P announcement a few months ago. I have no thoughts on your specific situation, beyond what you mentioned.
 
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I do get the logic here, but I also see it as flawed.

You can use this logic to talk yourself out of continuing to live indoors (omg - all those mortgage payments that could have been buying TSLA instead), or owning a car of any kind (those car and insurance payments that I could have replaced with a monthly bus pass!), or even eating.

After all, you can always eat more cheaply - get a 25lb bag of beans and rice, and you might get your meal costs under $0.50, even if those meals start getting monotonous or even not so healthy for you.
I believe you just discovered why there are so many homeless camps! They sold everything and invested in $TSLA!

What’s a few years of living off the good graces of society, while the big payoff is right around the corner...
/s
 
I never mentioned a margin call as the concern!

The way I followed the discussion it was about an E-Trade Margin loan at 1.94% against the TSLA shares. The shares keep growing in value and the interest is added to the principle (the share value borrowed).

As long as TSLA is maintaining or rising there is little in the way of costs (~2%) for purchasing whatever is within a "safe" portion of the TSLA value. 10% of the total value was one example that seemed a very reasonable margin loan amount. This leaves plenty of room for drops in SP that might adversly affect things. As long as the SP rise exceeds the interest rate this method is better than selling shares to make a large purchase.

Essentially, this isn't debt because it is being borrowed against an asset, the stock is the collateral. E-Trade makes 1.94% for doing you the favor, but it seems very much like having your cake and eating it too as you can buy something you want while the shares continue to increase in value, covering the cost of interest and over the long run the principle as well.

If I understand this mechanism correctly it is fascinating. Except the hassle of having to move the account to another broker in order to get their attention so they would cough up a good interest rate to get their account back. But, what the heck, not much different that butting heads with a phone company's "retention" department when all else fails.
 
Essentially, this isn't debt because it is being borrowed against an asset, the stock is the collateral. E-Trade makes 1.94% for doing you the favor, but it seems very much like having your cake and eating it too as you can buy something you want while the shares increase in value.

The other advantage is that you don't have to pay tax on the money you pull out and spend.
 
I can confirm this. Was talking to a colleague who worked on the street in a prior life, and he confirmed that index fund managers wishing to minimize tracking error would simply place market on close order. And there are a lot of these.

The net imbalance will only be known a few minutes prior. So a lot of front running will happen earlier. For what it's worth, he himself is positioned for this trade.

Does this mean, it's very likely that we will see a sharp rise/fall a few minutes prior to close?
Will the price movement continue into after hours? That is, keep moving up in after-hours if there aren't enough shares, and down if there are excess?
 
I know what CW thinks and I tend to agree with her. That doesn't mean I want to bet we are right. Sometimes the changes that end up happening are not telegraphed in advance. It's very difficult to predict these things. If you can predict interest rates and are willing to place leveraged bets based on your predictions, you can become very wealthy. If you're wrong you can go broke.

A "relatively small" bet won't make me very wealthy or broke. That's what I and the original poster talked about from the beginning. You reported using options when the betting looked good, so I don't know why you don't like any margin bets. But whatever, to each his own.

And don't worry, I won't go broke if IB raises their interest rate. I'll just change my plan. :)
 
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Since some of you have reached out to me around my new margin rate, here goes:

I've been with E*trade for 8 years, mostly with a company stock plan, but in the past couple years a small margin trading account and very recently a rollover IRA. Once I started to use margin consistently, I realized I needed to research how to lower my cost on it - that's when I found Interactive Brokers and their advertised rate that was about 5.5% lower. I tried to negotiate with E*trade to no avail and so I've decided to move both accounts over to IB and it was a painless and very smooth process (via ACATS transfer, took about 4-5 business days).

Please note that you will NOT be able to trade from start of transfer till end or even +1 business day
.
You might want to wait until Jan with this move, considering TSLA's upcoming party.


A couple days later, an E*trade consultant reached out to me from the Cupertino office via phone call AND email and suggested we have a chat about the move. I told him my primary concern was margin rate, and secondary was customer service wait times. He suggested that we try to get an approval for a rate he got for a client recently (1.94%) and I was excited to do that. A week later, the margin rate got approved and I'm in the process of moving the funds back. IB is blocking the transfer for another week and then should be okay. He is in constant touch with me via email and he suggested we discuss a line of credit on my margin account also, once all is resolved (at supposedly a MUCH better rate than 1.94% on the LoC).

All in all, this was surprising for me as E*trade straight up told me beforehand that they would NOT be able to negotiate.

Also, this is related from Twitter:

View attachment 614789

Needless to say, just this little move back-and-forth saved me more money monthly, than my Model Y payments.
Since I use my margin account as a checking account (house / car / credit card payments), this will help a lot in the long run.

FYI the combined account balance is ~$1M, nothing huge compared to some of yours' out there.

Good luck and I hope you can save some $ with this advice.

Can confirm something similar with TD. Someone higher up called me when I did a large TSLA transfer. Next time I should use it to discuss some of the rates.

I didn't think my position is large enough at any one brokerage though. I was under the impression that you are not on their radar at all until you reach around 100mil+
 
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I can confirm this. Was talking to a colleague who worked on the street in a prior life, and he confirmed that index fund managers wishing to minimize tracking error would simply place market on close order. And there are a lot of these.

The net imbalance will only be known a few minutes prior. So a lot of front running will happen earlier. For what it's worth, he himself is positioned for this trade.

This seems a little crazy - we are talking how many millions of shares that are needed to be bought? Simply placing a market on close order seems impossible to fill with these. Where are all these shares going to come from in the few minutes at market close?
 
I am on margin and plan to reduce it to zero or near zero in 2 weeks.

in March, my problems were exacerbated by the broker changing the requirement that the value of the stock (including shares bought on margin) must be 50% to lower than 30%. So, one may one is safe from a margin call, but if the sugar hits the fan the saying becomes true: Banks will happily loan you an umbrella but want it back when it starts to rain.

I don’t regret my margin. It allowed me to make up for part of my foolishness / inexperience that caused me to lose many shares in March.

I will sleep better. And should there be another crash, that will be a good time for a bit of margin.
 
A "relatively small" bet won't make me very wealthy or broke.

My point about being able to place bets on interest rate movements was simply to highlight that no one knows which way the interest rates will go (if they did know they could easily become very wealthy and if wrong they could go broke). In other words, it means little to me that people expect interest rates will remain low - I don't want to assume they will because it's impossible to know.

You reported using options when the betting looked good, so I don't know why you don't like any margin bets.

I was buying TSLA call options with cash. That's very different from buying anything using a margin loan. The road is littered with investors who thought they could use margin loans safely but found out the hard way that the market is capable of doing unexpected things (and brokers can react to those things by recalling margin loans). The little guy is at a huge disadvantage during such events. I put a high premium on liquidity because it ensures my solvency and autonomy, even through extra-ordinary events. One of the key principles that makes investing so compelling is the ability to use time to weather potential storms. Margin loans have the potential to negate that ability and bring disaster. Sure, at low debt to capital ratios the risks may be low, but not zero, and the debt and leverage compounds the potential losses brought on by such events.

IMO, the next 12 months is at heightened risk of potentially extraordinary market turmoil. That's not going to cause me to sell everything (because no one can predict these events) but it is a good time to reduce leverage and avoid unnecessary risks. I will point out that I was not recommending as much caution back in February as the pandemic was laying it's groundwork.
 
And you never know what that tricky Elon will announce next.
Elon was asked the "what's next?" question directly during the Q&A session at the Axel Springer Awards. The CEO of DHL asked how they can reduce the carbon footprint of their "many" jet cargo planes (32:12).

Fast-fwd to "the answer", (the consequence of what) Elon said is that Civil Airliners with 2,000km range will possible beginning in about 8 years.

Here's how we get there:
  • current Li-Ion bty are a little more than 300 wh/kg
  • a/c need about 400 wh/kg to get 1,000 km range
  • this will become available in about 5 yrs
  • this implies about +6%/yr incr. energy density (GED)
  • prop planes will be 1st to convert, then turboprops, then jets
  • climb req'd means range scales non-linearly w. bty improvements
  • for example, 20% increase in GED gives 100% incr range
  • that's 2,000 km rge for a regional jet w. 480 wh/kg
  • 6% CAGR bty energy density implies 8 years from now
Although he doesn't continue the thought in this interview, it's quite obvious that Elon is thinking about how his companies can be among those that "pioneer" electric aviation. Telsa and SpaceX joint venture seems a natural fit for this task, with the hard part being building the new A/C manufacturing plant (in Texas, of course!)

Cheers!
 
How is the price going to react if there is not enough share for sale?

The closing price mechanism is quite simple: it adds up all the 'sell' orders with their associated 'ask' price, and all the 'buy' orders with their 'asks', then solves for the closing price that MAXIMIZES the number of shares traded (ie: Liquidity).

There is no attempt to fill all orders, just to fill the most orders possible. And this won't just happen on Dec 18. It already happened on Fri, Dec 4th (notice the $5/share price increase in that last 10 minutes of the session?)

This 'end-of-day' runup will almost certainly will happen again on Dec 11, Dec 18, Dec 24, and finally on Dec 31 (as benchmark funds position themselves to close their books for the end-of-year). These are the Options expiry Fridays (extra liquidity), but there's a Closing Auction every single day, so I expect to see these mini-runups more frequently as we approach the S&P 500 addition date of Mon, Dec 21st (which logically may have a very large Closing Auction)

TL;dr It's not just about the Dec 18 Closing Auction. ;)

Cheers!
 
Jason Yang has the latest GF3 update out.

We're starting to see a few trucks parked in the loading bays of phase 2. This gives some more support to MY production being trialed. There's clearly not enough trucks for scale production but it's a good start.
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Attached documents provide the necessary info on the Nasdaq Opening/Closing Cross.

The essential purpose seems to be that by placing large orders for open or close, one can
(1) access enough liquidity to be executed all at once rather than affecting the market price over the course of the day
(2) adjust your limit price during the preceding several minute window based on the subscription-only Net Order Imbalance Information stream.
(3) benefit from "Imbalance-Only Orders" whose express purpose is to add liquidity (presumably via MMs).

The "Opening and Closing Cross threshold" is 10%, meaning that the Cross is restricted to within 10% of the bid-ask midpoint. However, "the threshold range is dynamic; as the Nasdaq Best Bid and Offer (QBBO) changes, the threshold price range changes." My uneducated interpretation is that the SP can change an unlimited amount up until the QBBO stops changing, then it can only move another 10%.

Therefore, the 12/18 Closing Cross presents an enticing opportunity for both sides of the trade. As others are saying, front-runners could create a gap up just prior to close upon the initiation of the Net Order Imbalance Information stream at 3:50pm (we saw a similar movement on Friday), by entering LOC orders with a much higher ask. Index funds must then decide whether to 'get it over with' or wait until 12/21.

Did You Know? "Short selling is permitted during the Cross."

Very informative and answered many of my questions, Thanks.

Also thank Dodger for the term: Closing Auction

Attaching Friday's chart showing the price movement at 3:50PM due to the Net Order Imbalance in the Closing Cross / Closing Auction for future reference.
(from $595.28 at 3:50PM to $599.04 at the close, a rise of 0.63% in 10 minutes)

Closing Cross volume on Friday 12/4 may amount to around 17,885,390 shares based on the sum of three grey boxes showing minute volumes of 7,379,896 at 4PM, 5,253,146 at 4:02PM, and 5,252,348 at 4:27PM. (or, if Cross orders are executed between 4:00 p.m. exactly and five seconds after 4:00 p.m.. then only the 7,379,898 amount)

Also to note that the Closing Cross volume is NOT reflected in CNBC's extended hours volume which only showed 1,272,070 shares traded.

Source: TSLA: Tesla Inc - Stock Price, Quote and News - CNBC



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We're starting to see a few trucks parked in the loading bays of phase 2. This gives some more support to MY production being trialed. There's clearly not enough trucks for scale production but it's a good start.
By trialed, do you mean pre-production line setup, or low rate saleable production?

The MIC Y was been approved for sale by the Chinese authorities in early November. In October, it was rumored deliveries would start in December. Tesla Giga Shanghai Could Soon Begin Delivery of Model Y in China & Europe
So it seems like they are in a saleable production / ramp up stage.
 
Grünheide: Connection for Tesla: More trains and a new bus line

Original German: Anbindung für Tesla: Mehr Züge und eine neue Buslinie

Google Translate:
Tesla is still building its electric car factory, but as early as December 13, its transport links will be significantly improved with the rail timetable change in a first step. Then the trains of the Regional Express RE1 stop twice an hour at the Fangschleuse station in each direction except in the very early morning and late evening. So far, the station, next to which there is nothing but a Greek restaurant, a residential building, a building yard, a carpenter's workshop and two parking spaces, runs every hour. A 20-minute cycle is to be set up in 2022.

With the timetable change, the Oder-Spree bus company will also put a new line 419 into operation, which will connect the stop, which is primarily used by residents of Freienbrink and Grünheide, with the Tesla area and the Freienbrink freight center (GVZ). The bus should reach the Tesla plant in less than five minutes.

The bus timetables, which like the future RE1 can already be viewed in the app and the online presence of the Verkehrsverbund Berlin-Brandenburg (VBB), will initially be “geared towards the needs of the GVZ”, as the VBB announced.

Tesla will use its own buses
When the Tesla factory starts operations, the company plans to set up shuttle buses to the Fangschleuse and Erkner stations at the beginning and end of the shift. It is still being checked whether Tesla buses will stop at Königs Wusterhausen and Strausberg. The RE1, east of Berlin in pre-Corona times used by 15,000 people every day, connects Magdeburg via Brandenburg / Havel and Berlin with Frankfurt (Oder), Cottbus and Eisenhüttenstadt, so it can bring employees from the cities to work at Tesla.

Arne Christiani, non-party mayor of Grünheide, can report on further traffic planning. On December 15th, for example, the municipal council will decide on a development plan that will allow the construction of a road bridge over the railway line.

The bridge is to be built about a hundred meters east of the gated level crossing on Landesstraße 23 at the Fangschleuse stop, and the road will be pivoted accordingly. Because, says Christiani: "When the factory is in full operation, freight trains bring material and fetch finished vehicles, the barriers no longer open."

Breakpoint should be moved
In the medium term, it is planned to relocate the stop around 1.5 kilometers to the west. Christiani: "If 40,000 people work at Tesla in the final stage and 10,000 of them come by train as expected, it is impossible to take them all by bus from the current train station to the factory." From the new station, however, they could work walk away.

Finally, a new state road is planned that will lead on the south side of the railway line from the current Fangschleuse stop to the future Autobahn connection Freienbrink-Nord.

The construction of the Tesla plant can continue in the meantime, although there is not yet a general permit: The State Environment Agency has now approved the installation of a paint shop, subject to the condition of economical water and solvent consumption. Already on Monday it was approved that Tesla may clear another 83 hectares of forest. So far, 92 hectares of pine forest have fallen.