We’ve been watching Tesla stock absolutely soaring this past week. Even more impressive than the gains the company has made in market cap though are the gains made by some people willing to take risks.
The Wall Street Bets subreddit is well known for people making risky trades and losing their life savings. But among all the memes and risky decisions, some traders are able to make it big. We’ve reached out to a couple of traders who’ve made massive gains on short term options contracts to see what they think about the state of Tesla and their future.
Tesla was positioned for success
We first spoke with ezim22, a trader who made $36,000 off an investment of only $1,700. He went into detail about why he felt Tesla was in the perfect position to grow.
I really believed Tesla was going up, I am a long term bull in Tesla and just did an investment banking case study on EV vehicles so I did quite a bit of research into Tesla. My only concern until this point is regarding Tesla’s profitability. After their incredible earnings release, I wanted in and short sellers wanted out. The Q4 earnings release was the perfect catalyst.ezim22
He went on, explaining how much confidence investors have in the future of the EV market.
EV market is going to grow rapidly, I won’t speak for the boomers, but Millennials and Gen Z’ers (such as myself) are big into EV/Sustainability, internal combustion engines aren’t attractive. Tesla is the best situated vehicle manufacturer to capitalize on this growth, and their self-driving vehicles will probably be implemented in the future, giving another possible revenue stream.ezim22
Given the success Tesla has already had establishing itself, things are looking very good for Tesla’s future. Profitability was the one thing investors needed to have confidence in the company. He explained that Tesla’s financial statements look good, and expecting moderate growth as they find new revenue streams and expand globally is reasonable. But with the rapid growth of the EV market ezim22 had one last warning for us.
I believe this is an industry that will absolutely take off in the next five years, but making sure manufacturers have enough EV batteries to meet supply will be tough when the consumers really start to buy these things.ezim22
We’ve talked briefly about problems meeting global lithium demand in our article about the environmental impact of lithium mining. But it’s clear that this could end up becoming the biggest obstacle in the way of EVs in a few years, so we’ll be covering this issue more in the future.
We also spoke with John Fisk, another investor who’s capitalized on this craze and made $36,000 off an investment of only $1000. He said that a move like this coming from Tesla isn’t very surprising. When asked what could be driving this growth though, he couldn’t ignore the hype surrounding Tesla and likened the event to the bitcoin craze:
Partially FOMO and people wanting to get in as soon as possible. Its reminiscent of the bitcoin craze and tulipmania, but the company has turned around in the past few years. They’re a proper contender in the automotive market compared to other car companies. They’re certainly ahead of the game when it comes to self-driving cars and electric vehicles. I suppose we could call this event Teslamania?John Fisk
Both of these investors see the volatility in Tesla though, and have moved their gains into less risky investments.
No, I’m certainly not gonna keep doing this. I’m a huge advocate of investing in index funds and I have a separate account for that. If you don’t plan to trade, just stick to some vanguard fund, and as far as trading goes I encourage higher probability trades. I typically avoid positions like this, but I had to with Tesla.John Fisk
Not all have been so lucky
Over 22,000 new users have purchased Tesla stock for the first time using the Robinhood app in the last 3 days. Clearly, with so much money moving around, there had to be some losers.
Those doubting Tesla were the first to feel the pain. One user, william_fontaine bet that he would tattoo “Elon Daddy” on his neck. We contacted him and while some might be disappointed he said he couldn’t risk his job with such a stunt, I think we can agree this design he made is the best thing to come from this story.
His reasoning for doubting Tesla makes a lot of sense. Given that EV sales represent such a comparatively small portion of the market it’s crazy they could be worth so much.
My surprise at Tesla stock price mainly comes from market share. It is worth a relatively large percent of the automotive market but still has a relatively small number of vehicles. I almost never see them where I live so encountering one on the street is still a big deal.william_fontaine
One of the most publicized losses of this craze comes from the user who started the TSLA Calls meme on the subreddit, WSBgod. After posting about over $4,200,000 made in a single day, they held on as Tesla stock took a huge stumble. Maybe they were experiencing this FOMO that seems to be driving this craze. We haven’t been able to get a hold of WSBgod, but since he sold 6 of his original 426 contracts at a massive gain he’s probably not being too hard on himself.
Is investing in the stock market gambling?
While making thousands of dollars in a single day might sound attractive, betting on a company having runaway success in such a short period of time is risky. Many users on the WSB subreddit often joke about having a gambling problem. Here’s how these users responded when I asked if they felt they had a gambling problem and some useful investment advice:
As a “boring” investor I almost never do anything with money except stick it in index funds. Though in this case a few hundred bucks in TSLA would have probably been better “skin in the game” than my actual neck!william_fontaine
You jest, and I’ll be honest it can be exciting to do dumb trades like this and get lucky, but you do have to check your emotions at the door. Money is money, and the market will be there tomorrow.John Fisk
And this response from ezim22 really embodies the culture of this subreddit:
Yes, I absolutely do. It’s only a problem when you lose, right?ezim22
So while this news may be exciting, we don’t recommend our readers burning their life savings betting on Tesla. If you’re trying to make a sound investment going with the “boring” choice of buying index funds would probably be a much better idea.
But we hope you enjoyed seeing this new, interesting perspective on the future of Tesla. Tesla is clearly ready to capitalize on the rapid growth we’re seeing in the EV market. So while Tesla stock may have stumbled a bit today putting an end to this Teslamania, the future of the EV market is looking very bright.