Almost one of every two dollars spent in the US options market through Wednesday went to Tesla even though there are 5,000 other stocks to trade.
Bets on Tesla flood Options Market, WSJ Thursday
We know maximum mood occurs at the end of a mania. Since exchange traded options began in 1973, I have never witnessed such a lop-sided situation. I realize the Options Exchange has rules but one has to wonder that even if Tesla stock rises, will the market makers be positioned to pay off?
$900 B was spent on Tesla options this week. That is five times the value of Tesla stock traded. When derivative trades are 5x the underlying security, we truly have a moment at or approaching maximum mood. Call options have an exercise price. The underlying stock needs to reach this exercise price to have actual intrinsic value. Incredibly on Thursday there was active trading in Tesla calls with an exercise price double the current price, $2,000.
The ratio of Tesla earnings per share to the stock price is 351. Amazon by comparison is 22. And Cathie Wood just dumped another $100M into Tesla.
Again this reminds one of Fall 1987, March 2000, or Fall 2007. All of these were market peaks preceding serious falls in price.
If real estate is a first derivative of stock prices, art is surely a second derivative. Art prices tend to soar with stock prices.
This spring an artist named Beepie sold a digital collage at Christie’s for $69 Million.
Beepie will sell his digital and somewhat physical statute of an astronaut for an estimated $15 M. It is covered in LED screens that will vary in content during the day. In the best spirit of imagined currencies, it comes with a corresponding Non Fungible Token.
It has such gravitas and it sucks you in, said Noah Davis, Christie’s head of digital art and online sale. I don’t think readers of this column will be ‘sucked in.’
Crude oil prices remain in the mid 80s. The trend must be respected and it is still up. It would take a weekly close under $75 to suggest the trend was neutralized. Natural gas prices remain high. Putin plays his hand against Europe which has shut itself out of reliable coal fired utility plants.
Biden’s shrinking big spending plan keeps getting postponed despite the deadlines he and Nancy set. Perhaps the good news is that the Progressive Caucus, frustrated at not achieving their socialist goals, makes good on their threat to vote against the package. We can only hope.
