Back in 2012, I was actively researching Tesla, investing in the stock, and charting the patterns here at TradingView. The pattern I found was that people were concerned the Model-S wasn't going to work as planned or they would have production problems. Tesla was still such a new company in 2012 to most and the price point for the Model-S car was much higher than originally planned. It took 6 months of production and sales for investors to take note and then the market capitalization of Tesla started to jump on the announcement of the larger SUV (the most profitable and popular segment of the auto business at the time), the Model-X.
What I noticed here is that the price was "IN THE RANGE" of where the stock had been trading for the previous 2+ years after the Model-S had started to go into full production. The same is true now with the Model-3 which is a very similar situation: It is similar because the "pricing of the vehicle" and the "doubt" of investors have about the success of the product and the uncertainty about how to value the company given what they saw in the product at the time.
For the Model-S, Elon Musk put up a guarantee for a floor value of the vehicle that he would personally guarantee, backed up by Tesla too, of course. This "price guarantee" added to the risk that Elon and Tesla could go under if the car didn't perform as promised.
I labeled March of 2018 as the time when "mass production" was in full swing because my Model-3 was delivered in March and I was near the top of the list since I had a Tesla already and had an order for two Model-3's put in the first minute of the first day they were available.
As each day passes and Tesla delivers more vehicles and as we wait to hear the quarterly report, investors are braced and hoping for good news while bears are positioned and hoping for bad news. It's a real war going on between bulls and bears in Tesla. Each day there are battles in Twitter as each side proclaims that they will win based on their view of the outcome. The most negative bears declare that Tesla will announce bankruptcy imminently. Tesla is without doubt the most controversial company right now, which is amazing given what is going on at Facebook at the moment.
Whoever thought that investing was easy hasn't looked at Tesla lately.
What is different this time in 2018 versus 2013 when Tesla rocketed from $30 to $100 after the Model-S release? Notably, competition on the horizon from bigger companies with deep pockets that can put up some kind of electric car to take away some of Tesla's market share. Also, Tesla's market capitalization is above $50 Billion now, which is far more than the $5 Billion back then.
Let me know what your opinion is and stay tuned to this page as the sales and earnings come in very soon. Early October is when we will see the monthly sales and deliveries. November 5th is when we will get earnings (or losses) announced and Elon had promised a profit at the last quarterly conference call and also profits every quarter from there going forward.
So there is a LOT AT STAKE here.
You can see the pattern - now tell me if you agree or not.
I think the reason Tesla will succeed is that they are not just making the best EV, they are making the best cars.
kenny1924
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I like TSLA, but I do not love TSLA with the huge losses, few cars produced, and also the amount of bearishness that stays with the stock. I say bearishness since the IV stays high, the premium stays unreasonable and hence it is BEST of BEST to do Put Sells in it. I might not make enough with a big up move or worry during the big down move, but just cash out a bit at a time. I will do multiple Put Sells $10 apart and 2 to 4 months out. If the market sells off, when IV is the highest I will jump into it with more Put Sells (deep OTM)!
In your new format of alerts, I was missing all of the emails, and now I know what happens and how it arrives.
Kenny
timwest
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@kenny1924, IV is high because the stock is expensive to borrow because it is already heavily shorted. So, "yes" the bearishness is high. The cars they sell are small in relation to other car makers, many of which are sold to maintain market share and to keep employees busy since firing them is more expensive than keeping them employed. Tesla's profit margin could be the highest of any car maker if the depreciation factor can be accurately assessed to estimate the expected lifetime of the equipment. Tesla sells software in the form of "driving assist" and "safety" and that can be a profit center all by itself. Tesla has built a large charging network that could be a profit center, but the goal is to keep costs low and drive innovation to prevent fears of range anxiety and to increase adoption rates. So, I agree with your idea to "sell IV when it is high". I like to buy the stock when IV is high and I like to sell OOTM put options too. I do expect Tesla might want to raise cash by sellling new shares and that could push the stock down 10%-20% in a short period of time. I also see that Elon will do everything possible to avoid raising cash and try to finance the growth internally and that will cause the great short-squeeze to begin and a new valuation adjustment to begin which could carry the valuation to $100 billion. Stay tuned!
kenny1924
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@timwest, all great points on potential profit centers that they are building. It is still not profitable overall and for any of the individual business units. Also, trying to play the card of taking private did not work, and it failed to support the stock price up also. With the stock at $300 it is great to just Sell Puts the way OTM and gain a monthly car payment, and go out and buy the Nissan Leaf that is all electric (I think). I have not gotten the Nissan, but do have the monthly payment happening with various PUTS that are $10 apart and then put in a closing order to Buy Back at $0.15 or so. It works well and keeps the margin buying power in check also. I am doing that with many securities like REGN, CELG, BABA, NFLX, BIDU and others, but I am careful to do it below the support levels so as to not get caught.
I absolutely love TradingView and the charts it draws without logging into any system (brokerage) and the indicators (CCI, MACD, EMA etc). I do not even use any of the custom and special indicators. Should I be looking into some of the fancy indicators on TV?
Thanks.
Ken
timwest
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@kenny1924, Great idea to sell put spreads to define your risk and keep margin buying power from being decimated. I have sold puts outright at the $250-$290 level over the past two years and have banked many profitable trades. I am always realistic as to the downside of the price. Tesla could use to raise $5 billion to $10 billion, but that dilutes shareholders and Elon doesn't want to do that unless he absolutely has to. I bought a Model-S used with 19K miles on it and drove it for 2 years until I received my Model-3 which I have had since March. I have 7200 miles on my Model 3 and I do love it. I try to keep myself from being one-sided in my thinking and after watching their new vehicles on display I got a bit over-enthused. But the big issue is the $50 billion market cap and being realistic about what it will take for the market to make this a $100 billion market cap. I think the market will need to see more data points and it will take time. I follow many commentators on Tesla to get data and perspective and that has helped me make 5%-15% returns in Tesla shares on many occasions. I trade against old "earnings levels" and "news levels" which I highlight in the chat-room called "Key Hidden Levels". I designed some indicators that I find help me see the 'signal' in the 'noise' of market action. Thanks for your comments Kenny. Best, Tim
kenny1924
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@timwest, that is great that you are not just enjoying the Put Sells and Spreads but also the car and now into a better model. I need to turn the corner and do it also, but just don't have a need cars which have become point A to B elements for us, since I work from home for 2 decades now. Have a friend that just goes for new Tesla every 3 years, talked to him today and being his 2nd car, he just loves it in every which way. He owns the stocks like you and writes a lot of covered calls.
I agree that for it to double from here, it is going to take a while. For them to be of 100B it will take a while, but if AMZN can become so huge, there is definitey a possibility with TSLA to gain the confidence in its multi-market-model from batteries to cars to all of the other areas that you referenced, shows the same prowess as that of Amazon in a completely different market.
The 5%-15% returns are great, and I am sure that in the model that I talked about earlier, it is easier, and my trader friend basically said, it is best to do it with buying the stock, and Selling Calls against it. He does it for many many securities by buying the LEAPS but in this case the LEAPS are too expensive and hence he does it with the stock ownership.
I have to look into the Chat Room and look for KHL indicator. I am not a paid subscriber of TV as yet. But, the fact that TV shows global stocks so easily and effectively is just great. It is an amazing platform to say the least.
Best Wishes on Good Trading,
Kenny
keshavreddi
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Great chart Tim, with model 3 and other energy division ramping up, the revenues will rise, slowly bear arguments will reduce. I never be confident in owning this stock. Hope this pays out well from here.
timwest
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@keshavreddi, Thanks for your feedback. It is hard to be "confident" in owning the shares, that's for sure. The amount of 'noise' and focus on the stock is intense. It's a bull-fight and a bear-fight. If the market cap was $10 billion, it would be easy to buy, but unfortunately it is $50 billion. Elon is taking aggressive moves to bring about an electric vehicle future, but he is paving the way. One big tell for a positive future is that it took $5 billion to build gigafactory 1, but it will only take $1-$2 billion to make G-2. That's an incredible cost reduction in a short period of time. Telsa encouraged competition to bring about adoption, but they are staying ahead of the competition. The product line-up that Tesla has in quite impressive: Semi-Truck, Model-Y, Pickup Truck, Roadster, Solar-Roof, Home Battery Packs, etc. I don't know why they don't get into utility trucks and other short-range trucks, but that might be coming around soon. Tesla has admitted they can't grow faster than the ability of electricians to install these products. There is a severe limit based on the lack of laborers here in the USA and around the world. That's quite interesting. The future of Tesla is also limited by their ability to produce batteries. They are escalating very fast, but that curve is predictable and accelerating. The valuation of Tesla declines each day as sales ramp and the valuation metrics have fallen dramatically as the stock has gone sideways for the past few years around the $50 billion valuation level. If you can hold on for 10 years, I believe the stock will be worth $500 billion, but that will mean a rocky ride to get there. Enjoy the ride. Cheers, Tim 9/25/2018 10:53AM EST
kenny1924
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@timwest, you are incredibly involved in TSLA and no wonder you are saying you buy the stock. Seems you have the stock and increasing ownership cause of your belief in the company and all of its ventures. Great going. I can't even affort to buy their LEAPs since they are expensive as hell. Getting $38 for Jan'2020 on a $300 purchase is a 12.67% return. Awesome on idle money, assuming the bullish case. If you add the $200 Put Sell for Jan-2020 with it, and only buy 1/2 the shares you want to buy assuming minimum buying was going to be 200, then the return becomes a whopping 23.67%.
It is NOT my cup of tea, but if I was a Tesla car owner and had idle cash, I would be a believer and therefore should be doing this!