Published May 18th 2023

Daily Brief - ☀️ Elon don’t care

TLDR: Is Elon going off the deep end? Or is he just catering to his core fanbase? Either way, his wonkiness could impact the market at large.

elon musk

Elon seemed to lose his thread in a recent CNBC interview. When asked about his “Soros hates humanity” tweet, he froze and after 20 seconds of silence decided to quote … Inigo Montoya from The Princess Bride?!

When David Faber challenged him about the impact of his communication style on TSLA’s price, he replied “I don’t care”.

Now Musk is a divisive figure, a love-or-hate character, and that’s part of his business model. That’s all fine except …TSLA still represents the majority of the option volumes of US traded stocks. TSLA options trade more volume than SPX options, just to give you an idea.

So when Elon’s tweets send TSLA down, it impacts the market as a whole. To understand why, we need to remember how market makers work: market makers use cross-correlations to hedge their risk.

This is why sometimes unrelated assets seem to co-move with clockwork precision. A market maker is using one stock to hedge an ETF for example. Thus any pressure on TSLA stock really adds downward pressure on the whole market.

To find the silver lining in this, at least Elon might get us out of this 4,100-4,200 SPX plateau we’ve been occupying for a month now!

In this spirit, tomorrow we’ll talk about a nice 0-cost put structure to short the market.

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Daily Brief - ☀️ Elon don’t care

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