2017 Investor Roundtable: TSLA Market Action

[Zhelko Dimic]

So how do we explain the GS fud action that appears to have pushed the price below 350 ?

GS as a counter party that provides hedge for Tesla is being hurt with SP between $327.5 and 600 something... Lower price works better for them, theoretically. Though I believe they've re-hedged the hedge, so probably don't care much...
And I think you're seeing connection where it doesn't exist.
Incompetence and short-sightedness of GS analyst is perfectly valid explanation, rather than conspiracy theory.

 

[TrendTrader007]

To continue your analogy: There can be multiple reasons for the loss of a P wave on an EKG. So, an EKG (like TA) is one tool for a cardiologist to use when assessing the cause of an arrhythmia or other medical issue. Just like TA is one tool in one's tool box for trying to discern the direction of the TSLA SP.

I like the postings about TA from people, like yourself, that understand it as I admit to not knowing all the nuances of TA. But, macros and news, positive and negative about Tesla need to be integrated when choosing how to invest.

PS: I admit to knowing FAR less about EKG. changes than a cardiologist. So, if you continue discussing EKGs you will quickly exceed my knowledge. Just continuing on with your analogy to make a point that TA without using other information available is much less effective

I totally agree. I would never ever invest in a company on the basis of TA alone. Infact, I never invest in a stock, only in a company (and in the case of Tesla an individual, EM)
In case of TSLA fundamentals trump Technicals. I would be totally comfortable investing in TSLA without looking at the stock chart. However, charts give me additional confidence in raising my bets.

 

[zdriver]

Yep, I'm going through the school of hard knocks on this right now after thinking I was a genius just starting with options during the run up. I was over $100k up and continuing to increase leverage even around $370. Turns out, my timing was just lucky initially. After dropping over $100k last week, i had to step back, reread some posts and books, set up some detailed spreadsheets, and catch my breath. The leverage with options is incredible (and addictive). The rise just today swung me back up $40k. I'm no TT007 but these are huge swings for me given that I was basically just investing in index funds and a moderate amount of TSLA stock up until 6 months ago.

Biggest lessons for me:
Set up your leverage plan for a dip and implement it then
Don't chase the stock up as it nears an ATH (you don't necessarily need to reduce leverage but don't increase leverage)
Be patient during the uptrend and the downtrend; don't buy on small dips thinking it will just bounce back up right away
Reduce leverage at some point on the way up or early on the way down (I'm still trying to figure that out)
If you're dreaming about your TSLA trades (and talking in your sleep about them according to my wife) then you are over-leveraged

Your whole story is frighteningly similar to my story, except mine started in ~January. Especially the underlined and italic parts.

Good list of lessons. I wish I had read something like what you just posted 6 months ago...

I'll add one more important one. If you ever wake up and find one of your accounts up $90k, don't ask questions, just sell the calls and wire at least half the money out. Furthermore, absolutely do not open up any new positions that day - sudden large gains tend to breed more risk taking & carelessness... (not TSLA - I may have been one of the lucky SOB's that had OTM BABA calls when it gapped up overnight into the $140's recently. Unfortunately, I still have much learning to do...)

 

[vgrinshpun]

Not TA, but the par share price for the 2022 notes is $327.50 and for the 2019/2021 notes $359.87. Above those respective levels, note holders can engage in arbitrage transactions and collect the semi-annual interest payments relatively risk free. Also, above those levels, the hedge counter-parties are exposed until the share price reaches the warrant levels--$655 for 2022, $512.66 for 2019, and $560.64 for the 2021 notes respectively.

The underwriters (and also likely hedge counter-parties) for the 2022 notes were:

Underwriters Principal Amount of Notes
Goldman, Sachs & Co. 425,000,000
Deutsche Bank Securities Inc. 27,500,000
Citigroup Global Markets Inc. 127,500,000
Morgan Stanley & Co. LLC 127,500,000
Barclays Capital Inc. 21,250,000
Merrill Lynch, Pierce, Fenner & Smith 10,625,000
Credit Suisse Securities (USA) LLC 10,625,000
Total 850,000,000 (add 15% to all the amounts for the "Greenshoe" options which were all exercised)

GS, MS, JPM, and DB were the underwriters for the 2019 and 2021 notes

Both prospectus for the notes state:
"In connection with establishing their initial hedge of the convertible note hedge and warrant transactions, the hedge counterparties or their affiliates expect to enter into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the notes, including with certain investors in the notes. This activity could increase (or reduce the size of any decrease in) the market price of our common stock or the notes at that time.

In addition, the hedge counterparties or their affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so during any observation period related to a conversion of notes). This activity could also cause or prevent an increase or a decrease in the market price of our common stock or the notes, which could affect your ability to convert the notes and, to the extent the activity occurs during any observation period related to a conversation of notes, it could affect the amount and value of the consideration that you will receive upon conversion of the notes."

Whether any of the foregoing has or will affect the share price is unknowable, because no further disclosures or reporting after the prospectus occurs. Whether it influences the timing and content of the updates to the underwriters' sell-side analysts reports---???

Thank you for bringing this up - this a very interesting point.

There are two questions in my mind.

First, what is the history on this? This is not the first rodeo for these institutions with convertible notes and TSLA SP running away against them. Were they successful in keeping the price where they wanted before?

Second, these institutions are only one party of the power equlibrium. There are few others, most notably Mr. Musk himself, and other large institutions invested in TSLA, which, perhaps, have nothing to do with the convertible notes hedges, notably Fidelity, Baillie Gifford, Price T Rowe, Vanguard, Blackrock, Morgan Stanley, Bank of Montreal, and, of course Tencent - each of them with more than $1B position in TSLA.

So yea, who will be more successful in pursuing their interests is unknowable, so get your pop corn and/or beverage of choice ready...

 

[1kEE]

Your whole story is frighteningly similar to my story, except mine started in ~January. Especially the underlined and italic parts.

Good list of lessons. I wish I had read something like what you just posted 6 months ago...

I'll add one more important one. If you ever wake up and find one of your accounts up $90k, don't ask questions, just sell the calls and wire at least half the money out. Furthermore, absolutely do not open up any new positions that day - sudden large gains tend to breed more risk taking & carelessness...

Add me to the list. Lost a lot of my gains from the 180 bottom trying to be clever. Learned a lot in the process.

Should have listened to @MitchJi, @aimc, @zhelkodimic re the dangers of extreme exposure though options. I don't regret the lesson one bit. It was a lesson that we all learn if we go into the deep dark waters. Listening to others that have done it doesn't seem to have the same effect as riding the roller coaster in person.

I have to learn by experimentation after reading theory... for some reason I always think I can beat the odds, but reality and statistics are not in favor of beginners in this game. Only reason I'm still solvent is I started at a nice bottom (180) and had plenty of gains from that to offeset the cost of education. If I had listened to the people that have been there and done it, I'd be a bit wealthier but not as salty.

Options are powerful tools, and people are weak. Trading stock is hard for most people... massive options plays will make you see stock trading in a whole new way. Just because you can have huge amounts of exposure doesn't mean you should. Slow and steady wins the race.

 

[GoTslaGo]

I consider TA analogous to ants around an ant hill... there's ants everywhere and they individually move in almost random directions. But there are also definite patterns that form dark lines. Also, those preferred paths shift in their own random fashion, slowly over time.

Sorry for OT, but just saw this interesting article about ants, and made me think of this conversation:

http://gizmodo.com/scientists-discover-the-secret-behind-incredible-ant-to-1796813537

 

[brian45011]

Oh, stop.

I merely replied to your question :

Who knows? But they've got until December 2017 to get it up and running to take the title from the South Australia deal, right?

If I had realized you were so sensitive to anyone posting anything that does not conform to your views, I would not have commented on your assertion:

In 100 - no 98? days Tesla's partnership with Neone and South Australia will have created the biggest battery 'farm' on the planet. Say, what?

Rest assured; this will be my last response to you and my last comment on any of your posts.

Elon waxing poetic in the news conference announcing the project that: "The system will be three times more powerful than any system on earth,This is not like a minor foray into the frontier — this is like going three times further than anyone's gone before." is technically true but not the complete perspective. The battery installation is described as 100 MW / 129MWh. The battery's energy storage capacity is just 9 MWh larger (7.5%) than the installation in Escondido that SDG&E has been operating since early February. The Rongke Power project that was announced in May, 2016 showcasing John Kerry's diplomatic/trade efforts, is described as:

"The battery arrays approved by the China National Energy Administration will be made up of ten (10X) 20MW/80MWh VFB systems deployed on the Dalian peninsula, which during extreme weather events has experienced stress on the electricity grid."​

That's twice as powerful with energy storage capacity of six times as large as the Hornsdale installation will be when completed.

It's been pointed out to you already that the China project, if it gets done, will only be partially operational in 2020.

Do you have a source or citation about the installation only be "partially operational in 2020?" The verbatim press release was:

" After full commissioning, the VFB battery will be able to peak-shave approximately 8% of Dalian's expected load in 2020. In addition, the large-scale battery will form an additional load center, which will enhance grid stabilization including securing the power supply and providing black-start capabilities in the event of emergency."
​

Rongke Power has been the National Development and Reform Commission and the Energy Board approved as "national Joint Engineering Technology Center "," National Energy Flow Battery Energy Storage Technology Key Laboratory ". It doubtful an EIS is a condition precedent to starting construction. The The Dalian peninsula is approximately 5,000 square miles. If "extreme weather events ... stress ... the electricity grid," a prudent T&D system operator would commission each of those 10 systems as soon as they are individually completed. It would only take two in service to exceed the announced energy storage capacity at Hornsdale.

The South Australia project will be the largest, fully operational one of its kind until such time as its not.

Energy storage markets are expanding rapidly, particularly in Australia where the average cost of residential grid connected electricity is apparently about $0.31/KWh. Lyon, an indigenous Australian private sector developer, has claimed: "The Lyon Group’s Australian project pipeline currently comprises more than 1,700MW of large-scale solar and 1,000MW of large-scale battery storage." http://lyonbatterystorage.com.au/wp...le-battery-storage-market-services-tender.pdf

Two of these, Nowingi (80MW / 160MWh) and Riverland (100MW / 400 MWh), are scheduled to start construction in September; first operation is forecast in January, 2018 for the former and 1Q18 for the latter.

I am not denigrating the SA award. It's an important endorsement of TE's competitive chops. Neoen will fund the batteries, and Tesla should receive a significant cash progress payment when the PowerPacks ship, which should show up in the 3Q16 Cash Flow statement in early November. The "100 days or free" is a PR sideshow; the key deadline is 1 December, the date both Elon and Neoen gave assurances to Premier Weatherill that the installation would be available to use. Explainer: What the Tesla big battery can and cannot do The Mira Loma 80 MWH project for SCE had negative gross margin 2017 Investor Roundtable:General Discussion We should see in February 2018 in the 10k whether sourcing the cells for Hornsdale from the GF results in a significant profit

 

[vgrinshpun]

Energy storage markets are expanding rapidly, particularly in Australia where the average cost of residential grid connected electricity is apparently about $0.31/KWh. Lyon, an indigenous Australian private sector developer, has claimed: "The Lyon Group’s Australian project pipeline currently comprises more than 1,700MW of large-scale solar and 1,000MW of large-scale battery storage." http://lyonbatterystorage.com.au/wp...le-battery-storage-market-services-tender.pdf​

Two of these, Nowingi (80MW / 160MWh) and Riverland (100MW / 400 MWh), are scheduled to start construction in September; first operation is forecast in January, 2018 for the former and 1Q18 for the latter.

I am not denigrating the SA award. It's an important endorsement of TE's competitive chops. Neoen will fund the batteries, and Tesla should receive a significant cash progress payment when the PowerPacks ship, which should show up in the 3Q16 Cash Flow statement in early November. The "100 days or free" is a PR sideshow; the key deadline is 1 December, the date both Elon and Neoen gave assurances to Premier Weatherill that the installation would be available to use. Explainer: What the Tesla big battery can and cannot do The Mira Loma 80 MWH project for SCE had negative gross margin 2017 Investor Roundtable:General Discussion We should see in February 2018 in the 10k whether sourcing the cells for Hornsdale from the GF results in a significant profit

Note that total installed cost for the BES portion of these projects range between $625-$1000/kWh,or between 1.61 and 2.57 *times* more expensive than the BES to be provided by TESLA . I think we need to keep this information in mind to get the right perspective. This does not seem to be sustainable for AES to have cost that is so much higher than Tesla's. Given the history of Tesla's guidance on margins I expect that TE will have very healthy margin once scaled up in second half of this year, even though they are undisputable price leaders.

 

[neroden]

Should have bought more yesterday.

In other news, my J19 330 call option is growing faster than my 200% all in margin account. I'm a bit surprised.

Yeah, they do that. One of the experienced options traders could explain it in terms of "greeks" but I am too zonked to do so right now.

 

[MitchJi]

The problem is, theta, time decay. If theta/delta is high, the stock price will have to move up faster to break even. You can be long calls, have the stock price move up, and still loose money because of this (stock price not moving up fast enough).

The theta is pretty low during the first ~year for LEAPS's.

 

[neroden]

It's not a mystery. One contract is for 100 shares. The current delta is 0.73458 so the total increase is ~$73.46 dollars per option for every $1.00 that the SP goes up. In other words about the same total dollar increase as 73 or 74 shares:
Delta. The ratio of the change in price of an option to the change in price of the underlying asset. Also called the hedge ratio. Applies to derivative products. For a call option on a stock, a delta of 0.50 [0.73458] means that for every $1.00 that the stock goes up, the option price rises by $0.50 [$0.73458] per share.

I've been assuming that his 200% leveraged account is more than 73 shares. I might be wrong.

If so, I think he may be witnessing the effects of:
(1) gamma as the stock prices approaches the option strike price, which makes delta go up
(2) volatility change: if you buy at lower volatility and volatility goes up you can see some *striking* moves up in option prices. I haven't checked the vega on this option, but they tend to be fairly high on TSLA options

 

[MitchJi]

I've been assuming that his 200% leveraged account is more than 73 shares. I might be wrong.

If so, I think he may be witnessing the effects of:
(1) gamma as the stock prices approaches the option strike price, which makes delta go up
(2) volatility change: if you buy at lower volatility and volatility goes up you can see some *striking* moves up in option prices. I haven't checked the vega on this option, but they tend to be fairly high on TSLA options

I checked the delta after today's close. So that delta includes the effects of being close to ITM and the effects of Vega.

$0.73 is fairly high when you consider a delta of $1.00 is the maximum possible.

I believe that the IV probably decreased today as the SP increased.

 

[Mike Smith]

330.50 in Germany

 

[Tslynk67]

A teaser for next-gen Roadster in the referral program... Could be the "secret" Elon referred to be revealed at the same time as semi?

Next Gen Roadster 10% discount appears in referral program, free at 50 referrals

(this car is on my radar for upgrading from mp P85)

 

[winfield100]

Following the TA discussion, it crossed my mind that opinions on observable trends with TSLA price action might be beneficial for this thread. @Papafox has made some great contributions, especially with observations on action around bollinger band limits.
I often read about amateur hour, and power hour observations. Having followed the stock for a couple years now, i would submit that it is amateur 15 mins in the morning, and that regardless of what trend TSLA is in, shorts will try to supress price at the open.
Regarding power hour, if TSLA is in a general uptrend, it is actually power 3.45-4.00, whereby if price has been consolidating up to this point, the increased volume typically observed from 3.45 onwards precipitates a spike.

If you look at 2 overlays, the 5 minute Vol and A/D line, two things stand out at least to me. I'm an amateur tho and have only been looking at these things since early 1980's so it could be jusr "noise" BUT
the vol daily is a concave 'lens' , amateur hour at 9:30, slows, then at end of day increases.
July 5th A/D was a CONVEX lens, buying falt middle of day then selling. Starting on the July 6th, Vol still has concave lens, BUT A/D (accumulation/distribution) line starts a steady upward trend, ie, mosr buying then selling and just before market close on 7/11 a sharp spike up, along with a spike of vol. It merely says what people are doing, and the spike of both at close of day yesterday, if __very short term__ predicitve says a morning positive movement
It could also be just "random noise" or "scrying the future with sheep entrails", but my portfolio andi am happy. The A/D line has been up since 11/30/2016 and seemed to get ahead of itself in June, and short interest is down ~18% so that might account for some. (It really seems to irk shorts when i point this out and tell them to close their positions before losing more and more money, bunch 'a ingrates)

 

[winfield100]

 

[bdy0627]

Tech stocks are up premarket, especially NVDA and TSLA. I'd like to pick up a bit more TSLA today but wondering when the low of the day will be. Will shorts attack early today? Or during the low volume lunch hours since an early attack may be futile today?

 

[bdy0627]

Your whole story is frighteningly similar to my story, except mine started in ~January. Especially the underlined and italic parts.

Good list of lessons. I wish I had read something like what you just posted 6 months ago...

I'll add one more important one. If you ever wake up and find one of your accounts up $90k, don't ask questions, just sell the calls and wire at least half the money out. Furthermore, absolutely do not open up any new positions that day - sudden large gains tend to breed more risk taking & carelessness... (not TSLA - I may have been one of the lucky SOB's that had OTM BABA calls when it gapped up overnight into the $140's recently. Unfortunately, I still have much learning to do...)

I very much agree with you about risk taking after large gains. I lost a lot short term after getting careless and sloppy following the run up in the spring. In fact, we should be doing just the opposite after big gains, protecting them and adjusting leverage for increased risk, but it seems very difficult to resist.

 

[AlMc]

I very much agree with you about risk taking after large gains. I lost a lot short term after getting careless and sloppy following the run up in the spring. In fact, we should be doing just the opposite after big gains, protecting them and adjusting leverage for increased risk, but it seems very difficult to resist.

While it limits my upside my rule with ST options is if they are nicely up: Sell enough of them to cover your initial cost, plus 10% and let the rest ride.

NOT advice

EDIT: I have learned that my greed usually costs me more than my caution over time.

 

[Navin]

Here is what I do with options after a nice run I leg into a bull call spread. Take my chips off the table and play with the houses money till expiration.