TSLA Market Action: 2018 Investor Roundtable

[neroden]

I'm in level 2. So no spreads for me yet.

The CSR who I got wasn't sure - and checked with someone else before saying Fidelity has chosen not to support covered calls using Leaps. I will call fidelity again and check to see if it has something to do with my level.

Oh, it definitely does. Writing a call against a LEAP is a spread.

Now, this is important:
Each broker has a different set of options approval levels which allow different things. And they each have their own standards for how to approve you. They are always similar but there are always subtle differences. So you might get approved for spreads at Schwab even if you weren't approved at Fidelity.

Fidelity:

• Level 1
  Covered call writing of equity options.
• Level 2*
  Level 1, plus purchases of calls and puts (equity, index, currency and interest rate index), writing of cash covered puts, and purchases of straddles or combinations (equity, index, currency and interest rate index). Note that customers who are approved to trade option spreads in retirement accounts are considered approved for level 2.
• Level 3
  Levels 1 and 2, plus spreads, covered put writing (selling puts against stock that is held short) and reverse conversions of equity options.
• Level 4
  Levels 1, 2, and 3, plus uncovered (naked) writing of equity options, uncovered writing of straddles or combinations on equities, and convertible hedging.
• Level 5
  Levels 1, 2, 3, and 4, plus uncovered writing of index options, uncovered writing of straddles or combinations on indexes, covered index options, and collars and conversions of index options.

Note that you need level 3 for spreads in Fidelity.

Schwab:

0

• Covered Calls
• Covered Puts
• Buy-Writes
• Unwinds
• Covered Rollouts

1

All of Level 0 plus:

• Long Calls
• Long Puts
• Long Straddles
• Long Combinations
• Long Strangles
• Cash Secured Equity Puts (CSEP)

2

All of Level 1 Plus:

• Spreads
• Diagonal Call Spreads
• Diagonal Put Spreads
• Ratio Spreads (long side heavy)

3

All of Level 2 Plus:

• Uncovered Calls
• Uncovered Puts
• Uncovered Roll-outs
• Short Straddles
• Short Combinations
• Short Strangles
• Uncovered Ratio Spreads

Note that Schwab's levels start at 0 (not at 1), and you need level 2 to do spreads.

Interactive Brokers is a little different. There are only two levels. This is because at IB you have to have a "Good" or "Extensive" knowledge level in options, and two years trading experience in options (somewhere else, presumably) in order to trade options at IB at all.

Everyone who qualifies gets the first level:

Limited option trading is also available with ANY Investment Objective. Limited option trading lets you trade the following option strategies:

• Long Call or Put
• Covered Calls
• Short Naked Put: Only if covered by cash
• Call Spread: Only European-style cash-settled
• Put Spread: Only European-style cash-settled
• Long Butterfly: Only European-style cash settled
• Iron Condor: Only European-style cash settled
• Long Call and Put

To get the higher level, which authorizes everything, you have to
(a) list "trading profits" or "speculation" as an investment objective,
(b) have a minimum liquid net worth and/or income,
(c) have made at least 100 trades in your lifetime.

-----
Et cetera. Some people say that OptionsHouse is particularly good about giving spreads authorization to relative newbies. I can't find their specific levels. Anyway, each broker is different.

Another note: when applying, proving formal education in options can get you over the "lack of experience" hump. The whole point of the levels is to prove that you know what you're doing, so walking in explaining that you have a specific spread strategy and how you're avoiding tail risks is going to get you a lot further than asking them questions...

I initially got level 1 approved at Schwab because I had decades of stock experience and specifically wanted to write cash-secured equity puts. After three years of doing that, I had three years of options experience, and I got level 3 approved.

(I asked for level 3 for a subtle reason: I've sold out of the money covered calls against a stock in a cash merger arb at a strike above the merger price. If the merger fails, the stock will certainly drop. I will want to bail out of the stock, but the calls are now illiquid and I don't know when they'll recover liquidity, so I want to be able to let the calls expire naked or wait for liquidity to show up rather than be forced to close them with the market maker forcing a huge spread on me due to illiquidity. If the merger fails, it is super unlikely for the stock to first drop and *then* rally massively, which is the only scenario where I get hit by the risk. I haven't actually used level 3 for anything other than avoiding the risk of being hammered on the bid-ask spread due to a forced position closure.)

 

[Carl Raymond]

Big oil has much better things to do than fund some shorts to fight Tesla. Infact the biggest oil wants to invest in Tesla (KSA).

These are just your average wall street hedge fund managers playing God. They do it all the time knowing the friendly neighborhood SEC people they party with will never trouble them. For them destroying companies, communities and making obscene amount of money money is just business as usual.

So who funds the troll army and who funds the climate change denialist campaigns? If those are oil funded, why would they not reek as much havoc as possible with a shorting campaign? Jury out to lunch.

 

[EVNow]

Note that you need level 3 for spreads in Fidelity.

Thanks for the pointer the other day. I called today to confirm this - applied for level 3, and got approved. All in one day.

 

[neroden]

Dr. Elon & Mr. Musk: Life Inside Tesla's Production Hell

Good piece. Carefully cited, 100% accurate.

Shows that as Musk lost his mind, due to stress, sleep deprivation, Ambien, and who-knows-what-else, he damaged the company. Thankfully not fatally.

I'm wiser than Elon Musk, but I would be likely to make *some* similar mistakes (I have some experience with stress and sleep deprivation). I would not, however, be unwise enough to arrogantly and ignorantly dismiss the expert opinions of people who know a lot more than me about a specific subject, though, and this is where Musk has really caused serious damage repeatedly. Musk is great when he does his homework, and worthless when he doesn't do his homework, which is unsurprising.

 

[EVNow]

So who funds the troll army and who funds the climate change denialist campaigns? If those are oil funded, why would they not reek as much havoc as possible with a shorting campaign? Jury out to lunch.

I think a lot of us in this forum have a Tesla centric view. Big oil is not threatened by Tesla - which they view (rightly) as a niche player. They have bigger problems - like government regulations, peak oil, falling oil prices etc to worry about.

Oh yes, those are the things they do spend money on - lobbying and more nefarious things as well. Why spend billions on shorting when a few million can sway a lot of things in congress ?

For eg., they never opposed EV credits directly. They just don't feel threatened with EVs. As I've noted before there are 50 new car buyers in India & China for every EV sold.

 

[neroden]

I will point out that, as noted in the Wired article itself and in the comments, plenty of wildly successful CEOs have been prone to temper tantrums and had poor personal skills. Henry Ford was brought up in the comments...

I think the Wired article is essentially accurate regarding Musk's, um, "management style". There's been far too much other evidence supporting this over the last decade to dismiss it. He *is* firing people when he shouldn't be, for stupid reasons. He *is* misdirecting the company's resources to whatever tweet he just read rather than to long-standing very important problems which affect thousands of customers. He *is* creating unnecessary chaos and he *is* burning out and ticking off people who quit, who he'd be better off keeping. He *is* doing this because he's trying to save the world from global warming, and he *is* a lot better when he doesn't have severe sleep deprivation. That said, I think the sleep deprivation seems to be getting better and he's started having a better sense of prioritization; maybe after a while he'll stop alienating people like Field who would be valuable to him.

 

[2virgule5]

Surprisingly decent article in Politico tonight - they got it mostly right (including Frunk puppies!)

Why Trump Can't Kill the Electric Car
(via POLITICO for iOS)

Why Trump Can’t Kill the Electric Car

 

[EVNow]

I will point out that, as noted in the Wired article itself and in the comments, plenty of wildly successful CEOs have been prone to temper tantrums and had poor personal skills. Henry Ford was brought up in the comments...

We don't need to go so far. Steve Jobs & Bill Gates did this too. Probably common with many of the "super star CEOs".

One thing is - they do have interpersonal skills - that's how they can inspire thousands of employees etc. But on a 1-1 basis with people who are reporting to them - they can be quite bad. Either they don't have the patience or they don't simply care - but they will behave nicely in public gatherings (or TV).

 

[neroden]

The article keeps getting increasingly hit-piecey. Example:

---
One person who tried to share concerns with Musk himself was his personal assistant. She approached him one day in private, according to people who later heard about the conversation. Executives are struggling, she told Musk. (In an email, she objected to any suggestion of tension with Musk and declined interview requests.)

Colleagues say the assistant was a gentle, calming presence in Musk’s life. It was her job to give him feedback, even if it was sometimes hard to hear. She was beloved by other executives, who often asked her to help them gauge Musk’s moods.

A few months later, she left the company.
---

So let me get this strait. A person - who is no longer with the company, and thus has no incentive to spin things - tells you that the way you want to report things about them personally is wrong. But you're still going to report them that way regardless?

Unfortunately this fits previous stories *about this specific position*, personal assistant to Musk, which I've heard from essentially pro-Tesla, pro-Musk sources. And declining interview requests is an absolutely standard method of doing "I don't want to say anything bad about my friend even though it's true". Most people don't do what Justine Musk does and spill all the dirt while still saying that she likes him and wants him to succeed. In fact that's super uncommon.

 

[anthonyj]

Saudi Arabia Pumps Up Stock Market After Bad News, Including Khashoggi Murder

Wouldn’t be surprised if they are buying more TSLA. Would be hilarious if we found out institutions were dumping right into Saudi’s strong hands.

Edit: yes I am aware the article talks about Saudi stock market

 

[neroden]

Makes me wish I had some money in a day trade account. It seems like it would be easy money.

The timing isn't totally consistent. Sometimes the stock peaks at 9:30, troughs at 10:00, and is back up at 10:30. Sometimes it peaks at 10:00, troughs at 10:30, and is back up at 11:00. Sometimes it peaks at 9:30, troughs all the way to 10:30, and is back up at 11:30...

...makes it harder to actually trade it mechanically.

 

[neroden]

OT

Yeah, but my directors account grew a bit on the large side... So this is to cut that down...

They go back to personal account on January 3rd - hopefully before we get any Q4 delivery figures!

Now I am intensely curious about Belgian tax law. Can you start a NEW TOPIC please? None of this makes any sense from an American context...

 

[Zhelko Dimic]

The article keeps getting increasingly hit-piecey. Example:

---
One person who tried to share concerns with Musk himself was his personal assistant. She approached him one day in private, according to people who later heard about the conversation. Executives are struggling, she told Musk. (In an email, she objected to any suggestion of tension with Musk and declined interview requests.)

Colleagues say the assistant was a gentle, calming presence in Musk’s life. It was her job to give him feedback, even if it was sometimes hard to hear. She was beloved by other executives, who often asked her to help them gauge Musk’s moods.

A few months later, she left the company.
---

So let me get this strait. A person - who is no longer with the company, and thus has no incentive to spin things - tells you that the way you want to report things about them personally is wrong. But you're still going to report them that way regardless?

Your question strikes me as naive. I don't know if it's cultural differences, but answer she offered fits many different scenarios that would still support facts of the story, exactly as told.
For example, signed non-disclosure agreement in exchange for nice severance.
I mean, I've done the same; that's how exits in North America work for anyone in non-trivial position...

 

[defc0n]

9:31-9:32 is often a decent peak. Somewhere between 10:30-11:30 is often a good time to buy.

Relatedly, I might try to buy in again at around 11am tomorrow. I’ve been working on playing this game during the overall march upward in the SP right now.

Also, I’m scared to hold the stock after hours. But yes all of this is inconsistent otherwise everyone would be doing it right?

 

[neroden]

Yep. Was the 4th or 5th broker I tried to register with, but the first to actually work.

Still have a lot of stock held with my bank, but whenever TSLA hits one of my sell points, I sell some stockfrom there, then transfer the money to IB, and when we hit one of my buy prices, I buy calls with it. Of course, my bank apparently sucks at SWIFT transfers, and I usually get "Upp kom villa.." ("An error has occurred...") and I have to spend a day or two working with the bank to get it to actually go through :Þ

I have never understood this European thing of having stock held at a bank. Can you get the stock transferred direct from your bank to IB? You probably should. In the US I know three different ways to move stock between different custodians, but I guess things are different in Iceland.

 

[Carl Raymond]

I think a lot of us in this forum have a Tesla centric view. Big oil is not threatened by Tesla - which they view (rightly) as a niche player. They have bigger problems - like government regulations, peak oil, falling oil prices etc to worry about.

Oh yes, those are the things they do spend money on - lobbying and more nefarious things as well. Why spend billions on shorting when a few million can sway a lot of things in congress ?

For eg., they never opposed EV credits directly. They just don't feel threatened with EVs. As I've noted before there are 50 new car buyers in India & China for every EV sold.

Well they are wrong - they should feel threatened by EVs. I remember similar arrogance from coal re solar. Solar is now destroying coal at a delightful pace.

Let's keep one eye on the $/kWh for batteries. I know it's not Moore's law, but let's see if doesn't go sub US$100, then head for sub US$50, at which point only the rich will be using the more expensive petroleum vehicles, even in India.

Yes, the material cost alone is currently $80, but that too comes down with a) scale and b) energy density improvement.

Been down this road too many times.

 

[neroden]

The SEC needs to be humiliated in my view.

No, the SEC just needs to go back to doing its actual job. Like shutting down a massive media disinformation campaign run by people who concealed their identity and strawmen fronting for others, coordinated with timed holiday-weekend bear raids... that was what the SEC was *supposed* to regulate. Not honest mistakes by sleep-deprived CEOs who thought they had deals with untrustworthy sheiks.

 

[neroden]

I can't help but think, shorties are mostly climate change deniers. Because that adds to the whole fraud narrative - if climate change itself is a hoax, obviously a solution to it must be a fraud.

You're probably right.

 

[defc0n]

Well they are wrong - they should feel threatened by EVs. I remember similar arrogance from coal re solar. Solar is now destroying coal at a delightful pace.

Let's keep one eye on the $/kWh for batteries. I know it's not Moore's law, but let's see if doesn't go sub US$100, then head for sub US$50, at which point only the rich will be using the more expensive petroleum vehicles, even in India.

Yes, the material cost alone is currently $80, but that too comes down with a) scale and b) energy density improvement.

Been down this road too many times.

Electrification is driving down the cost of energy. Lower cost of energy means lower cost of “mining” lithium, logistics, etc. This means lower battery costs.

In other words, electrification will reduce the cost of electrification. A beautiful thing really.

 

[neroden]

well 2B thats a big boy, not some Spiegel guy with his 1million short position in Tesla. We should squeeze 2B out of Chanos, it will add about 2% to market cap.

I believe 2B is his entire fund, not the TSLA position. TSLA position is probably no more than 10% of that, more likely 5%; fund managers (who aren't named Warren Buffett) rarely allow higher concentrations. Still, covering $100 million in TSLA shares would be significant.