TSLA Market Action: 2018 Investor Roundtable

[beachbum77]

beachbum77 You are right. Meant it as a joke.
Looking at 350's myself.

We bought $360's on Monday because we wanted to pay under $1. I see this as a quick payoff. They were already up to $1.20+. We just need a nice upward spike to cash out at close to double.

 

[Fact Checking]

The only time they short or buy shares is when the call/put ratios get out of balance for a particular date.

Donn Bailey, you are missing that there's a lot more PUT options than CALL options in the TSLA chain, the TSLA PUT/CALL ratio is around 2 right now, i.e. there's more than twice as many PUTs as CALLs:

Tesla, Inc. (TSLA) - Put-Call Ratio (Open Interest) (120-Day)

Historically it was also as high as ~3x when it was even more heavily shorted.

This means that all those extra PUTs have risk associated with them that cause market makers to go short in the stock.

There are not enough shares in the float to even cover a fraction of the put count.

That is because a significant proportion are deep out of the money and thus have lower levels of direct delta hedge requirements, plus if expiry is farther away then the hedging requirements are lower as well. Once the price moves closer to their strike prices, or the expiry time gets closer and they are in the money or closer to in the money, they are hedged immediately (and pretty much automatically).

I.e. true net options risk, as measured by market makers, is represented in the current short interest.

There's nothing surprising or unusual about any of this, these are pretty much options trading desk basics.

 

[humbaba]

Looking at today's NIO SP, I wish I would have bought some as well!

I thought I did (put in a market order for this morning), but apparently I failed to confirm the order

Oh well

 

[beachbum77]

Donn Bailey, you are missing that there's a lot more PUT options than CALL options in the TSLA chain, the TSLA PUT/CALL ratio is above 2.1 right now, i.e. there's more than twice as many PUTs as CALLs:

Tesla, Inc. (TSLA) - Put-Call Ratio (Open Interest) (120-Day)

Historically it was also as high as ~3x when it was even more heavily shorted.

This means that all those extra PUTs have risk associated with them that cause market makers to go short in the stock.



That is because a significant proportion are deep out of the money and thus have lower levels of direct delta hedge requirements, plus if expiry is farther away then the hedging requirements are lower as well. Once the price moves closer to their strike prices, or the expiry time gets closer and they are in the money or closer to in the money, they are hedged immediately (and pretty much automatically).

I.e. true net options risk, as measured by market makers, is represented in the current short interest.

There's nothing surprising or unusual about any of this, these are pretty much options trading desk basics.

I agree with your post. I just did not agree that there was a 1 to 1 correlation as you stated in your earlier post. That buying "one put will cause 100 shares to get shorted". There are not enough shares in the float to support that.

 

[beachbum77]

I thought I did (put in a market order for this morning), but apparently I failed to confirm the order

Oh well

You should take a small stake anyway. It has nowhere to go but up. The ES8 is going to do very well in China and NIO like BYD, (that is another EV play we are in) are pure moves to electrification.

NIO is like Tesla in 2008 in my mind. I missed that play. Under $10 per share is a bargain IMHO for any pure EV play.

 

[Fact Checking]

I just did not agree that there was a 1 to 1 correlation as you stated in your earlier post. That buying "one put will cause 100 shares to get shorted".

Your characterization of my comment is simply false, in my comment I very clearly explained it that it's an example for at-the-money options, and that there's non-linearity for out-of-money and long-term options:

For example if $TSLA trades at $300 and a short buys one PUT contract at the money ($300 strike price) with next week expiry, then the market maker who writes the PUT option will almost immediately adjust their inventory and short about 100 shares of $TSLA.

In practice it's more complex than that: due to the non-linearity of options the exact formula depends on how much in or out of the money an option is, and what the expiry time is - but the majority of historic risk of current options is hedged with linear stock. As the price rises or drops, and as time passes, the market makers adjust their inventory as options move closer or farther away.​

If there was a 1:1 mapping then they'd not have to adjust their inventory as the stock price moves...

 

[Ratanpara]

I think these German car makers understand autonomous EV is the future. They just can't figure out a good way to move forward. Autonomous is hard, let's put that aside. They can build decent EVs if they put in the effort. They can build charging networks too.

The real problem is what to do with the current cash cow. VW makes $10B profit each year. If they introduce good EVs, their customers will quickly find out EVs are much better than ICEs. They will have a hard time to sell ICE vehicles. So from money point of view, their best approach is to only talk about EVs, but focus on selling ICEs.

The second big problem is that Tesla moves really fast, Mercedes, VW, BMW can't build EVs that's competitive. In 2 months Tesla will start to release autonomous driving features. Next year $35k Tesla is coming. If I were Mercedes's CEO, I wouldn't be able to sleep.

Elon said if he were a legacy carmaker, he couldn't figure out what to do. It's a difficult problem for ICE makers.

Totally aggred, Announcement from ICE makers is cheap but reality is harsh.

 

[HG Wells]

In case no one is watching we are about to go GREEN.

 

[MarcusMaximus]

In case no one is watching we are about to go GREEN.

*did* go green

Also, I like the Yahoo Finance headline published just as Tesla was approaching yesterday's close saying "Tesla slips". Gotta hurry up and get that out there before it goes green!

 

[Yggdrasill]

The Nikola One does not have a front engine either. It is an EV just like the Semi.

A hydrogen vehicle has more waste heat and therefore larger cooling requirements.

A truck requiring 100 kW average on the wheels will produce about 25 kW waste heat if it's a BEV, and about 108 kW waste heat if it's a FCEV (60% FC efficiency). So, it makes complete sense for the Nikola truck to have a grille, while the Tesla truck does not.

 

[X Fan]

Tesla does deliveries in exactly the same way all other companies do. Hiring delivery companies with auto-trains "hauling trucks".

Delivery by trains is extremely slow, and it takes months to complete. Actually all deliveries everywhere are slow, you can check it by looking at sold out models or special orders. If you don't find "your" car at the dealer slot you have to order and wait. Weeks at best.
Tesla delivery practice is not special and definitely it's not worse executed than in any other company. It's actually done by the same people and all reported problems real or not are of exactly same type one can found dealing with any other auto company. Existing "focus on "incapacity" of Tesla to deliver" is ridiculous.

If to look at the waiting times for EV after order in Europe Tesla is actually on a better side.

“Delivery by trains is extremely slow, and it takes months to complete.”

FWIW: both of my X’s were shipped via rail from West Coast to a staging area in the Southeast. Then, they were trucked a moderate distance to South Florida. The process was weeks, not months.

 

[lunitiks]

 

[beachbum77]

Does anyone have any clue why Bloomberg is predicting under 4k per week Model 3 production for the rest of September? I can find no other data to support this.

 

[gora321]

Not following your numbers.

8*60*24*365,24*,10 = $420k/yr

My bad (mistake). Thx.

 

[X Fan]

I believe "sharing the platform" is the only way for ICE manufacturers to proceed, which is a major disadvantage.

The fundamental problem ICE carmakers have is the unpredictability of demand and the unpredictability of the transition from ICE to BEV. The only way to handle that uncertainty is to make sure that the production lines are 'shared' and that these dual-design BEVs where the cells are where the engine is normally can be made as demand shifts. The fundamental paradox: to an ICE carmaker a new BEV sale is also lost ICE vehicle sale, on average.

If they kept separate ICE manufacturing lines, and EV demand rises "too fast" for them and they cannot sell their ICE models, they'd have to run their ICE factories much under capacity, or even be forced to write them off altogether. This would be catastrophic to profits.

The big problem: as Tesla has demonstrated it, a grounds-up BEV design like the Model 3 offers various fundamental advantages, while Mercedes EQC has utility trade-offs due to leaving space for an optional ICE engine: no frunk, reduced interior volume, no sedan version, etc.

Tesla and other pure BEV carmakers don't have these problems: they do not hurt from dropping ICE sales, increasing EV demand is a pure upside for them.

It remains to be seen whether Mercedes will be able to sell these Frankenstein cars that are burdened with ICE legacies, as "premium" vehicles.

Good post.

Fact is market disrupters, particularly in the technology industry, have a significant advantage in not worrying about the “past”.

Wang and DEC (particularly Wang) are in the computer grave yard by not adapting quickly enough to the new paradigm, personal computers.

BMW & Mercedes are very vulnerable since they are taking a half baked approach to market transformation.

 

[beachbum77]

“Delivery by trains is extremely slow, and it takes months to complete.”

FWIW: both of my X’s were shipped via rail from West Coast to a staging area in the Southeast. Then, they were trucked a moderate distance to South Florida. The process was weeks, not months.

Auto deliveries work much like airlines using a hub and spoke system for cross country moves. Trains move the cars across the country to off-loading yard locations like Birmingham, AL and Mira Loma, CA. Then trucks take the cars to the dealers. For shorter, regional routes trucks are used the entire way. It never takes "months" to complete the trip except in rare circumstances related to weather or derailments into isolated areas.

 

[beachbum77]

Just to make sure shorts are not bringing this BS as new fud
View attachment 334635

NOT funny. By this weekend people will lose their lives and $billions in damages will occur thanks to Florence possibly affecting my friends and family. Keep your off-color "humor" in Germany thank you.

 

[scaesare]

3) The Nikola needs the extra width since it has two forward seats instead of the one on the Tesla. The Nikola One is designed for OTR operations for teams and couples who travel together. The Tesla is a day cab designed for a single driver with a jumpseat against the back wall of the cab.

EDIT: I misread @beachbum77 's post. He is indeed correct, I'll leave the pic here for reference.

 

[X Fan]

Auto deliveries work much like airlines using a hub and spoke system for cross country moves. Trains move the cars across the country to off-loading yard locations like Birmingham, AL and Mira Loma, CA. Then trucks take the cars to the dealers. For shorter, regional routes trucks are used the entire way. It never takes "months" to complete the trip except in rare circumstances related to weather or derailments into isolated areas.

Yup, agreed. Previous poster was misinformed.

 

[scaesare]

Design changes to make the battery pack significantly cheaper doesn't sound like a minor thing. It's likely a very big undertaking and Elon is being unrealistically optimistic as usually with timeline.

From earnings conference call, "“We came up with a new design that achieves the same outcome, that’s actually lighter, better, cheaper and we will be introducing that around the end of this year – probably reach volume production on that in Q1 or something. That will make the car lighter, better, and cheaper and achieve a higher range.”

I'll interpret this. If we work our butt off and focus, and everything goes our way, we'll start production of standard range battery packs in late December, and then by end of March reach a decent production rate. But in reality, we'll probably get out the first standard range Model 3s in Q2, with Q3 and Q4 being the quarters that we ramp production.

All that said, Tesla doesn't have much incentive to rush out the standard range Model 3. Rather, Tesla has much, much greater incentive to sell the long-range car with options for as long as they can, and to as many countries as they can so they can make healthy margins.

Thanks for the info and source for it.