TSLA Market Action: 2018 Investor Roundtable

[Carl Raymond]

FUD can be FUD while being true, of course. The F in FUD does not stand for False. It stands for Fear.

Well the most effective FUD selects something true, such as the end of tax credits, then blows it out of all proportion, and fails to mention or glosses over counter points - such as the rapidly declining labour input, increasing margins, overseas markets etc.

This approach protects the journalist who then cannot be proven guilty of outright lies.

 

[tivoboy]

Still doesn't want to close over 355.5$. ;-)

 

[Carl Raymond]

Did anyone notice that the Saudi PIF probably sold their shares, maybe 9 million (~5%). Shorts covered around 9 million from the peak of 38 million.

From now on there should be fewer shares for sale, since everyone expects the price to go up, meaning the shorts will have more problems covering?

I noticed 3 disagrees to this comment. Can somebody clarify pls, does it contain a factual error? The logic seems valid.

 

[Chickenlittle]

Funny, but to answer your question, fortunately, no.



Thank you.

I'm just curious about the scale of risk and exposure to the brokerages/banks themselves were a number of large shorts to be completely wiped out offering no recourse.

If there is reason for concern (I'm thinking of the institutional level, not the level of the short account holder nor the larger systemic level), I wonder how the grown-ups at the brokerages and banks would navigate if they had to unwind the large amount of short interest still out there?

If it wasn’t for a friend was it for you?

 

[Chickenlittle]

Volkswagen could build up to 15 million electric cars over several years on its new electric vehicle production platform, the company said on Friday, adding that its Chief Executive Herbert Diess had misspoken in an interview on Monday.

VW says could build up to 15 million electric cars

They should have left it at 50 million cars, just as likely as 15bmillion

 

[M3Rider]

Note that there's a big jump in implied volatility from 18/Jan/2019 to 15/Feb/2019 calls: the January chain was the earliest LEAP options chain and was used popularly by shorts to bet on Tesla bankwuptcy.

The result is that for example 15/Feb/2019 calls for $400 are currently almost twice as expensive at ~$18 as 18/Jan/2019 calls - which are ~$9.9, there's a lot of short interest included in expectations which are probably not justified anymore. That pricing is probably not justified from a pure time decay POV either (IMHO): it's 91 days vs. 63 days expiry.

So a possible improvement would be to go 18/Jan/2019 calls and then roll them over into February (or later) calls after the January delivery report, to capture the Q4 financial results and 10-Q and the other possible good news.

You could possibly have about 50% higher leverage that way (1.5 times the number of contracts at the same strike price), for roughly the same investment, assuming roughly $350 price levels up to early January. For example right now the 1 month out Dec 14 options at $400 cost around $3. So assuming a trajectory of the stock price of ~$350 up to early January and then a rise, you'd have an effective 90 days cost of $13 instead of $18 - a 40% improvement in leverage.

Of course different stock price trajectories with different outcomes are possible as well: for example a January expiry + roll-over wouldn't capture a string of bad news up to 18/Jan/2019 followed by expectations of a string of good news up to 15/Feb/2018, which would make the roll-over more expensive.

It also depends on how close to the current stock price you intend to have your 15/Feb/2019 call options. Below $400?

Anyway, not advice.

Thanks for the info. I am finally green after the going private for the first time today

So, applied for option priviliges and sold some funds to be able to try it before TSLA skyrockets.
For the first attempt at options following your strategy, do I understand correctly that if I buy 1 contract for Jan18 strike $400 at, say $11 and then roll over to Feb 15 for say another $5, that means I'll spend $1600 and will only make any money if SP goes above $416?
Is that "rollover" option available with all brokers or only some? I don't see info on this in the broker's FAQ.

 

[Cherry Wine]

Thanks for the info. I am finally green after the going private for the first time today

So, applied for option priviliges and sold some funds to be able to try it before TSLA skyrockets.
For the first attempt at options following your strategy, do I understand correctly that if I buy 1 contract for Jan18 strike $400 at, say $11 and then roll over to Feb 15 for say another $5, that means I'll spend $1600 and will only make any money if SP goes above $416?
Is that "rollover" option available with all brokers or only some? I don't see info on this in the broker's FAQ.

Options will increase in value prior to reaching the strike price if the underlying increases in value; they don't need to hit the break-even point for you to make money. I don't know of an explicit "roll over" option; rather, I expect that you would simply sell your Jan19 call and then purchase a Feb19 call.

EDIT: Here's a rough tool to help give you an idea of the impact on different variables on options prices, chiefly: underlying price and time.

Options profit calculator

 

[SpaceCash]

Thanks for the info. I am finally green after the going private for the first time today

So, applied for option priviliges and sold some funds to be able to try it before TSLA skyrockets.
For the first attempt at options following your strategy, do I understand correctly that if I buy 1 contract for Jan18 strike $400 at, say $11 and then roll over to Feb 15 for say another $5, that means I'll spend $1600 and will only make any money if SP goes above $416?
Is that "rollover" option available with all brokers or only some? I don't see info on this in the broker's FAQ.

Congrats on the green and best of luck stepping into the options arena!

You essentially have it correct re your hypothetical options maneuver but don't forget that you could viably make money by selling the option early, if share price rapidly increases, counterbalancing time loss before expiry, even without crossing the 416 threshold.

"Rolling" is available with etrade but only on computer, not on the phone app. I believe it just streamlines the process of selling your option and buying a new one but actually I'm not positive how it works

 

[shlokavica22]

Thanks for the info. I am finally green after the going private for the first time today

So, applied for option priviliges and sold some funds to be able to try it before TSLA skyrockets.
For the first attempt at options following your strategy, do I understand correctly that if I buy 1 contract for Jan18 strike $400 at, say $11 and then roll over to Feb 15 for say another $5, that means I'll spend $1600 and will only make any money if SP goes above $416?
Is that "rollover" option available with all brokers or only some? I don't see info on this in the broker's FAQ.

The macro is very shaky and considering you are new to options- don't jump immediately to Jan'19 options.
Get familiar with Delta/Theta/IV for start. Use Cboe Options Exchange to play with the variables and get better understanding where/when to place your bet.

 

[TradingInvest]

I noticed 3 disagrees to this comment. Can somebody clarify pls, does it contain a factual error? The logic seems valid.

I don't know if Saudi PIF sold TSLA or not, but that logic doesn't make sense.

First, the link makes no sense. Shorts covered 9 million shares, that has nothing to do with Saudi's shares. It's like saying Kobe Bryant is 6 feet tall. I am 6 feel tall, so I must be Kobe Bryant.

Second, look at the reasoning why PIF invests in Tesla. They are trying to diversify out of oil. Tesla is tech/EV/renewable energy, which is the best place to be for PIF. They are long term investors, not swing traders.

The logical thing for PIF to do is to increase to 10%, or at least sit on the shares.

 

[capster]

If it wasn’t for a friend was it for you?

Nope. I sit in the safety of a being a long term TSLA shareholder. Based on my own experience and insight, I long ago came to the conclusion that TSLA is actually a pretty safe bet, whereas predicting the volitility generated by fools and scoundrels is certainly beyond my ken.

Neither is this an advice

 

[vigleik]

I noticed 3 disagrees to this comment. Can somebody clarify pls, does it contain a factual error? The logic seems valid.

Why did you think that the Saudi PIF sold? They are not an “institutional investors” in the technical sense, so they won’t show up in that table no matter how much they own. That was the reason for my disagree.

 

[EVNow]

Sorry, I just read the last 10 pages, but I may have overlooked the news you’re talking about. Could you pls share.

Oh and what a nice TSLA day!

Strong and with your adressed separation from nasdaq in the end! That was about time!

Yes, I'm surprised its not getting more play. Infact I can't find it anywhere online. It is on my Fidelity trading app.

update : It was Reuters quoting Gasparino tweet.

Charles Gasparino on Twitter​

 

[AudubonB]

Volkswagen could build up to 15 million electric cars over several years on its new electric vehicle production platform, the company said on Friday, adding that its Chief Executive Herbert Diess had misspoken in an interview on Monday.

VW says could build up to 15 million electric cars

Aah, a fine prognosticator at his best:

"could" and "up to" covers all bases.

 

[EVNow]

If there is reason for concern (I'm thinking of the institutional level, not the level of the short account holder nor the larger systemic level), I wonder how the grown-ups at the brokerages and banks would navigate if they had to unwind the large amount of short interest still out there?

30 million shares short. Lets say, they are down $100 (having shorted at $350). That is still just $3B. As they say, that won't break the bank.

As to what the "grown ups" at the brokerages would do - basically start negotiating on a golden parachute

I guess, they will ask the shorts to put up more margin money. But if we are talking about really big fish - like Einhorn - I've no idea how they even trade. Do they go through brokerages or do they have direct trading privileges ? No idea.

 

[defc0n]

I don't know if Saudi PIF sold TSLA or not, but that logic doesn't make sense.

First, the link makes no sense. Shorts covered 9 million shares, that has nothing to do with Saudi's shares. It's like saying Kobe Bryant is 6 feet tall. I am 6 feel tall, so I must be Kobe Bryant.

Second, look at the reasoning why PIF invests in Tesla. They are trying to diversify out of oil. Tesla is tech/EV/renewable energy, which is the best place to be for PIF. They are long term investors, not swing traders.

The logical thing for PIF to do is to increase to 10%, or at least sit on the shares.

Hi Kobe nice to meet you I’m a huge fan!

 

[tsunamiofhurt]

Keep in mind Feb calls will include the Q4 ER results - that’s a big reason for the extra premium you’re seeing.

Not necessarily -- Feb '19 option expiry is February 15th and Q4 ER results aren't always out by then. Only once in the past 4 years.

Feb 23, 2018
Mar 01, 2017
Feb 10, 2016
Feb 24, 2015

EDIT: These are the 10-K dates, not earnings release dates. Although as @MikeC points out, they are sometimes after Feb 15 too.

 

[SpaceCash]

Not necessarily -- Feb '19 option expiry is February 15th and Q4 ER results aren't always out by then. Only once in the past 4 years.

Feb 23, 2018
Mar 01, 2017
Feb 10, 2016
Feb 24, 2015

Weird. I have Feb calls that I bought with the full expectation Q4 results would be out. Should have done better research I guess

 

[Wnuk]

Interesting take

 

[Carl Raymond]

Why did you think that the Saudi PIF sold? They are not an “institutional investors” in the technical sense, so they won’t show up in that table no matter how much they own. That was the reason for my disagree.

Ok, so the commenter pulled that number out of the air. That answers my question, thank you. (Not so much a factual error as a baseless assertion.)