TSLA Investor Discussions

[Robert.Boston]

Here's the buy American provision for the DOE. Which I think the article is trying to leverage to create fear. Because nothing like a government crackdown can create the amount of fear needed. notice how it says "applies only to Public works and infrastructures".

Buy American Provision

This Web page contains guidance for financial assistance recipients regarding Buy American Recovery Act provisions under projects funded by the American Recovery and Reinvestment Act of 2009 and administered by the Office of Energy Efficiency and Renewable Energy (EERE).The Buy American provision in the American Recovery and Reinvestment Act of 2009 (section 1605 of Title XVI), ....

While your posting is accurate, it is irrelevant. Tesla's loan was not made pursuant to the ARRA of 2009, and consequently Tesla Motors is not subject to its requirements.

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Yah, its very very surprising. Them being cashflow positive means no more secondaries. That removes a huge risk.

I'm not sure I agree with that statement, but I think I agree with what your underlying conclusion. Cash-flow positive means there won't be anymore "oops, almost ran out of cash there!" secondaries. But faced with very high levels of demand, Tesla may want to invest in some more machine tools and other capital goods, and they may need equity to do that. OTOH, Tesla hasn't tapped the bond market yet, and with a few solid quarters, it should be able to get a decent bond issuance, if needed, to fund future growth.

 

[PureAmps]

The market maker stands to earn 2 mil if Jan 35 call options expire worthless. However, if it is above that amount, they risk having to put up $38 million of cash. That's about one day's worth of volume for Tesla stock. Because of the amount of money that's involved, I am guessing they have a bigger gun reserved for January. If there's a whale here with more than 38 mil, hey, crush them.

That's not how market-making works in the option market. At least not by any market maker that wants to stay in business very long. Market makers manage their position through delta-hedging, that is continually buying/selling the underlying stock to match the current "delta" of the option. When managed correctly, the market maker is guaranteed the "risk-free" return on their money no matter what the price of the underlying security is on option expiration. In other words, the "house always wins".

So for example, the Jan 35 calls currently have a delta of 0.41 as I write this. That means if a market maker were to sell one contract (worth 100 shares) to you, they would have created a negative delta of -41 (-100 * 0.41). So they would immediately buy 41 shares of TSLA, to create a positive 41 delta, netting them a delta neutral position. As the stock price goes up and approaches the option strike price, delta will tend to rise, so they will have to buy more shares. Likewise, as the stock moves away from the strike price delta will fall and they will sell shares. The net of all of this buying/selling of stock and the option premium should be the risk-free rate of return for the market maker. Or so the theory goes (http://en.wikipedia.org/wiki/Black–Scholes).

For an excellent technical discussion on options pricing I recommend:

Options, Futures, and Other Derivatives and DerivaGem CD Package (8th Edition): John C. Hull: 9780132777421: Amazon.com: Books

It is worth every penny, but can be quite technical, so you had better like math.

 

[SteveG3]

just looked up Washington Times on wikipedia. sections on funding and political leanings below:

Funding

The Washington Times has lost money every year that it has been in business. By 2002, the Unification Church had spent about $1.7 billion subsidizing theTimes.[SUP][45][/SUP] In 2003, The New Yorker reported that a billion dollars had been spent since the paper's inception, as Moon himself had noted in a 1991 speech, "Literally nine hundred million to one billion dollars has been spent to activate and run the Washington Times".[SUP][46][/SUP] In 2002, Columbia Journalism Reviewsuggested Moon had spent nearly $2 billion on the Times.[SUP][21][/SUP] In 2008, Thomas F. Roeser of the Chicago Daily Observer mentioned competition from the Timesas a factor moving the Washington Post to the right, and said that Moon had "announced he will spend as many future billions as is needed to keep the paper competitive."[SUP][47][/SUP]

[edit]Political leanings

Times dispenser​

The political views of The Washington Times are often described as conservative.[SUP][48][/SUP][SUP][49][/SUP][SUP][50][/SUP] The Washington Postreported: "the Times was established by Moon to combat communism and be a conservative alternative to what he perceived as the liberal bias of The Washington Post."[SUP][5][/SUP]
Conservative commentator Paul Weyrich has called the Times an antidote to its liberal competitor:

The Washington Post became very arrogant and they just decided that they would determine what was news and what wasn't news and they wouldn't cover a lot of things that went on. And the Washington Times has forced thePost to cover a lot of things that they wouldn't cover if the Times wasn't in existence.[SUP][51][/SUP]
​

In 1999 the Times was criticized by the Daily Howler for misquoting vice-president Al Gore.[SUP][52][/SUP] In 2000 the Howler criticized the Times again, this time for making unsubstantiated allegations about Gore's campaign fundraising.[SUP][53][/SUP] In 2004 the Howler criticized a Times' front page story which made fun of Democratic Party presidential candidate John Kerry's vacationing in France.[SUP][54][/SUP]
Conservative-turned-liberal writer David Brock, who worked for the Times' sister publication Insight on the News, said in his 2002 book Blinded by the Right that the news writers at the Times were encouraged and rewarded for giving news stories a conservative slant. In his 2004 book The Republican Noise Machine, Brock wrote "the Washington Times was governed by a calculatedly unfair political bias" and that its journalistic ethics were "close to nil."[SUP][55][/SUP]
In 2007, the liberal Mother Jones news magazine said that the Times had become "essential reading for political news junkies" soon after its founding, and quoted James Gavin, special assistant to Bo Hi Pak:

We're trying to combat communism and we're trying to uphold traditional Judeo-Christian values. The Washington Times is standing up for those values and fighting anything that would tear them down. Causa is doing the same thing, by explaining what the enemy is trying to do.[SUP][56][/SUP]
​

In a 2008 essay published in Harper's Magazine, historian Thomas Frank linked the Times to the modern American conservative movement, saying:
There is even a daily newspaper—the Washington Times—published strictly for the movement’s benefit, a propaganda sheet whose distortions are so obvious and so alien that it puts one in mind of those official party organs one encounters when traveling in authoritarian countries.[SUP][57][/SUP]In 2009 the New York Times reported:

With its conservative editorial bent, the paper also became a crucial training ground for many rising conservative journalists and a must-read for those in the movement. A veritable who’s who of conservatives — Tony Blankley, Frank J. Gaffney Jr., Larry Kudlow, John Podhoretz and Tony Snow — has churned out copy for its pages.[SUP][35][/SUP]
​

Though not listed, another conservative writer who trained there was New York Times op-ed columnist David Brooks, a Washington Times editorial writer in the 1980s.[SUP][58][/SUP]
The Times has generally opposed gay and transgender rights.[SUP][59][/SUP] In 2010, the Times published an editorial opposing the Employment Non-Discrimination Actbecause it granted legal protective status for transgender people.[SUP][60][/SUP][SUP][61][/SUP][SUP][62][/SUP] The editorial criticized transgender people and said that gender identity can be a choice, not an innate characteristic.[SUP][6[/SUP]

 

[CyberDutchie]

When managed correctly, the market maker is guaranteed the "risk-free" return on their money no matter what the price of the underlying security is on option expiration. In other words, the "house always wins".

Wow, risk-free return. How much starting capital would you need to give up your day job and become a market maker with a decent 6 figure income?

And after you've mastered the market-making trade, how much time per day would you need to put in?

Just dreaming...

 

[PureAmps]

Wow, risk-free return. How much starting capital would you need to give up your day job and become a market maker with a decent 6 figure income?

And after you've mastered the market-making trade, how much time per day would you need to put in?

Just dreaming...

Keep dreaming. The LIBOR and treasury yield curves are the most common proxies for the risk-free rate, so we are not talking about a big rate of return here. The 1-month LIBOR is 0.21% (annualized), so if you were doing this every month that would be your rate of return. So, you would need about $47.6M to make $100k/year. If you already have $47.6M, I think you can find plenty of money managers who could make you a lot more money than that every year.

Of course, real market makers use much more complex hedging across their entire portfolio, operate primarily on margin (they can borrow money at the risk-free rate!), so they get better returns.

 

[Causalien]

That's not how market-making works in the option market. At least not by any market maker that wants to stay in business very long. Market makers manage their position through delta-hedging, that is continually buying/selling the underlying stock to match the current "delta" of the option. When managed correctly, the market maker is guaranteed the "risk-free" return on their money no matter what the price of the underlying security is on option expiration. In other words, the "house always wins".

So for example, the Jan 35 calls currently have a delta of 0.41 as I write this. That means if a market maker were to sell one contract (worth 100 shares) to you, they would have created a negative delta of -41 (-100 * 0.41). So they would immediately buy 41 shares of TSLA, to create a positive 41 delta, netting them a delta neutral position. As the stock price goes up and approaches the option strike price, delta will tend to rise, so they will have to buy more shares. Likewise, as the stock moves away from the strike price delta will fall and they will sell shares. The net of all of this buying/selling of stock and the option premium should be the risk-free rate of return for the market maker. Or so the theory goes (http://en.wikipedia.org/wiki/Black–Scholes).

For an excellent technical discussion on options pricing I recommend:

Options, Futures, and Other Derivatives and DerivaGem CD Package (8th Edition): John C. Hull: 9780132777421: Amazon.com: Books

It is worth every penny, but can be quite technical, so you had better like math.

Thanks for the education, I will look up that book. In this case, then somebody stands to have to put up collateral for 38 million and it's not the Market maker?

 

[ahimberg]

Wrt the cash flow positive statement not having as big of an impact as you might have expected... Not long ago we heard Tesla was hoping to b positive for the month (or that's how I read it, not positive for a day, although hitting a turning point may be what that was what they were talking about)

That's all to say maybe getting positive has already been priced in, until big $$s are known or fully hitting 400 deliveries a week happens there is not new news yet..
Sent from my Lumia 800 using Board Express

 

[JRP3]

What scares me is that the left leaning media are very pro Auto Unions, and the current status quo in the industry, partly because that's how their audience thinks. Until this perception changes, I don't think we will start seeing many newspapers giving much attention to Tesla, simply because it's not what people want to hear.

So much for that theory of the "left leaning" media:

just looked up Washington Times on wikipedia. sections on funding and political leanings below:

The political views of The Washington Times are often described as conservative.[SUP][48][/SUP][SUP][49][/SUP][SUP][50][/SUP] The Washington Postreported: "the Times was established by Moon to combat communism and be a conservative alternative to what he perceived as the liberal bias of The Washington Post."[SUP][5][/SUP]
Conservative commentator Paul Weyrich has called the Times an antidote to its liberal competitor:

The Washington Post became very arrogant and they just decided that they would determine what was news and what wasn't news and they wouldn't cover a lot of things that went on. And the Washington Times has forced thePost to cover a lot of things that they wouldn't cover if the Times wasn't in existence.[SUP][51][/SUP]
​

In 1999 the Times was criticized by the Daily Howler for misquoting vice-president Al Gore.[SUP][52][/SUP] In 2000 the Howler criticized the Times again, this time for making unsubstantiated allegations about Gore's campaign fundraising.[SUP][53][/SUP] In 2004 the Howler criticized a Times' front page story which made fun of Democratic Party presidential candidate John Kerry's vacationing in France.[SUP][54][/SUP]
Conservative-turned-liberal writer David Brock, who worked for the Times' sister publication Insight on the News, said in his 2002 book Blinded by the Right that the news writers at the Times were encouraged and rewarded for giving news stories a conservative slant. In his 2004 book The Republican Noise Machine, Brock wrote "the Washington Times was governed by a calculatedly unfair political bias" and that its journalistic ethics were "close to nil."[SUP][55][/SUP]

 

[jerry33]

That's how it always starts ...

+1. One of my favourite movies too.

 

[PureAmps]

Thanks for the education, I will look up that book. In this case, then somebody stands to have to put up collateral for 38 million and it's not the Market maker?

I'm not sure where your $38M number comes from. But I'll assume you are referring to the 11k open interest on the Jan 35 calls, multiplied by the strike price, which is about $38M. In either case, the "collateral" is usually stock (or options) that is owned as part of the trade.

For example, I frequently write covered calls against stock I already own. In this case the collateral is my stock that I have previously purchased and I'm the one creating new open interest in the option. The other side of the trade may have been taken by another investor or the market maker. If it was another investor, they may be buying on pure speculation, and unhedged. If it was a market maker, they will immediately sell shares short to become delta neutral on their position to manage their risk.

If I were buying calls, it is very similar. The other side of the trade could have been another investor selling covered calls or a spread. If the market maker sold the options, they will buy some shares to become delta neutral. Those shares they purchases are the collateral, same as the case of writing covered calls. If the calls are "in the money" as expiration nears, the delta of the option will approach 1, so at this point the market maker will have already purchased shares (at a price below $35) to fully cover their position through delta hedging. They will simply forgo those profits above $35.

The last case is somebody who writes naked calls that are not covered or hedged. These people are the ones that usually end up bankrupting themselves or their companies (see Nick Leeson - Wikipedia, the free encyclopedia).

It is doubtful the entire open interest of Jan 35 calls is one big naked short by some rogue trader, so the majority of the collateral for those options already exist as long stock and option positions held by investors or market makers. I'm sure the majority of that open interest is covered call writing or the top strike of a vertical spread and are fully covered positions held by investors.

 

[bonnie]

+1. One of my favourite movies too.

And then there's running and screaming.

 

[TEG]

Funny how "ICE" is investigating them.

Yeah... I used to have a custom bumper sticker "Crush the ICE" (Internal Combustion Engine), but now that the acronym is used frequently for "Immigration and Customs Enforcement" I destroyed the sticker out of concern that it could be misinterpreted...

Tesla doesn't want to have anything to do with the "ICE" (either meaning...)

 

[vfx]

Yeah... I used to have a custom bumper sticker "Crush the ICE" (Internal Combustion Engine), but now that the acronym is used frequently for "Immigration and Customs Enforcement" I destroyed the sticker out of concern

Still would be a good sticker for the new Electric Monster truck

 

[agelston]

SA Article about yesterday

Time To Buy Tesla: Cash Flows Turn Positive And Federal Probe Not An Issue - Seeking Alpha

Today has been super boring. Apple is the interesting one today lol.

 

[Lloyd]

Foreign parts investigation against Tesla closed a year ago finding nothing wrong

http://www.torquenews.com/1075/foreign-parts-investigation-against-tesla-closed-year-ago-finding-nothing-wrong

 

[smorgasbord]

Short sentiment is still very high in TSLA. Today I bought a synthetic long position for June at $32 and got $1.35 credit. That's like buying Tesla today at $30.65 with a 7.5 month horizon.

Typically, synthetic longs are enterable at about par for the then going price of the stock. To get a credit on a buy-in at a lower price is, well, nice.

 

[Norbert]

Foreign parts investigation against Tesla closed a year ago finding nothing wrong

http://www.torquenews.com/1075/foreign-parts-investigation-against-tesla-closed-year-ago-finding-nothing-wrong

Although no source is mentioned, the knowledge of the exact date suggests that this can be taken as a confirmation of our interpretation of the article :

The investigation closed on December 22, 2011 (almost a year ago), and in September 2012 the Free Trade Zone status was approved.

EDIT: Actually, the date seems to come from the "investigative memo" linked to in the reference Washington Times Article.
( http://media.washtimes.com/media/misc/2012/12/03/tesla_ig.pdf )

December 22, 2011 is the date on which DOE OIG advised the DHS ICE that they would not investigate the matter any further.

Since in general the DHS ICE will apparently "neither confirm nor the deny the existence of ongoing investigations ", this in itself would not necessarily mean that the DHS ICE investigation was closed as well, however since DHS ICE conducted this investigation as a matter of determining whether Tesla's application for a "sub zone" was valid, and since this application was approved in September 2012, on can safely assume that the DHS ICE investigation had been closed as well.

Whereas the articles manages to present that information in a way that one could easily get the impression that there would be an ongoing investigation and possible wrong-doing. Which there obviously is not.

 

[Norbert]

Here, the authors have been as confused as described above. Written today, they actually think there is an ongoing investigation:

Home Depot To Offer Samsung Products, Tesla Investigated by ICE: Consumer Biz Report | Wall St. Cheat Sheet

 

[Brian H]

...
Whereas the articles manages to present that information in a way that one could easily get the impression that there would be an ongoing investigation and possible wrong-doing. Which there obviously is not.

Indeed. A suspicious mind might suspect stock manipulation. That would be, for example, me.

 

[Mycroft]

Just shows how ridiculously stupid it would be to make investment decisions based on those websites.