The NEXT Tesla?…OK, if You Say So
I over explain everything. Really. My kids could tell you lots of stories.
So, when I was telling my daughter about how I predicted VectoIQ Acquisition Corp would do an acquisition very soon, (which I shared that with Warrant Observer members on February 21), I think I over explained.
So, here’s my “under explanation”.
There’s a mini-series, are they even called that anymore, on Netflix right now called The Stranger. Very Sherlock Holmes-esque.
No spoiler alerts, I highly recommend the show, so I won’t give it away. But the premise is a young woman shows up, and starts telling people “secrets” about them or their loved ones. Havoc ensues.
The show goes through how the “secrets” she spills are interconnected, and what the consequence of the various secrets is on people’s lives.
It’s a really cool connect-the-dots story. Very entertaining.
Trading is a lot like that story. There is data we know, and data we don’t, and we get to connect-the-dots…and get paid for it. What could be more fun than that??
Warrant trading in particular is a lot more “connect-the-dots” than other types of trading. I can always just buy Apple and stuff it in my portfolio. Probably not a bad play for most people, but I would be bored out of my mind watching it.
But with warrants, and really most of the trading I do, whether it is with warrants or not, I love connecting-the-dots. It’s a game. And if I win, I make more bank than the next guy who either didn’t, or didn’t care to, connect-the-dots.
Take yesterday. I sent you (if you’re on my free email list…that email is at the end of this post) an email about VectoIQ Acquisition. The stock trades under the symbol VTIQ and the warrant is VTIQW, which I put in the email.
I told you about how I predicted the company would do an acquisition, which meant the warrants would move much higher. That was my proprietary connect-the-dots knowledge, that I share with my paid members.
But, honestly a lot of that is my experience trading warrants and working in securities regulation. It’s not easy to predict.
But, here’s the money question for you? Did you connect any dots?
I didn’t say in the email who VTIQ was going to buy. Just that they announced an acquisition, and boom the warrants flew.
Did you look to see who it was? If you did, you may have connected a dot or two.
Here’s exactly what I saw, and the dots I connected. (BTW, there are still more to connect.)
So, first there was seeing that a merger was coming, again, those are my dots, and probably will never be yours.
But, once the announcement happened I took a look at the company they are merging with…Nikola Corp, or Nikola Motor Corp. (right off the bat, you may be thinking, hang on, I recognize that name…)
So, Nikola makes transfer trailer trucks, semis, that are hydrogen powered, and zero emission. (Oh yeah, Nikola, that’s the first name of that Tesla dude, he did some light bulb thing or something or other…)
So, here we have what will be a newly public company, going public via this SPAC, VectoIQ, and…HOLY CRAP, HANG ON…Tesla???, like the stock that has gone up a billion percent in the past few months.
So what you’re sayin’ is, we can buy a warrant (like an option, gives you leverage) of a company that does something very similar to Tesla, the stock that has gone up a billion percent in the past few months, for a little over $2. (dot)
AND, it’s literally the second day anyone knows about this (dot) and there are just a few news stories out there about this (dot) and it wasn’t on CNBC because yesterday was ALL about coronavirus (dot) and SOMEBODY on CNBC, is going to, in the next few days, DEFINITELY call this “THE NEXT TESLA”. (dot…I actually told my group that last one yesterday)
Well, my dot connecting kept me long some (not a ton, but some) of my VTIQW from when I bought it February 21 at $0.80…even though it was up huge yesterday. Again, not a ton, but long.
This was because my dot connecting said, as soon as someone utters, “the next TESLA” who do you think is going to jump into VTIQW? Yep, the mo-mo traders, pushing it higher. The same mo-mo traders who ripped Virgin Galactic higher.
Oh, yeah, how has VTIQW done since I emailed you about it yesterday? It was up 75% at one point today from yesterday’s close…connect…the…dots.
The Warrant Observer
If you’re not on my email list…or in my paid group (shame on you)…this is the email I sent yesterday to free email Warrant Watchlist subscribers:
Sent Tuesday, March 3rd
My email inbox was blowing up this morning.
The market had tanked, then the Fed cut interest rates, then the market rallied, and then tanked…and I didn’t even know any of this was going on until around 11 when I saw the Fed was giving a press conference.
Most people think of trading as being glued to a monitor 24/7 watching every tick of the market. And, I did do that, when I was learning to trade as a market maker on a hectic Wall Street trading desk during the dotcom era.
But, these days I like to be able to pick up my son early on a Friday from college. Walk the dog during the day. And not worry about catching ANY virus in any office full of hacking, sneezing co-workers.
So, much of the warrant trading I do is what the high falutin financial types call “special situation trading”.
Do you know what a special situation trade is? Let’s look at the all knowing “Investopedia” for an answer.
Special situation trading is defined as ” A special situation in investing is an unusual event related to a stock or other asset that is seen by investors as a buying opportunity. “
So why was I answering emails this morning, and totally missed the Fed move? Let me share a few of the emails to explain.
” Thanks Steven!! First warrant closed. That just paid for my warrant course + Warrant Observer for the year!”
” thx for tip. just sold for 2.34pp. [up 193% from yesterday’s close] Big win….thx so much for the hand holding! “
” Thanks for all the help – if you buy a new car subscribers should buy your gas !! ” [I had joked with this guy I was going to buy a new car with my gain this morning]
And I was also spending a lot of time in our forums, responding to posts like this:
” hehe! I had 2500 warrants initially and added another 7500 warrants at 0.90$ after the mini pop last week… sold partly at 2$ and still selling above 2.50$! lol”
So, why the party this morning in my email box, and Warrant Observer forum? Even as the market tanked and rallied and tanked and everyone was wringing their hands over what the Fed would do, and if it would help, and blah, blah, blah.
Well, a few weeks ago I saw something interesting in one of the many warrants I watch. It was moving higher, in a very particular way. I had seen this before. Warrants move up and down everyday, just like stocks.
But, this one made my “spidey sense” tingle as I told Warrant Observer readers. I sent out an email, and posted in the forum. This is my exact post from February 21st.
Guys, VTIQ and VTIQW are seeing a lot of volume and the warrants are moving higher. These are in the SPACfolio, we got in the warrants at $0.43 and they are now approaching the target price of $0.90.
I personally own them at $0.53.
This looks exactly like a SPAC about to make an announcement of an acquisition, and somebody is scooping up warrants.
I’m taking a shot on this hunch and buying more here. I’ll send this out via email as well.
And then this morning…BOOM, BANG, Booyah (and any other cool word to describe, “this warrant is up 275% overnight, I just made this semester’s college tuition…almost” you can think of).
That is why I love special situation trading. I don’t have to be “in the market” to make great returns. And, I don’t have to depend on unknown moves by the Fed, or try to time frantic market moves to squeeze out a tiny profit.
I literally just heard in the background on CNBC…we’re down over 600 points at the session lows right now…think I’ll do some web surfing for new cars, my old Honda just topped 211,000 miles…thanks VectoIQ warrants.