Fun Week for Tesla

by JDH on October 27, 2018

Let’s review: Tesla was in a down-trend, and then they announced that they would announce their quarterly earnings early.  Pre-earnings the stock was trading below $255; after earnings on Tuesday it bumped up to $295, and after a pullback on Thursday closed the week at just under $331.

That’s show those shorts!

Not really.

Yes, it’s true they showed positive cash flow, and profit, but it’s all a mirage.  If you don’t pay your suppliers your cash flow improves.  That’s temporary.  Eventually they have to be paid.

If you slap together a lot of cars of poor quality, you can sell them, and that increases revenue, and profit, until the cars fall apart and you spend all of your cash fixing them.  The present looks good, but the future will look dismal.

So here’s how I played it: Before earnings I bought both calls and puts that were out of the money by a similar amount.  After earnings, I sold the calls, at a profit, and re-invested that cash in the puts, which of course now are under water.  on Monday I will average down again (I’ve bought puts expiring around Christmas, so I’ve got time).

This pig won’t fly.

I know everyone thinks Elon is a genius, and maybe he is, but he doesn’t know how to build cars.  Quality is horrible.  Even Consumer Reports says they are terrible.

So, I’m short, and will continue to be.

More next week.