Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[azaz]

a possible catalyst in the somewhat near term might be the plaid model s vs taycan article that Seth weintraub of electrek hinted at

 

[kbM3]

With useful comment explaining it in simple terms:

by Kirk57

I’ll give you an example:

In June when the stock price was $180 Fred (being a very astute Tesla fan) realized, it was fundamentally very underpriced. Rather than buying more shares, he decides to buy call options at $750 / share that expire Feb. 7th. XYZ institution makes a lot of money by capitalizing on irrational dreamers like Fred. They looked at their data and realized no large company ever has stock that goes up 4X in less than a year. So they’re willing to sell Fred 10k options at $0.15 each.

Each option gives Fred the right to buy 100 shares of Tesla from XYZ at $750 any time over the next 8 months. So:

each option costs Fred $0.15 * 100 = $15.
10k options cost Fred $150k.

They give him the right to buy 1M shares of Tesla anytime on or before Feb. 7th for $750.

Fred’s breakeven point on the stock is $750.15. He would buy the 1M shares at $700, sell them at $700.15 and get his initial $150k back.

However if Tesla is at $1500 per share Friday, Fred buys the 1M shares from XYZ for $750, resells them for $1500 and makes $750M!

XYZ institution is sitting there in June feeling very happy with the $150k they got from Fred. Easy money!

In July TSLA goes back in the $200’s but XYZ is not that nervous.

Tesla releases the surprise Q3 results and Tesla soon jumps into the $300’s .

Now XYZ is a little nervous, so they buy 50k shares of Tesla stock. That way at least as Tesla rises, they’re protected a little in their bet, because they’ll have some of those shares, plus those shares appreciate, so it would mitigate their loss to Fred.

Tesla releases q4 and the stock jumps again. Now XYZ buys 200k shares of Tesla. XYZ and other institutions are now continually buying shares to hedge their bet against people like Fred, just in case they have to give him 1M shares below market value.

Ironically this is happening to such a large extent, this hedging causes the stock price to rise again and causes XYZ to buy even more shares! They’re now caught in a positive feedback loop where this call hedging, plus shorts covering, is causing TSLA to skyrocket, gaining more and more each day.

Now it’s Wednesday and TSLA is shooting up to over a $200 gain in one day following a $100 gain the day before. Poor XYZ has only bought 300k shares, but come Friday, they’re going to have to sell Fred 1M shares. They now know they are looking at a $750M loss to Fred, but maybe even worse, if the positive feed back loop accelerates.

So they decide to illegally force Tesla down. The problem is that if they do it more than 15 minutes before close, it will trigger a rule that will prevent them from continuing the next day. So 13 minutes before close they borrow 2M shares and sell them for lower prices than they’re worth to immediately stop Tesla’s momentum and drive the price down. They know lots of nervousTesla shareholders set limits in the $900’s to lock in their gains, and so they can start a reaction where those investors will automatically sell and the price will drop under $900 / share.

Now early yesterday morning they can sell more shares in the small German index and drive the price down further very easily, and spook lots of investors and cause everyone to sell and drive the price to the $700’s. Now slowly they can buy back the 2M shares at $750 that they borrowed at $950 and make a very nice profit of $400M.

On Friday, Tesla will close at $748 and Fred will get $0.00. XYZ pockets Fred’s $150k and they win again. They know there’s no risk, because the SEC never prosecutes stuff like this.

THE END

In that thread there’s a really nice ELI5 breakdown of how delta hedging works and may have contributed to the run.

EDIT: And posted two posts above!

Someone took @Fact Checking's analysis and explained it so even I could understand it:
What really happened to Tesla - Guess what - we should be over 1k rn. : teslainvestorsclub

‘Thanks. Explaining like I’m five is easy, since my mental acuity is roughly equal to a 6 year old

I just regret I forgot to add the MarketWatch article to tie it together. Edit: Just did

 

[StealthP3D]

I'm confused; is there an "uptick" rule in effect today that prevents short selling? And if there is, how long does that last?

It doesn't prevent them from short-selling, but they can only short on an uptick.

 

[EVCollies]

That two bots are fighting? "Would you like to play a game?"

I haven't thought much about that movie till this post.

War Games

 

[rsm287]

Statistically, they will fail more often than they succeed. A random investor is not as "well armed" in this battle as funds with bots.



That's literally the opposite of what I said. I said if you're not buy and hold, you should buy on the way down / sell on the way up - not the opposite. Which is just basic math.

Example. Let's say the stock is $700, goes to $900, and you practice each strategy at $50 increments, starting after it first makes a move (because you're not a bot / MM, you're not going to know the instant it's going to move significantly in one direction, or how far it's going to go).

Buy on the way up / sell on the way down:

• $750: Buy X shares ($750*X)
• $800: Buy X shares ($800*X)
• $850: Buy X shares ($850*X)
  
• $900: Buy X shares ($900*X)
• $850: Sell X shares ($850*X)
  
• $800: Sell X shares ($800*X)
  
• $750: Sell X shares ($750*X)
  
• $700: Sell X shares ($700*X)

Net result: X*(-750-800-850-900+850+800+750+700) = You lose $300 * X, where X is the number of shares you bought/sold at each increment

Now we invert it: sell on the way up / buy on the way down:

• $750: Sell X shares ($750*X)
• $800: Sell X shares ($800*X)
• $850: Sell X shares ($850*X)
  
• $900: Sell X shares ($900*X)
• $850: Buy X shares ($850*X)
  
• $800: Buy X shares ($800*X)
  
• $750: Buy X shares ($750*X)
  
• $700: Buy X shares ($700*X)

Net result: X*(750+800+850+900-850-800-750-700) = You gain $300 * X, where X is the number of shares you bought/sold at each increment.

Don't be dumb and bet against basic arithmetic...

Thanks, that's really helpful. I had heard of this strategy previously, but never seen it explained so clearly (or taken the time to do the maths). Should the loss/gain in this case not be $200 * X in each case?

 

[lklundin]

Less than 2 months ago people were we ecstatic that the SP was 420. Now most are complaining that it's not 1000.

View attachment 508631

What I am reading are complaints of an apparent and clearly illegal market manipulation.

 

[Artful Dodger]

Neither news nor macros support TSLA fade into close. You know who needs to keep TSLA under control until close of options on Friday. It's getting almost predictable.

Yeah, they're gunning for a Close below $734.70 to make this a red day. PsyOps meets Kabuki Theatre.

 

[dl003]

I dont know about you guys but Im having a great day. My 1 free Sprint share, courtesy of RBH, is solidly green today. #Diversify

 

[KarenRei]

I'm confused; is there an "uptick" rule in effect today that prevents short selling? And if there is, how long does that last?

Uptick rule does not prevent short selling. It means that shorting can only occur on an uptick.

 

[neezer]

The production and delivery of the Model S.

And where were these anal-ysts and whiners galore back then, when it 4X'd from 50 to 200/share? Based on very low production and delivery of the expensive Model S ... sure it's a nice milestone in the history of the firm, sure, but 4X ... in very short order. No FUD perpetuated and paid for because the interest in the alternatives were not feeling threatened of course, thinking it's gonna be a small niche player...

 

[VT_EE]

It seems likely that Tesla will already be producing their “new” cells/batteries when they have the battery investor day. Announcing a near-future, significant increase in capability before production will surely delay many people from buying. Uncertainty with factory tooling schedules would explain why a date hasn’t been set yet.

 

[Compton]

What I am reading are complaints of an apparent and clearly illegal market manipulation.

It has been going on since the IPO and the only thing we have been able to do is bitch about it. So what about leaning back and just holding & waiting? The SP will go up if and when Tesla executes.

 

[neezer]

I didn't realize they took out the uptick rule in 2008 (or 2007) ... but some studies say it would NOT have helped the meltdown even if it was still in effect.

SEC Director: Uptick rule didn't work

 

[dw4ngg]

Going over $800 tmrw fellas.. time to load the truck right now!! Get your TSLA discount.....

 

[myt-e-s-l-a]

Had to put my cash to work today. The volatility and options premiums make spread trading profitable in light of the risk.

Bought 100 tsla @ 755 and sold 1 covered 200207C770 Call for credit of 26$

and sold

1 200207P740 Put for credit of 23$

This will force me to buy tsla @ 705 if the options expire worthless and tsla does NOT go below 705

When tsla hit a high of $790 at 11.26am I decided to close this position as my stochastic was way overbought and the vix was very high.
So this is the result.

Closed tsla 740 put @ 6.25 for 1675$ profit
Closed tsla 770 call @ 38.00 for -1200$ loss
Sold tsla @ 790 for profit 3500$ profit

Net 3975$ profit (not bad for one day of trading

and just now with tsla tanking,

Sold 1 tsla 200207P740 Put for credit of 16.50$ or 1650$

 

[LJS22]

727, 737, 747, 757, 767, 777, 787, back to 727, 747, etc...

Geez enough with the Boeing-like stock prices, if the stock has to settle around models of aircraft let's see some Beechcraft (1900) or Hawker (4000) prices already.

I bought Boeing after it fell below 310 because it reminded me of Tesla. Every bad news story was dropping it and it’s investors were just waiting on one single good news story to send it back up. They finally had a couple decent stories today so it was a good trade!
Tesla has only good news for a few months and we almost hit a thousand haha but one negative story and they want to crash us now.

 

[TheTalkingMule]

I'm hoping we float here a month then I'm buying calls for 10 days after Battery Day.

 

[LJS22]

Going over $800 tmrw fellas.. time to load the truck right now!! Get your TSLA discount.....

What’s the max pain looking like haha

 

[LoveTSLA]

They are running out of juice now?

 

[rsm287]

Yeah, they're gunning for a Close below $734.70 to make this a red day. PsyOps meets Kabuki Theatre.

Seems like someone wants it to go green at the moment!