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𝗧𝗲𝘀𝗹𝗮 𝗙𝗮𝗰𝘁𝘀 🔋 Profile picture
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21 Dec, 5 tweets, 1 min read
Update: SPY has updated their TSLA weight to 1.69%, which means 3 of the largest S&P 500 passive index funds are done with their TSLA rebalance.

1/
It still remains to be seen whether the large after-hours seller on Friday was a genuine TSLA long, or a tactical short-seller.
2/
Right now TSLA is following a larger macro drop - the coronavirus-v2 scare that is affecting European markets.

The S&P 500 is down -2.1% - which does not yet include TSLA (will do on the open).
3/
This macro drop creates an arbitrage opportunity for S&P 500 benchmarked funds: The $695 inclusion price on Friday will be the basis for the S&P 500 inclusion, and with ES down -2.1% and TSLA beta 2.0 the 'index fair price' of TSLA right now is $695 lower by -2.1%*2.0: $665.
4/
On the open then this TSLA index-fair-price will move down and up with macro. Any actively managed funds, or late-rebalancing smaller index funds can buy up TSLA below $665 and earn alpha over the benchmark.
5/
Of course bigger macro effects and any negative or positive Tesla news could overwhelm this basic correlation.

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More from @truth_tesla

𝗧𝗲𝘀𝗹𝗮 𝗙𝗮𝗰𝘁𝘀 🔋 Profile picture
22 Dec
1/
The biggest challenge for Apple to compete with Tesla is organizational: right now almost all innovation happens at Apple HQ with annual releases, the hardware supply chain is tightly controlled but low-innovation & low-cost.
2/
This works well for consumer electronics, where owning the latest iPhone is an annual purchase event, and where each new iPhone is designed from scratch.
3/
But Apple's annual 100% redesign cycle is fundamentally incompatible with Tesla's approach, who in an Agile development method has made the entire Tesla factory agile & iterative, where most equipment runs the "Factory OS", part of their iterative R&D effort.
Read 9 tweets
𝗧𝗲𝘀𝗹𝗮 𝗙𝗮𝗰𝘁𝘀 🔋 Profile picture
20 Dec
1/
There's a valuable but under-reported aspect of Tesla joining the S&P 500 tomorrow: the decade long flight of capital from active funds to passive index funds and the massive, unprecedented, ongoing cash inflows passive index funds enjoy.

morningstar.com/insights/2019/… Image
2/
On the asset valuation basis active funds managed to grow in value, but this is only because of a bull market. The actual cash outflows from active funds to index funds & the arrival of new cash to index funds are massive: $200b-$300b per year. Image
3/
With TSLA joining the S&P 500 tomorrow, 1.67% of this ~$200b-$300b per year cash inflow will be invested into buying more TSLA stock - which is semi-permanently removed from the TSLA float and not traded again.
Read 14 tweets
𝗧𝗲𝘀𝗹𝗮 𝗙𝗮𝗰𝘁𝘀 🔋 Profile picture
19 Dec
The TSLA failed-cross plot thickens: 80% of AH volume, or about 40M was sold at $695.

The tape actually shows many 999,999 share orders coming through @ $695. Presumably OTC, where a short seller was willing to go short?

I think only ~7M shares traded after hour under $680...
I.e. only about 69m shares worth of shareholders were willing to sell to index funds in the closing cross, and a large short seller sold them ~40m shares after-hours for $695.

This explains the sharp AH "spikes" to $695 visible in charts that many commented on.
Here's a finer grained view of the market anomaly: lots of huge orders with hundreds of thousands of shares slipping up to 695 & filling there.

I presume these were the indexers buying OTC/dark, while the entity 'painting' the price moved liquidity back to $680 quickly.
Read 5 tweets
𝗧𝗲𝘀𝗹𝗮 𝗙𝗮𝗰𝘁𝘀 🔋 Profile picture
19 Dec
1/
What I expect for TSLA next week:

🟢 Bullish scenario: if there's a significant index buying shortfall as the numbers below suggest, then a post-inclusion rally might begin on Monday.
🔴 Bearish scenario: if that's wrong then @garyblack00's 10-20% pullback is possible too.
2/
The bearish scenario is weakened by these facts:

Any short term hedge funds driving a 10-20% correction had:

✅ 47m buy liquidity in AH to sell @ ~$680
✅ 69m liquidity to sell @ $695 on the close

Why didn't they sell? 🤔
3/
There's two main explanations:

✅ either hedge funds are confident about higher TSLA prices next week
✅ or the HF-selloff hypothesis was false to begin with, as explained by former large hedge fund quantitative equities and derivatives trader below.

Read 8 tweets
𝗧𝗲𝘀𝗹𝗮 𝗙𝗮𝗰𝘁𝘀 🔋 Profile picture
19 Dec
1/
Here's my estimates of maximum index fund TSLA buying so far:

❌ before the close: almost none, due to tracking risks
✅ at the close: maximum 69.3m shares
✅ after hours: maximum 47.1m shares

Total: an upper bound of 116.1m TSLA shares, a 13.6m shares shortfall.
2/
In reality probably quite a few of the buyers on the close were not passive index funds:

❌ shorts covering or getting covered
❌ active funds that didn't want to stay TSLA-short against their benchmark & wanted to track TSLA at exactly the closing price
❌ options writers
3/
So the 13.6m shortfall of indexing shares is likely substantially higher.

Monday TSLA trading will IMO be determined by market participants thinking these through, and by continued index fund accumulation.

But macro might interfere, and so might market shenanigans. 🤠
Read 5 tweets
𝗧𝗲𝘀𝗹𝗮 𝗙𝗮𝗰𝘁𝘀 🔋 Profile picture
19 Dec
@garyblack00 1/

Gary, I don't have the investigatory tools to answer your questions about last Friday's disorderly closing cross definitely.

A potential explanation is that indexers wanted to avoid a close above $700 and abused the 10% circuit breaker rule.

@garyblack00 2/

There was a 15m shares shortfall of indexing shares, as indicated in the closing cross indicator.

But whoever was accumulating for big indexers, might also have written $700 calls to finance it.
@garyblack00 3/

At around 3:20, seeing the lack of shares, the big index accumulator started flooding the TSLA market with sell requests, overwhelming demand & triggering stop losses of retail & other investors.

The sell tick below alone was over 400,000 TSLA shares.
Read 13 tweets

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