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- Tesla's S&P 500 Inclusion: Predicting TSLA's post-inclusion stock price
- Tesla's S&P 500 Inclusion Part 2: Predicting the transformation of the TSLA float
- 3:00PM - 3:50PM
- The Closing Cross
- After Hours Trading
- TSLA Going Forward
- Final Thoughts
I finished writing about half of this post, and then as I came to better understand what transpired on Friday, I deleted everything, and now I am starting again from scratch.
I stayed up for 36 hours straight from Friday morning Singapore time to Saturday night Singapore time, and I've spent 80-90% of my time on TSLA since the S&P announcement. Moreover, I spent basically 100% of my time on TSLA during the first week after the announcement and during this past week leading up to the inclusion. For the next six months, I'm probably going to be swamped after my INSEAD MBA program starts in two weeks, and I could really use a break before then, but with a bunch of real-life stuff that needs taking care off, I'm not sure if I'll manage to fit in any off-time.
Basically, I'm quite exhausted and busy, so with all of this in mind, I'm going to keep this as brief as possible.
2: 3:00PM - 3:50PM
TSLA traded fairly steadily for most of Friday. There was likely some buying, speculating, and profit taking during the first two hours, but after that the day was pretty uneventful until 3PM. The explanation of what started the events around 3PM likely lies in something pointed out by Sudre on TMC:
|3:47AM Singapore time - 2:47PM Eastern time|
3: The Closing Cross
- There were ~72.5M closing cross buy orders willing to buy at <$680. At $695, it appears this number was lower at 69M. Meaning there were a few LoC buy orders with limits between ~$680 and ~$700.
- There likely were 48.5M MoC sell orders, unless some of these sellers had LoC sell orders with limits below $640.
- There were likely some LoC sell orders with limits at $650+. This is part of what reduced the imbalance as the reference price ran-up, and sometimes increased the imbalance as it went down.
- There also likely were some traders taking advantage of this arbitrage opportunity, but not enough to close the gap between the stock price and the Near Indicative Clearing Price.
Price Action 3:50PM - 4:00PM
- Due to the massive amounts of money involved, and the amount of money already invested in front-running this inclusion, I believe there wasn't enough money available in the market to make it work perfectly. I believe there weren't enough billions of dollars watching TSLA during those 10 minutes to take advantage of the arbitrage opportunity.
- I believe that more ITM options were being liquidated by brokers on behalf of clients who had insufficient margin to exercise them. It's also likely that speculators, who couldn't afford to exercise their options positions, either liquidated them, or shorted the stock to lock in gains. If you own a $650 call expiring in 5 minutes, and you can't liquidate the position, you can short the stock at $670 and cover by exercising your options. ITM options positions being liquidated in massive amounts might also help explain the large strange drops in options premiums near close on Friday.
- I believe that some of the biggest players might've been incentivized to not sell during the closing cross, thereby artificially inflating the closing price, allowing them to sell for higher prices to index funds during after hours. Imagine you have 15M shares you want to sell to indexers, and you see the massive imbalance. Are you going to put in an on-close sell order and drive down the price, or are you going to keep your shares and sell them for more during after hours in block trades at a higher closing price?
4: After Hours Trading
- TSLA - 47.1M
- AAPL - 15.31M
- BABA - 1.26M
5: TSLA Going Forward
Where do we go from here?
- There shouldn't be too many investors left looking to divest near-term. I think just about everybody who wanted to do so, got the chance to do so at $695.
- TSLA settled at a price and valuation that really isn't all that unreasonable. Financials and growth in a year from now, and continued FSD development could easily provide 50% upside over the next 12 or so months. Unlike if we had settled at $1,000+, I think TSLA can continue to go up slowly but surely.
- There could still be S&P buying left. I think probably most of it has finished, but even if just 10M shares are left, that's still a lot of buying pressure.
- Benchmarked funds might buy dips below $695, because it's an easy way to outperform the S&P 500.
- Year-end window dressing.
- With so many expiring in just 4 trading days, a big macro crash or something along those lines would really hurt. It's already unfortunate macros are down a few percent today, and my options would lose 80% of their value, if the stock somehow dropped further to $600.
- Although there could be S&P buying left, there could not be. For me, it's hard to say either way at this point.
- I believe there's still some money betting on the S&P inclusion in the form of near-term call options. Mostly 24Dec expiries, but likely also some 31Dec and January expiration call options. These could cause a dip if owners take profits.
6: Final Thoughts
- Selling and managing massive fleets of AEVs (Autonomous Electric Vehicles)
- Leading the conversion of the ways in which the world generates and stores energy from unsustainable to sustainable
- Working with The Boring Company to expand a new form of transport through tunnels
- Building electric airplanes, and perhaps also electric boats
- Selling top-notch cloud AI computing ala Dojo
- Various other smaller lines of businesses, such as HVAC
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