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larmor
Active Member
Zhelko Dimic
Careful bull
My understanding is that other than manipulation, max pain is self-leveling mechanism, due to tendency of market makers to have 0 delta exposure.
For example, say you're hedgie, and mm sell you lots of puts strike $200 (case last week, 17000 contracts at $200). Say this happens to be max pain too, to simplify case (which it was last week). In order for MM to stay balanced, they will need to sell short certain amounts of shares. MMs make money on spreads, not so much on betting which direction it goes. These short sales exhibit initial pressure on stock to drop, others join the trend, jump into buying puts and/or short stock, more pressure.
But, as you're approaching $200, and strike date is approaching, puts holders want to take some money off the table. Put holder sell puts, MM close position, and buys back shares that they were short, to balance their own delta. There it is, buying that raises stock above $200.
Every time you approach $200, or dip below, someone is madly selling puts, MM's buying shares, and voila, stock stays stuck to max pain.
I'm not saying there is no manipulation on top of this, but part of it is natural mechanism...
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For the love of Moderation....can I make a suggestion - one with some precedence - can we split off all of this "I love you, I hate you, I'll miss you, you're a misleading Bull, you're a dirty-dog Bear....blah, blah, blah," into a 2016 Investment "Social Chat" thread and get back to the business of business.
Luv2B leaving, Dave T not posting, Sleepyhead not around - those are worth some nostalgic single tears. Someone who's been here since August of 2015 and helps to clog the pages with the garbage listed above - kind of view them as an F(reaking)NG - stay and contribute if you would like, but if not, don't go away mad, just go away.
As for the business of TSLA/Market business - Not trying to call a bottom, but Wednesday at noon seemed to be a nice reversal. The market, and Tesla, were significantly oversold by most technical indicators. There has been a lot of discussion about the Macro, but the non-TV and internet people I know thought the 1-2-3 punch of "China Slow Growth, Oil 'Crashing' and the spillover effect in the High Yield market/Financials, and the market punishing the FED for raising rates in December," was not as material as blown up by the media. We should start to see the Central Banks step in aggressively (as Draghi hinted at yesterday and Japan announced today). A lot of the stimulus is being injected into the world economy and it takes some time to work its way into GDP growth - usually about 6-9 months. At some point the US Fed will stop hinting that they "may" raise rates every other meeting this year own up that the US is the best house in a bad block and tightening has too much impact on other nations - they will take the rest of 2016 off, but say contradictory things in public and confuse everyone. The $1.1 - $1.8 Trillion dollar tax and spending authorization passed by Congress in December should add about .5% to US GDP in 2016.
So put it in a pot and stir it and what does that mean for Tesla in 2016 - TSLA won't track oil, and it may not be too correlated to the overall market, except in a kind of drunkard's walk. If they execute - Model X rollout, guide to 75-80k deliveries, open the gigafactory, roll out Model III, get a magnitude of Model III reservations, go cash flow positive, deliver on the potential of Tesla Energy, or swing a deal to partner with someone with deeper pockets to expand more rapidly and mitigate some of the concerns of serial capital raises - with short interest where it is - the stock price will light up these pages. If it is hit and miss - like the last 2 years where TSLA has traded volatilely from 180-280 - it will yo-yo but end up in the 200-220 range. If Tesla stumbles materially, Shorts win.
Despite their inconsistent execution, I believe Tesla and TSLA will execute in 2016 and have invested accordingly. In addition to core shares, I've bought mostly LEAPS that I've been DCA'ing down from about 240 before the New Year. When it went below 200, I picked up some March short-term options for an earnings/gigafactory & Model III announcement (wish April contracts had been available). I still have some cash on the sidelines and I'm waiting for some news or a more discernible direction before I add more (although the April options opening up might be too tempting).
Good luck to longs - would be disingenuous to wish well to the shorts - although without my analog on the other side, there would be no market, so soldier on.
You can agree, disagree, call me a misleading Bull or a dirty dealing, no good, mangy whore.....
Just don't call me late for dinner.
Luv2B leaving, Dave T not posting, Sleepyhead not around - those are worth some nostalgic single tears. Someone who's been here since August of 2015 and helps to clog the pages with the garbage listed above - kind of view them as an F(reaking)NG - stay and contribute if you would like, but if not, don't go away mad, just go away.
As for the business of TSLA/Market business - Not trying to call a bottom, but Wednesday at noon seemed to be a nice reversal. The market, and Tesla, were significantly oversold by most technical indicators. There has been a lot of discussion about the Macro, but the non-TV and internet people I know thought the 1-2-3 punch of "China Slow Growth, Oil 'Crashing' and the spillover effect in the High Yield market/Financials, and the market punishing the FED for raising rates in December," was not as material as blown up by the media. We should start to see the Central Banks step in aggressively (as Draghi hinted at yesterday and Japan announced today). A lot of the stimulus is being injected into the world economy and it takes some time to work its way into GDP growth - usually about 6-9 months. At some point the US Fed will stop hinting that they "may" raise rates every other meeting this year own up that the US is the best house in a bad block and tightening has too much impact on other nations - they will take the rest of 2016 off, but say contradictory things in public and confuse everyone. The $1.1 - $1.8 Trillion dollar tax and spending authorization passed by Congress in December should add about .5% to US GDP in 2016.
So put it in a pot and stir it and what does that mean for Tesla in 2016 - TSLA won't track oil, and it may not be too correlated to the overall market, except in a kind of drunkard's walk. If they execute - Model X rollout, guide to 75-80k deliveries, open the gigafactory, roll out Model III, get a magnitude of Model III reservations, go cash flow positive, deliver on the potential of Tesla Energy, or swing a deal to partner with someone with deeper pockets to expand more rapidly and mitigate some of the concerns of serial capital raises - with short interest where it is - the stock price will light up these pages. If it is hit and miss - like the last 2 years where TSLA has traded volatilely from 180-280 - it will yo-yo but end up in the 200-220 range. If Tesla stumbles materially, Shorts win.
Despite their inconsistent execution, I believe Tesla and TSLA will execute in 2016 and have invested accordingly. In addition to core shares, I've bought mostly LEAPS that I've been DCA'ing down from about 240 before the New Year. When it went below 200, I picked up some March short-term options for an earnings/gigafactory & Model III announcement (wish April contracts had been available). I still have some cash on the sidelines and I'm waiting for some news or a more discernible direction before I add more (although the April options opening up might be too tempting).
Good luck to longs - would be disingenuous to wish well to the shorts - although without my analog on the other side, there would be no market, so soldier on.
You can agree, disagree, call me a misleading Bull or a dirty dealing, no good, mangy whore.....
Just don't call me late for dinner.
dc_h
Active Member
My apologies if I caused offense. My hope is we get back on track and discuss short term issues. I enjoy the trading strategies and long term fundamental threads as well, but they are underutilized and could be well populated by some of the posts here, in the short term thread, where we talk about short term issues affecting the stock price.
Short term post:
Our lack of bounce with the market is interesting. I remain concerned about Sig X's getting completed and starting to see production models. At 238 per week and 500 complete at the end of December, the Sig's should be done and production models should be in production. Are the seats or doors or windows still holding them up, or are they tightening production and ready to speed it up in February. I know it's not Tesla to announce data, but we also have not seen a lot of X posting on the delivery side or the X tracker.
I am harping on the issue, but am fishing for more insight. If I have time over the weekend, I'll head over to my local sales center and see if they have any information about Sig deliveries or if they have any production models expected. I think some of the market shorts may want to take profits if X production appears to be on track.
Also, I'm adding a link here. I'm a bit reminded of Dell a couple years after they went public in 1993. They had supply chain issues that caused the stock to fall back temporarily, but they invented the direct to consumer model for PC computers (sound familiar). They redesigned their supply chain quickly (having an entrepreneur leading the company is critical at this stage), and went on to go up in value about 200 times before the tech crash. Hope I'm not breaking any rules posting that here, but it is an MBA study (very light reading). I think Tesla is in a transition stage as important as the Model S transition and a stage similar to Dell 1993. They are a multi-car manufacturer and becoming a conglomerate, with Tesla Energy, and as they nail down Model X production, they need to finish the Model 3 design and laying out the new production line. This may also be a longer term discussion, but I think the management structure has been challenged handling the X rollout. Manufacturing processes, suppliers, getting the cars to the customers and communicating is maybe above all a cloud hanging over the stock.
Short term post:
Our lack of bounce with the market is interesting. I remain concerned about Sig X's getting completed and starting to see production models. At 238 per week and 500 complete at the end of December, the Sig's should be done and production models should be in production. Are the seats or doors or windows still holding them up, or are they tightening production and ready to speed it up in February. I know it's not Tesla to announce data, but we also have not seen a lot of X posting on the delivery side or the X tracker.
I am harping on the issue, but am fishing for more insight. If I have time over the weekend, I'll head over to my local sales center and see if they have any information about Sig deliveries or if they have any production models expected. I think some of the market shorts may want to take profits if X production appears to be on track.
Also, I'm adding a link here. I'm a bit reminded of Dell a couple years after they went public in 1993. They had supply chain issues that caused the stock to fall back temporarily, but they invented the direct to consumer model for PC computers (sound familiar). They redesigned their supply chain quickly (having an entrepreneur leading the company is critical at this stage), and went on to go up in value about 200 times before the tech crash. Hope I'm not breaking any rules posting that here, but it is an MBA study (very light reading). I think Tesla is in a transition stage as important as the Model S transition and a stage similar to Dell 1993. They are a multi-car manufacturer and becoming a conglomerate, with Tesla Energy, and as they nail down Model X production, they need to finish the Model 3 design and laying out the new production line. This may also be a longer term discussion, but I think the management structure has been challenged handling the X rollout. Manufacturing processes, suppliers, getting the cars to the customers and communicating is maybe above all a cloud hanging over the stock.
dc_h
Active Member
I think the Fed also tried to calm the market. James Bullard, Fed Governer from St. Louis and a hawk, came out and expressed some dovish sentiment. If the hawks (raise rate camp) are already backing off rates for the first half of 2016, we're likely to hold rates for the rest of the year, and the fed is likely to signal holding steady. I don't think more QE, but not cashing out their holdings and not raising rates and more aggressive moves by International central banks should help in the next couple of weeks.
Zhelco Dimic, your comments regarding the self-leveling aspects of max-pain are appreciated because one needs to balance various explanations for stock behavior. Nonetheless, the significant selling that took place this morning shortly after opening made TSLA's trading look bizarre in comparison with market trading, and at a time when there was no significant news regarding Tesla. That selling was so anti-intuitive that it really is hard to explain without considering manipulation.
Perhaps we're dealing with definitions here. I am not implying that the market makers have any ill-intent for Tesla. I'm simply implying that in order for them to maximize their profits they are buying or selling shares sometimes in a fashion that brings the stock price closer to the max-pain number. They're going to buy or sell in a fashion that maximizes their profits, and I think this morning they sold shares in a fashion that broke the spirit of many buyers and minimized the amount of selling of TSLA they would have to do to reach their objectives.
Perhaps we're dealing with definitions here. I am not implying that the market makers have any ill-intent for Tesla. I'm simply implying that in order for them to maximize their profits they are buying or selling shares sometimes in a fashion that brings the stock price closer to the max-pain number. They're going to buy or sell in a fashion that maximizes their profits, and I think this morning they sold shares in a fashion that broke the spirit of many buyers and minimized the amount of selling of TSLA they would have to do to reach their objectives.
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Might I point out that that you have missed the point entirely, particularly in regards to the last line. Nobody here is trying to move the stock. Secondly may I suggest you take the weekend to read Asimov's foundation series. He presents a reasonable framework for thinking about future history (large population size game theory if you like).
There are severe limitations upon mapping TSLA or any other stock over short time frames and small price movements and as you point out there are general problems mapping a stock price at all, however the future history of Tesla the company is possible to map and it is an order of magnitude easier to map than a typical company because under Musk's direction it behaves as an almost purely logical entity and its competition is purely reactive. It is possible to effectively calculate what it will do and how the competition will react, and it is possible to foresee the interactions with other significant players on the chess board too (I'm thinking the behavior of Wall Street) - and yes that is a first principles analysis within the frameworks of the tech adoption cycle and the economics of disruption, both of which are possible to study and I would highly recommend doing so. Tesla follows those patterns flawlessly (and deliberately for Tesla's part because Musk does so as a singularity operating almost entirely unaffected by group think that afflicts just about any other publicly traded company since Apple at the height of Jobs' powers).
The TSLA stock price over a reasonable time frame is a first order approximation to the determinable trajectory of the business, but in my opinion and experience with it, that approximation is pretty excellent over a reasonable time frame especially when it is possible to study and observe the ebb and flow of the critical mass of thinking on either side of the trade. In particular the shorts are an open book to the point of playing poker against an opponent with all of his cards showing and the fascination with TSLA shorts as opposed to the shorts of any other stock is a deep disconnect between the actual progress and ramifications of the Tesla business and a critical mass of short-trader perceptions of it as a result of very significant non-investor related influence over the bearish narrative that emanates from Tesla's competitors resulting in transparent investing errors backed by $billions in cash. TSLA longs on the other hand have a relatively normal market response to greed and fear that is somewhat tamped when compared with a normal publicly traded stock by philosophical investing. Tesla is sufficiently well covered to make that analysis possible.
Hope that helps.
Edit: I should probably point out the reason for considering large population sizes and reasonable time frames is that black and white swan events (luck) has a habit of cancelling out. There are some foreseeable very large scale events on the Tesla timeline - an obvious one being that disrupting the ICE auto industry will hurt the traditional auto sector i.e. Tesla and its EV colleagues following the tech disruption trend line, as these emerge will precipitate an auto industry recession with numerous ramifications across the economic and political spectrum because it does not take much to send a traditional auto maker bust. Much less than it takes to re-supply its customers or re-employ its workers.
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jhm
Well-Known Member
Yes, 100% renewables by 2035 is mathematically possible by growing at 30% annually from an energy supply viewpoint. However, there are practical obstacle. Growing electric vehicles fast enough to replace the fleet of conventional vehicles is a tall order. I think by 2030 virtually all new private vehicles could be electric, but the total fleet of gas vehicles peaks around this time and will take another 20 years to retire from the road. Shared autonomous electric vehicles is an alternative scenario that could accelerate the process substantially. But short of that revolution I think gas vehicles will still be on the road into 2050.
But if we are talking about merely a 100% renewable power grid by 2035, that is much more feasible. From a supply side no problem. But my practical concern is political push back from utilities. Basically we are talking about retiring or writing off all fossil generation assets in 20 years. That fight won't go easy. Climate change activists need to reorient their political language to free market economics. A free market approach would delegitimize the economic obstructionism that fossil incumbents are defending their interests with. It's no longer about advocating for subsidies and government mandates. It's about allowing the economic forces to play out unincumbered by government protection of incumbent interests. For example protecting the economic freedom of homeowners to install solar, batteries and other useful energy technology without being singled out for punitive fees from the local monopolistic utility is really key to harnessing the economic force. Utilities are in fact using the power of the state to protect themselves from business competition.
So simply put a free energy market can solve this. Governments need to avoid being used to obstruct economics. So this is why I'm a bit more bullish about developing and emerging markets where there are fewer lagacy issues to obstruct.
Meanwhile, project lead for Apple Car has left: Apple Veteran Overseeing Electric-Car Project Leaving Company - WSJ
Also, according to Bloomberg, Einhorn has not confirmed that he is short Tesla: Einhorn’s Greenlight Fund Shows Bets Against Amazon, Netflix - Bloomberg Business
Also, according to Bloomberg, Einhorn has not confirmed that he is short Tesla: Einhorn’s Greenlight Fund Shows Bets Against Amazon, Netflix - Bloomberg Business
Oi.
And that would make more sense.
Einhorn is an analytical short and occasionally an activist short.
It is not possible to analyze TSLA and arrive at the conclusion that shorting it is a good idea without making errors of assumption that Einhorn is too good to make. Taking on Musk in public is not a profitable idea either.
FredTMC
Model S VIN #4925
great post! "I love you man". Doh!
I share your view on Tesla in 2016. Per others, tesla has made the critical investments to get to MX and MS ramp up. 2016 is the year Tesla needs to show high rate production and show some Free Cash Flow (i.e. ROI for prior Capex investments)
i assume tesla will need major CapEx for Model3 in 2017. Atleast in 2016 they shouldn't be drawing down a ton on their cash. They should be pretty neutral on cash burn.
btw, I just did a write up on FCF for Q4'15. It's here: Q4 2015 Earnings prediction
Pretty much been saying the same thing. i.e. Macro thing is a short term news cycle event, not a long term macro event and the recipe for 2016 execution looks good.
i.e. +1 you dirty bull.
Zhelko Dimic
Careful bull
Out of respect for your contribution and excellent insights that have delighted me, and clarified for me some of my own thoughts, I'll try to rephrase and clarify my statements. I'm afraid I didn't communicate my point clearly. Should this fail to read well, I don't think it's worth my or your time, or other readers' time to indulge further explanation, so I'll abort with this post.
#1 I didn't say that you moved stock. I failed to explain necessary mental leap, unfortunately, I am not best communicator. My point is that Elon is in actor in TSLA price story. You and I are observers. Here is why that is important. Assume Elon is trying to build new, cheaper, better battery. He starts from first principle, looking at elements and how much they cost. While everyone says not possible, first principle says that battery can be much, much cheaper. It doesn't say it's easy or what to do and how to get to the cheap battery, but that it's perhaps possible and worth exploring. So, he comes up with the GF. Now, Elon in this story can do something, and get to the cheap battery. He has resource, intellect and will to do it, as he's actor, part of the process. Me and you, we are observers and we can _only_ hope that Elon succeed. So you and I can't claim with certainty that based on first principle he's gonna get to the battery. (What if his plane crashed? What if he were assassinated?)
And this is not about the battery, right? If **** happens, and Einhorn really shorts, Elon can tweet. If stock falls on worries of cash burn, Ellon can slow down spend. If there is a World War, Elon can start making electrical tanks. Maybe self-driving electrical tanks. He could say: based on first principle and cost/talent/technology advantage over conventional car industry, given reasonable timeframe, stock price of TSLA will rise.
You and I can't do squat over unknowns, unexpected events and black swans, so we don't have that certainty
#2 'Reasonable timeframe' - I very much agree. But you were calling 9 weeks (not reasonable timeframe) and laying down (almost) month by month play. You can't be certain of that, however, you projected certainty. I actually think there is very good probability you're correct to a high degree. The only reason I keep bringing this up, is because I felt your unwillingness to consider probabilities lead to fairly rigid posture that made other opinions unwelcome.
You also mention experience. Humans are very, very poorly equipped to handle unique black swan events, based on experience. You can't imagine something if your experience didn't prepare you for. Hence our blindness to black swans. Have you considered war? Real war, with bombs under your window, not war at foreign soil that you don't feel. I almost woke up to one after living for many years in supposedly civilized country in Europe. There was NO SIGN couple years before it. Have you considered massive terrorist attack that shakes society and throws economy into massive recession? Things centered on Elon? He works so much, and eats unhealthy. Is it really impossible he dies of heart attack, or anything else equally morbid? Or again, traffic accident, plane crash, assassination... God knows he's disrupting half of the world industries and few countries to boot. Sure, that can't stop change, but can you count on logic of someone losing trillions of dollars. What about earthquake that ruins the factory (it is CA after all)? What about massive sabotage in the factory?
If you think this is all impossible, that's your experience lying to you, so you can't see black swan coming.
I don't anticipate any of this in reasonable timeframe, however, my point is about lack of certainty, i.e. one has to be open to possibilities.
#3 I'm afraid this is not true. Entropy and second law of thermodynamics ensures Black swan events are default when it some to surprises, and white swan doesn't really exist, it's called hard work.
Cheers
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Cool, thanks for clarifying. My point is that it's an automated programmed action (I think most of the time), not a decision for MM to buy back shares they shorted after buying back puts to close open position. They write puts -> short stock, buy back open puts -> buy back shorted stock.
In that sense, it's not MM that does anything, it's put owners selling that cause predictable MM action, hurting themselves, i.e. each other.
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Chickenlittle
Banned
is it my imagination or are the posts getting longer and longer. Not pointing fingers and I am sure that everyone has valuable opinions but frankly I find myself skipping many which are way too long to read. I think posters who can express their opinions with more brief texts will be moe effective communicators. Unless there is a contest going on for the longest post. If there is I would love to compete. Let me know the prize
Krugerrand
Meow
Chickenlittle
Banned
If you could accommodate me that would be great. Otherwise people may want to post an abstract for their posts
When you buy ice cream at a regular ice cream shop, you get ice cream. When you buy ice cream at the grocery, you get emulsifiers and lots of air.
What we get here is store bought ice cream. I don't post but I read. I also buy ice cream at the grocery.
At least the containers are getting smaller.
Chickenlittle
Banned
I was surprised to read history of ice cream and how Americans added air to make it light. My daughter travels a lot in Europe and reports how much better ice cream is there without the air. Perhaps smaller containers means less air?
No, the smaller packages are just to maintain the same price and deliver less product. It is a hidden price increase. Tuna used to be sold in 7 ounce tins and then was reduced by 1/4 ounce at a time until it is only 5 ounces. But the price is the same. It is going on everywhere.
The ice cream in Europe isn't ice cream. It is gelato or custard. And the price is pretty shocking at stands, especially in Paris. But you can always do as one does here and buy it in the stores. The difference between here and Europe is that what you get in the store is pretty close to being the same as what you buy at the stand.
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