Market: Elevator Action

But selling might come in different forms, like with ARKK, which holds a very concentrated TSLA position.

The point is, when you look at the price action in Tesla over the last year, you see a lot of nonlinearity. Procter & Gamble (PG), it is not.

The company itself is growing linearly, but the stock grew exponentially. Either this is because Elon Musk is the best stock promoter of all time, or Tesla holds some promise above and beyond what a normal carmaker might do.

Probably a little bit of both.

The Search for Nonlinearity

I am constantly in search of convex opportunities, which makes missing out on TSLA (on the way up) so difficult to bear.

It was relatively easy to spot—once it paid off its converts in late 2019, it was off to the races. If you missed that trade, you should be mad at yourself, as I am. Those don’t come along very often.

GameStop (GME) was another convex opportunity.

Now, I haven’t seen any of Roaring Kitty’s YouTube videos or read any of his r/WallStreetBets posts. But if he was looking at the fundamentals of the company, he was barking up the wrong tree.

The fundamentals of that company were a disaster. But the convex opportunity came from the huge short interest in the stock.

Popular shorts rarely work. Most that did work, worked in the financial crisis, where there were liquidity issues.

It is very difficult for a company to go bankrupt. In a market like this, they can always refinance debt, issue more debt, or draw down a line of credit. Playing for the zero is just too hard.

  • GameStop was, in effect, a call option—more like a compound option. A call option on a call option.

Roaring Kitty says he still likes the stock, but he kind of has to say that for legal reasons. Then he had to back it up with a 50,000-share buy order. He will probably lose money on that.

I’m still looking for convex opportunities. I am not seeing too many on the upside.

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Disclaimer: The Mauldin Economics website, Yield Shark, Thoughts from the Frontline, Patrick Cox’s Tech Digest, Outside the Box, Over My Shoulder, World Money Analyst, Street Freak, Just One ...

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