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

[generalenthu]

As we stare into how the day is going to unfold, here is an update on the delta hedge inventory. The hedge need estimate (Using 60% or raw numbers below) is a bit shy of 150 million shares (corresponding to the 245 million number today in the table below)

While this is high, we have seen higher levels. This was as high as 290 million raw hedge need, right after the announcement of the stock split. So 245 million is not off the charts number, and we will perhaps hit that threshold if we see prices around 800.

Interesting to note that almost 50% of the gamma (increasing delta with price phenomenon) is from options expiring today (~35 percentage points) and next week (~14 percentage points). As holders of these options sell, that should provide some additional liquidity to the index buyers. I'd say these option holders are well positioned to profit off and provide liquidity at the same time. They represent anywhere from 21 to 36 million shares (net) in at prices ranging from here to 800 (raw numbers would be 35 to 60 million). As a bonus I am also publishing the hedge need by expiry for large moves as things stand today.

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Want to make this a separate post as its an important takeaway. There will be a lot of options unwinding going on during the day. Options cannot be closed on a cross like shares, as far as I can tell. There will be a need for this delta inventory to be absorbed by day traders who will be looking to unload into the closing cross. Again this will induce volatility during the day if we don't have enough front runners. This also means there will be insufficient inventory at the cross, with action spilling over into next week. Brace yourself for a volatile day.

 

[Tslynk67]

Counting my losses. Down about $5k so far today. From exchange rates. About $100k total since March. Around 20%

Good thing my money is not in a US index or it would have been been a negative year.

Yeah, the $ is so weak right now against the € - I thought that with Biden getting in and some political stability coming it would strengthen.

Even though I'm in Europe, I keep my trading accounts in $ and just convert to € as-and-when I need it. Just that now I need some. Painful!

 

[Johan]

8:20 AM and we're already at 1 million shares tradet pre-market, price up 1,6% to $666. Today will be interesting!

 

[Todd Burch]

Everyone’s using the term “volatile”. It makes me nervous.

Rather than saying “it’s gonna be a volatile day”, can we just say “it’s gonna be a bullish AF day”?

There. I feel better now.

 

[strago13]

Here we go! Getting spicy in pre-market

Thank you all for the insights over the years. Should be an epic day no matter the outcome. May the odds be ever in your favor.

 

[Cherry Wine]

Interesting- some deep ITM covered calls (dated 2022) I had sold awhile back were exercised this morning.

 

[Tslynk67]

Good luck y'all!

 

[Johan]

Interesting- some deep ITM covered calls (dated 2022) I had sold awhile back were exercised this morning.

Have you ever experienced that before? (I'm not a seasoned options trader and couldn't sell covered calls since my shares are held with my Norwegian broker while I trade options with a US brokerage, so I couldn't say of this would be common or uncommon. )

 

[TheTalkingMule]

Yeah, the $ is so weak right now against the € - I thought that with Biden getting in and some political stability coming it would strengthen.

Even though I'm in Europe, I keep my trading accounts in $ and just convert to € as-and-when I need it. Just that now I need some. Painful!

The irrational $ strength pre-pandemic was about us selling 13M barrels of oil a day and growing IMO. As a TSLA investor you know.....that's all over now. Petro-dollars in general could be said to be "over" now.

 

[JBRR]

Isn´t it the closing price that is relevant for options expiry?

I was under the impression that the witching expirires all took place on the close, but a recent email distribution from a goldman sachs guy says:

Specifically related to TSLA, yes it's the closing price. But if all this stuff expires on open it will cause some ripples on its own.

 

[Nocturnal]

The parties that be have run the numbers and decided that the market will resolve itself and not go too crazy at the close. I think they are probably discounting how insane Tesla bulls are and our reluctance to sell. If I'm correct it will be fun to watch (and profitable).

 

[TheTalkingMule]

Interesting- some deep ITM covered calls (dated 2022) I had sold awhile back were exercised this morning.

Do I need to be doing somethng with my Fidelity IRA account to make sure contracts aren't executed before I want? Keep hearing these posts about random executions by brokers.

 

[FrankSG]

Can anyone who uses IBKR help me with this?

I have 2 options positions expiring today which, if they end up in the money, I do not have the ability to exercise.

However, I may want to hold these positions until minutes before market close, or even until after market close. Although I may sell them earlier during the day, I may want to sell them during the cross, or even short the stock in AH if the options are ITM, and then buy back the shares through exercising the options.

I just talked to the IBKR trading desk, and was informed that (as I suspected) these positions will be automatically closed by them, because I will be unable to exercise them. As early as 12:30 Chicago time... I asked them to not do so, but the best the person I talked to could do for me is put in a request to the risk department, which he informed me usually isn't granted.

I'm kind of at a loss, because it sounds like IBKR will close these positions automatically as early as 1:30PM if they are ITM. Does anybody know of anything else I can do? Worst thing that could happen is that I lose internet connection, the options expire ITM, and I don't have the margin to exercise them. I don't understand why IBKR would have a problem with this.

 

[CyberDutchie]

Wow, $666.67 just added another digit to my net account value, need to make the column in the spreadsheet a little wider

 

[Congo Line]

Until the past 24 hours, I was not aware of the availability of 'Market Close' orders, which could be useful to trade the closing cross.

TD Ameritrade offers this in their online ordering system.

Vanguard, surprisingly, does not. I called their representative this morning and they said their system was not equipped for it. I told the rep that I was going to transfer my shares pronto. Hard to believe that an institution of their size doesn't have this.

 

[Model S M.D.]

PM Preparty

 

[TheTalkingMule]

Interesting to note that almost 50% of the gamma (increasing delta with price phenomenon) is from options expiring today (~35 percentage points) and next week (~14 percentage points). As holders of these options sell, that should provide some additional liquidity to the index buyers. I'd say these option holders are well positioned to profit off and provide liquidity at the same time. They represent anywhere from 21 to 36 million shares (net) in at prices ranging from here to 800 (raw numbers would be 35 to 60 million).

Wouldn't you expect almost a net increase in contracts today as SP and IV spike? Today in particular since most inclusion play options are 12/24, 12/31, 1/15?

I would think we'll see a tons of covered call writing on a SP spike today and also a ton of put buying from the post-inclusion decline crowd.

 

[Nocturnal]

Do I need to be doing somethng with my Fidelity IRA account to make sure contracts aren't executed before I want? Keep hearing these posts about random executions by brokers.

I think you missed that those were sold contracts so the buyer can exercise them at will.

PM Preparty

Ok but I can't start drinking yet. I have to at least wait until market open which is 830AM for me.

Vanguard, surprisingly, does not. I called their representative this morning and they said their system was not equipped for it. I told the rep that I was going to transfer my shares pronto. Hard to believe that an institution of their size doesn't have this.

Same experience here. "oh, that's a thing? Oh, apparently Vanguard doesn't offer them." I guess you can set a ladder of limit sells to do something similar?

 

[bkp_duke]

Legit question:

How do you put in a limit sale in Fidelity for a share price of like $2000? Fidelity restricts limit prices to 50% above current market price.

I'm a HODLer, but am willing to part with some shares if the price basically triples from where it is now.

 

[15Peter20]

I think you missed that those were sold contracts so the buyer can exercise them at will.

Ok but I can't start drinking yet. I have to at least wait until market open which is 830AM for me.


Same experience here. "oh, that's a thing? Oh, apparently Vanguard doesn't offer them." I guess you can set a ladder of limit sells to do something similar?

Lunchtime here in the UK. Drinking has begun.