TSLA Market Action: 2018 Investor Roundtable

[Dan Detweiler]

I wonder why 430 calls (not 420?) exp dec were most bought. They must be expecting a massive squeeze. I remember there were some earlier posts today about the call spread being really out of whack. Obviously something going on

Nah...they're just uping their canibus useage a bit. LOL!

Dan

 

[shlokavica22]

33 million shares short interest is a lot, so there must be a couple of really, really big short positions - and I'm not sure it's all just Chanos's.

Chanos' short fund is ~2B total if I remember correctly. Ihor Dusaniwsky mentioned recently that there are multiple big players on the short side.

 

[Fact Checking]

Chanos' short fund is ~2B total if I remember correctly. Ihor Dusaniwsky mentioned recently that there are multiple big players on the short side.

So with an average entry price of $250 ~2B would be roughly 8 million shares short - or an additional 800 million dollars of loss if the price goes from $320 to $420.

That still leaves another 25 million shares short unaccounted for.

Compared to today's $320 price going to $420 would add 3.3 billion dollars of permanent losses to short positions - and that only if they are able to post 3.3 billion dollars of additional collateral to maintain a short position at $420, to exit in an orderly fashion at those levels.

That's going to hurt ...

 

[beachbum77]

So with an average entry price of $250 ~2B would be roughly 8 million shares short - or an additional 800 million dollars of loss if the price goes from $320 to $420.

That still leaves another 25 million shares short unaccounted for.

Compared to today's $320 price going to $420 would add 3.3 billion dollars of permanent losses to short positions - and that only if they are able to post 3.3 billion dollars of additional collateral to maintain a short position at $420, to exit in an orderly fashion at those levels.

That's going to hurt ...

Don't assume anyone has a large naked position. They protect themselves with options contracts as insurance policies.

 

[The Blue Owl]

Don't assume anyone has a large naked position. They protect themselves with options contracts as insurance policies.

All those options are doing is spreading the risk to those participants who provide the insurance. Losses don’t magically disappear. Collectively, the set of those thinking the price wont’t rise lose the same total amount.

AIG was hard hit in 2008.

 

[Fact Checking]

I wonder why 430 calls (not 420?) exp dec were most bought. They must be expecting a massive squeeze. I remember there were some earlier posts today about the call spread being really out of whack. Obviously something going on

So this is how Bloomberg characterized the position:

While the amounts involved are small -- about 3,000 options worth $1.3 million changed hands -- it suggests at least some investors see a chance for Tesla to shake off its recent difficulties.​

3,000 call options represent 300,000 shares worth $129m at $430 price levels - and any profits (and market effects) will scale with that position size, not with the initial purchase price of $1.3m.

Regarding the $430 strike price: if what you speculate on is a larger short squeeze then what you want is maximum leverage. The 2018 Dec $430 strike price options were sold at a price of about $4.3, while the $420 would have cost about ~$6, reducing leverage by 30-40%.

If you want to maximize the return on a large short squeeze then the $470-ish strike price is better, it will lever up 2x-3x more than $430 or $420.

A $430 call could still be used to break even if there's no short squeeze but if the $420 buyout materializes: if there are price spikes to above $434 - which is not unreasonable to expect even if a short squeeze does not materialize, as shorts will be covering out of phase with institutional investors selling their stakes in Tesla.

But also note that buying ~300,000 shares worth of call options could also be a protective hedge for a 300k shares short position, to cap short position losses at $430.

 

[Fact Checking]

Don't assume anyone has a large naked position. They protect themselves with options contracts as insurance policies.

Firstly, what you are talking about are not 'naked short positions' (which denote short positions without a backing loan of matching shares), but 'unhedged short positions' - and there's a big difference. Naked short positions are illegal, while unhedged short positions are common: the only requirement to create a short position is to post 102% of cash collateral on a mark-to-market basis.

Secondly, which idiot of an investment bank or market maker is going to sell shorts such a get-out-of a jail card and eat all the huge losses if a large short squeeze materializes??

Such out of the money options quickly get expensive if purchased in quantities, and if we sum up all the current $420+ call options open interest there's not nearly enough of these contracts to protect all the short interest ... (And that calculation makes the unrealistic assumption that all of the options contracts protect shorts and are not leveraged long positions.)

So options chain open interest data suggests that more than half of the 33 million short shares are not hedged with options.

I.e. most of them are probably bear-trapped at $320 price levels, without most of them having hedges, and a $420 buyout price is going to hurt them big time.

 

[Xorbit]

Does anyone here know or have good guesses about the position sizes of the biggest TSLA shorts? 33 million shares short interest is a lot, so there must be a couple of really, really big short positions - and I'm not sure it's all just Chanos's.

Tesla has issued a lot of convertible debt ($11.5B I think), so some (a lot?) of the short interest could be a convertible arbitrage play as opposed to unhedged shorts*.

* Edited from "naked shorts" - thanks Fact Checking

 

[Fact Checking]

Tesla has issued a lot of convertible debt ($11.5B I think), so some (a lot?) of the short interest could be a convertible arbitrage play as opposed to naked shorts.

That debt has to be decomposed:

• Big part of the debt are short term credit lines or secured loans that have no equity relevance
  
• There's $1.8b of 2025, $1.0b of 2022 and $1.4b of 2021 convertible notes - but it's very inefficient to hold a short position for such a long time so I don't think those are in play as short hedges, yet.
  
• There's $0.23b of 2018 notes due in November, inherited from Solar City - but the conversion price of $560 is (way) too high.
  
• The only convertible notes left which might have a short interest effect are the March-2019 notes with a face value of $920m, which at a $360 conversion price represent about 2.5 million TSLA shares.

I.e. I don't think those 2.5 million shares-equivalent convertible notes are large enough to be a big factor in the short interest.

The most obvious arbitrage play with those 2019 notes would be to start "shorting against the box" at around $360, but I'd expect those positions to be pretty short term - while much of the TSLA short interest (about 30 million shares) has been around for a long time.

The much better feature of those 2019 notes would be to use their call option property: above $360 they'll start generating some serious money. At $420 they give a 16% return which is really nice for bonds. Then, if the price spikes significantly above $420 those profits can be taken by taking a short position and triggering the conversion of the shares.

 

[SwTslaGrl]

"Waymo is setting up shop in Shanghai,"
"The filing was dated May 22, but was first disclosed this week by a Shanghai-based state media outlet."
WSJ

 

[NicoV]

I recommend to login into reddit only when you want to post something. It's a general recommendation for most of the social sites.
If you allowed to build a history=profile on you, you will be bombarded with such targeted crap all the time.

If you’re a European citizen, GDPR gives you the right to opt out of such targeted advertising (and any site accessible,to Europeans should comply)

 

[winfield100]

Just to make sure this came through: it was a joke - I have no idea whether UBS has any TSLA short position. I also have no idea what their motivation is to out-FUD even Chanos.

Does anyone here know or have good guesses about the position sizes of the biggest TSLA shorts? 33 million shares short interest is a lot, so there must be a couple of really, really big short positions - and I'm not sure it's all just Chanos's.

Ah, thank you. I have apparently a major short freaking out at me to the point it seems of needing virtual depends, (adult diapers) and demanding proof. The guy brags he does hundreds of trades, makes 10's of thousands of dollars, rapid trades, is quite arrogant, has a group of 9 people helping him, graduated from high school around 1965 and has a trading desk may would envy, and is extremely distressed about Tesla going private. a nice guy all around in every way. I will have to inform my source was making a joke and kidding. they have no sense of humor when faced with Billions in losses it seems. i just crunch numbers.

 

[KarenRei]

"Waymo is setting up shop in Shanghai,"
"The filing was dated May 22, but was first disclosed this week by a Shanghai-based state media outlet."
WSJ

In "overvalued companies" news, Waymo is worth an estimated $175B (Morgan Stanley), over three times Tesla's market cap.

 

[Skryll]

Chanos' short fund is ~2B total if I remember correctly. Ihor Dusaniwsky mentioned recently that there are multiple big players on the short side.

So if somebody shorts a company by more than 5% if its shares, do they have to declare that also as when somebody buys more than 5% of shares ?

 

[Xorbit]

So if somebody shorts a company by more than 5% if its shares, do they have to declare that also as when somebody buys more than 5% of shares ?

"Notifying a short position
Notification must be made of any position attaining 0.2% of the issued share capital, and of every subsequent 0.1% above this threshold. Notifications from 0,5% and each 0.1% above are made public via the register short selling"
Notification of net short positions

 

[generalenthu]

"Notifying a short position
Notification must be made of any position attaining 0.2% of the issued share capital, and of every subsequent 0.1% above this threshold. Notifications from 0,5% and each 0.1% above are made public via the register short selling"
Notification of net short positions

No such rule exists in the US equities space. Why post Dutch info that is irrelevant.

 

[Xorbit]

No such rule exists in the US equities space. Why post Dutch info that is irrelevant.

My bad. I should have checked the source of the link. Just trying to help.

 

[X Fan]

FUDster stories out in some force today from WSJ, NY Post, Apple forums with topics: Elon “blank” show, loss of talent to Apple, etc.

I gather with production stats firming and some go private momentum emerging they have to go back to disinformation.

 

[KarenRei]

FUDster stories out in some force today from WSJ, NY Post, Apple forums with topics: Elon “blank” show, loss of talent to Apple, etc.

I gather with production stats firming and some go private momentum emerging they have to go back to disinformation.

It's all too easy for journalists to find a few random disgruntled employees and then plaster the media with front-page stories based on them. Hope their new PR firm can get to work ASAP. Let's see if they're worth their money.

Kind of wonder if it might be worthwhile to have a pollster with a good reputation (Gallup or their ilk) anonymously survey Tesla employees. Obviously can't be an internal poll, or nobody would give it credence, but an external entity can lend credibility.

 

[avoigt]

FUDster stories out in some force today from WSJ, NY Post, Apple forums with topics: Elon “blank” show, loss of talent to Apple, etc.

I gather with production stats firming and some go private momentum emerging they have to go back to disinformation.

Same her ein Germany: Don't click the link its German. I add the links just as prove that I did not make this up

Die Welt a highly recognized newspaper. Conservative and known for good reporting and balanced views.

Its full of made up false narrative.

Quote:

"A disappointing and partly dangerous test drive"

"The Display is a disappointment. The fine chiselt Graphic looks obsolete"

"... the Handling did not impress us...."

" No fun with the breaks, spongy and insensible..."

" .... the car rolls hard and is uncomfortable..."

"It is also due to the price policy that the demand for the Model 3 in the US has massively broken down. It did go around quickly that they have problems with delivery and customers who received one have problems with it"

Tesla Model 3 im Test: Dieses E-Auto ist eine Enttäuschung - WELT

Unfortunately thats not the only hit and fud piece these days. The UBS article as used for another one.

Articles are full with made up and easily to prove complete wrong content. Just think about it, they really claim that the demand for the 3 in the US has been breaking down.

Unbelievable!