Short-Term TSLA Price Movements - 2013

[brianman]

In the account I'm working in, I don't have options turned on (yet?) so I'm just doing shares.

Figured I'd share a data point:

• 2013/06/20 Bought @ $100.67
  [Battery swap announcement]
• 2013/08/05 Sold @ $144.72
  [Profit-taking before Earnings jitters]
• Duration: 46 days, 44.05% return

Scouting the next dip...

 

[deonb]

"e) 1% odds: Some magical set of numbers that causes TSLA to stay within $5 before and after ER. In related news, Nasa discovers Jimmy Hoffa still alive on Mars."
This is where I disagree the most. I can see the following scenario possible. Maybe with 20-25% possibility.
5100 cars delivered, 22,000 cars guidance, 14% GM, 560m revenue, 1c profit.
In this scenario, I could see the stock open at +/- $10 of where it closed on earnings day.

The reason I don't see a small move is more psychological than that. If there is a positive the price will go up, and then go up further.

Long: This thing is unstoppable - and I want to be a part of it.
Short: This thing is unstoppable - and I better get out of the way.

But if there is any indication that the price stabilizes, that mentality changes to "this thing has been stopped". And if that is the thinking, the price drops - longs that reluctantly came in at $140 won't want the risk further exposure since it's clear they're not going to partake in short-term gain, and shorts will feel more secure about themselves, piling back in. The technical aspect of the price itself then becomes the driving force, rather than the ER.

It might open within $5 the next day, but if it does it will freefall during the rest of the day and close more than $5 down. I suspect it will already fall through that during pre-market though.

So in your scenario, I see it go down as such - not stabilize. I find it hard to imagine a set of numbers that's precise enough to overcome the psychology of the stock, and instantly devolatilize it. (SO did not know that was a word). Hence my 1% attribution.

"a) 25% odds: Strong positive (5400, 25000 guidance, second line opening, 15c profit) - 15% gap up - opening $161."
I see the odds being 10% for this.

"b) 40% odds: Positive (5200, 22500 guidance, 3c profit) - 8% gap up - opening $151."
Yes I can see 40% odds for this.

"c) 20% odds: Meet / weak positive (5000, 21000 guidance, 5c loss) - 15% gap down - opening $119."
Yes, I can see 20% odds for this

"d) 14% odds: Negative (4800, lowering guidance, > 5c loss) - 33% gap down - opening $93."
I see 5% odds for this.

e) 1% odds: Some magical set of numbers that causes TSLA to stay within $5 before and after ER. In related news, Nasa discovers Jimmy Hoffa still alive on Mars."
This is where I disagree the most. I can see the following scenario possible. Maybe with 20-25% possibility.

I also think my (a) is a bit big, but I had (a) at 25% because I believe the odds of (a) is bigger than that of (d). Looks like you agree in principle there.

You however solved (a) another way by making (e) bigger. However, I don't agree with your 25% of (e) due to the reason above. But if you move the majority of (e) to (c) that would be another way of making (a) smaller.

 

[sleepyhead]

DaveT - How do you buy shares aftermarket? I always wondered how you can do this. Can I do this with Schwab?

DaveT - I agree with your assessment that the economy is picking up. Europe has been in a recession for the past several months and it looks like they are getting out of the recession and will return to growth in the second half.

China is not a concern since they cannot grow at 10% indefinitely; it is still amazing that they are growing at 7.5% with such a large economy. Everyone talks about how China is building ghost towns, etc. just to keep the economy going and that it is going to backfire on them. Well it is not, because they are a nation of savers and don't have the debt to cause a major crash. Because they don't have debt, the government can keep on instituting huge stimulus packages if necessary to kick the can down the road for many years and probably even decades.

The U.S. economy is just finally starting to pick up. Think of the past 3 years as a period of stagnation post recession and that the economic recovery is starting right now. The reason for this is oil production, fracking, alternative energy revolution, housing recovery, and stock market recovery. The first three create jobs and make energy independence a reality and cheaper. The latter two make people feel more rich and willing to spend. I think that we are on a brink of a perfect economic storm that will lead to huge job creation and economic growth. This will then eventually turn into out of control inflation and that is when we will see our next big recession. That is still several years away. The bull market is real, so don't miss out on it. Buy protection if you are cautious, but I personally don't have any.

In the short-run though I feel like we may be headed towards a pull-back/correction, but that is still probably a few weeks away. You can never time these things so you might as well just stay invested.

 

[Cattledog]

Curt - Agree 100%. I didn't know of the $161.88, makes sense. I speculated (hoped) they'd do another offering around $180, about double the last one's price, offer fewer shares to make up another billion or so, then go for the jugular on the Model X and Gen 3. They should put big $ at finishing design/fabrication on Model X so they do not slip their dates. Then massive $ at Gen 3, particularly battery tech.

Then Elon can go to Mars and start the Red Planet Post...

That’s a fine conjecture, Dave. Let’s keep in mind that in May, Goldman Sachs and its clients bought convertible notes at an equity equivalent of $124.52 that can be converted to common shares, if after September 30 the share price remains above $161.88 for twenty out of thirty consecutive days. I’m sure they would love to be able to convert. Therefore there may be some institutional interest in seeing the price achieve and hold above $161.88.

At that level, it would not surprise me if Tesla Motors again publicly offers new shares and notes. The proceeds would allow acceleration in the introductions of Model X and Gen III that could keep potential competitors eating dust.

 

[nursebee]

I am sitting still thru earnings. Elon and Co. continue to execute. When the growth stops then I am out. 20% drop quite possible after earnings. Active traders getting white on rice with this one.

Congrats to those with profits harvested.

I recall a guy on CNBC saying this was the next Cisco. I'm not selling any more until it is on the way down!

My price targets are not met. Short or long term.

 

[sub]

I can't decide what to do, would appreciate any insight from those that have way more experience that I do which isn't much. I'm all in on shares of TSLA, and I don't want to give up any of my position. I would like to take advantage of any possible dip post ER, but I'm cash poor at the moment. I haven't activated my trading account for options or margin (I'm using Scottrade).

I have no idea how much puts cost and how many I would need to buy as a percentage to cover my shares and possible pocket some money on a dip? Or, would it be better to just wait for the dip and pile in every dollar I can scrounge up (maybe using some margin).

It seems crazy to sell part or all of my position and get hit with short term tax given that I'm long Tesla. If i'm going to take a 35% hit, and let's say the stock hits 160, It has to drop down to about 140 for me to break even after taxes ( I got in originally in the low 90's and sold, then again at 102). So, if it were to stay above 140 I would actually lose money due to taxes. Is my math correct on this? My goal would be to sell, wait for dip then pile it all back in. if I have to wait for this big of a dip, seems like a big risk given it may go up instead of down. The reason I'm in at 102 is I got greedy and tried to time the swings when it was trading in the 80's for a week or so after it hit 90's when I bought. As soon as I sold after it hit 92 again it never went back down so I had to swallow my pride and buy back in at 102. Lesson learned.

So, puts seem like a better option but I can only scrap together 1-2k at this point without using margin. Part of me wish I hadn't just spent 28k on my solar system!.
My other thought was to put a stop order in just to protect my original investment and close my eyes for the next 1-3 years and try not to over think the short term ups and downs.

I'm a complete newb when it comes to investing in stock in case my post hasn't given it away

 

[Jack6591]

Just curious. Does anyone think Elon's press conference on Monday will affect the stock price????????

 

[DaveT]

DaveT - How do you buy shares aftermarket? I always wondered how you can do this. Can I do this with Schwab?

It depends on your brokerage. Wells Fargo doesn't allow extended hours trading. OptionsHouse allows it for the first hour after market close. OptionsXpress allows it during full extended hours. Best to check with your brokerage directly.

 

[deonb]

I can't decide what to do, would appreciate any insight from those that have way more experience that I do which isn't much. I'm all in on shares of TSLA, and I don't want to give up any of my position. I would like to take advantage of any possible dip post ER, but I'm cash poor at the moment. I haven't activated my trading account for options or margin (I'm using Scottrade).

I have no idea how much puts cost and how many I would need to buy as a percentage to cover my shares and possible pocket some money on a dip? Or, would it be better to just wait for the dip and pile in every dollar I can scrounge up (maybe using some margin).

It seems crazy to sell part or all of my position and get hit with short term tax given that I'm long Tesla. If i'm going to take a 35% hit, and let's say the stock hits 160, It has to drop down to about 140 for me to break even after taxes ( I got in originally in the low 90's and sold, then again at 102). So, if it were to stay above 140 I would actually lose money due to taxes. Is my math correct on this? My goal would be to sell, wait for dip then pile it all back in. if I have to wait for this big of a dip, seems like a big risk given it may go up instead of down. The reason I'm in at 102 is I got greedy and tried to time the swings when it was trading in the 80's for a week or so after it hit 90's when I bought. As soon as I sold after it hit 92 again it never went back down so I had to swallow my pride and buy back in at 102. Lesson learned.

So, puts seem like a better option but I can only scrap together 1-2k at this point without using margin. Part of me wish I hadn't just spent 28k on my solar system!.
My other thought was to put a stop order in just to protect my original investment and close my eyes for the next 1-3 years and try not to over think the short term ups and downs.

I'm a complete newb when it comes to investing in stock in case my post hasn't given it away

So not sure how many shares you want to protect. Let me take a scenario with 300 shares and a $1500 hedge.

To cover 300 shares you need 3 put contracts (a contract is 100 options). Meaning for $1500 you need to look at puts that are $500 per contract ($5 per option).

I also think you probably want to just eliminate the risk of the ER day yourself - there is a risk afterwards, but less so (and puts will become cheaper day after - so you can re-evaluate). So look at August 9th puts.

For $5 what you can buy right now is a put at $136. That means your stock is effectively supported from falling below $136. (If the price continues to rise until Wednesday, maybe $5 will buy you a $140 put.)

Alternatively, and what I would do, is to buy a $142 put right now and sell a $130 put (vertical put spread). That will cost you $4.40 per option. That way you're covered from any fall between $142 and $130. Total cost: $1320. For the remaining $180, buy 10x $100 puts at 18c each. If the price falls that quickly below $130, you'll have enough volatility to wake up the $100's to provide some support (not full though). Fall below $100-ish and you'll be better off than you were before the ER - for a short while.

You'll have to watch it like a hawk after earnings - those $100 put premiums will evaporate like Purell within a matter of hours, unless the stock falls below $90-ish as well.

 

[kcveins]

DaveT - How do you buy shares aftermarket? I always wondered how you can do this. Can I do this with Schwab?

If I can do it, you can too.
When you go to the main Trade page, right next to the "Trade Stocks" tab (just under your account name/number) is "Extended Hours"
You can do both After Hours and Pre-Market trading here.
Hope this helps.

 

[Jonathan Hewitt]

DaveT - How do you buy shares aftermarket? I always wondered how you can do this. Can I do this with Schwab?

I can do it in my IRA with Fidelity, just requires a phone call. My non retirement is with USAA and haven't figured it how if I can do it with them or not.

 

[blakegallagher]

I had to sell half my Aug 140s at $12.50. I may regret that if there is a big jump after earnings, but I bought them at $2.25...so can't complain too much.

!!! wowzers .... I have got to start buying further OTM calls .... what was the stock at approx. when you bought the aug 140's

 

[Jonathan Hewitt]

!!! wowzers .... I have got to start buying further OTM calls .... what was the stock at approx. when you bought the aug 140's

It's too late now, unless you have a really high risk tolerance I'm wishing the same, my AUG 17th $160s are up 165% from when I bought them July 26th, but I only bought 2 of them!

 

[aznt1217]

Just curious. Does anyone think Elon's press conference on Monday will affect the stock price????????

What press conference?

 

[DaveT]

What press conference?

Hyperloop, Twitter / elonmusk: Will publish Hyperloop alpha ... .

But I haven't heard of a press conference on it yet.

 

[aznt1217]

I don't get it. Can you explain?

It's a typical term on wall street. It's essentially saying don't get greedy. Pigs are the ones who wait and are indecisive and just have blind faith in holding. It just means to be wise with your profits.

 

[DaveT]

It's a typical term on wall street. It's essentially saying don't get greedy. Pigs are the ones who wait and are indecisive and just have blind faith in holding. It just means to be wise with your profits.

I get the saying, just wondering what were you inferring? Were you suggesting to take some profit now? Or were you referring to people betting lots on deep OTM options as "pigs"? Didn't understand your reference.

 

[sahanim]

Its not a press conference. He said he'll be releasing a report of sorts

Hyperloop, Twitter / elonmusk: Will publish Hyperloop alpha ... .

But I haven't heard of a press conference on it yet.

 

[aznt1217]

Hyperloop, Twitter / elonmusk: Will publish Hyperloop alpha ... .

But I haven't heard of a press conference on it yet.

Unless he was referring to the JP Morgan Conference. Tesla was in it last year. It's essentially a meet and greet of company to investors (institutional mainly).

Auto Conference | J.P. Morgan

- - - Updated - - -

I get the saying, just wondering what were you inferring? Were you suggesting to take some profit now? Or were you referring to people betting lots on deep OTM options as "pigs"? Didn't understand your reference.

I didn't make the term or post it here. Truthfully, to me that saying never meant much. It's just something people say to sound big because it sounds cool and aggressive. In plain English it means to be nimble with your profits and only put what you are willing to put in. I think it's to those guys who are on the fence and perhaps are on this forum seeking for magical advice on what to do with their investments.

 

[sub]

So not sure how many shares you want to protect. Let me take a scenario with 300 shares and a $1500 hedge.

To cover 300 shares you need 3 put contracts (a contract is 100 options). Meaning for $1500 you need to look at puts that are $500 per contract ($5 per option).

I also think you probably want to just eliminate the risk of the ER day yourself - there is a risk afterwards, but less so (and puts will become cheaper day after - so you can re-evaluate). So look at August 9th puts.

For $5 what you can buy right now is a put at $136. That means your stock is effectively supported from falling below $136. (If the price continues to rise until Wednesday, maybe $5 will buy you a $140 put.)

Alternatively, and what I would do, is to buy a $142 put right now and sell a $130 put (vertical put spread). That will cost you $4.40 per option. That way you're covered from any fall between $142 and $130. Total cost: $1320. For the remaining $180, buy 10x $100 puts at 18c each. If the price falls that quickly below $130, you'll have enough volatility to wake up the $100's to provide some support (not full though). Fall below $100-ish and you'll be better off than you were before the ER - for a short while.

You'll have to watch it like a hawk after earnings - those $100 put premiums will evaporate like Purell within a matter of hours, unless the stock falls below $90-ish as well.

Thanks for that explanation, I'm doing some reading on options now so I can hopefully understand it better. In your scenario above, if the stock drops to 135-140, what are the puts worth?