Long TSLA Update: What's That Smell?

What's That Smell?

"When I was in England, I experimented with marijuana a time or two, and I didn't like it... and didn't inhale, and never tried it again." - Bill Clinton

That, my friends, is the smell of Musk smoking my September calls.

Quick recap: Back in 2013, former forum member @WhiteHat and I got into a war of words over Tesla.

At the time, all of the shorts I spoke with assumed nothing would go right with Tesla, using emotionally charged language and ideological arguments to justify their position:

  • Musk is a welfare queen! That's not capitalism!
  • Tesla will never hit growth targets! Musk is a charlatan!
  • Disagree? You don't understand finance, moron!

The shorts missed the forest for the trees, and hubris cost them dearly.

Today, all of the longs assume everything will go right with Tesla, using emotionally charged language and ideological arguments to justify their position:

  • Musk is changing the world! This is bigger than capitalism!
  • Who cares if Tesla misses targets? Musk is a visionary!
  • Disagree? You're spreading FUD, liar!

The longs neglected due diligence and it's costing them dearly.

The Great Man Theory

"In reading the lives of great men, I found that the first victory they won was over themselves... self-discipline with all of them case first." - Harry Truman

I'll say this for Elon: dude does not give a fuck.

I can't lie, I admire the man and want him to succeed. There is a part of me that hates "the system," and I can't help but support people brave enough to take it on...

But calling someone out as a paedophile on Twitter? Even if it were true Musk should not have said it.

Smoking weed on the Joe Rogan podcast? I watched the podcast live and could not believe he would blaze up live on camera.

He might be the head of a $50bb company, but he sure doesn't act like it.

Public facing CEO's need to have control of their emotions...

Finders Keepers

"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor." - Jesse Livermore

But I'm the last one who should be talking!

I had a 10x gain less than 3 weeks after buying my options which, according to my back of the envelope math, was my expected value.

Unfortunately, I got greedy and almost all of my options expired worthless.

My last set of contracts are good until Jan18 and at this point, barring a miracle, I will have lost 100% of the capital I put up for this trade... and truthfully, even if the January calls payoff, it will have been luck.

This was a very expensive (and public!) lesson on greed and emotional control.

I hope you, dear reader, can learn from my mistake so you can avoid your own.

Good hunting,


Comments (22)

Sep 10, 2018

For what it's worth, I don't think you're wrong. Musk deserves to be stressed out and frustrated about Tesla. The shorts are plaguing him with doubt and their own set of greed. I'm pretty sure this will be another truth that great and magnificent WSO minds will love to pile poo on, but idc. The long story short is, Americans just don't want electric cars.

China is positioning itself to be the leader in the market, and it's because they have the support of the national sentiment, pushed forward by Xi and the PRC. Unfortunately, China is winning in this battle, right as the current administration seems to want to go in the opposite direction.

It's an expensive endeavor building a national reliance on EVs versus the combustible engine. There needs to be a network of infrastructure from locations for charging stations, to enough charging stations to fuel everyone, and then also a general detachment from the convenience we've come to understand from gas powered cars. But the future will no doubt be EV, it's just a matter of who gets there first. China is showing how it can use political pressure to change the market in spite.

I think Musk could benefit from stepping away from the spotlight of running such a visible company for a while. Tesla should continue to position itself to be the leader once the country catches up, because it's probably inevitable.

    • 3
Sep 10, 2018

I still own shares, and I still think the company is a smart bet with a very small % of a portfolio... but I got greedy and therefore stupid speculating, and I deserved to have my nose rubbed in it.

Sep 10, 2018

Double Bottom :D ?

Sep 10, 2018

You bet all of your capital on TSLA call options? Or, do you mean just the capital that you put on for this trade?

Sep 10, 2018

Just the capital I put on for this trade lol... I'm actually still up on TSLA as a whole, but mentioning that in the post would kind of defeat the purpose.

And good catch on the grammar, I fixed.

Sep 10, 2018

love the humility, +1

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Most Helpful
Sep 10, 2018

Your problem is having a long-term thesis and trading it on short term time frames.

Tesla has legitimated issues. Musks mental health. The highest valuation in his industry. An industry with low margins. Let's be honest Tesla will never be worth 60 billion as a car company. It's too competitive and margins are around 10-15% with extremely efficient producers that adopted Toyota manufacturing processes (which musks tried to skip and jump to some combo of robots plus hand made cars).

He's facing a ton of competition to be the leader. The German manufacturers are experienced a no joke. There are other startups like Dyson. And Tesla burns cash and constantly needs a high valuation to prevent a ton of dilution.

But still you positioned this as a trade but your thesis was an investment. A trade needs to be based on oversold (which I believe it was when you bought) or a potential near term catalysts.

You confused a trade with an investment which is why when it went from range lows to range highs you didn't cover.

    • 8
Sep 10, 2018

Short and helpful. +1

Sep 10, 2018

Your problem is having a long-term thesis and trading it on short term time frames.

You confused a trade with an investment which is why when it went from range lows to range highs you didn't cover.

You might be correct, but I disagree.

I watched the squeeze happen in real time during 2013, - https://www.wallstreetoasis.com/forums/long-tsla - and it looked like everything was identical.

Like I said, I used Bayes' theorem and came up with a 100/1 shot at a squeeze paying out 1000/1, expected value: 10x.

My options were up 10x in value shortly after purchase, but I got (VERY) greedy and instead of liquidating I HODL'd and the squeeze didn't play out.

Sep 10, 2018

I'd like to see how your options were up 10-1. I do not remember anything happening in Tesla other than going from lows of range to highs of range. Kinda surprised you could find an option that paid off that much.

I have zero idea in your short squeeze theory. It doesn't fit any trading strategy I've ever heard of. And at the end of the day you are just making up probabilities.

Also not once did you mention the borrow rate or anything associate with a short squeeze.

This wasn't trading. Just some retail guy punting in options.

Sep 25, 2018

This and you clearly ignored the greeks!

Sep 10, 2018

I was gambling, not trading.

I threw out the rulebook for options pricing theory.

Sep 23, 2018

I don't understand how someone can invest in a company that has never been profitable.

Sep 10, 2018

Profits are an opinion.

Sep 10, 2018

alright @CuriousCharacter I'll admit I was wrong, I didn't think they could get to positive cash flow of over a billion this year. well done, Elon

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Sep 10, 2018