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TSLA Market Action: 2018 Investor Roundtable

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I generally feel like people referencing things like Max Pain never bother to notice it never works.

The max pain pricing phenomenon seems to be working reasonably very well when open interest is significant and the Friday is reasonably quiet - but those are only certain expiries on TSLA: the quarterlies, but also the yearly options where both shorts and longs tend to gang up well in advance - these also tend to be the most traded, most liquid expiries.

For example the September 21 expiry had a huge open interest of 353K PUTs and 171K calls and the closing price came within $1 of the max pain price, and there was some significant volume in the last minute before closing where market makers appeared to have been flushing their inventory.

Most other expiries are 'boring' in this regard and I agree with you that in the typical case fundamentals, the macro environment, technical trends and of course big buyer/seller flows would overwhelm any max pain forces. This is the case for 90% of the TSLA options expiry dates.

Also note that I disagree with the very common anthropomorphizing interpretation of the 'max pain' phenomenon: IMO the force is really just the net effect of delta hedging inventory movements of asymmetrically positioned options market makers (there are dozens), not some 'intentional' price action intended to 'hurt' anyone explicitly.

So in that sense I'd rather define it as the 'equilibrium price of delta-hedge inventory management in multi-market-maker options markets' or so, but it's quite a mouthful and nobody would recognize what I mean. :D

So, with all that in mind I'd expect the price action leading up to January 18 to be truly spectacular one way or another: there's no clear max pain equilibrium price visible yet and about ~10 million shares heavy TSLA inventory will be sloshing around in the fuel tanks during max-Q. ;)

February 15 will probably have very little max pain price effect, with just ~25k of open interest currently.

Ah, and tomorrow's (Oct 19) expiry probably explains the overtime work of Dana and Linette as well to manufacture FUD and yesterday's attempted bear raid: 264K PUTs, 151K CALLs - every $1 dip is worth millions:
Code:
 PUT $ 25: 22,228, CALL $ 25:      2
 PUT $ 30:  4,582, CALL $ 30:      0
 PUT $ 35:  5,028, CALL $ 35:      0
 PUT $ 40:  6,469, CALL $ 40:      0
 PUT $ 45:  4,604, CALL $ 45:      0
 PUT $ 50: 67,499, CALL $ 50:      2
 PUT $ 55:    343, CALL $ 55:      0
 PUT $ 60:    572, CALL $ 60:      8
 PUT $ 65:    243, CALL $ 65:      0
 PUT $ 70:    964, CALL $ 70:      0
 PUT $ 75:  6,029, CALL $ 75:      0
 PUT $ 80:    356, CALL $ 80:      9
 PUT $ 85:    824, CALL $ 85:      0
 PUT $ 90:  1,134, CALL $ 90:      0
 PUT $ 95:  1,073, CALL $ 95:      0
 PUT $100:  9,592, CALL $100:      1
 PUT $105:    521, CALL $105:      0
 PUT $110:    606, CALL $110:      1
 PUT $115:    444, CALL $115:      0
 PUT $120:  2,117, CALL $120:      1
 PUT $125:  1,535, CALL $125:      0
 PUT $130:  1,735, CALL $130:      1
 PUT $135:  1,241, CALL $135:      0
 PUT $140:  1,448, CALL $140:      3
 PUT $145:    942, CALL $145:      1
 PUT $150:  6,229, CALL $150:      5
 PUT $155:    637, CALL $155:      0
 PUT $160:  1,260, CALL $160:     30
 PUT $165:  1,126, CALL $165:     12
 PUT $170:  2,739, CALL $170:      4
 PUT $175:  4,937, CALL $175:      1
 PUT $180:  3,938, CALL $180:      4
 PUT $185:  1,051, CALL $185:      2
 PUT $190:  1,743, CALL $190:      2
 PUT $195:  1,080, CALL $195:      9
 PUT $200: 11,253, CALL $200:    268
 PUT $205:  2,173, CALL $205:     24
 PUT $210:  1,911, CALL $210:      6
 PUT $215:  2,161, CALL $215:     26
 PUT $217:    125, CALL $217:      0
 PUT $220:  3,015, CALL $220:    324
 PUT $222:    122, CALL $222:      7
 PUT $225:  2,881, CALL $225:    107
 PUT $227:    287, CALL $227:     27
 PUT $230:  2,596, CALL $230:    141
 PUT $232:    437, CALL $232:     65
 PUT $235:  1,391, CALL $235:     57
 PUT $237:    336, CALL $237:     40
 PUT $240:  4,833, CALL $240:    236
 PUT $242:    481, CALL $242:    436
 PUT $245:  1,674, CALL $245:    230
 PUT $247:    956, CALL $247:    458
 PUT $250:  8,558, CALL $250:  1,060
 PUT $252:  1,279, CALL $252:    459
 PUT $255:  2,609, CALL $255:    682
 PUT $257:  1,410, CALL $257:    656
 PUT $260:  4,336, CALL $260:  1,766
 PUT $262:    964, CALL $262:    685
 PUT $265:  2,014, CALL $265:  1,543
 PUT $267:    655, CALL $267:    993
 PUT $270:  4,521, CALL $270:  4,417
 PUT $272:    512, CALL $272:  1,479
 PUT $275:  3,129, CALL $275:  3,474
 PUT $277:    559, CALL $277:  1,832
 PUT $280:  4,012, CALL $280:  6,513
 PUT $282:    279, CALL $282:  3,311
 PUT $285:  1,145, CALL $285:  3,657
 PUT $287:    216, CALL $287:  1,073
 PUT $290:  2,218, CALL $290:  6,839
 PUT $292:    323, CALL $292:  1,005
 PUT $295:  1,253, CALL $295:  2,270
 PUT $297:    296, CALL $297:    830
 PUT $300:  5,607, CALL $300:  9,014
 PUT $302:    539, CALL $302:    902
 PUT $305:    802, CALL $305:  1,972
 PUT $307:    454, CALL $307:  1,229
 PUT $310:  3,014, CALL $310:  5,734
 PUT $312:    161, CALL $312:    677
 PUT $315:    554, CALL $315:  2,419
 PUT $317:     85, CALL $317:    584
 PUT $320:  1,496, CALL $320:  4,991
 PUT $325:  1,004, CALL $325:  6,356
 PUT $330:  1,083, CALL $330:  5,277
 PUT $335:     83, CALL $335:  1,251
 PUT $340:  1,656, CALL $340:  4,593
 PUT $345:    100, CALL $345:    849
 PUT $350:  1,617, CALL $350:  9,973
 PUT $355:     43, CALL $355:  2,413
 PUT $360:    381, CALL $360:  4,313
 PUT $365:    441, CALL $365:    846
 PUT $370:    579, CALL $370:  1,470
 PUT $375:     40, CALL $375:  1,184
 PUT $380:    280, CALL $380:  2,359
 PUT $385:    225, CALL $385:    798
 PUT $390:    207, CALL $390:  1,603
 PUT $395:     17, CALL $395:    613
 PUT $400:    160, CALL $400:  4,676
 PUT $405:     50, CALL $405:    382
 PUT $410:    180, CALL $410:  2,188
 PUT $415:     25, CALL $415:    930
 PUT $420:    114, CALL $420:  2,584
 PUT $425:      3, CALL $425:    491
 PUT $430:      9, CALL $430:    546
 PUT $435:      7, CALL $435:    656
 PUT $440:      5, CALL $440:    651
 PUT $445:      0, CALL $445:    250
 PUT $450:      9, CALL $450:  1,531
 PUT $455:      0, CALL $455:    201
 PUT $460:      0, CALL $460:  1,261
 PUT $465:      0, CALL $465:    200
 PUT $470:      0, CALL $470:    200
 PUT $475:      0, CALL $475:    130
 PUT $480:      0, CALL $480:    479
 PUT $485:      0, CALL $485:     11
 PUT $490:      0, CALL $490:    420
 PUT $495:      0, CALL $495:     26
 PUT $500:      0, CALL $500:  1,075
 PUT $505:      0, CALL $505:    114
 PUT $510:      0, CALL $510:    369
 PUT $515:      0, CALL $515:      3
 PUT $520:      1, CALL $520:    182
 PUT $525:      0, CALL $525:     50
 PUT $530:      0, CALL $530:    165
 PUT $540:      1, CALL $540:    412
 PUT $550:      0, CALL $550:  1,730
 PUT $560:      0, CALL $560:  3,959
 PUT $570:      0, CALL $570:    665
 PUT $580:      0, CALL $580:    523
 PUT $590:      0, CALL $590:    423
 PUT $600:      0, CALL $600:  4,710
 PUT $610:      0, CALL $610:      0
 PUT $620:      0, CALL $620:     10
 PUT $630:      0, CALL $630:      0
 PUT $640:      0, CALL $640:      1
 PUT $650:      0, CALL $650:  1,067

Note the significant near-the-money PUT interest in keeping the TSLA price below $280, with incremental advantages in keeping it below $270, $260, $250 if possible, with an almost quadratic increase in short seller income as these barriers of support are broken.

Manufacturing a drop from $280 to below $250 would bring an incremental windfall of $50m for about 35K PUT options contracts in that price range, and another $3.5m for every $1 below that price.

There's also about 25K PUT options at higher price levels - so the per $1 gain below $250 is about $6m per $1 drop - quite the profit motive to make that happen through whatever means necessary ...

Anyway, tomorrow's maximum pain price point is around $275-$285 currently, centered around $280, so unless something big happens in the fundamental or macro space, or shorts use up a lot of dry powder with the risk of holding it across the weekend I'd expect the TSLA price to trend towards that. Or not! :D

And I guess the SEC is sleeping at the wheel again - or are they planning to give Tesla anti-investor shorts a helping hand again? ;)
 
Last edited:
I don't see how it is an end-run around it. Tesla can't accept reimbursement, directly or indirectly, from any source. My fear is that if Elon follows through with the plan the SEC will jump on it and invalidate the settlement. Putting us in way worse shape.
Since when buying Tesla shares became reimbursement of any kind? Is TSLA going bonkers next week? Why I didn't see that?\
But seriously guys, you look too much at the same dot. If you look too long you will see shadows where there is none.
As the 8K says Tesla is going to pay the fine by issuing new shares. Musk warrants buying the shares at the market price.
The point is to avoid any possible speculations on TSLA price. Nothing more. Obviously Musk is not going to loose money, obviously TSLA is going to get dilluted, obviously that Tesla cash ballance is not going to get affected. Period. Move on.
 
The max pain pricing phenomenon seems to work reasonably very well when open interest is significant - but those are only certain expiries on TSLA: the quarterlies, but also the yearly options where both shorts and longs tend to gang up well in advance - these also tend to be the most traded, most liquid expiries.

For example the September 21 expiry had a huge open interest of 353K PUTs and 171K calls and the closing price came within $1 of the max pain price, and there was some significant volume in the last minute before closing where market makers appeared to have been flushing their inventory.

Most other expiries are 'boring' in this regard and I agree with you that in the typical case fundamentals, the macro environment, technical trends and of course big buyer/seller flows would overwhelm any max pain forces. This is the case for 90% of the TSLA options expiry dates.

Also note that I disagree with the very common anthropomorphizing interpretation of the 'max pain' phenomenon: IMO the force is really just the net effect of delta hedging inventory movements of asymmetrically positions options market makers, not some 'intentional' price action intended to 'hurt' anyone explicitly.

So in that sense I'd rather define it as the 'equilibrium price of delta-hedge inventory management in multi-market-maker options markets' or so, but it's quite a mouthful and nobody would recognize what I mean. :D

So, with all that in mind I'd expect the price action leading up to January 18 to be truly spectacular one way or another: there's no max pain equilibrium price visible and about ~10 million shares heavy TSLA inventory will be sloshing around in the fuel tanks during max-Q. ;)

February 15 will probably have very little max pain price effect, with just ~25k of open interest currently.

Ah, and tomorrow's (Oct 19) expiry probably explains the overtime work of Dana and Linette as well to manufacture FUD and yesterday's attempted bear raid: 264K PUTs, 151K CALLs - every $1 dip is worth millions:
Code:
 PUT $ 25: 22,228, CALL $ 25:      2
 PUT $ 30:  4,582, CALL $ 30:      0
 PUT $ 35:  5,028, CALL $ 35:      0
 PUT $ 40:  6,469, CALL $ 40:      0
 PUT $ 45:  4,604, CALL $ 45:      0
 PUT $ 50: 67,499, CALL $ 50:      2
 PUT $ 55:    343, CALL $ 55:      0
 PUT $ 60:    572, CALL $ 60:      8
 PUT $ 65:    243, CALL $ 65:      0
 PUT $ 70:    964, CALL $ 70:      0
 PUT $ 75:  6,029, CALL $ 75:      0
 PUT $ 80:    356, CALL $ 80:      9
 PUT $ 85:    824, CALL $ 85:      0
 PUT $ 90:  1,134, CALL $ 90:      0
 PUT $ 95:  1,073, CALL $ 95:      0
 PUT $100:  9,592, CALL $100:      1
 PUT $105:    521, CALL $105:      0
 PUT $110:    606, CALL $110:      1
 PUT $115:    444, CALL $115:      0
 PUT $120:  2,117, CALL $120:      1
 PUT $125:  1,535, CALL $125:      0
 PUT $130:  1,735, CALL $130:      1
 PUT $135:  1,241, CALL $135:      0
 PUT $140:  1,448, CALL $140:      3
 PUT $145:    942, CALL $145:      1
 PUT $150:  6,229, CALL $150:      5
 PUT $155:    637, CALL $155:      0
 PUT $160:  1,260, CALL $160:     30
 PUT $165:  1,126, CALL $165:     12
 PUT $170:  2,739, CALL $170:      4
 PUT $175:  4,937, CALL $175:      1
 PUT $180:  3,938, CALL $180:      4
 PUT $185:  1,051, CALL $185:      2
 PUT $190:  1,743, CALL $190:      2
 PUT $195:  1,080, CALL $195:      9
 PUT $200: 11,253, CALL $200:    268
 PUT $205:  2,173, CALL $205:     24
 PUT $210:  1,911, CALL $210:      6
 PUT $215:  2,161, CALL $215:     26
 PUT $217:    125, CALL $217:      0
 PUT $220:  3,015, CALL $220:    324
 PUT $222:    122, CALL $222:      7
 PUT $225:  2,881, CALL $225:    107
 PUT $227:    287, CALL $227:     27
 PUT $230:  2,596, CALL $230:    141
 PUT $232:    437, CALL $232:     65
 PUT $235:  1,391, CALL $235:     57
 PUT $237:    336, CALL $237:     40
 PUT $240:  4,833, CALL $240:    236
 PUT $242:    481, CALL $242:    436
 PUT $245:  1,674, CALL $245:    230
 PUT $247:    956, CALL $247:    458
 PUT $250:  8,558, CALL $250:  1,060
 PUT $252:  1,279, CALL $252:    459
 PUT $255:  2,609, CALL $255:    682
 PUT $257:  1,410, CALL $257:    656
 PUT $260:  4,336, CALL $260:  1,766
 PUT $262:    964, CALL $262:    685
 PUT $265:  2,014, CALL $265:  1,543
 PUT $267:    655, CALL $267:    993
 PUT $270:  4,521, CALL $270:  4,417
 PUT $272:    512, CALL $272:  1,479
 PUT $275:  3,129, CALL $275:  3,474
 PUT $277:    559, CALL $277:  1,832
 PUT $280:  4,012, CALL $280:  6,513
 PUT $282:    279, CALL $282:  3,311
 PUT $285:  1,145, CALL $285:  3,657
 PUT $287:    216, CALL $287:  1,073
 PUT $290:  2,218, CALL $290:  6,839
 PUT $292:    323, CALL $292:  1,005
 PUT $295:  1,253, CALL $295:  2,270
 PUT $297:    296, CALL $297:    830
 PUT $300:  5,607, CALL $300:  9,014
 PUT $302:    539, CALL $302:    902
 PUT $305:    802, CALL $305:  1,972
 PUT $307:    454, CALL $307:  1,229
 PUT $310:  3,014, CALL $310:  5,734
 PUT $312:    161, CALL $312:    677
 PUT $315:    554, CALL $315:  2,419
 PUT $317:     85, CALL $317:    584
 PUT $320:  1,496, CALL $320:  4,991
 PUT $325:  1,004, CALL $325:  6,356
 PUT $330:  1,083, CALL $330:  5,277
 PUT $335:     83, CALL $335:  1,251
 PUT $340:  1,656, CALL $340:  4,593
 PUT $345:    100, CALL $345:    849
 PUT $350:  1,617, CALL $350:  9,973
 PUT $355:     43, CALL $355:  2,413
 PUT $360:    381, CALL $360:  4,313
 PUT $365:    441, CALL $365:    846
 PUT $370:    579, CALL $370:  1,470
 PUT $375:     40, CALL $375:  1,184
 PUT $380:    280, CALL $380:  2,359
 PUT $385:    225, CALL $385:    798
 PUT $390:    207, CALL $390:  1,603
 PUT $395:     17, CALL $395:    613
 PUT $400:    160, CALL $400:  4,676
 PUT $405:     50, CALL $405:    382
 PUT $410:    180, CALL $410:  2,188
 PUT $415:     25, CALL $415:    930
 PUT $420:    114, CALL $420:  2,584
 PUT $425:      3, CALL $425:    491
 PUT $430:      9, CALL $430:    546
 PUT $435:      7, CALL $435:    656
 PUT $440:      5, CALL $440:    651
 PUT $445:      0, CALL $445:    250
 PUT $450:      9, CALL $450:  1,531
 PUT $455:      0, CALL $455:    201
 PUT $460:      0, CALL $460:  1,261
 PUT $465:      0, CALL $465:    200
 PUT $470:      0, CALL $470:    200
 PUT $475:      0, CALL $475:    130
 PUT $480:      0, CALL $480:    479
 PUT $485:      0, CALL $485:     11
 PUT $490:      0, CALL $490:    420
 PUT $495:      0, CALL $495:     26
 PUT $500:      0, CALL $500:  1,075
 PUT $505:      0, CALL $505:    114
 PUT $510:      0, CALL $510:    369
 PUT $515:      0, CALL $515:      3
 PUT $520:      1, CALL $520:    182
 PUT $525:      0, CALL $525:     50
 PUT $530:      0, CALL $530:    165
 PUT $540:      1, CALL $540:    412
 PUT $550:      0, CALL $550:  1,730
 PUT $560:      0, CALL $560:  3,959
 PUT $570:      0, CALL $570:    665
 PUT $580:      0, CALL $580:    523
 PUT $590:      0, CALL $590:    423
 PUT $600:      0, CALL $600:  4,710
 PUT $610:      0, CALL $610:      0
 PUT $620:      0, CALL $620:     10
 PUT $630:      0, CALL $630:      0
 PUT $640:      0, CALL $640:      1
 PUT $650:      0, CALL $650:  1,067

Note the significant PUT interest in keeping the TSLA price below $280, with incremental advantages in keeping it below $270, $260, $250 if possible, with an almost linear increase in short seller income as these barriers of support are broken.

Manufacturing a drop from $280 to below $250 would bring an incremental windfall of $50m for about 35K PUT options contracts in that price range, and another $3.5m for every $1 below that price.

There's also about 25K PUT options at higher price levels - so the per $1 gain below $250 is about $6m per $1 drop - quite the profit motive to make that happen through whatever means necessary ...

Anyway, tomorrow's maximum pain price point is around $275-$285 currently, centered around $280, so unless something big happens in the fundamental or macro space, or shorts use up a lot of dry powder with the risk of holding it across the weekend I'd expect the TSLA price to trend towards that. Or not! :D

And I guess the SEC is sleeping at the wheel again - or are they planning to give Tesla anti-investor shorts a helping hand again? ;)

I'll have to chew on that. It takes some work to move my long running bias against these things. It takes careful attention when trying to find true signal in noise. Even back tested data mining can overfit. Anything mechanical can be exploited particularly with fairly routine algos until it doesn't exist. This may not be convincing. more just stating my position.

For the record I'm also skeptical of the dana/linette theories. I think they might be manipulated with added Twitter and email notes from helpful people with names that rhyme with thanos, but that's about as far as I take it. Linette definitely has a grudge on top. I think reporter DNA typically consists of a certain resistance to industrialists and capitalism and particularly enjoys joining a theoretical resistance movement when Elon pressures them to be more sympathetic. I have seen a lot of people turned to haters who didn't have particularly obvious prior biases. Tesla fans can actually be exceedingly annoying to non inductees and they create a lot of haters with their sort of naive sounding assertions that Tesla will take over everything and Elon knows all since often they don't know much about the car business but rather are tech style investors, bitcoin punters, climate change activists, sci fi fans, etc.
 
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Reactions: Fact Checking
Something is very wrong with the market. Seems that FED meeting spooked everyone. But yesterday the AA and STLD came out with their numbers and outlooks and they looks very good, this should show that manufacturing is strong and everything looks good for economy. what the heck I am missing.
 
For the record I'm also skeptical of the dana/linette theories.

FWIIW, the last time they were this active was the week leading up to the huge September 21 expiry - which is at minimum very interesting timing. Remember that huge drop from $301 to $275 on September 18 and then the rise back on the next day on September 19? It was that week of Sep 21 expiry, and the drop was created by a single news article choosing to disclose old (but not publicly known) information in a very misleading and market-moving fashion, and the price action was IMO magnified by a significant delta-hedging downside volatility effect created by the huge PUT interest expiring shortly.

The SEC eventually granted their wish one day before the Friday expiry of the September 28 options, which was a very profitable day for Tesla anti-investors.

Where in the spectrum of willing co-conspirators to useful fools these journalists are positioned exactly doesn't really matter.

(Something for @Papafox to potentially add to his long list of weird TSLA price action phenomena. ;))
 
sorry i’m not following the last part, could you elaborate? much appreciated
thx
The pay package offered to Musk is a huge carrot specially grown to keep him in Tesla for the next 10 years. The volume and the payments are estimated in the "fair" and "realistic" matter to make it acceptable for Musk. (btw. I believe this evaluation will be reached sooner in no smaller part thanks to the immense inertion of conventional car companies, but it's not important here). The package is designed for Musk by other people, and what we all see is the final revision with his latest "corrections" and it is not something he wanted or expected before March 2018.
To see why March 2018 you have to check his old interviews in 2016, 2017. He intended to step out after Model 3 success.

The procedure itself with corresponding media outfall was stressful, but I believe that it is the understanding of what to come was that "straw".
The understanding that he has another 10 years to deal with all these Q reports etc. crap
And I believe that indeed your support here and in reddit/r and of course public reaction to the JRE podcast had helped him to gain ground.
He obviously reads or at least scans both platforms.
Just some random thoughts.
 
Yeah, Thomas Gorman, former senior counsel to the SEC, has read the complaint and was not convinced the SEC has a case:

'This is the beginning of the road' for SEC vs. Elon Musk, says former SEC counsel

There's a fair amount of hand-wringing before they let him talk though, but then he mostly slaps down the counterarguments.
he has also reached a number of other MM platforms with his Op-ed, so it is not the typical "counter-balance" opinion. More of it he is the voice of SEC investigators and he has quite informative blog.
SEC ACTIONS - A blog covering SEC investigations, Civil and Criminal enforcement Actions, Internal investigations and Related matters.
 
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Reactions: Fact Checking
Something is very wrong with the market. Seems that FED meeting spooked everyone. But yesterday the AA and STLD came out with their numbers and outlooks and they looks very good, this should show that manufacturing is strong and everything looks good for economy. what the heck I am missing.

Two effects:
  • Fed signaling willingness to rise rates,
  • economy doing well increasing inflation expectations.
These are both bearish signals - which is a bit counterintuitive for the second item.
 
So I wake up and check the news, and apparently today we're waiting for a lemur? Okay then.

I feel sorry for junior fund managers who have to argue for increasing their Tesla stakes today because of rumours of "A lemur" ;)

----
And as for that @ma_ma080 "MBS" twitter account, that looks totally fake.
Well to be fair 2 weeks ago he said "Saudi Arabia has a huge deal on October 18 with Tesla" . Could be a coincidence of course.
 
So I wake up and check the news, and apparently today we're waiting for a lemur? Okay then.

I feel sorry for junior fund managers who have to argue for increasing their Tesla stakes today because of rumours of "A lemur" ;)

----
And as for that @ma_ma080 "MBS" twitter account, that looks totally fake.

Don't tell the shorts but lemurs are called like that because of the large eyes and the ancient Romans thought it looks like "Death Ghost" eyes. Can't wait for the moment we hear a story about Elon advised the Tesla Death Ghost is expected today ;) (Lemures)
 
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