FundBigPercentOfYour Model 3 purchase by buying Tesla Stock

MitchJi

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I copied this from a thread I started on the TMC Model 3 forum:
https://teslamotorsclub.com/tmc/threads/fund-a-big-percent-of-your-m3-purchase-by-buying-tesla-stock.76732/

If you want my response it might be better to post there.

I am sharing information and opinions which I believe is very close to a slam dunk. But please be careful with your hard earned money. Please do your own research and DD before investing. Please don't invest money that you can't afford to lose!

That said, in the past quite a few TMC Members funded their Model S purchases by buying TSLA. I believe that buying shares to fund a Model 3 purchase is extremely safe, almost as safe as shooting fish in a barrel. OTOH between now and whenever Tesla has produced over 100k M3's I think it could be a bumpy ride, which means that even though I believe that shares purchased now, for about $200 will be worth at least $350 when the M3 production has ramped, I would not be shocked if it dips to $150 at some point between now and then. If that would be stressful for you I'd advise you not to do this!

It also means that buying options is a much riskier strategy. Please don't buy options unless you are very knowledgeable! I'll might post on this thread when and why I believe buying options is relatively safe. In the meantime educate yourself as much as possible about investing in general, and about investing in TSLA.

It's important to note that a major reason that this opportunity is so huge are the problems Tesla has had ramping the MX production. This was due to the fact that the MX is an extremely difficult car to build. If they had designed and built a conventional SUV, which would have been about as difficult to build as the MS there is every reason to think that the results would have been similar to the Model S (very successful).
http://bgr.com/2016/01/03/tesla-model-s-sales-2015/
...during the last quarter of 2015 managed to deliver more Model S vehicles than ever before. Over the weekend, the company quietly issued a press release announcing that it delivered 17,400 Model S sedans to customers over the past three months, setting an all-time quarterly record in the process.

To put that figure into perspective, the number of Model S deliveries in Q4 of 2015 represents a 75% increase compared to the same quarter a year-ago. What’s more, Tesla completely smashed its previous delivery record (11,574 set during Q3 2015) by an incredible 50%.

For the entirety of 2015, Tesla delivered 50,580 cars, an impressive figure that just managed to surpass the low-range of Tesla’s delivery projection of 50,000 to 55,000 vehicles. By way of contrast, Tesla’s previous annual delivery record, set in 2014, checked in at 33,157 units. All told, Tesla deliveries year over year increased by 52%, a striking figure given that some analysts have been quick to proclaim that anyone who already wants a Tesla likely already owns one.

Income (profits), driven by car sales, has always been the major determinant of Tesla's share price (SP).

From "Elon Musk" by Ashlee Vance Page 342:
The 500 or so people Musk had turned into car salesmen quickly sold a huge volume of cars. Tesla, which had only a couple of weeks of cash left in the bank, moved enough cars in the span of about fourteen days to end up with a blowout first fiscal quarter. Tesla stunned Wall Street on May 8, 2013, by posting its first-ever profit as a public company--$11 million-- on $562 million in sales. It delivered 4,900 Model S Sedans during the period. This announcement sent Tesla's shares soaring from about $30 a share to $130 per share in July.

Elon's projection for 2018 MS-MS plus M3 production:
I think the most important point here that we want to make is that we're advancing the Model 3 build plan substantially, and just the overall volume plan, with Tesla aiming to get to the half million unit per year run rate in 2018 instead of 2020.

To put the effect of the M3 on the SP in perspective a major issue now for the SP is the ability of Tesla to produce 50k cars in the second half of 2016. When they have the M3 production line running smoothly they will be producing over 40k per month off MS-MS plus M3! Even if that slips by 12-24 month's (chances close to zero IMO), that only delays the SP increase.

In the very near future stationary storage (TE) will start to have a huge impact on profits. At the 2016 shareholders meeting Elon said that (he said this was highly speculative) that he thinks that the revenue from TE will be equal to the revenue from cars, and that it will grow faster. That would be the revenue equivalent to 250k (projected) cars in 2017.

The following estimate for SP, based higher vehicle deliveries, and not considering the impact of Tesla Energy Storage (TE) was posted on Jan 6, 2014. about 2 years before the M3 reveal, and the accelerated ramp plans were announced.
Notes:
1. I added numbers in brackets "projected by Elon", next to DaveT's numbers.
2. If we add the TE revenue equivalent to about 250k cars to Elon's projection of 500k cars we have revenue in 2018 that is greater than the the 700K cars number that DaveT used to calculate his 2019 projected conservative SP of at least $630/share!

3. Even if Tesla sells zero M3's in 2018, between the MS-MX and TE their revenue should be equal to roughly 400k cars, for an SP of about $360!

In other words, if you are saving for an M3 you have a double hedge when buying TSLA. When the M3 ramps the SP will rise, and even if M3 is never produced at all (not going to happen) TE production will cause the SP to rise.
https://teslamotorsclub.com/tmc/posts/543169/
2019: The long horizon approach to TSLA investing
The main reason I’m invested in TSLA is because of the long-term potential of Tesla to disrupt the auto industry and lead an electric vehicle revolution. The world auto market is huge and is prime for disruption but the shift to EVs will not happen overnight. That’s why I think it’s crucial that the buy-and-hold investor has a long-term view on Tesla.
<snip>
TSLA as a stock will likely go through great volatility over the next several years. It will waver between periods of exuberance where much distant future value will be sucked into the present stock price and periods of depression where people dwell on major doubts of Tesla’s ability to disrupt the auto industry and be a global leader in the auto market.
<snip>

2019 TSLA stock price
Let’s examine a bit more what TSLA stock price might be in 2019 if they’re able to sell 700k cars. I’ll use rough numbers but you can plug in numbers you feel more comfortable with.
<snip>

I’ve plugged in rough guesses for 2014-2016:
2016 120k [vs 85k-95k Tesla's guidance]
2017 200k [vs 220k-320k projected by Elon]
2018 400K [vs 500k projected by Elon]
2018 700K [vs 750k projected by Elon]
700,000 cars x $50,000 (avg selling price due to 150k cars being Model S/X and GenIII selling mostly with 5-10k in options) = $35 billion 18% gross margin = $6.3 billion.

So, now the question is what multiple will investors give Tesla. If Tesla is growing rapidly, which they will be in order to reach 700k cars in 2019, investors will likely give at least 20x profit. So, $3.15b x 20 = $63 billion market cap divided by 150m shares (rough estimate) = $420/share.

Now this is a very conservative estimate of $420/share if Tesla is able to sell 700k cars in 2019. More likely is that investors will give a higher multiple than 20x since Tesla is still rapidly growing.

I would imagine a 30-40x multiple might be fair and realistic. Let’s use a 30x multiple to be conservative. $3.15 billion profit x 30x p/e = $94.5 billion market cap divided by 150m shares = $630 share price.

So conservatively if Tesla can sell 700k cars in 2019 then the stock price will likely be at least $630/share...
 
.... in 2015 Tesla delivered 50580 cars, an impressive figure that just managed to surpass the low-range of Tesla’s delivery projection of 50,000 to 55,000 vehicles. By way of contrast, Tesla’s previous annual delivery record, set in 2014, checked in at 33,157 units. All told, Tesla deliveries year over year increased by 52%, a striking figure .....
bla, bla, bla, ...word salad,...bla, bla,... number salad, ..bla bla...
An awful lot of "ifs", and speculation in that forcast.
So in 2015 Tesla increased deliveries by 52% over previous year....a "striking"figure agreed !...an impressive achievment for any manufacturing operation, even in a start up period .
BUT to speculate that Tesla could convert that rate of improvement into 500,000 cars in 2018,.... Is a huge leap in faith !
That is a 10 fold increase in 3 years ( 1000%, or more than 100% year on year, every year) ...that is some prediction.!
In order to even come close to being on track for that prediction, they need to deliver double their best ever quarter figure (17,400 in Q4 2015) ,..so Thats 35,000 vehicles per qtr, for every quarter in 2016. ...And redouble again in 2017 !.
Unfortunately , in 2016 to date, they have fell far short of that, with only 27,000 vehicles delivered for the first 8 months of the year. . :shock:
 
Hillhater said:
.... in 2015 Tesla delivered 50580 cars, an impressive figure that just managed to surpass the low-range of Tesla’s delivery projection of 50,000 to 55,000 vehicles. By way of contrast, Tesla’s previous annual delivery record, set in 2014, checked in at 33,157 units. All told, Tesla deliveries year over year increased by 52%, a striking figure .....
Hillhater said:
bla, bla, bla, ...word salad,...bla, bla,... number salad, ..bla bla...
An awful lot of "ifs", and speculation in that forcast.
So in 2015 Tesla increased deliveries by 52% over previous year....a "striking"figure agreed !...an impressive achievement for any manufacturing operation, even in a start up period.
BUT to speculate that Tesla could convert that rate of improvement into 500,000 cars in 2018,.... Is a huge leap in faith !
That is a 10 fold increase in 3 years ( 1000%, or more than 100% year on year, every year) ...that is some prediction.!
In order to even come close to being on track for that prediction, they need to deliver double their best ever quarter figure (17,400 in Q4 2015) ,..so Thats 35,000 vehicles per qtr, for every quarter in 2016. ...And redouble again in 2017 !.
Unfortunately , in 2016 to date, they have fell far short of that, with only 27,000 vehicles delivered for the first 8 months of the year. . :shock:
[sigh!]
Completely missing my points:
Point 1:If you are saving for an M3 it doesn't matter if they are late or not:
In other words, if you are saving for an M3 you have a double hedge when buying TSLA. When the M3 ramps the SP will rise, and even if M3 is never produced at all (not going to happen) TE production will cause the SP to rise.
To put the effect of the M3 on the SP in perspective a major issue now for the SP is the ability of Tesla to produce 50k cars in the second half of 2016. When they have the M3 production line running smoothly they will be producing over 40k per month off MS-MS plus M3! Even if that slips by 12-24 month's (chances close to zero IMO), that only delays the SP increase.
Point 2: the fears of a similar M3 delay are being (foolishly) exaggerated by the market:
It's important to note that a major reason that this opportunity is so huge are the problems Tesla has had ramping the MX production. This was due to the fact that the MX is an extremely difficult car to build. If they had designed and built a conventional SUV, which would have been about as difficult to build as the MS there is every reason to think that the results would have been similar to the Model S (very successful).
Before they started MX production Tesla revamped their production line. Setting up 2 lines S and X designed to do initial production, plus a 3rd line designed to do final assembly for both. In spite of the fact that problems with the X final assembly have had a negative impact on S production, the S production has increased nicely. The mistakes the markets are making is to equate the X problems as general problems, rather than X specific problems, and to think there is any reason at all to think they will happen with the M3, which is being designed from the ground up to be easy to build. If anything their problems with the X make it less likely that they will have similar problems with the M3, because they are clearly bending over backwards to avoid repeating that mistake.
http://www.fool.com/investing/2016/09/09/tesla-motors-inc-looks-to-falcon-wing-doors-for-ma.aspx
y traditional automakers' standards, Tesla Motors' (NASDAQ:TSLA) falcon-winged Model X shouldn't exist. Or it, at least, should be limited to a concept design, not actually making it into production. After all, famed auto industry veteran Bob Lutz said earlier this year Model X, with its complex doors, "appears to be unbuildable." And even Tesla CEO Elon Musk has said the company "put too many new features and technology" on Model X.

But Tesla has charged forward -- and production has soared. Sure, ramping up production wasn't easy; Model X production troubles are largely why Tesla has missed its own vehicle delivery targets for two quarters in a row. However, there's no turning back now. Model X production now looks like it could rival the build rates for Model S as early as this quarter.
[/sigh!]
 
MitchJi said:
I am sharing information and opinions which I believe is very close to a slam dunk. But please be careful with your hard earned money. Please do your own research and DD before investing. Please don't invest money that you can't afford to lose!

I think to help with doing your own research and DD I should have provided more sources of information, which I just did here (sister thread on TMC):
https://teslamotorsclub.com/tmc/threads/fund-a-big-percent-of-your-m3-purchase-by-buying-tesla-stock.76732/page-4#post-1725875
Continued:
https://teslamotorsclub.com/tmc/threads/fund-a-big-percent-of-your-m3-purchase-by-buying-tesla-stock.76732/page-4#post-1725898
 
Like i said,...a lot of word salad....But the basic strategy simply hinges on the SP increasing significantly and consistently.
In order for that to happen, Tesla must at the least meet their projected targets and increase production of cars (and storage systems) significantly.
So far in 2016 they have dramatically failed to do that ( reasons/ excuses dont cut much slack on Wall St), and the SP reflects that to some extent ( currently down over 20% from its Q1 high !)
Even if the storage business goes to plan, if the Car business does not perform, it will be seen as failure and put huge pressure on financials, and we have yet to see how well that storage business (and cell manufacturing) start up is going.
But if you have the confidence in the business, fine,...its your money
 
Hillhater said:
Like i said,...a lot of word salad....But the basic strategy simply hinges on the SP increasing significantly and consistently.
In order for that to happen, Tesla must at the least meet their projected targets and increase production of cars (and storage systems) significantly.
So far in 2016 they have dramatically failed to do that ( reasons/ excuses dont cut much slack on Wall St), and the SP reflects that to some extent ( currently down over 20% from its Q1 high! )
Once again you completely missed my point, which is that if you understand the reasons that the SP is "down over 20% from its Q1 high!" better than the market it looks like an opportunity. It seems like you don't understand a basic concept of investing. If you can understand something better than the market (for EV's members of this forum should be able to do that), that provides an opportunity for information arbitrage.
http://namityadav.com/post/3755518876/internet-startups-5-information-arbitrage
I define arbitrage as the practice of discovering data and then extracting previously unavailable information from it to create market opportunities. In my opinion, the economics definition of arbitrage is just one example of arbitrage. But, to not confuse the two, let me call my definition Information Arbitrage.
In the process the arbitrageur pockets a risk-free return. Differences in prices usually occur because of imperfect dissemination of information.
Of course you can wait for the market to figure this out, and buy the stock at a higher price.

Hillhater said:
Even if the storage business goes to plan, if the Car business does not perform, it will be seen as failure and put huge pressure on financials, and we have yet to see how well that storage business (and cell manufacturing) start up is going.
But if you have the confidence in the business, fine,...its your money.
Yes you can wait until the SP increases if you prefer. On the conference call when they fielded questions about the storage business, an analyst asked given how much easier it is to produce Powerpacks and Powerwalls than cars, if it made sense to continue making cars.
https://www.tesla.com/blog/addressing-peak-energy-demand-tesla-powerpack
Last week, through a competitive process, Tesla was selected to provide a 20 MW/80 MWh Powerpack system at the Southern California Edison Mira Loma substation. Tesla was the only bidder awarded a utility-owned storage project out of the solicitation.

Upon completion, this system will be the largest lithium ion battery storage project in the world. When fully charged, this system will hold enough energy to power more than 2,500 households for a day or charge 1,000 Tesla vehicles.
Do you think Wall Street cares if the profit comes from thousands of cars or storage.

Plus, getting back to Information Arbitrage the odds of Tesla failing to produce cars is close to zero.
Like i said,...a lot of word salad....
If you want to continue with your insulting and condescending replies that are nonsensical I don't mind. But IMO you are only succeeding making yourself look foolish.
 
Bottom line is that *no one* knows exactly how Tesla stock will perform in the future. If you were so sure you would have already sold your house (and the houses of your family) to invest in Tesla stock. In reality research shows no one can consistently beat the market i.e. perform better than chance in making investments.
 
Going by his over sensitive responses to any negative comments on the subject ..
insulting and condecending"
... I believe Mitchji is already committed to Tesla stock to some degree, and is simply "willing" it to multply in value, whilst ignoring the data that indicates the business is not performing anywhere near their own projected targets required to meet the business forecasts.
From a previous post of Mitchji ..
I am about to pull the trigger on a 5 figure Tesla Stock purchase, about 20 percent of our savings. I am also tentatively planning to use about $1k to to lock up some stock with call options, because I believe the Stock will rise substantially after they introduce the Model X.....
 
Hi,

An Important Note:
I am posting my opinions with some information about purchasing TSLA Jan19 LEAPS's options to fund an M3 purchase, with the intention it will help others reach their own conclusions. You are responsible for the result of your investment decisions, so please think for yourself.


That said if you are saving money to buy a M3, and you are very confident that Tesla will be producing them in quantity by September 2018 (almost a full year later than their goal) buying a few Jan19 LEAPS's now is probably an excellent idea. I've posted some charts below that show the potential profits. You can see that the potential profits from just a few LEAPS's could easily pay for most of your M3. Of course you need to weigh that against the possibility that you could lose a substantial portion of your investment.

LEAPS's option buying decisions should depend mainly understanding the SP, not on an in-depth understanding of options:

IMO the main consideration to buy LEAPS's should have very little to do with understanding options. Mainly you need to be extremely confident that at least 1-10 month's (6-10 is better) before the January 2019 expiration date that the SP will increase enough that you will make a substantial profit. I believe that now (TSLA SP under about $230) is an excellent time for the following reason. If this belief turns out to be correct you should definitely buy some LEAPS's:
I strongly believe that by November 2017-September 2018 Tesla will be profitably producing M3's at a rate of at least 7k per week. When that happens I believe that the SP will rise to at least $300.

Statements by Elon Musk about Production
Then you look at velocity. What is a reasonable expectation for the exit velocity for the vehicle coming out of the factory. You might think that some of the most advanced car factories in the world are very good at making cars and they are maybe making a car every 25 seconds – that sounds fast, but actually, if you say the length of the car plus some buffer space is approximately 5 meters so it’s taking 25 seconds to move 5 meters.

“We’ve realized that the true problem, the true difficulty, and where the greatest potential is, is building the machine that makes the machine. In other words, building the factory. And really thinking of the factory like a product, not a hodgepodge of things where the machines are bought from a catalog.

The CEO said that he recently – in the last 2 or 3 months – came to the realization that the potential for improvement is at least a factor of 10 greater in manufacturing vehicles than in the actual vehicle engineering.

“I think probably a lot of people will not believe us about this, but I’m absolutely confident that this can be accomplished. We’re basically designing our factory the way you’d design an advanced computer.

He also said that internally they are calling the M3 production line the alien dreadnaught. He compared alien dreadnaught with the fastest conventional automotive production lines which produce one car every 25 seconds. He said the initial version of the line will be alien dreadnaught V0.5 and that V3.0 will be five to ten times faster than 25 seconds per car. If I believed that using V0.5 they are only able to produce one car every 30 seconds which is 20% slower than the fastest conventional lines, I believe that when the market realizes that cars are coming off the assembly line at a rate of two per minute that the SP will rise enough to make a reasonably conservative LEAPS's purchase (SP up to about $230-$240, strike price up to about $250) profitable on that alone.

I also believe that 20 seconds per car which is 20% faster is much more likely. The M3 is engineered to be easy to manufacture and EV's are much simpler than ICE cars.

I am going to copy and paste this excellent, very conservative strategy by Papafox on purchasing LEAPS, in the next post in this thread. It's too long to include in my post, but it the information it contains is so good that I decided to mention it near the top of this post.
https://teslamotorsclub.com/tmc/threads/tsla-trading-strategies.40245/page-46#post-1586841
Papafox said:
Someone asked how I trade options, and here it is. My technique doesn't provide huge returns, but it seldom loses money either.

Buy now or wait?:
IMO the remaining question is when to buy (if you believe that my M3 production projections are correct), which boils down to what are odds that if you wait there will be an opportunity to buy Jan19 LEAPS's for substantially less than you can buy them for now (the date you are reading this). As I write this on December 26, 2016 the SP is $213.30.

The option doesn't need to be in the money to in-the-money to make a huge profit for the buyer. I bought some J19's for $19.50 each when the SP was $183. The J19 strike price of $240 I bought on Nov 14 for about $19.50 ($1,950 per contract), when the SP was $183 are worth $31.90 ($3,190 per contract) today (a 64% gain) Dec 24 with an SP of $213.30 (a 16% gain). If the SP rises to $300 by mid sep 2018 I'd make about $4,500 per option.

If I believed that it was extremely likely that the SP will drop again to below ~$195 I might wait. I don't personally believe that is likely enough to risk losing what I consider to be the sure thing of the rise from $213 to over $300. If the SP rises to $300 by mid sep 2018 I'd make about $4,500 per option.

OTOH if the SP rises to exactly $240 in J19 and I hold it until expiration I would lose 100% of my investment! (Which is one reason that I would never hold LEAPS's until the expiration date. It's an extremely bad idea.) So the main thing when buying expensive options is being extremely confident that at some point before they expire the SP will be high enough that they are profitable. This also means that buying LEAPS's when the SP is low is very very important.

MitchJi said:
IMO now is an excellent time to buy J19 LEAPS's [posted when the SP was about $190], if you believe that we are either at or close to the bottom. Obviously if you think that the SP is likely to drop to $140-$175 it's better to wait.

I would never even consider holding LEAPS to expiration. If you do that you're making your long term gains subject to short term SP fluctuations. It's also better to roll LEAPS about 8-12 months prior to expiration because the time decay accelerates as the option gets closer to expiration. If you don't hold them until expiration you definitely want to sell them, rather than exercise them, because if you exercise them you will get nothing for the remaining time value.

One thing that holding them until expiration definitely accomplishes is to run the remaining time value down to zero. You can see the effect of that on any of the charts below, by following any horizontal line the effect of waiting until the the remaining time value down to zero (aka waiting until expiration to sell or exercise the option).

Option Buying Information Sufficient IMO to Buy LEAPS's:
Start by reading pages 1-16,18-19,57-61,49-53 in this booklet (sections) on buying calls and puts. Understanding "intrinsic value" vs "time value" which is important and more are covered:
http://www.optionsclearing.com/components/docs/riskstoc.pdf

When you buy and sell options be absolutely sure that you are "Buying to Open" (buy) and "Selling to Close" (sell)! Not "Selling to Open" or Buying to Close!

Understanding Delta might also be useful to youower strike prices:
https://en.wikipedia.org/wiki/Greeks_(finance)#Delta
Delta measures the rate of change of the theoretical option value with respect to changes in the underlying asset's price.

For a vanilla option, delta will be a number between 0.0 and 1.0 for a long call...depending on price, a call option behaves as if one owns 1 share of the underlying stock (if deep in the money), or owns nothing (if far out of the money for 0.0), or something in between.

These numbers are commonly presented as a percentage of the total number of shares represented by the option contract(s). This is convenient because the option will (instantaneously) behave like the number of shares indicated by the delta. For example, if an American call option has a delta of 0.25 (=25%), each option will gain or lose value just like 25 shares of XYZ as the price changes for small price movements. The sign and percentage are often dropped – the sign is implicit in the option type (negative for put, positive for call) and the percentage is understood.
the

Which strike price to buy:
The main decision (if you are confident that the SP will rise) is which strike price to buy.
You pay for two things when buying options time value, and a lower strike price which also gains you more time for the option to make a profit at a given level.

Lower strike prices equals less risk, due to the fact that a lower SP is required to make a profit and allows more time for that to happen (essentially another way of gaining more time value).

A lower strike price also buys you a higher Delta. A higher Delta is a two edged sword. When the SP rises the option value will rise faster, but if the SP decreases the option value will sink faster.

I decided to buy J19 240's. I feel good about the $240's, $200-$220's would be safer though. But please decide for yourself. The main tool that I use to do that is the:
http://www.optionsprofitcalculator.com/calculator/long-call.html

Below is a chart for J19 $240's, priced at $19.50, that I used to make my decision. The way I use these charts is to pick a date or dates that I prefer to sell by. A for the J19 LEAPS I used the end of March (Q1) when I'd prefer to roll them, and my personal "worst case" date July-August 2018. I used July-August 2018 because even though I'm highly confident that the M3 will start volume by the end of 2017 I don't want to risk a major amount of money on that, so at the end of March I would make a small profit if the SP is $224 and in July-August 2018 I would make a small profit if the SP is $236. I believe that those are very conservative numbers. That's almost a full year after Tesla's goal. I believe that that the SP will exceed those numbers based solely on MS-MX production and TE production, without any contribution from the M3.
Sc-ONE-J19Strike$240-OptionPrice$19.50.jpg

Lower strike prices equals less risk, due to the fact that a lower SP is required to make a profit and allows more time for that to happen (essentially another way of gaining more time value).

And it also buys you a higher Delta. A higher Delta is a two edged sword. When the SP rises the option value will rise faster, but if the SP decreases the option value will sink faster.

I believe that an SP of $350-$450 is more likely by July-August 2018 than $236 (if it's at $350 that means about a $9k profit per contract).

Below are two charts for J19 $240's, priced run with todays (Dec 23, 2016) SP of $213.80, priced at $33.53 ($350=~$7.8k profit per contract), and J19 $350's (yikes!) priced at $10.20 ($350=~$2.2k profit per contract):
Check the difference between the same J19 $240's priced at $19.50 (above) and those priced at $33.53.
Sc-ONE-J19Strike$240-OptionPrice$33.53.jpg

You can also see that the chart for the $350's has a much steeper slope (much less time for the option to make a profit at a given level).
Sc-ONE-J19Strike$350-OptionPrice$10.20.jpg


Making the actual purchase:
Repeating:
When you buy and sell options be absolutely sure that you are "Buying to Open" (buy) and "Selling to Close" (sell)! Not "Selling to Open" or Buying to Close!

For increased liquidity I normally buy options with a relatively high "open interest". It's sometimes useful to check the open interest on the option chain for the previous year.

When buying option I start by placing gradually increasing limit orders, close to the bid price, at about five-fifteen minute intervals until one is accepted. It might not be worth the time if you are buying weeklies with a small spread. But for buying high priced LEAPS's this can save you hundreds of dollars per option. The J19 options that I bought for $19.50 had a bid/ask of 18-22.50. The program I use to buy options fills in the asking price as the default. That's a $200 per contract difference! Of course when selling them I do the opposite, placing gradually decreasing limit orders, close to the ask price.

You can also place a low order before the open to take advantage of a possible opening dip. Or place a low order and leave it for a while. Because the Tesla SP frequently fluctuates by quite a bit it's possible to gain or lose a substantial amount with these strategies. When trying these strategies I check the five day and one day Tesla charts.

Repeating an Important Note:
I am posting my opinions with some information about purchasing TSLA LEAPS's options to fund an M3 purchase, with the intention it will help others reach their own conclusions. You are responsible for the result of your investment decisions, so please think for yourself.

[/b]
 
Papafox said:
Someone asked how I trade LEAPS's options, and here it is. My technique doesn't provide huge returns, but it seldom loses money either.

I move a fair amount of my money into deep in the money calls (Jan18 100s, for example) when the stock price is fairly low and then when the price goes up and we get near a peak I sell the calls over some time and use the money to buy shares of TSLA. Sometimes when I'm pretty sure we're going to go back down a bit, I don't buy as much stock and hold some cash. I get about 2 to 1 leverage over stock by buying deep in the money calls for a future year, but by deleveraging by selling the calls and buying shares as the stock price approaches what may be a peak, I reduce my exposure to falling stock prices and in so doing I can make money on the ups and downs, even if we end up at the same point on each peak. The main advantages of such a conservative trading style is that 1) I'm usually "all in" and don't miss unexpected runs up, and 2) I'm very well positioned for rolling my leaps forward if Tesla isn't doing well. For example, if you owned Jan17 100 calls, you could sell these for about $118.50 apiece today, and the cost to buy Jan18 100 calls right now is about $121 apiece. The difference in price between Jan17s and Jan18s is only about $2.50, and so I would by now have added a little money and rolled my Jan17 100s into Jan18 100s. If we have a surprise and selling the Jan18 100s does not look good in 2016 or 2017, I can always sell them and roll them into Jan19 100s for very little money.

Actually, I seldom need to add money to roll deep ITM leaps from one year to the next because I use rising or falling share prices to do that. Often we get caught in a cycle where TSLA is heading up or heading down. When it is heading up, I will use some of my liquidity to buy 2 Jan18 leaps and then when my Jan17s reach the same value as what I bought the Jan18s for, I sell the Jan17s. It's even better when TSLA stock price is heading down, because I sell 2 of the Jan17 leaps and then wait for the price of the same Jan 18s to be reached and then buy 2 of them. If I think the stock price will continue down I sell 2 more Jan17s and hang loose until I can buy Jan18s for the same price.

Trading most options is an easy way to lose money if you are not careful, or if the stock price hands you a surprise. If you are considering options for the first time, here are a few terms you need to know.
Strike Price: The underlying value of an option. If you bought a Jan 18 100 call option ($100 is the strike price) and on the morning of the date in Jan of 2018 when the option expires the stock is trading at $250, that option has a theoretical value of $150 when it is "exercised" ($250 - $100 = $150. Note: most traders don't exercise options with a market maker. They sell the option instead at market price.
Expiration Date: Some options are good for only a week, some for over a year. The expiration date is the last date that the option can be exercised. Obviously, options with later expiration dates are going to have a higher market value. When we call an option a Jan 18, we really mean it has an expiration date in January, 2018.After the expiration date, your option becomes worthless, even if it had value the day before expiration.
Market Value: This is the price that the option is currently trading at (approx. $121 in our example)
Time Value: This is the difference between Strike Price+market value of the option and the current market value of the stock. In our example, $100 + $121 = $221. TSLA stock is trading for $218. Therefore, TIme value = $3. Another way of looking at time value is that this is the amount the stock would have to rise in price in order for you to break even exercising it on the final day of the contract. So, TSLA would have to go up $3 between now and Jan 18 for you to break even on this trade (commissions not considered).
Let's take another example. Right now TSLA Jan18s with a strike price of 200 trade at about $52. If we add strike price to market value we get $200 + $52 = $252. With the stock currently trading at $218, we would need to see TSLA rise to $200 + $52 = $252 by January of 218 for you to break even selling the stock on the final day of the contract. The time value would be the difference between the $252 and $218, so you would have a whopping time value of $34. You can see there's lots more leverage buying an option that is close to the trading price, but you need to either see it go up in value fairly quickly or you need to see lots of appreciation if you want to make money selling the option close to its expiration date. The time value of an option decreases with time and is close to $0 on the final day of trading before expiration.
A Call Option: When you buy one option, you are actually buying the right to trade the equivalent of 100 shares. Thus, a single option with a market price of $121 sells for $12,100 plus your usual brokerage commissions. If TSLA goes up $1 during the day, your Jan18s call option would increase in value close to $1 x 100 = $100. On the other hand, your 200 strike price call option would appreciate less than $100 because some of the rise has been absorbed by time value.
Personally, I suggest if you've never traded options before that you start very small and buy a conservative option such as a Jan 18 100 strike. Keep most of your money in stocks as you slowly learn about the good and bad of options. The good: you get more leverage and can make more profit from the same investment if things go well. The bad: you can lose your entire investment in the option if things go poorly. For example, if TSLA falls below $200 in value, your $200 strike price option (if you opted to buy that one) would have very little value as expiration date approached. Thus, they're less forgiving than stock, and they have a time limit, which stock does not have.
Buying or selling an option: There are far fewer options traded than shares of stock. Some days, not a single TSLA Jan18 100 trades. Take a look at the bid and ask prices of an option. You might see sellers asking $123.95 for Jan 18 100 and buyers offering $119 for those options. The price you buy at will be somewhere in between. Midway sometimes works, but you might be paying too much if there are 80 options offered at $123.95 and only 4 buyers bidding $119. In such a case, I'd try to buy at a little more than $119, but not midway between the two numbers. It's a frustrating experience at first, because if you bid $119.50 you might see some buyers upping their bids to $119.50, too. It takes practice and sometimes patience to buy an option for the right price, and sometimes you have to walk away if the sellers are not budging from asking prices that are just too high.

Anyway, for those of you asking how I trade options, that's it in a nutshell.
 
I probably should have mentioned that the reason I waited to recommend LEAPS Options is that I was waiting until the January 2019’s became available which was in mid November 2016. A fair number of investors are holding J18 LEAPS, but I think that’s too risky. I believe that will probably work, but if Tesla misses on the M3 by a few month’s…

I should also have included this post by a professional investor after the the excellent Q3 results, when the SP went down instead of up:
Does no one else get excited on days like these? I love irrational market discounts!

Let's see, 50% CAGR has continued, production run rate is at goals, model S and X are at steady state production, model 3 is temporarily on schedule, powerwall 2.0 is wildly better than any competitors offering, utilities are starting to understand the capex for battery storage, the solar-roofs look fantastic, full autonomy hardware already in production and will be standard on model 3, Tesla network is confirmed, model y, pickup, minibus, semi all confirmed, cashflow positive and profitable operation are all here and I get to buy at a significant discount to the normal trading range for when model S was at 800/month run rate and model Xwasn't released yet?

Today is a wonderful day if you like making money! The Tesla story has only grown in scope, execution, and value while the price has sunk due to solar industry struggles, macro, interest rate risk, election risk, and your standard not very good analysts not understanding a merger. I love information arbitrage!
 
Hi,

http://teslaweekly.com/issues/128?#start
Legendary AAPL analyst, Gene Munster, shares his thoughts on TSLA. Munster was one of the best-known analysts covering AAPL over 15 years. His thoughts on Tesla are a great read, and a must if you're a TSLA investor. He was also on CNBC two times being interviewed regarding TSLA.

Excellent TSLA Investor Information

http://loupventures.com/teslas-bedrock-in-ai-robotics-will-transform-the-industry-our-lives/

Tesla the next Amazon?
Tuesday, 21 Feb 2017 | 5:51 PM ET
Gene Munster, Loup Ventures managing partner, discusses why he sees Tesla as a tech company, not a car company, with parallels to Amazon.
http://video.cnbc.com/gallery/?play=1&utm_campaign=teslaweekly.com&utm_medium=email&utm_source=Tesla_Weekly_128&video=3000595071

At the end of this video (after Munster leaves, is a segment that addresses Hillhater's questions :mrgreen: ):
Munster: Tesla will continue to move higher
Wednesday, 22 Feb 2017 | 5:51 PM ET
Gene Munster, Loup Ventures founder and managing partner, weighs in on news of Tesla CFO leaving and the company's Q4 earnings.
http://video.cnbc.com/gallery/?utm_campaign=teslaweekly.com&utm_medium=email&utm_source=Tesla_Weekly_128&video=3000595436
 
MitchJi said:
Hi,
At the end of this video (after Munster leaves, is a segment that addresses Hillhater's questions :mrgreen: ):.....
Well they chewed it over, bounced it around, tossed it about, and ended up saying...
...the last $20 - $40 on this stock is the Trump factor.....
......but is that a reason to hold a stock ?......
No one seems to understand why TEsla stock is performing .
 
Tesla is planning on buying enough parts to make 2,000 Model 3s in July and 4,000 Model 3s in August, said Musk on the call. But those are just parts orders, he said. The number of cars shipped could be different.
Musk also said that while Tesla has enough capital raised to get the Model 3 to market, it would be “close to the edge” in terms of how much money it’s spending. To reduce the company’s risk, it “probably makes sense to raise more capital,” said Musk.
 
Hillhater said:
MitchJi said:
Hi,
At the end of this video (after Munster leaves, is a segment that addresses Hillhater's questions :mrgreen: ):.....
Well they chewed it over, bounced it around, tossed it about, and ended up saying...
...the last $20 - $40 on this stock is the Trump factor.....
......but is that a reason to hold a stock ?......
No one seems to understand why TEsla stock is performing .
I should have said similar FUD to that expoused by hillhater.

Why it's currently performing is irrelevant to the medium term (investing for an M3 purchase).
Hillhater said:
Tesla is planning on buying enough parts to make 2,000 Model 3s in July and 4,000 Model 3s in August, said Musk on the call. But those are just parts orders, he said. The number of cars shipped could be different.
You don't seem to have a clue about what he's talking about (no surprise). He is saying that the number of parts ordered doesn't necessarily mean that the ramp will go that quickly. Even if it's delayed by six months, which is looking extremely unlikely, my J19 LEAPS will be golden.
Musk also said that while Tesla has enough capital raised to get the Model 3 to market, it would be “close to the edge” in terms of how much money it’s spending. To reduce the company’s risk, it “probably makes sense to raise more capital,” said Musk.
How is that relevant to anything?! He also said that they could be cash flow positive today if they decided to do that. But since they have orders for over 375k M3's it makes sense to borrow to accelerate the production ramp.

You obviously don't know that in the past after Tesla capital raises the SP has increased!
 
This Is Why the Great Electrification of BMW Should Terrify Tesla

Article on Yeehaw originally posted on "The Street" site:
https://www.thestreet.com/story/140...ctrification-of-bmw-should-terrify-tesla.html

Starts:
Tesla (TSLA) , and all makers of electric cars, take note. BMW AG aims to sell worldwide 100,000 of its electric cars, dubbed the BMW i3, this year, up from some 40,000 sold last year.

In 2016, electric vehicles accounted for 2.6% of BMW's sales, but the Munich-based auto maker expects that number to shoot up over the next decade as the electric and plug-in car markets heat up.
 
Are you kidding?!
LockH said:
Starts:
Tesla (TSLA) , and all makers of electric cars, take note. BMW AG aims to sell worldwide 100,000 of its electric cars, dubbed the BMW i3, this year, up from some 40,000 sold last year.

In 2016, electric vehicles accounted for 2.6% of BMW's sales, but the Munich-based auto maker expects that number to shoot up over the next decade as the electric and plug-in car markets heat up.
 
I believe that most of the SP Surge before the Tencent purchase (bottom of post) was due to Elon's M3 tweets on March 24 and that the completion of the cap raise boosted that impact substantially:
https://electrek.co/2017/03/25/elon-musk-tesla-model-3-reservation-holders-buy-model-s/
He shared a few new details about the Model 3 and its rollout, but I feel like the main point that transpired from the Tweetstorm is that Musk is trying to down-sell the Model 3 and push the Model S instead.

https://electrek.co/2017/03/24/tesla-model-3-release-candidate-drive-elon-musk/
Elon Musk has released the very first images of the very first Tesla Model 3 release candidate. As we reported last week, Tesla started production of release candidate Model 3 vehicles, which are cars made almost entirely on production machines in order to test both the production process and the vehicles themselves.

As part of ‘Tweetstorm’ today, Musk shared a short low-resolution video of the Model 3.

At first glance, there are no visible changes other than the fact that we can see the cameras for the Autopilot sensor suite. We can see the camera in the Tesla badge on the front fender and in the pillar on the side.

Maybe there are some slight adjustments to the front fascia and headlights, but again, the video is very low-res and it’s hard to tell.

Here’s the video in question:
https://twitter.com/elonmusk/status/845287211306139648?ref_src=twsrc%5Etfw&ref_url=http%3A%2F%2Felectrek.co%2F2017%2F03%2F24%2Ftesla-model-3-release-candidate-drive-elon-musk%2F
I believe that most of the rise is due to investor enthusiasm from seeing the video (in spite of Elon talking down the M3),and feeling (justified or not) that the M3 will be approximately on time. IMO that means that when the factory starts producing 5k-10k M3's per week an SP of at least $350 is a slam dunk.
https://electrek.co/2017/03/24/tesla-model-3-battery-pack-75-kwh-elon-musk/
I am also personally encouraged that the Model 3 will not be available with all-wheel-drive dual motors at launch. Because I'm going to wait for the AWD option. ELON said that he thinks it will be in time to qualify for the tax credit, and even if it isn't I'm extremely confident that by the time it happens, the SP will rise enough to more than pay for the difference.

Two Notes:
I am extremely confident that the SP will be much higher than today by the time in 2018 when we can buy an AWD M3. But my confidence is very low that between now and then that it won't drop substantially.

I am holding 30 J19 LEAPS Options, so that a $1 dollar increase in the share price the value of our options increase by ~$2,400.


The Tencent purchase triggered most of the SP rise from about $268 to about $277.
https://techcrunch.com/2017/03/28/tesla-tencent-investment/
Elon Musk is not done with his Tweetstorm today on his way to Cape Canaveral in Florida for SpaceX’s upcoming launch. After confirming that the Tesla Model 3 will not be available with all-wheel-drive dual motors at launch

Tencent, Asia’s second highest valued tech firm, has bought a five percent share in Tesla. According to a filing, the Chinese firm scooped up 8,167,544 shares for around $1.7 billion to become one of Tesla’s largest shareholders.

The news itself sent Tesla’s share price up three percent in pre-market trading. The purchase was arranged on March 17, and those now-Tencent-owned shares are worth around $2.2 billion at current market value.

Tencent is a prolific investor. It holds equity in Snap, this year’s hot tech IPO, among others following an early investment. While that interest in messaging makes sense since Tencent’s operates China’s dominant chat app — WeChat — it isn’t immediately clear whether the Tesla investment has strategic undertones. An alliance with Tencent could significantly boost Tesla’s efforts in China, which is already impressive. Chinese sales accounted for 15 percent of Tesla’s $7 billion revenue last year.
https://cleantechnica.com/2017/03/29/tencent-purchases-5-stake-tesla/
The China-based Internet giant Tencent Holdings has purchased a 5% stake in Tesla, making it one of the top investors in the electric vehicle pioneer.

The firm reportedly paid around $1.8 billion for the 5% stake (8,167,544 shares). The stock shares were bought through the open market and also through Tesla’s stock offering last month, going by regulatory filings.

An email sent by Tencent to Bloomberg read: “Elon Musk is the archetype for entrepreneurship, combining vision, ambition, and execution. Tesla is a global pioneer at the forefront of new technologies including electric vehicles, assisted driving, shared vehicles, digitizing real-world information, sustainable energy generation and scalable energy storage.”

For those unfamiliar with the company, it would be fair to say that the firm is amongst the three largest tech companies in China — the others being Alibaba and Baidu (which itself is certainly focused on self-driving EVs).

Interesting news — yet another bit of news contradicting the opinions of short sellers on Seeking Alpha.
 
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