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Update on Tesla’s Combination with SolarCity
- Afforess 10y agoIf you're interested in money lying on the floor, and believe the SolarCity + Tesla acquisition will go through, you can buy SolarCity shares while they are below the strike price of 22.19 and make instant profit in November. https://www.bloomberg.com/gadfly/articles/2016-09-16/solarcity-tesla-deal-spread-150-percent-return-no-takers https://www.bloomberg.com/gadfly/articles/2016-09-16/solarci...
- ghaff 10y agoReading that piece, it's probably more accurate to state: >believe the SolarCity + Tesla acquisition will go through and that Tesla stock doesn't instantly take a dive as a result.
- kryptiskt 10y agoYeah, an arbitrageur would buy SolarCity and short Tesla. So that isn't a risk for them.
- toomuchtodo 10y agoOr buy calls on SCTY and puts on TSLA. Much less risk (only the options premiums).
- jonknee 10y agoGood luck with that, you'll lose all profits in premium. Check out the Nov 18 SCTY calls, IV over 70 and the premium for the 20 strike is 10% of the current share price. TSLA is not a lot better, IV of 50.
- JumpCrisscross 10y agoDon't do this. You have worse data, less training and slower connections to the exchanges than the competition. You're spitballing in an arena (merger/stat arb) filled with smart people thinking day in and day out about this specific phenomenon. I used to build market-making algorithms for exchange-listed stock options. Many of our counter-parties were stat arb funds; we'd try to pre-empt their moves. We'd then predict how their likely trades would interact with our merger views as well as our predictions around how other stat arb funds would trade, and trade on those meta predictions. I'm sure there were turtles another level down trading based on predictions of how our meta models would interact with other market makers' meta models and the stat arb funds themselves. TL; DR options are complicated, stat arb is complicated, and lots of smart and dedicated people are making it all more complicated every day.
- SEJeff 10y agoTHIS SO MUCH ^ I work for one of said financial firms and you simply can't beat algorithms with directly connected market data feeds to the exchanges unless you also want to pay for them.
- deleted 10y ago[deleted]
- gaadd33 10y agoWhy does exchange speed matter if your internal model shows profit at the current bid/ask prices and volatility? Is it because in the event of a massive change in the underlying you can't exit the positions fast enough to recover some of the premiums?
- SEJeff 10y agoBecause other users with the same or more sophisticated models might have fiber optic direct connections into the exchange, and they will have algorithms which make those decisions before your optical nerves have processed numbers changing.
- JumpCrisscross 10y ago
- jacquesm 10y agoImage of a goldfish jumping into a sharktank saying 'much less risk'.
- kbody 10y agoYou basically are betting for the same outcome in two different ways, full exposure. I don't see how this is arbitrage.
- milcron 10y agoYou're betting on the merger going through, but keep a net-neutral exposure to whether the stock goes up or down.
- kryptiskt 10y agoIt's merger arbitrage, the exposure is against the merger going through or not. The market is filtered out. LTCM lost a bundle on it when they were hunting opportunities at the end.
- maverick_iceman 10y agoI think that's hedging, not arbitrage.
- thomasahle 10y agoSo if the market hasn't updated the prices to match yet, does that mean most people don't believe it will go through?
- forgetsusername 10y agoThere's a price discount associated with the risk that reflects the probability of the merger going through. It doesn't necessarily mean "most". But...why is this on the front page?
- ap3 10y agoBecause Elon ?
- M_Grey 10y agoFor the next decade or so, communities like this will be fiercely defensive of anything Musk in involved in; not unlike people who would chant "Don't Be Evil" at you if you tried to point out some trouble with Google on the horizon. Just because people are technically inclined and bright, doesn't mean they're not subject to the same human frailties as anyone else, including the desire for heroes. Then, when those heroes disappoint... outrage.
- toomuchtodo 10y agoQuickest production car currently in production (P100D), a first stage booster that reliably returns to the pad for reuse. Disappointed? Hardly. Even if Musk loses everything, he's done more than most (if not all) people who have that kind of money.
- M_Grey 10y agoLets have this conversation in a decade, and if you still feel that way, believe me we'll both be very happy about. The only difference is that I'll be surprised.
- yellowapple 10y agoAll I ask from this is a new SolarCity commercial involving Ra driving a Tesla.
- iplaw 10y agoSolarCity is not the solution. I contacted them about getting a large array installed, and the actual arrangement is much different than what is conveyed via marketing materials and during the sales process. Many, many customers end up paying substantially more for electricity.
- Joof 10y agoI'd love to hear the details. Even when it's simply a discounted rate for installing the panels?