Short-Term TSLA Price Movements - 2016

[rallykeeper]

(This whole conversation perhaps belongs in a separate thread so apologies).

I think you may be confusing Fidelity the broker with Fidelity the investment adviser to publicly-traded mutual funds.

When you see Fidelity's institutional ownership of 15.4% or 20.7 million shares, that's primarily shares held in its mutual funds (it's hard to see exactly given a date mismatch in reporting, but it looks basically right). It can also include shares that are managed in trustee-like accounts (not IRAs) by Fidelity investment adviser representatives (but that's not a big part of Fidelity's business so it wouldn't amount to much).

I think @vgrinshpun was given his answer by someone on the brokerage side. The brokerage side cares about lending shares held in customer brokerage accounts. Of course they're not going to recall those shares -- they likely don't recall shares when they are voting on behalf of their customers (so-called broker voting).

In this merger, Fidelity brokerage doesn't even have the right to vote its customer shares (non-routine matters are not eligible for broker voting). So, Fidelity brokerage isn't recalling any shares.

The mutual fund holdings are distinctly different.

The SEC made a big deal a few years ago about mutual funds failing to vote proxies. Fidelity will not make this mistake -- it has been under scrutiny too many times. It will adhere to its proxy voting policy and vote all its mutual fund shares.

This is all leaving aside the economics that @vgrinshpun observed. If Fidelity approves of the merger, it wants to vote every possible share so that it passes. In addition, Fidelity would never take on additional risk (in your example, increasing its exposure by 50%) just so that it could continue to profit from securities lending. If something happened and the share price declined, their entire "profit" from securities lending could be wiped out and then some.

Final thought: never overestimate the robustness of the securities lending system. It is very possible that Fidelity will not be able to recall all its shares because they aren't available. It is frankly unclear to me what happens then. I wouldn't want to be short, though.

Corrected below, it was based on what I was told by TD Ameritrade's corporate governance.

I did some further research and TD Ameritrade's corporate governance representative was incorrect:
Selling Short-Fidelity

But I still believe that the major institutions are buying shares so that they can vote without calling in their shares. One reason I believe that is Fidelity told @vgrinshpun that they don't intend to call in shares in order to vote.

 

[MitchJi]

I think you are both missing the point.

A few thoughts on the SCTY merger.

I think it's great for long term. I think not many here would disagree on this.

I'll bite since I am one of the self confessed bears on not just Solarcity but on Tesla energy as well.

The Secret Tesla Motors Master Plan (just between you and me)

As you know, the initial product of Tesla Motors is a high performance electric sports car called the Tesla Roadster. However, some readers may not be aware of the fact that our long term plan is to build a wide range of models, including affordably priced family cars.

When TSLA was under $30 if I had known what the response would be to the M3 I would have put in every penny I could put my hands on!

Master Plan, Part Deux

Integrate Energy Generation and Storage
Create a smoothly integrated and beautiful solar-roof-with-battery product that just works, empowering the individual as their own utility, and then scale that throughout the world. One ordering experience, one installation, one service contact, one phone app.

Now that Elon is planning to disrupt energy production using solar and storage I'm not going to be foolish enough to miss the train again!

 

[Fallenone]

I think you are both missing the point.




The Secret Tesla Motors Master Plan (just between you and me)

When TSLA was under $30 if I had known what the response would be to the M3 I would have put in every penny I could put my hands on!

Master Plan, Part Deux

Now that Elon is planning to disrupt energy production using solar and storage I'm not going to be foolish enough to miss the train again!

MP2 is for the very long term. What I wanted to share was short-mid term, before MP1 even starts to complete (M3 release).

 

[FredTMC]

Looks like market makers will work to have TSLA settle at $225 today
(Low volume day and August monthly expirations)

I approve of this message...

Yep. $225 close. Winner winner chicken dinner

 

[Gerardf]

I would greatly appreciate "higher". Holding 20 $225 contracts expiring in about 45 min (bought today at $0.25 average price)

Wow, looks like you did a great job.
As I am a techie, and not into options, out of curiosity how do I calculate how much the profit on that was ?

(OK, should have been posted in the options newbie thread)

 

[bonaire]

Part of the lack of volume has to do with trading in August. It's vacation season.

Another part of the low volume has to do with a feeling by longs that the story is going to be played out this year with 2nd half of year results and since we have weeks to wait and no reliable indications of results, it's simply a waiting game. Add the fact that the SCTY merger will not become a thing until the 4th quarter. News of the merger will move the stock, but news is lacking.

Then there's the reduced role of short-sellers. In previous months, with short interest as big as the shares held by non-institutional longs, trading by shorts often made up the majority of the trading for a day. Now the smart (and perhaps deepest pocket) shorts have closed their positions and they're smart enough not to re-enter now. So, we see far less short trading. You still have the Mark Spiegel types who are short until they are forced to cover and go broke, but they're confounded, cost of borrowing TSLA has gone way up, and they're not adding to their positions. They're just sitting on those positions, with a little mischief thrown in when volume is so low they can manipulate the SP lower. Seriously, in previous months, TSLA trading was more affected by what the shorts were doing than what the longs were doing.

You also see growing institutional ownership and by default you have shrinking small-trader ownership. Again, institutions are holding their positions, and waiting for 2nd half results.

Finally, you have a well-defined trading range of 220 to 230 at the moment, with 220 being a strong support level and 230 being a weaker resistance level, but a resistance level all the same. Until real news impacts TSLA, there are little expectations that the stock is going to zoom up or plummet down. We are in a waiting game and volume supports this position.

The market can be changed when the market maker teams decide to reprice something. This isn't run by analysts or retail investors. Pricing of at least TSLA, and many others, are managed in what appears to be "other hands." Nothing in the world changed from Jan1-Feb11 but the markets really too major baths (due to what, .25% fed rate hike in 2015?) And August 2015 was relatively a non-news event and yet another deep V-bottom there. It's almost like big players request a dip be served up and then they buy a bunch of equities, sell puts and then bring it back up again. It just doesn't seem natural.

So, don't be complacent. The weather can change when not expecting it.

 

[Papafox]

... So, don't be complacent. The weather can change when not expecting it.

Not only can the weather change, the weather WILL change, but more likely through substantial positive or negative news affecting Tesla rather than treachery cooked up by the market makers. In the meantime, we're singing the "I'm stuck trading in the 220s" blues, "'til they bring us the news".

I would greatly appreciate "higher". Holding 20 $225 contracts expiring in about 45 min (bought today at $0.25 average price)

Closed at 225 exactly and (in my best MM version of Darth Vader voice), "not a penny for you, young Luke Vgrinshpun."

 

[Gerardf]

closed at 225 exactly and (in my best MM version of Darth Vader voice), "not a penny for you, young Luke Vgrinshpun."

Owe. Sorry.

 

[vgrinshpun]

Wow, looks like you did a great job.
As I am a techie, and not into options, out of curiosity how do I calculate how much the profit on that was ?

Actually I had a loss. Average buying price was $.25, sold to close couple minutes before closing at $.12. So loss was 2000 X $0.13 = $260 plus fees.

The (unsuccessful) bet was that if not closing above $225, SP can go above $225 intraday, allowing for a gain...

 

[Gerardf]

Actually I had a loss. Average buying price was $.25, sold to close couple minutes before closing at $.12. So loss was 2000 X $0.13 = $260 plus fees.
The (unsuccessful) bet was that if not closing above $225, SP can go above $225 intraday, allowing for a gain...

Sorry to hear that, thanks for the explanation.

 

[vgrinshpun]

Closed at 225 exactly and (in my best MM version of Darth Vader voice), "not a penny for you, young Luke Vgrinshpun."

I did get few pennies, just not on this particular trade, and not from MM, but from the game partners that buy puts...

 

[Nate the Great]

27M shares are short, out of 150M, i.e 18%
If 18% of shares are sold short, there are 118% owners of shares in existence. That means retail owns 29% of the float (+ elon 22%, + inst. 67% = 118%) Some portion of that, potentially large portion of that is owned by traders, not investors.

Your point still stands - shares are borrowed and if they're all recalled, and institutions don't sell, shorts have to buy 18% out of 28% from retail, i.e. they need to take 2 out of every 3 shares in retail ownership. But of course, not all shares will be recalled, traders can be convinced to sell much easier and we don't know %, and finally it's possible brokers fail to deliver recalled shares...

The lower volume has continued after the announcement. My feeling is that this is associated to the uncertainty that the market has regarding the merger. If that is the case then it's possible the volume will continue to be muted until the merger is completed.

Also as a side note does anyone now if the listed volume includes option and short activity?

 

[dha]

Part of the lack of volume has to do with trading in August. It's vacation season.

Just FYI there was not a single day in August 2015, 2014 or 2013 with < 2 million shares traded.

 

[Intl Professor]

So, don't be complacent. The weather can change when not expecting it.

As Buddha and other wise men have said, things are always changing, the outcome concerns us when we have preferences. One thing you can aways expect is change. The best you can do is prepare for it to go bad, when you can, and go with the flow otherwise. (Bowdlerized summary of Machiavelli on Fortuna.) I think that is what Mohammed El-Erian meant when he said Pimco seemed to have anticipated "the new normal" when in fact they advised no concern, they had only prepared for it through what he called "scenario planning." The wise and successful shorts on this thread play well and have no need to promote their perspective, just advise the less capable, like me, to stay long with Tsla.

I can't find a citation but I remember someone like Ortega y Gassett observing revolutionaries do not make revolutions, regimes fall. They fail because they do not match the requirements of their times. Lenin gets a lot of credit for the "October" revolution, but the failures of the Tsar and the Kerensky regime preceded his success. Elon Musk gets a lot of credit, deservedly so, for the current disruption of the auto industry. It is very profitable to watch Ford, BMW, VW try to catch up. The regime of the fossil fuel economy is over. I just hope its not too late!

 

[Krugerrand]

What's with the snark?

I asked a simple question after you accused a certain CEO of borrowing against company shares to maintain his particular style of living. I might therefore ask you the same question right back.

Let me refresh your memory. You said: ...but we do know that Elon has his shares in his own margin account and is borrowing against them to finance his lifestyle and other things.

Note the bolded of which I know no such thing about and nothing in your second post on the topic proved that he was using the money to 'finance his lifestyle'. So, I ask again, what personal stuffs is he spending the money on?

 

[Krugerrand]

How many "dislikes" does it take here to get a troll banned (even for a few days)?

At least one more than they currently have.

 

[Krugerrand]

As far as new battery technology goes, a battery engineer at the GF opening told me that Tesla keeps tabs on about 70 different battery research efforts. Very few of them to date have produced a battery that Tesla has even tested. If there was a viable new battery tech out there, Tesla would know about it...

This has also been publically discussed by Tesla. I've heard it on at least two occasions. They also rate each venture on a scale of 1 to 5. To date there are no 5's, and if I recall correctly only two have received a 3, which indicated they might be on to something but are still a long way away from having it viable for mass producing. Something like that anyway...maybe someone will recall the discussions and be able to pull up the related video/recording.

 

[Cosmacelf]

I asked a simple question after you accused a certain CEO of borrowing against company shares to maintain his particular style of living. I might therefore ask you the same question right back.

Let me refresh your memory. You said: ...but we do know that Elon has his shares in his own margin account and is borrowing against them to finance his lifestyle and other things.

Note the bolded of which I know no such thing about and nothing in your second post on the topic proved that he was using the money to 'finance his lifestyle'. So, I ask again, what personal stuffs is he spending the money on?

The WSJ article linked above about his borrowing against his shares stated that he doesn't draw a salary from any of his ventures, ergo he must be borrowing money against his shares to fund his living expenses. It turns out, though, that his living expenses are probably very small in comparison to the amount of money he has borrowed to buy more Tesla and Solarcity shares. According to the WSJ article, he has borrowed about $450M to date against his stock holdings to purchase more stock.

Actually, that WSJ article had enough info in it to make a fairly decent estimate of how low Tesla stock would have to go to trigger a margin call.

 

[RobStark]

The WSJ article linked above about his borrowing against his shares stated that he doesn't draw a salary from any of his ventures, ergo he must be borrowing money against his shares to fund his living expenses.

Elon does not draw a salary from Solar City or Tesla.

We don't know about SpaceX because SpaceX is not a public company.

He may very well pay weekends in Miami with Amber Heard with SpaceX money.

Someone alert Congressional Republicans!

 

[Cosmacelf]

So I did a quick analysis of how low Tesla stock would have to drop for it to cause a margin call, assuming Elon doesn't borrow any more big chunks of money against his shares - it's like $30. So yeah, not a big risk factor.