
Update on Tesla’s Combination with SolarCity - dwaxe
https://www.tesla.com/blog/update-teslas-combination-solarcity
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Afforess
If you're interested in money lying on the floor, and believe the SolarCity +
Tesla acquisition will go through, you can buy SolarCity shares while they are
below the strike price of 22.19 and make instant profit in November.

[https://www.bloomberg.com/gadfly/articles/2016-09-16/solarci...](https://www.bloomberg.com/gadfly/articles/2016-09-16/solarcity-
tesla-deal-spread-150-percent-return-no-takers)

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ghaff
Reading that piece, it's probably more accurate to state:

>believe the SolarCity + Tesla acquisition will go through

and that Tesla stock doesn't instantly take a dive as a result.

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kryptiskt
Yeah, an arbitrageur would buy SolarCity and short Tesla. So that isn't a risk
for them.

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toomuchtodo
Or buy calls on SCTY and puts on TSLA. Much less risk (only the options
premiums).

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JumpCrisscross
Don't do this.

You have worse data, less training and slower connections to the exchanges
than the competition. You're spitballing in an arena (merger/stat arb) filled
with smart people thinking day in and day out about this specific phenomenon.

I used to build market-making algorithms for exchange-listed stock options.
Many of our counter-parties were stat arb funds; we'd try to pre-empt their
moves. We'd then predict how their likely trades would interact with our
merger views as well as our predictions around how _other_ stat arb funds
would trade, and trade on those meta predictions.

I'm sure there were turtles another level down trading based on predictions of
how our meta models would interact with other market makers' meta models and
the stat arb funds themselves.

TL; DR options are complicated, stat arb is complicated, and lots of smart and
dedicated people are making it all more complicated every day.

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gaadd33
Why does exchange speed matter if your internal model shows profit at the
current bid/ask prices and volatility? Is it because in the event of a massive
change in the underlying you can't exit the positions fast enough to recover
some of the premiums?

~~~
JumpCrisscross
> _Why does exchange speed matter if your internal model shows profit at the
> current bid /ask prices and volatility_

The implication is that every sophisticated investor who focusses on this
domain ( _i.e._ merger arbitrage with options) have probably either (a) seen
and passed on _or_ (b) already executed on the pricing you're witnessing. You
need an extremely high level of confidence in your models to act. Given you
are the less-sophisticated agent, the Dunning-Krueger effect merits
consideration.

This is not a blanket statement against individual investing. Individual
investors _have_ been shown to possess statistical edge, particularly over 20+
trading-day time horizons. But if you're stacking yourself against the experts
in a domain marked by legal theory, board-executive politics, other-
stakeholder politics, shareholder-board-management politics, _et cetera_
together with thinly-traded non-linear derivatives, you're unlikely to
succeed.

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iplaw
SolarCity is not the solution. I contacted them about getting a large array
installed, and the actual arrangement is much different than what is conveyed
via marketing materials and during the sales process. Many, many customers end
up paying substantially more for electricity.

~~~
Joof
I'd love to hear the details. Even when it's simply a discounted rate for
installing the panels?

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yellowapple
All I ask from this is a new SolarCity commercial involving Ra driving a
Tesla.

