Short-Term TSLA Price Movements - 2013

[kevin99]

Nice, it is a Tesla Tues. after all. My cash is at the ready!

Perhaps someone has commented on this, but this pattern of "Monday pop, Tuesday drop" really is going strong.

I think after a full weekend, the media exposure, the wealthy people who visited the store put down an order and decided to invest, is a legitimate reason to produce the pop on Monday. Then of course followed up by a bit of profit taking Tuesday, which could trigger over sized drop. All these actions seems to over reacting and produce some dramatic movement.

My accounts has gotten too big that it will be irresponsible for me to just let it ride the stock. I have to hedge. It is a weird feeling to not feel bad at all seeing a drop on TSLA. My hedge is shorting of weekly OTM call, which could be ITM after a few days of run up. My goal is to capture 2/3 of the upside, while eliminating 2/3 of the risk.

 

[DaveT]

My accounts has gotten too big that it will be irresponsible for me to just let it ride the stock. I have to hedge. It is a weird feeling to not feel bad at all seeing a drop on TSLA. My hedge is shorting of weekly OTM call, which could be ITM after a few days of run up. My goal is to capture 2/3 of the upside, while eliminating 2/3 of the risk.

Kevin, can you share what specifically you did in your hedge? Just curious because I'm also looking to start hedging my position eventually (especially if there's a run-up post Q2).

 

[kevin99]

Kevin, can you share what specifically you did in your hedge? Just curious because I'm also looking to start hedging my position eventually (especially if there's a run-up post Q2).

I only sell weekly or monthly OTM call. Buying put is too expensive and wouldn't protect a 10-20% drop, which i think is much more likely and more often scenarios than a 30-50% drop.

The option premium has gotten so high that the credit from the short call is a nice stabilizing factor. If I am wrong by 5%(in term of price target at expiration date), my account would be the same as no hedge. If I am wrong by 10%, then I wouldn't gain as much as if I leave it alone. So the OTM call could become ITM and I could end up losing money. So far overall I lost money on shorting the OTM calls. But it has a nice Tax benefit, the loss absorb my short term profit and keep majority of the gain the long term position.

The timing of the sell and the strike price of the OTM call is more arts than science, that I wouldn't be able to theorized. Any way I have a bad record doing it so far.

I do sometime roll the call further out of the money, or further deep in the money, again it is more arts than science.

 

[twinklejet]

what's OTM?

 

[NuclearPowered]

Out of the money. Underlying below the strike price for calls. Above for puts.

 

[kevin99]

Out of the money. Underlying below the strike price for calls. Above for puts.

It is easier to look at it from the opposite angle.
A call with strike price above the current price is considered OTM call.
A put with strike price below the current price is considered OTM put.

 

[Norse]

Perhaps someone has commented on this, but this pattern of "Monday pop, Tuesday drop" really is going strong.

I think after a full weekend, the media exposure, the wealthy people who visited the store put down an order and decided to invest, is a legitimate reason to produce the pop on Monday. Then of course followed up by a bit of profit taking Tuesday, which could trigger over sized drop. All these actions seems to over reacting and produce some dramatic movement.

My accounts has gotten too big that it will be irresponsible for me to just let it ride the stock. I have to hedge. It is a weird feeling to not feel bad at all seeing a drop on TSLA. My hedge is shorting of weekly OTM call, which could be ITM after a few days of run up. My goal is to capture 2/3 of the upside, while eliminating 2/3 of the risk.

JINX! This seems strong IMO! I think some "weak longs" are out now.

 

[maekuz]

Yes! Green close today.

 

[Citizen-T]

Perhaps someone has commented on this, but this pattern of "Monday pop, Tuesday drop" really is going strong.

I think after a full weekend, the media exposure, the wealthy people who visited the store put down an order and decided to invest, is a legitimate reason to produce the pop on Monday. Then of course followed up by a bit of profit taking Tuesday, which could trigger over sized drop. All these actions seems to over reacting and produce some dramatic movement.

They call it "Mutual Fund Monday" in the business. Everyone contacts their managers over the weekend (when they generally look at finances) and make their changes (add money, change funds to better performing ones). A lot of what we see on Monday *could* be people moving into funds that hold TSLA. Might not even be because of TSLA itself, just because the fund is out-performing whatever it is they currently have.

 

[Room_A113]

Interesting article by Jim Cramer this morning. He totally missed on TSLA, but it's interesting to see the mentality of the shorts exposed:

When I was at the Delivering Alpha conference, a young buck kind of guy comes up to me and says he's just kiting, hasn't paid the fee for Delivering Alpha, he just wanted to see me about a job prospect. Some people remain under the delusion that I have a lot of jobs to give as I did a decade ago.

But I played along, even as I felt proprietary enough to almost want him thrown out, and I said, "give me your best idea." He said, "Short Tesla." First, I asked why. He said the sales numbers are inflated. I asked him whether he had ever tried to get one? He said, "No." I urged him to go to the Short Hills Mall dealership and try to get on the waiting list. He didn't know there was a dealer or a waiting list. Unimpressive. Then I asked him, "Have you ever driven one?" He said, "No." I was wide-eyed and said, "Why do you insult me with your lack of homework?" I am as miserable to arrogant professionals as I am nice to unsophisticated amateurs.

So he said that it was only a matter of time until the novelty wore off. I asked, "Do you know how many Teslas have been sold in Europe?" He had no idea. I said, "How about two? Is that novelty about to wear off?"

 

[MikeC]

Interesting article by Jim Cramer this morning. He totally missed on TSLA, but it's interesting to see the mentality of the shorts exposed:

When I was at the Delivering Alpha conference, a young buck kind of guy comes up to me and says he's just kiting, hasn't paid the fee for Delivering Alpha, he just wanted to see me about a job prospect. Some people remain under the delusion that I have a lot of jobs to give as I did a decade ago.

But I played along, even as I felt proprietary enough to almost want him thrown out, and I said, "give me your best idea." He said, "Short Tesla." First, I asked why. He said the sales numbers are inflated. I asked him whether he had ever tried to get one? He said, "No." I urged him to go to the Short Hills Mall dealership and try to get on the waiting list. He didn't know there was a dealer or a waiting list. Unimpressive. Then I asked him, "Have you ever driven one?" He said, "No." I was wide-eyed and said, "Why do you insult me with your lack of homework?" I am as miserable to arrogant professionals as I am nice to unsophisticated amateurs.

So he said that it was only a matter of time until the novelty wore off. I asked, "Do you know how many Teslas have been sold in Europe?" He had no idea. I said, "How about two? Is that novelty about to wear off?"

Cramer talking about doing homework when he just took his test drive a month ago. Kind of ironic that he doesn't care for "arrogant professionals".

 

[MartinAustin]

I think Cramer wants to be behind TSLA but can't stake his reputation on what looks like a risky stock. He doesn't really say anything negative.

As for short-term TSLA movements, well, looks like it has overcome the TSLA Tuesday factor. I'm hoping that straight line of climbing support keeps on lifting it through the day.

 

[DaveT]

I think Cramer wants to be behind TSLA but can't stake his reputation on what looks like a risky stock. He doesn't really say anything negative.

It's interesting he said this in the article:

"You don't know when the three Achilles' heels will play out -- if they ever will -- but the long side, preferably with deep-in-the-money calls, most likely, is the way to go."​

He's saying if he had to choose, he'd go long with deep ITM calls!

Cramer: 3 Things Needed to Kill a Cult - TheStreet

 

[Citizen-T]

It's interesting he said this in the article:

"You don't know when the three Achilles' heels will play out -- if they ever will -- but the long side, preferably with deep-in-the-money calls, most likely, is the way to go."​

He's saying if he had to choose, he'd go long with deep ITM calls!

Cramer: 3 Things Needed to Kill a Cult - TheStreet

His standard recommendation for expensive high-flying stocks that don't pay a dividend.

 

[sullitf]

Laid my bets when the stock slid back to 143 as it didn't seem like it was going any lower, I bought a few Sept 110 & Sept 145 calls. I had been kicking around the idea of going for OTM calls but I'm not up for the risk at the moment since I'm still new to options.

I'm sure I'll be kicking myself when the stock goes through the roof and I didn't bet bigger or more aggressively (i.e. risky), but I'd much rather make a moderate profit than loose more than I can comfortably afford!

 

[DaveT]

His standard recommendation for expensive high-flying stocks that don't pay a dividend.

Yeah, it's just interesting that he says long is probably the way to go. He's come a long way.

 

[sullitf]

Yeah, it's just interesting that he says long is probably the way to go. He's come a long way.

...he finally drove one

 

[kevin99]

It's interesting he said this in the article:

"You don't know when the three Achilles' heels will play out -- if they ever will -- but the long side, preferably with deep-in-the-money calls, most likely, is the way to go."​

He's saying if he had to choose, he'd go long with deep ITM calls!

Cramer: 3 Things Needed to Kill a Cult - TheStreet

I hope this time around the meaning of 'Cult' leave no room for wide interpretation!

- - - Updated - - -

Remarkable strength TSLA exhibits. I was almost certain it will go down further on this Tuesday but it just proves me wrong.

Seems most people already buy into the theory that Q2 will have a surprise beat. I wonder how much the forum gives away that 'insider' information. I think it does give away a lot! Nowadays information is transparent. When I asked about the 'Faster filling a full tank of gas' question in the share holder meeting, Elon gave away too much for the Jun 20th announcement and it quickly circled out and left nothing to play with. :frown:

Same situation here, so far I couldn't find the entry I want to play Q2. I still will do some before tomorrow.

 

[DaveT]

Contrafund, big money and what it might mean to volatility

I want to throw out a thought and ask for your feedback.

It seems to me that we've risen quite fast the past couple weeks, especially the past week when we shot past the 130s (in 5 days) and now are in the mid 140s. It's probably higher than most of us were expecting going into Q2 earnings.

Sure, retailers and day/momentum traders are contributing to that price rise but I can't help but think a large part of it is due to big money (ie., funds/institutions). I'm thinking some funds/institutions who are bullish on TSLA are wanting to get in with more position prior to Q2 earnings, thus it's been creating a stronger upward price pressure than usual.

Last week, it was reported that Fidelity's Contrafund has been bullish on TSLA and has been adding to their position (evidence shown in their end of June SEC filing).

Here's a couple links about Contrafund:
Danoff's Contrafund Is Best of Biggest: Riskless Return - Bloomberg
http://www.reuters.com/article/2013/07/31/us-fidelity-apple-idUSBRE96U11B20130731

Contrafund's move into increasing their TSLA position is interesting because they hold a lot of assets ($93 billion), and Danoff (fund manager) tends to look for young, healthy, growing companies and hold for a long time. I think this bodes well for TSLA stock.

Another effect of Contrafund's ramping their TSLA position is that other funds might be influenced by Contrafund's actions. They see Contrafund ramping up their TSLA position, and might follow.

Overall, if these funds are like Contrafund and have a long-term view, then they won't easily liquidate their position when the stock rises. However, if some of the funds/institutions that have added recently (excluding Contrafund) have more of a short-term/quarterly view (which probably most do), then they will be tempted to sell when the price rises significantly.

Anyway, I think this works both ways IMO. Contrafund (and long-term funds/institutions) will add price support as TSLA stock increases, but short-term view funds/institutions will contribute to downward volatility as they profit-take at higher levels. But if the long-term funds/institutions (and retailers) are stronger in numbers and conviction, then dips can be minor. But if the mood turns and doubt/hesitation sinks in with long-term funds/institutions/retailers and they don't buy the dips aggressively, then we can have times where the short-term funds/institutions/retailers/traders take profits and bring the stock down in more significant dips.

Would love to hear anyone's thoughts.

 

[kevin99]

Short-Term TSLA Price Movements

I want to throw out a thought and ask for your feedback.

It seems to me that we've risen quite fast the past couple weeks, especially the past week when we shot past the 130s (in 5 days) and now are in the mid 140s. It's probably higher than most of us were expecting going into Q2 earnings.

Sure, retailers and day/momentum traders are contributing to that price rise but I can't help but think a large part of it is due to big money (ie., funds/institutions). I'm thinking some funds/institutions who are bullish on TSLA are wanting to get in with more position prior to Q2 earnings, thus it's been creating a stronger upward price pressure than usual.

Last week, it was reported that Fidelity's Contrafund has been bullish on TSLA and has been adding to their position (evidence shown in their end of June SEC filing).

Here's a couple links about Contrafund:
Danoff's Contrafund Is Best of Biggest: Riskless Return - Bloomberg
http://www.reuters.com/article/2013/07/31/us-fidelity-apple-idUSBRE96U11B20130731


Would love to hear anyone's thoughts.

Thanks Dave for the links. Good read.

How many people thinking doing some sorts of profit taking/hedging after earning, with the expectation of Q2 pop? Count me in.

But your perspective does give me some food for thought. Indeed the run-up of TSLA has been nothing short of incredible. I am scrambling to try to find other similar cases, and last night I zero into LNKD. Other than in different industries, LNKD also shows very similar momentum, propelled by excellent quarterly earning and evidence of accelerated growth. It is a slight comfort to find others in the same league as TSLA, and it seems there is quite some room to ride before the inevitable resistance territory looms.