To The Moon

A slight miscalculation.

The original idea last week was for the market to decline this week, then rebound next week after tariffs were finalized. It seemed like a solid plan. But if everyone expects a shakeout, why not just rally right away? That’s also a form of shakeout.

Of course, Monday's rally could still mimic last week’s pattern, where the market climbed early in the week but then fell back in subsequent days. That’s a common strategy. However, if there’s a pullback, it will likely only last for about a week. With earnings season fast approaching, what else can happen?

Chinese stocks might experience a sideways consolidation, followed by a sudden drop and then a rebound. This scenario warrants continued observation.

$NVIDIA(NVDA)$

The sudden rally on Monday caught institutions selling calls off guard, as the strike prices they sold were relatively low. They hedged by selling $120 calls and buying $128 calls. However, as of Monday's trading session, institutions hadn't yet planned to roll their positions:

• Sell: $NVDA 20250328 120.0 CALL$ 

• Buy: $NVDA 20250328 128.0 CALL$ 

For my part, I’ve initiated a sell call at $130 and a sell put position, planning to sell additional puts after this week’s dip, with the strike still set at $110.

$Tesla Motors(TSLA)$

Institutions weren’t as lucky with Tesla. On Friday, a spread trade blew up: sell $250 calls and buy $270 calls ($TSLA 20250328 250.0 CALL$  → $TSLA 20250328 270.0 CALL$ ). They were forced to roll the position to sell $285 calls and buy $310 calls.

This Tesla rally essentially happened in advance, likely due to the upcoming early April release of delivery reports. USB summarized Q1 data with the following key takeaways:

1. Delivery Forecast:

   • USB lowered its Q1 2025 delivery forecast from 437,000 units to 367,000 units.

   • This represents a 5% YoY decline, a 26% QoQ decline, and is 13% below Visible Alpha’s consensus estimate.

2. Demand Signals:

   • UBS Evidence Lab indicates shorter delivery times for Model 3 and Model Y in core markets (typically within 2 weeks), suggesting weaker demand.

3. Gross Margin Forecast:

   • Q1 2025 automotive gross margin (excluding credits) is forecasted at 10.3%, down from 13.6% in Q4 2024 and 16.4% in Q1 2024.

   • This is also below the consensus estimate of 13.5%.

4. Full-Year Gross Margin Forecast:

   • Full-year 2025 automotive gross margin (excluding credits) is estimated at 11.7%, compared to the consensus of 15.4%.

5. Region-Specific Notes:

   • China: Tesla’s official website shows the delivery time for the new Model Y is 2-4 weeks.

   • USA: According to Autodata, Tesla delivered 92,200 vehicles in January/February, which is 12% lower than the first two months of Q4 2024 but 3% higher than the first two months of Q1 2024.

   • Europe: Deliveries in the first two months of Q1 2025 were weak, driven by significant YoY and MoM declines in Germany, France, Norway, and Spain, with the UK faring slightly better. Tesla’s Europe sales are estimated to be 45% lower YoY for the first two months.

   • China: Wholesale shipments in the first two months of Q1 2025 were 36% lower than the first two months of Q4 2024, and 29% lower YoY. January retail deliveries in China were 33,700 units, down 17% from the first month of Q4 2024 and 15% YoY.

Conclusion: Tesla’s 2025 EPS is expected to be ~30% below consensus estimates, with 2025 delivery volumes projected at 1.7 million units (a 5% YoY decline, and 14% below current market consensus).

Given this data, a rally followed by a decline seems quite reasonable.

$Alibaba(BABA)$

Institutions are also engaging in sell call strategies for Alibaba. This week’s trades:

• Sell: $BABA 20250328 140.0 CALL$ 

• Buy: $BABA 20250328 149.0 CALL$ 

$Financial Select Sector SPDR Fund(XLF)$

Financial stocks are worth considering. Last week, institutions opened significant sell put positions, suggesting that financials are unlikely to break below previous lows before earnings. While it’s unclear how high financials might rally, selling puts to capture time value seems like a low-risk strategy.

• Sell: $XLF 20250417 48.0 PUT$  (33,000 contracts opened)

• Sell: $XLF 20250417 47.0 PUT$  (30,000 contracts opened)