TSLA Trading Strategies

[neroden]

this doesn't help anything.

placing a trade at the midpoint still hands the trade to a market maker who pays for that flow and tries to work against it. specifying the route doesn't help either - the order goes to a market maker with instructions to post to that route. but they will still work against the order and/or front run if they can.

also at many firms going straight to the bid or offer with small orders guarantees better execution than you could get on your own. best as I can tell it is due to specific mechanisms they use that are either market maker or exchange based. when it works, that works for 1 or 2 orders at most, usually 100 or fewer contracts.

the only way to avoid the problem of someone getting your orders to frontrun is to use agency only execution, which take your orders direct to exchanges.

I've been too lazy to switch brokerages. So I've just been eating the spread. Since I'm really a long-termer I'm willing to do this. Time value decay on short puts still works in my favor.

My best results lately when the spread is fairly narrow have been to issue limit orders at the ask price (to buy) or at the bid (to sell); I get whatever "improvement" the brokerage has been promised by the firm they've sold order flow to, but I avoid the risk of a sharp move against me which is present with a market order; the front-running in this case, when I'm putting through an executable order, is prohibited by law, and I think they actually would get caught. To be clear I'm generally making relatively small trades (just a few contracts) because I'm always ready for execution, and even a few contracts is a lot of cash to pony up for execution. (I mean, right now, 10 $300 strike contracts is $300,000 if it executes.)

If the spread is really gaping wide and the prices aren't moving too fast, however, I make a slightly-worse-than-midmarket ask (to give the market maker his 5 or 10 cents) and wait the bots out. After they figure out they aren't getting a nibble with price manipulation, they often take it. If they don't take it, I withdraw the order entirely and wait; half the time they end up bouncing the bid all the way above my price, which is weird.

I still lose the spread but you always lose the spread; I grew up expecting to lose the spread, back in the dark days of handing your order to a broker and waiting for 24 hours to see what they did with it.

There are almost certainly better ways to handle this, but I think most of them require that I spend the week opening a brokerage account at a different broker, which I simply haven't been willing to spend the time to do. C'est la vie.

 

[elasalle]

At what volume and how large of a spread do they become a liability? I don't trade frequently enough or at that large of a volume. Further, most of my reasoning/rational is done late at night. To buy/sell, I need to quickly get in and out (mostly via mobile) as a 9-5 worker .. so I haven't been paying too much attention to it . However, I always go with the low price and do cancel/resends based on how quickly I want it?

 

[D-egg-O]

Has anyone here used Robinhood Gold? If so, I'm curious what their experience has been so far. This unnecessary dip has be thinking about trying it. Robinhood says they only charge a monthly fee, so no margin calls or interest is how I understand it. But if the value of my account goes down due to another big dip in TSLA, I assume my RG buying power decreases, and could potentially get in trouble there. It just sounds too good to be true. They also have limits on how much buying power you can put towards one stock. Anyway, I'm curious what you experience has been if you do use it. My TSLA shares in this account are primarily buy and hold. Sometimes I try to time the market. I missed the boat with this latest dip.

 

[GoTslaGo]

Has anyone here used Robinhood Gold? If so, I'm curious what their experience has been so far. This unnecessary dip has be thinking about trying it. Robinhood says they only charge a monthly fee, so no margin calls or interest is how I understand it. But if the value of my account goes down due to another big dip in TSLA, I assume my RG buying power decreases, and could potentially get in trouble there. It just sounds too good to be true. They also have limits on how much buying power you can put towards one stock. Anyway, I'm curious what you experience has been if you do use it. My TSLA shares in this account are primarily buy and hold. Sometimes I try to time the market. I missed the boat with this latest dip.

Sounds like @Jayjs20 might be using it.

 

[chibi_kurochan]

Has anyone here used Robinhood Gold? If so, I'm curious what their experience has been so far. This unnecessary dip has be thinking about trying it. Robinhood says they only charge a monthly fee, so no margin calls or interest is how I understand it. But if the value of my account goes down due to another big dip in TSLA, I assume my RG buying power decreases, and could potentially get in trouble there. It just sounds too good to be true. They also have limits on how much buying power you can put towards one stock. Anyway, I'm curious what you experience has been if you do use it. My TSLA shares in this account are primarily buy and hold. Sometimes I try to time the market. I missed the boat with this latest dip.

I've been using this and it's been great for me. I buy and keep for long term and I buy more whenever there's a dip like this past week. Funds also available immediately for use when you initiate transfer from checking. For gold, you'll have a pool of funds that you can backfill later and being able to trade before and after market close.

There's A Free Stock Waiting For You

 

[luvb2b]

what you've described is in my opinion the optimal trading method for those trading smaller lots.

I've been too lazy to switch brokerages. So I've just been eating the spread. Since I'm really a long-termer I'm willing to do this. Time value decay on short puts still works in my favor.

My best results lately when the spread is fairly narrow have been to issue limit orders at the ask price (to buy) or at the bid (to sell); I get whatever "improvement" the brokerage has been promised by the firm they've sold order flow to, but I avoid the risk of a sharp move against me which is present with a market order; the front-running in this case, when I'm putting through an executable order, is prohibited by law, and I think they actually would get caught. To be clear I'm generally making relatively small trades (just a few contracts) because I'm always ready for execution, and even a few contracts is a lot of cash to pony up for execution. (I mean, right now, 10 $300 strike contracts is $300,000 if it executes.)

If the spread is really gaping wide and the prices aren't moving too fast, however, I make a slightly-worse-than-midmarket ask (to give the market maker his 5 or 10 cents) and wait the bots out. After they figure out they aren't getting a nibble with price manipulation, they often take it. If they don't take it, I withdraw the order entirely and wait; half the time they end up bouncing the bid all the way above my price, which is weird.

I still lose the spread but you always lose the spread; I grew up expecting to lose the spread, back in the dark days of handing your order to a broker and waiting for 24 hours to see what they did with it.

There are almost certainly better ways to handle this, but I think most of them require that I spend the week opening a brokerage account at a different broker, which I simply haven't been willing to spend the time to do. C'est la vie.

 

[MitchJi]

what you've described is in my opinion the optimal trading method for those trading smaller lots.

You get a better price by setting your buy limit (for example) at the ask price rather than half way between the bid/ask?

What do you mean by smaller lots? 50 contracts? 100?

 

[luvb2b]

yes, it sounds insane but that's what happens. this is at a number of retail brokerages where they have various deals with market makers that seek price improvement for marketable orders. by going at the market or at the offer, you are a marketable order and they put you through some auction processes where people compete for your order. usually the market makers love this kind of flow as they believe it is mostly naive traders entering those trades.

you can experiment with this doing 1-10 contracts. i routinely find i get fills as a market order that are better than i could get by posting in-between. smaller lots means <= 100 contracts.

You get a better price by setting your buy limit (for example) at the ask price rather than half way between the bid/ask?

What do you mean by smaller lots? 50 contracts? 100?

 

[MitchJi]

yes, it sounds insane but that's what happens. this is at a number of retail brokerages where they have various deals with market makers that seek price improvement for marketable orders. by going at the market or at the offer, you are a marketable order and they put you through some auction processes where people compete for your order. usually the market makers love this kind of flow as they believe it is mostly naive traders entering those trades.

you can experiment with this doing 1-10 contracts. i routinely find i get fills as a market order that are better than i could get by posting in-between. smaller lots means <= 100 contracts.

Thank you very much! Much appreciated! I'll do some experiments using TD Ameritrade but that sounds great. That will be easier and faster to make trades too.

 

[luvb2b]

in my experience td amtd is one of the worst when it comes to selling your order flow. you should assume anything that can get front-run will get front-run. small market orders usually don't afford that chance as a near immediate fill is required if it is the first such order (for example, i get a good fill on the first 100, but if i send more and more the fills will get worse and worse).

Thank you very much! Much appreciated! I'll do some experiments using TD Ameritrade but that sounds great. That will be easier and faster to make trades too.

 

[MitchJi]

Three more questions:
Does amount in dollars matter or only the number of contracts? For example what about selling ~70 LEAPS's for $600-700k?

If you divide the order how long do you need to wait until you can expect to get good fills again?

in my experience td amtd is one of the worst when it comes to selling your order flow. you should assume anything that can get front-run will get front-run. small market orders usually don't afford that chance as a near immediate fill is required if it is the first such order (for example, i get a good fill on the first 100, but if i send more and more the fills will get worse and worse).

About how much worse?

 

[luvb2b]

my experience is the number of contracts matters more, although you may find the size threshold drops slightly at larger contract values. for example, i feel more comfortable sending 75-lots vs 100-lots for contracts that are trading above $25-30.

you need to wait a little while when dividing the order. i'm not sure what determines it exactly, some rare instances the 2nd order also gets a good fill when sent immediately (say less than 10%). in more active stocks i think waiting 10-15 minutes is long enough. less liquid stock may need more time. think of it this way: when you get that juicy fill the guy on the other side still needs to hedge it off. he's not going to be giving out more juicy fills until he has a nice hedge on that he's comfortable with.

by worse means you will get filled at the offer - or sometimes not. those 2nd fills they are not going to be eager to hand you price improvement. if you don't get filled at the offer and become a limit bid, the other guy who filled you will know he was duped. those quotes will start backing away fast. if you want that second fill, put the price somewhere you know you will get it otherwise they will work around you. generally my recommendation for trading size is to try to avoid these order-flow selling retail brokerages whenever possible. you should get a different broker if you are trading hundreds of contracts.

Three more questions:
Does amount in dollars matter or only the number of contracts? For example what about selling ~70 LEAPS's for $600-700k?

If you divide the order how long do you need to wait until you can expect to get good fills again?

About how much worse?

 

[MitchJi]

Thanks again @luvb2b!

 

[luvb2b]

you're welcome! one favor: when you are done with your tests please post back what you find.

Thanks again @luvb2b!

 

[bdy0627]

yes, it sounds insane but that's what happens. this is at a number of retail brokerages where they have various deals with market makers that seek price improvement for marketable orders. by going at the market or at the offer, you are a marketable order and they put you through some auction processes where people compete for your order. usually the market makers love this kind of flow as they believe it is mostly naive traders entering those trades.

you can experiment with this doing 1-10 contracts. i routinely find i get fills as a market order that are better than i could get by posting in-between. smaller lots means <= 100 contracts.

I do my trades through Vanguard. Do you think this is true for Vanguard as well?

 

[surfside]

@luvb2b, you taking a crack at working on 2Q earnings estimates, or not worth the effort given the lack of upside potential given disappointing deliveries and unlikely SCTY large positive contribution?

I'd be curious for your thoughts on TSLA at this point given large run up and back down...

Thanks in advance,
surfside

 

[luvb2b]

hi @surfside. i agree on lack of upside potential. i do have a model here for q2. maybe i can start posting for discussion purposes next couple days. thanks for the friendly nudge.

 

[MitchJi]

hi @surfside. i agree on lack of upside potential. i do have a model here for q2. maybe i can start posting for discussion purposes next couple days. thanks for the friendly nudge.

Do you mean lack or potential upside in the Q2 numbers or the SP?

Because I believe that the SP could be close to $400 after the ER if the reveal is good and the M3 production information is good on the ER. I don't believe that the A2 numbers will be bad enough to matter.

I don't want to discourage you from posting your numbers. I'd love to see what you have.​

 

[techmaven]

hi @surfside. i agree on lack of upside potential. i do have a model here for q2. maybe i can start posting for discussion purposes next couple days. thanks for the friendly nudge.

Of course, investors may overlook the EPS Q2 loss as that is already built into expectations and instead, focus on the Model 3 ramp. The size of the Model 3 ramp is very important to the cash requirements in the next 3 quarters. If they have sufficient ramp, it is more likely they have gross margin positive production in Q4. Combined with 90 day payment terms, the Model 3 launch could be cash generating. So if we get a good read on production, it can overcome the Q2 issues. Also, we only have one, albeit major, data point for Q2.

 

[MitchJi]

Tesla, Inc. Earnings: Mark Your Calendar -- The Motley Fool

Scheduled just days after Tesla's first Model 3 deliveries, the electric-car maker's second-quarter update will come at a crucial time for the company. Here's what to watch.

Daniel Sparks
(TMFDanielSparks)
Jul 14, 2017 at 11:37AM

Just days after Tesla plans to begin Model 3 deliveries, investors will get a peek into the electric-car maker's business. Tesla has put its second-quarter earnings release on the calendar: Aug. 2.

As usual, key areas to watch when Tesla reports earnings will be its revenue and earnings (or loss) per share. But with Tesla planning to start delivering the Model 3 on July 28, any updates on the important vehicle could steal the show.

Here's an early look at what investors should look for when Tesla reports its second-quarter results.

Financial results
Tesla's second-quarter revenue and earnings per share will help investors see the electric-car maker's ability to scale its business as it continues to rapidly expand.

With the help of Tesla's already reported 53% year-over-year increase in second-quarter vehicle deliveries, Tesla's revenue is set to soar. On average, analysts expect Tesla to report second-quarter revenue of $2.58 billion, up over 65% compared to Tesla's non-GAAP revenue in the same period last year (comparing Tesla's GAAP revenue to its non-GAAP revenue reflects a change in the company's reporting practices between these two quarters).

Ahead of Tesla's second-quarter earnings release, the consensus analyst estimate for Tesla's non-GAAP earnings per share is a loss of $1.69. Notably, this is a wider loss than both Tesla's year-ago non-GAAP EPS of $1.61 and Tesla's first-quarter non-GAAP loss per share of $1.33.

Analysts' forecast for a negative earnings trend in Tesla's second quarter likely reflects expectations of higher expenses related to the final development stages for Model 3, as well as the fact that Tesla's second-quarter vehicle deliveries came in at the low end of Tesla's guidance.

Model 3
Even though Tesla's Model 3 launch didn't fall in Tesla's second quarter, the vehicle will likely be a central topic in Tesla's second-quarter update for several reasons.

First, the Model 3 is expected to have significant financial implications on Tesla's second quarter even though deliveries aren't scheduled to begin until Q3. Not only did management say it expected to incur some GAAP and non-GAAP-related operating expenses associated with the final stages of Model 3 development and growth in its customer support infrastructure ahead of the vehicle's launch, but Tesla also said it expected its capital expenditures to soar as it builds out Model 3 production capacity. Tesla forecast year-to-date capital expenditures to be slightly over $2 billion by the time it starts Model 3 production. By the end of Tesla's first quarter, Tesla's year-to-date capital expenditures were just $553 million.


In addition, investors will be looking for an update on Tesla's volume expectations for the Model 3 ramp-up. With the earnings release falling less than a week after the first Model 3 deliveries, management will likely have more insight into its forecast for Model 3 deliveries for the rest of the year, and possibly provide updated guidance. As of Tesla's last estimates, it expected to deliver about 30 Model 3 units at its July 28 handover event, 100 in August, and more than 1,500 in September. By December, CEO Elon Musk has said he expects Tesla to be able to deliver about 20,000 units.
.