2017 Investor Roundtable: TSLA Market Action

[Turing]

Thanks vgrinshpun. In a way, the fact that we've reached 304 without any substantial short covering is even more bullish. It tells us that longs continue to drive this rally and shorts haven't really joined in yet. I suppose it's best to partake of the dessert towards the end of the meal.

Would be hilarious if Elon's stormy weather tweet caused retail and momo traders to jump aboard and made it harder for shorts to get out before Q1 numbers are released. His version of checkmate?

 

[geneclean55]

Would be hilarious if Elon's stormy weather tweet caused retail and momo traders to jump aboard and made it harder for shorts to get out before Q1 numbers are released. His version of checkmate?

I think it was a genius tweet. Gives confidence to TSLA longs, and rational traders. Lets face it Elon is a dependable guy right now on the back of the SpaceX stuff.
On the flip side, i think a lot of rational shorts might have left earlier in the year and we are now left with/replaced by the not so smart idealogical shorts who were enraged by his tweet and doubled down.

 

[WarpedOne]

I have 5000 sell order. I might be tempted to adjust a bit higher ....

I suspect these shorts are not your regular run-off-a-mill short traders.
These might be bigly fueled by oil and ICE money, and will thus stay in the game far longer.
When the times come for them to capitulate, things might get absurdly yuuuuge.

 

[Starno]

So guys, what do you think is gonna happen tomorrow ? :
- Big fall (under 290)
- Low fall (under 295)
- Meh meh (295- 305)
- Low rise (310-315)
High rise (315+)


I think a meh meh is gonna happen, because of a lot of mixed action (longs who are cashing out a bit, shorter who don't know what to do, new longs, new buys...).

Until new good news (probably earnings, or news that M3 prod is happening) , meh-meh days are gonna rule I think.

 

[Paracelsus]

.............I suspect these shorts are not your regular run-off-a-mill short traders. These might be bigly fueled by oil and ICE money, and will thus stay in the game far longer. When the times come for them to capitulate, things might get absurdly yuuuuge.

I have had exactly the same thought for the past few weeks because I simply can't find any other answer that holds water for the relatively huge positions the shorts are still hanging on to despite recent momentum. Since the writing seems to be on the wall that they will get crushed with all certainty at this point, the only investors I can think of that would willingly and intentionally get crushed are those that are already hanging by their short hairs in their other larger investments, and the only hope they have of getting out of their other larger and more painful investments is to hopefully delay an inevitable transition away from their holdings - i.e. trying to divest their stranded fossil fuel assets prior to TSLA growing by biblical proportions. Better to loose many millions shorting Tesla if it might prevent them from losing ten's or hundreds of millions on their fossil fuel investments and infrastructure. Case in point would be all the natural gas investment pressure on Australian politicians while Elon offers a more sustainable, efficient, effective, and less costly solution. They are royally screwed in the near term and their only hope is to delay Elon's efforts through drastic measures while they hope someone else will take the really smelly bag of 'sugar' they have invested in off their hands at almost any cost - because it ain't going to be worth the 'sugar' in the bag if they have to hold it too long!

Thanks for sharing your thoughts on this. I agree that when they finally exit we will see buying levels we didn't imagine possible this far into an already great run. And I believe the reverse-engineered squeeze by the lending houses didn't just spank the small short position at this point. Fidelity and others may have accidentally advanced the efforts to combat climate change by launching the value and the awareness of TE and TM into orbit while burying those shorting from fossil fuel positions permanently . All I can say is Wow! Nobody could have written this script and the wave Elon is more comfortably riding every day just keeps growing in the strangest of ways

 

[neroden]

That's normal, most shorts are shorting because of fundamentals not matching the stock price. Being rational here, the fundamentals didn't change, except the fact that there was a growth in revenues...

Shorts will give up once profits will be at the corner and inevitable : basically once M3 production and deliveries will prove itself working.

For now, to them, what's happening here is just a bubble inflating even more.

Sure, but they're starting to get in a tough position *even if they're right* about the company being overvalued. With major institutions (Tencent) accumulating, and momentum traders piling on, as the stock price rises, how many of them will get margin calls? How many of them will be closed out involuntarily by their brokers? The famous line about short-selling is "the market can remain irrational longer than you can remain solvent". At this high a short level, with this many shares in the hands of long-termers, they're even starting to risk a squeeze, where they can't find shares to buy.

A highly skilled short-seller (sadly I forget who) once said: never short an overvalued company. He only shorted dumpster trash fires of companies, companies which are (for example) already bankrupt, or whose main product has been internationally banned, stuff like that.

 

[winfield100]

Retest of $304.

Everyone buy 100 shares on the count of three. Here we go. 1, 2, 3. Buy NOW!

Bought 4 @ $301.1829 Settles 04/07/2017 1:57 PM 04/04/2017
beat you to it, my pebbles voted in the melt up avalanche

 

[neroden]

The reason it is puzzling is that as SP hitting ATH every day, short sellers, at the end of every day are required to increase their collateral in a separate account to a value higher than SP x quantity of shares held short. So if somebody held 1000 shares short, as the stock moved from $245 to $300 in less than a month he/she would be required to increase the collateral from $245k+ to $300k+. That got to hurt, and at certain point could lead to insolvency...

So I started looking up the numbers on this. Yes, the short-seller has to have collateral equal to the full market value of the short position -- but they actually have to have more. When opening the position, they need an extra 50%. (Note, when opening it they do get cash for the initial sale so that covers the "full market value"). So when our example short-seller opened the trade, they needed "extra" collateral of $122.5K, for a total of $367.5K

In order to maintain it, they need an extra 25% by NASDAQ regulation, but almost all brokers require 30% or more. On volatile stocks, like Tesla, they often require even higher amounts. If we assume the 30% requirement, then at $300, they need $330K of collateral. Our sample short-seller isn't dead yet...

But, for example, consider someone who was short 1000 shares at the beginning of January, at $213.69. This position has a value of -$213,690. They must have started with collateral equal $106980, plus the short sale proceeds of $213960, for a total of $320940. At the current price of $303.70, and a 30% maintenance margin, they need $394810 in collateral to maintain the position. They need to add $73970 in collateral. This is a margin call; if they don't wire the funds in, the broker will close their positions for them. (Obviously most short-sellers would have started with excess collateral for safety, but you see the mechanics here.)

The thing is, certain stocks have higher margin maintenance requirements. For instance, last I checked, Tesla has a 50% maintenance requirement at Schwab if you want to hold it on margin "long". I just checked and the requirements for holding it "short" are just as hefty -- 50%.

In this case, this is pretty brutal. If we assume a 50% maintenance margin, our hypothetical short-seller who shorted at the beginning of January has had to add $135,010 of collateral (1.5 times the change in share price). Note that they started with $106980 before making the short sale, so they've already had to throw in 1.3 times as much money than they initially invested.

I don't know if we can generalize from Schwab, but if this is the maintenance margin level for TSLA at most brokers...

 

[1kEE]

Tesla Model 3 release candidate spotted in the wild and daylight for the first time

Will this spread around and become tomorrow's catalyst for going past 305? Who knows, tomorrow will tell...

I'm tempted to repeat today's adventure, buying lows in the premarket and a few weeklies during the morning volatility, selling towards close.... although that behavior taken to an excess has cost me a bunch over the last month so I better be careful and not overindulge.

 

[Starno]

Tesla Model 3 release candidate spotted in the wild and daylight for the first time

Will this spread around and become tomorrow's catalyst for going past 305? Who knows, tomorrow will tell...

I'm tempted to repeat today's adventure, buying lows in the premarket and a few weeklies during the morning volatility, selling towards close.... although that behavior taken to an excess has just cost me a bunch over the last month so I better be careful and not overindulge.

Don't know, but I love it.

That means they're getting really close to production and correcting the last bits before it gets going.

I hope the tests are going well, what's good with electric is that the " mechanical issues " are basically just a question of battery. M3 is basically just a less powerful MS.
Whereas it's different with gas cars because from model to model it's the whole engine that can get different(work different).
So normally the tests should be going well with few issues to correct.

 

[1kEE]

Bought 4 @ $301.1829 Settles 04/07/2017 1:57 PM 04/04/2017
beat you to it, my pebbles voted in the melt up avalanche

Darnit I was wrenching on a big ole CNC lathe and missed the ritual coordinated buy! Not fair!

 

[TrendTrader007]

So I started looking up the numbers on this. Yes, the short-seller has to have collateral equal to the full market value of the short position -- but they actually have to have more. When opening the position, they need an extra 50%. (Note, when opening it they do get cash for the initial sale so that covers the "full market value"). So when our example short-seller opened the trade, they needed "extra" collateral of $122.5K, for a total of $367.5K

In order to maintain it, they need an extra 25% by NASDAQ regulation, but almost all brokers require 30% or more. On volatile stocks, like Tesla, they often require even higher amounts. If we assume the 30% requirement, then at $300, they need $330K of collateral. Our sample short-seller isn't dead yet...

But, for example, consider someone who was short 1000 shares at the beginning of January, at $213.69. This position has a value of -$213,690. They must have started with collateral equal $106980, plus the short sale proceeds of $213960, for a total of $320940. At the current price of $303.70, and a 30% maintenance margin, they need $394810 in collateral to maintain the position. They need to add $73970 in collateral. This is a margin call; if they don't wire the funds in, the broker will close their positions for them. (Obviously most short-sellers would have started with excess collateral for safety, but you see the mechanics here.)

The thing is, certain stocks have higher margin maintenance requirements. For instance, last I checked, Tesla has a 50% maintenance requirement at Schwab if you want to hold it on margin "long". I just checked and the requirements for holding it "short" are just as hefty -- 50%.

In this case, this is pretty brutal. If we assume a 50% maintenance margin, our hypothetical short-seller who shorted at the beginning of January has had to add $135,010 of collateral (1.5 times the change in share price). Note that they started with $106980 before making the short sale, so they've already had to throw in 1.3 times as much money than they initially invested.

I don't know if we can generalize from Schwab, but if this is the maintenance margin level for TSLA at most brokers...

i dunno about short sellers but as a long at Fidelity with a concentrated position my margin requirements is 80%. in other words for every million dollars of TSLA stock i hold i can only borrow $200K. i keep on getting margin calls in my account like there is no tomorrow.
i mean over the last year i have gotten literally 30 to 40 margin calls to the point that i treat a margin call as no big deal
so, if a long like me fields margin calls on a routine basis, i can't imagine shorts doing much better

 

[neroden]

Ah, concentrated position. Yeah, the margin requirements will be even higher for concentrated positions. I don't think most of the TSLA short-sellers were actually that concentrated when they *opened* their short position, but with TSLA going way up, they may be getting concentrated now....

That's an asymmetry.... When I get "involuntarily concentrated" as a long it's because one of my stocks is doing really well compared to the others. When they get concentrated as shorts, it's because one of their shorted stocks is doing really badly for them....

 

[geneclean55]

So I started looking up the numbers on this. Yes, the short-seller has to have collateral equal to the full market value of the short position -- but they actually have to have more. When opening the position, they need an extra 50%. (Note, when opening it they do get cash for the initial sale so that covers the "full market value"). So when our example short-seller opened the trade, they needed "extra" collateral of $122.5K, for a total of $367.5K

In order to maintain it, they need an extra 25% by NASDAQ regulation, but almost all brokers require 30% or more. On volatile stocks, like Tesla, they often require even higher amounts. If we assume the 30% requirement, then at $300, they need $330K of collateral. Our sample short-seller isn't dead yet...

But, for example, consider someone who was short 1000 shares at the beginning of January, at $213.69. This position has a value of -$213,690. They must have started with collateral equal $106980, plus the short sale proceeds of $213960, for a total of $320940. At the current price of $303.70, and a 30% maintenance margin, they need $394810 in collateral to maintain the position. They need to add $73970 in collateral. This is a margin call; if they don't wire the funds in, the broker will close their positions for them. (Obviously most short-sellers would have started with excess collateral for safety, but you see the mechanics here.)

The thing is, certain stocks have higher margin maintenance requirements. For instance, last I checked, Tesla has a 50% maintenance requirement at Schwab if you want to hold it on margin "long". I just checked and the requirements for holding it "short" are just as hefty -- 50%.

In this case, this is pretty brutal. If we assume a 50% maintenance margin, our hypothetical short-seller who shorted at the beginning of January has had to add $135,010 of collateral (1.5 times the change in share price). Note that they started with $106980 before making the short sale, so they've already had to throw in 1.3 times as much money than they initially invested.

I don't know if we can generalize from Schwab, but if this is the maintenance margin level for TSLA at most brokers...

Tesla has 40% margin maintenance at Fidelity, if I am reading it correctly.

 

[TrendTrader007]

I'm sorry but this 15 minute chart still looks pretty darn bullish to me
I dare say we can go up even higher from right here
Now I can't predict every single day's movement but this is not a bearish chart by any means

 

[TrendTrader007]

Don't be too shocked if the stock keeps on trudging higher from here
A pullback is inevitable but at what point? Maybe at a much higher price level than current

 

[vgrinshpun]

So I started looking up the numbers on this. Yes, the short-seller has to have collateral equal to the full market value of the short position -- but they actually have to have more. When opening the position, they need an extra 50%. (Note, when opening it they do get cash for the initial sale so that covers the "full market value"). So when our example short-seller opened the trade, they needed "extra" collateral of $122.5K, for a total of $367.5K

In order to maintain it, they need an extra 25% by NASDAQ regulation, but almost all brokers require 30% or more. On volatile stocks, like Tesla, they often require even higher amounts. If we assume the 30% requirement, then at $300, they need $330K of collateral. Our sample short-seller isn't dead yet...

But, for example, consider someone who was short 1000 shares at the beginning of January, at $213.69. This position has a value of -$213,690. They must have started with collateral equal $106980, plus the short sale proceeds of $213960, for a total of $320940. At the current price of $303.70, and a 30% maintenance margin, they need $394810 in collateral to maintain the position. They need to add $73970 in collateral. This is a margin call; if they don't wire the funds in, the broker will close their positions for them. (Obviously most short-sellers would have started with excess collateral for safety, but you see the mechanics here.)

The thing is, certain stocks have higher margin maintenance requirements. For instance, last I checked, Tesla has a 50% maintenance requirement at Schwab if you want to hold it on margin "long". I just checked and the requirements for holding it "short" are just as hefty -- 50%.

In this case, this is pretty brutal. If we assume a 50% maintenance margin, our hypothetical short-seller who shorted at the beginning of January has had to add $135,010 of collateral (1.5 times the change in share price). Note that they started with $106980 before making the short sale, so they've already had to throw in 1.3 times as much money than they initially invested.

I don't know if we can generalize from Schwab, but if this is the maintenance margin level for TSLA at most brokers...

I believe that margin requirements for the account in which short position is held that you described is *separate* from the collateral account requirements I was referring to. I did researched this at Fidelity a while ago, but can't seem to locate reference at the moment. The requirement is to deposit and maintain (subject to daily adjustment) 105% of the value of short position in a separate, dedicated secure account, typically in cash.

 

[vgrinshpun]

i dunno about short sellers but as a long at Fidelity with a concentrated position my margin requirements is 80%. in other words for every million dollars of TSLA stock i hold i can only borrow $200K. i keep on getting margin calls in my account like there is no tomorrow.
i mean over the last year i have gotten literally 30 to 40 margin calls to the point that i treat a margin call as no big deal
so, if a long like me fields margin calls on a routine basis, i can't imagine shorts doing much better

I also have concentrated TSLA position at Fidelity, but it must be much less concentrated than yours as my margin requirement is 40%.

 

[MitchJi]

Once I took out a sizable, for me, second mortgage on my house, and bought physical gold with it at around $350 an oz. Sold it years later at $1250. It turned out pretty sweet, but in retrospect I realize that I had no idea what I was doing and just got very lucky.

We took out second and spent $50k on J18 LEAPS when the SP was $160 and $170. Then when the SP hit -$180 used another $30k. Best financial moves I ever made.

always buy new all time highs
always sell new all time lows
if you do this alone, you will make a fortune

Don't you mean lose a fortune?

For a perspective of this situation, consider that Tencent buying 8.2M shares over roughly 3 month moved SP about 100 points. So we can expect similar SP pressure if short interest of roughly 30M shares (on 3/15) would unwind by about 8M shares to roughly 22M, over the course of several month. Over-impose piling in of momentum traders and potential for seriously strong positive catalysts and next several months indeed look good.

There is a potential for a violent short squeeze over the course of days rather than month on especially strong.

From their statements tencent didn't invest in TSLA, they invested in Elon Musk, aks Tesla's Moat. I bet that they could trigger a squeeze by merely announcing that they plan to acquire another 10-20%.

 

[vgrinshpun]

Video: "there is still food on the table" $320 short term, $380 for a longer setup:

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