Tesla price is going down in the short term.
Why do I say this? It’s simple logic and observation. Elon Musk has for many years not received a salary from Tesla. He has been paid with stock options. It’s one way he’s been able to achieve immense wealth while reducing his tax bill. No salary or income = no tax! Let’s face it, he is in a different situation than the majority of us. He can afford to do this since he was already made money from Paypal. What does all this have to do with Tesla and the drop in its share price? Well, his stock option awards have an expiration date. Exercise them or lose them. While he still has some time until their expiration, what better time to exercise them than now? A quirky thing about stock options is when you excercise them, you have to pay tax on the event, whether you keep them or sell them. From what I understand, he filed in September to exercise and sell a portion of his shares. He needs to pay capital gains tax on the exercise of his options. So, he’s selling SOME, not all of the shares he received from the options to pay his tax bill and other expenses.
Wait, shouldn’t that be a bullish sign since he’s keeping a majority of his stock? The stock price should be going up not down. You’re right. It should be seen as a bullish signal. BUT, investors can be irrational and see this as a bearish sign. Oh no! A major insider is selling, this must mean things aren’t going well. The stock will keep going down in the short term as he sells his pre-planned stock sales. However, in the long term, Tesla is going to keep going up.
How do I make sense of the short term? Well, you can buy put options or sell your shares as the price trends downward in the short term and then try and time the bottom and get back in for the rise. Or, you can just sit it out and hold on to your holdings and just look at it as a “transitory” event. Myself, I have put options to play the short term. How low will it go? Who knows, but given Elon’s preference for numbers and symbols, I think we can expect bullish tweets from him around a 420 drop in price. All time high of 1250 – 420 = $830 bottom. Sure, it wipes out a significant amount of market cap for Musk. But what does he care? He’s already made his billions and he knows that it’ll go back up.
Glad I put zero confidence into your predictions. Of course 15% in a week isn’t that much right? Or by “short term” did you mean, like, next month, or “someday”? Because if that counts as good advice, I’ve got a TON of good advice!
I was wrong with my price target. As I said in my post, I’m bullish in Tesla in the long term. In the short term, they did drop. If you had bought a put, you would’ve made some money with their recent dip. The key with short term trading is being able to stay on top of it and sell for the profit. It’s well known that Tesla shorts have lost money the last few years. You sound like a buy and hold investor rather than a trader. It’s a good strategy with Tesla.