Short-Term TSLA Price Movements - 2013

[DaveT]

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.

Sorry, I thought you had posted it here but it was another user.

 

[gym7rjm]

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?

Just fyi, with Scottrade you cannot sell puts. You would have to open a completely new account with their OptionsFirst platform. I also use Scottrade and this has bothered me. They claim that they will eventually allow selling puts in regular accounts, but it hasn't happened yet.

As a word of advice to your situation, I would not procrastinate on getting options form and margin form filled out. I kept procrastinating and by the time I decided to commit to trading options I had to wait for my form to clear. This was during the run up to $50 and it cost me. Even if you might not use options or margin you will at least be prepared if an opportunity comes up.

 

[TSLAopt]

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.

Interactive Brokers allows it up until 8pm EST and also allows you to buy Tesla on the Frankfurt exchange overseas if you want to buy it at 3am EST. They are quite simply the best broker for many other reasons too, especially options.

 

[deonb]

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?

On intrinsic value alone (there is also premium):

If the price drops to $140, the 142 put is worth $2, the 130 is $0 (so 3 contracts is $600)
If the price drops to $135, the 142 put is worth $7, the 130 is $0 (so 3 contracts is $2100)
If the price drops to $130, the 142 put is worth $12, the 130 is $0 (so 3 contracts is $3600)

Your stock value would drop the same, so the one offsets the other.

On further drop:
If the price drops to $120, the 142 put is worth $22, the 130 is $10 (so 3 contracts is $6600 - $3000 = $3600).

The $100's would be mostly premium:

If the price rapidly drops to $120, the $100 would be worth ~$1 (so 10 contracts is $1000)
If the price rapidly drops to $110, the $100 would be worth ~$3 (so 10 contracts is $3000)
If the price rapidly drops to $100, the $100 would be worth ~$8 (so 10 contracts is $8000)
If the price rapidly drops to $90, the $100 would be worth ~$15 (so 10 contracts is $15000)

But keep in mind the $1500 you pay for the setup. You would be out that permanently unless the price drops below $90.

 

[austinEV]

I think this forum is prone to group think. Everyone is reflecting optimistic sentiments back at each other, and there is really no room for other opinions because "everyone who had doubts was proven wrong before".

The best way to make decisions is to see both sides of the argument.

Disclosure: I am long TSLA, but heavily in doubt. Also short QQQ (via puts) and SPY (vanilla).

I agree we get echo-chamber-y often. Two ways to think of this: 1) This is a place to get the bull case. You can find bear cases elsewhere. and 2) We should be cultivating the bear cases ourselves. It isn't so hard to do. i think some of the recent what-ifs have been pretty balanced. Regardless, a smart investor knows to get worried when they only hear "It will go up forever. This time it's different."

 

[ggr]

Today was like deja vu all over again. It's going to be an exciting week.

Regarding after hours trading, or trading on Frankfurt: remember that the volume is very low, which means bad things can happen really quickly. Never do market orders. Never do stop loss type orders (my broker won't even let me, not that I would).

 

[deonb]

Never do market orders.

Good point - same goes for options. Never do market orders either.

Unless you're chasing a $1 trading range, limit halfway between bid and ask, and move up closer to the price (ask/bid, depending on buy/sell) by 5c every 5 seconds.

You generally hit it at 50% to 90% between bid and ask.

 

[sub]

Thanks deonB and Gym7 for the help. I've been meaning to get my Scottrade account setup properly but have been busy and procrastinating. Not good that Scottrade doesn't offer Put contracts, I will have to figure that out. I've gone back and forth on whether or not I would ever use margin. The money I have in TSLA is money I can afford to lose, but of course I would prefer not to.

If you guys were in my situation, would you even bother with "insurance"? I'm confident in TSLA long term, it's just painful watching some of these price swings, especially the GS swing and not take advantage of it. I do think that there will be a correction sometime after this earnings report but I have no idea if it will be to 130-150 or 60! I've been reading these investor forums religiously (and I'm an atheist). I wish I had wandered in here 1 month earlier, I didn't decide to invest in TSLA until after my test drive and that was 1 week later than ideal for me.

 

[blakegallagher]

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!

There will be times in the future ... It might be now but I got some cash ready in case there is a "tesla" Tuesday tomorrow

 

[deonb]

Thanks deonB and Gym7 for the help. I've been meaning to get my Scottrade account setup properly but have been busy and procrastinating. Not good that Scottrade doesn't offer Put contracts, I will have to figure that out. I've gone back and forth on whether or not I would ever use margin. The money I have in TSLA is money I can afford to lose, but of course I would prefer not to.

If you guys were in my situation, would you even bother with "insurance"? I'm confident in TSLA long term, it's just painful watching some of these price swings, especially the GS swing and not take advantage of it. I do think that there will be a correction sometime after this earnings report but I have no idea if it will be to 130-150 or 60! I've been reading these investor forums religiously (and I'm an atheist). I wish I had wandered in here 1 month earlier, I didn't decide to invest in TSLA until after my test drive and that was 1 week later than ideal for me.

No. I wouldn't insure a long-term (10 year+) position. TSLA will still be $400 in 2023. If you keep insuring every ER you'll lose most of the gain in insurance.

I think it's a good play to buy $95 Aug 9 puts because they're so cheap now, but that's short-term speculation, not long-term protection.

 

[Convert2013]

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

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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.

I put the comment there cuz I realized both GS and DB made some serious $$$ using their "price targets" into earnings. So it would be wise to take some profits off the table before ER for the rest. That's what I meant. But to each their own. Boy is this the most important week for TSLA investors for 2013 or what?

 

[DaveT]

I put the comment there cuz I realized both GS and DB made some serious $$$ using their "price targets" into earnings. So it would be wise to take some profits off the table before ER for the rest. That's what I meant. But to each their own. Boy is this the most important week for TSLA investors for 2013 or what?

No problem. You're totally entitled to your opinion. I was just wasn't clear on who it was directed to. But thanks for clarifying.

 

[Convert2013]

No problem. You're totally entitled to your opinion. I was just wasn't clear on who it was directed to. But thanks for clarifying.

Yeah I think that saying basically means "know when to put your money in and when to take it out".. Some of my friends got burnt with AAPL when it dropped from $700 to high $300s... they bought high expecting the thing to go to $1000 according to crazy price targets from analysts who were pumping the stock. At the end of the day each person has to determine for themselves (research, experience, and gut instinct) when to pull out. Pigs in my mind are most likely to be individual investors who are not as savy as fund managers, etc.

 

[sub]

ok, thanks. I think I'm maybe better off to just close my eyes short term and not worry about it. I don't need the money I have invested and the plan has always been to let it sit for years. I'll have more cash soon to take advantage of the dips. In the mean time I need to learn options so I can maybe play those along the way in tsla and other stocks.

 

[DaveT]

Yeah I think that saying basically means "know when to put your money in and when to take it out".. Some of my friends got burnt with AAPL when it dropped from $700 to high $300s... they bought high expecting the thing to go to $1000 according to crazy price targets from analysts who were pumping the stock. At the end of the day each person has to determine for themselves (research, experience, and gut instinct) when to pull out. Pigs in my mind are most likely to be individual investors who are not as savy as fund managers, etc.

I think what you might be referring to is sheep. Sheep blindly follow (ie., "AAPL is going to $1000") w/o doing the research. Pigs in my mind are the ones who take way too much risk during a time when the odds have become stacked against them (ie., go 100% of life savings on Aug 190 strike calls). I think it's part greed that gets them, but also part ignorance (they deny/reject the real risks at hand).

 

[AlMc]

Yeah I think that saying basically means "know when to put your money in and when to take it out".. Some of my friends got burnt with AAPL when it dropped from $700 to high $300s... they bought high expecting the thing to go to $1000 according to crazy price targets from analysts who were pumping the stock. At the end of the day each person has to determine for themselves (research, experience, and gut instinct) when to pull out. Pigs in my mind are most likely to be individual investors who are not as savy as fund managers, etc.

I don't think the term pig applies to all individual investors who are not as smart as savvy fund managers (like me). In my mind, it would be more accurate for any investor who runs heavy on margins to invest in a momentum stock like TSLA, day trading to capitalize on swings, then get burnt.. While I will certainly be unhappy with a large drop in the stock price, as a loooong position person I hope I can ride the ups/downs that inevitable here.

I take no personal offense to the term pig...just adding my two cents/my opinion as to the definition.:wink:

The next 3-4 days are going to VERY interesting....

 

[hershey101]

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.

Hi Curt,
I want to thank you for your contribution to these forms. You have provided me with a lot of knowledge and insight.
I was wondering why would it be better for investors to convert the offering to shares? It doesn't make sense, one would think that they would want to convert as late as possible so as to get the most interest payments, and they can still enjoy any future upward movements in the stock as the convertion price is still $124.52. Am I missing something?

 

[deonb]

Hi Curt,
I want to thank you for your contribution to these forms. You have provided me with a lot of knowledge and insight.
I was wondering why would it be better for investors to convert the offering to shares? It doesn't make sense, one would think that they would want to convert as late as possible so as to get the most interest payments, and they can still enjoy any future upward movements in the stock as the convertion price is still $124.52. Am I missing something?

Takes the risk out of it and frees the money back up for other investments. Converting at $168 in September gives them a much better ROI than converting at $200 in 2017.

 

[Citizen-T]

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

I'm not sure... I bought them 7/16 @ 2:41pm. You could probably look it up. Mobile right now so not gonna try.

 

[Curt Renz]

Takes the risk out of it and frees the money back up for other investments. Converting at $168 in September gives them a much better ROI than converting at $200 in 2017.

hershey101, deonb explains it succinctly and well. I'll add that the notes only pay 1.5% per year and must be redeemed at par if they have not been converted by June of 2018. Even if not converted as soon as allowable, the notes become more valuable as the price of a common share rises above $161.88. Therefore it is in the interest of the note holders that the share price gets above that level. But as deonb notes, converting ASAP allows greater flexibility.