2017 Investor Roundtable: TSLA Market Action

[MXWing]

I agree that the M3 delivery number in 2017 is insignificant, but the production rate existing 2017 would be very significant. If it's not good, it will bring back a lot of bad MX memories.

No Falcon wing doors or multi seat configurations on the Model 3. I think that will make all the difference in the world.

 

[vgrinshpun]

Oh good grief, this is not true. Just ask someone knowledgeable at Fidelity (or read your share loaning agreement) if you have doubts.

Oh good grief, read my post one more time - it is about shares that are OWNED by Fidelity and lent out, not client's shares. Fidelity, like all other brokerages have self imposed limit on how many of shares they own they are allowed to lend out. Typical number is in the range of 50% to 80%. The particulars are established based on the risk/return evaluation. So it is absolutely logical that if Fidelity risk department decides to limit risk due to the possibility of short squeeze, they might raise interest rate, lower percent of THEIR shares that can be lent out or both. So was describing completely plausible scenario. I do not know if it will pan out or not, but it is absolutely plausible, especially considering that this week was unusual in that shares available for lending were depleted before market open and not replenished as usual.

Additionally, if what you are saying about lending CLIENT's shares by Fidelity is true, Fidelity is on the hook for delivering shares regardless of whether collateral covers purchase of them at the run-up pricing or not. So once again it is plausible that Fidelity in situation when they see risk of short squeeze will try to limit that risk by not adding to the depleted shares available to short from the CLIENTs.

So any way one looks at it, if there is a perception of the possible squeeze, Fidelity (and other Brokerages) would limit their exposure to this risk by lowering percentage of shares they are willing to add to the pool available for borrowing.

 

[adiggs]

...

Additionally, if what you are saying about lending CLIENT's shares by Fidelity is true, Fidelity is on the hook for delivering shares regardless of whether collateral covers purchase of them at the run-up pricing or not. So once again it is plausible that Fidelity in situation when they see risk of short squeeze will try to limit that risk by not adding to the depleted shares available to short from the CLIENTs.

So any way one looks at it, if there is a perception of the possible squeeze, Fidelity (and other Brokerages) would limit their exposure to this risk by lowering percentage of shares they are willing to add to the pool available for borrowing.

My understanding, as somebody that is lending their shares to Fidelity and has previously read the share lending documentation pretty closely, if Fidelity is in a position where they are unable to return my shares and instead returns the cash collateral, that is an actual default on their part with the collateral back stopping that default. The collateral isn't the first guarantor of the loan - Fidelity is, and the cash collateral is there in case Fidelity is unable to perform (yes - they get that cash collateral from whoever borrows the shares from them).

So the risk management situation for Fidelity that you describe is entirely plausible to me.

(I haven't read earlier posts in the thread, as I tend to dip in and out)

 

[NOLA_Mike]

IB Traders Insight | Interactive Brokers

Can you non-IB clients see the information in that link? I opened an "incognito" browser window and pasted it in there and successfully loaded so I assume so but I don't want to post links that only "logged in clients" can see.

 

[racer26]

IB Traders Insight | Interactive Brokers

Can you non-IB clients see the information in that link? I opened an "incognito" browser window and pasted it in there and successfully loaded so I assume so but I don't want to post links that only "logged in clients" can see.

View attachment 212002

I seem to be able to see the link as a Canadian that doesn't deal with IB.

 

[3Victoria]

I seem to be able to see the link as a Canadian that doesn't deal with IB.

I can see it as a Canadian .... I had to scroll down past sign in, though.

 

[NOLA_Mike]

Thanks all - if it can be accessed by all then I feel free to post the link and screenshots!

Mike

 

[vgrinshpun]

My understanding, as somebody that is lending their shares to Fidelity and has previously read the share lending documentation pretty closely, if Fidelity is in a position where they are unable to return my shares and instead returns the cash collateral, that is an actual default on their part with the collateral back stopping that default. The collateral isn't the first guarantor of the loan - Fidelity is, and the cash collateral is there in case Fidelity is unable to perform (yes - they get that cash collateral from whoever borrows the shares from them).

So the risk management situation for Fidelity that you describe is entirely plausible to me.

(I haven't read earlier posts in the thread, as I tend to dip in and out)

Exactly, just to dot the i's and cross the t's, here is relevant excerpt form the Fidelity securities lending agreement:

 

[Irishjugg]

The upward trend is unbroken, up in Europe as of 10:30 MEZ +1.4%, 238.70 €, or 256.53 USD.

If ever the mother of squeezes ( as in Porsche / VW) would happen, are you trading guys (as opposed to me boring buy & hold investor) prepared to profit from it an how ? Having sell orders at ridiculous heights in different steps ? Can somebody compute to what max the SP could top if the +-30m shares short have to be covered ?

I personally am not preparing to do anything as of now, since i am convinced that my selling would mean releaving to a short, something i am not prepared to do...

Thanks for your input.

Trailing stops at like 6-10 or so percent down from eod highs level would be my plan.

 

[Nate the Great]

So if this pattern follows the last over sold pattern, the following day we traded sideways and then rallied on the third, which would be Friday for us.

 

[MXWing]

$252 would have been the dip to buy in LOL.

 

[Johann Koeber]

Trailing stops at like 6-10 or so percent down from eod highs level would be my plan.

To me this seems too dangerous. TSLA loses 6 to 10 % from the eod high level all the time. We would have to trigger it after a hike in SP of say 50 %.

Personally I have been thinking about a trailing stop at 20 %, but I will activate this only after I recognise a short squeeze is imminent - which I do not see ATM.

I have participated in the VW short squeeze of 2008, made a little money, but would have done a lot better with a strategy in place.

 

[ZenMan]

I think you guys are too paranoid. The run up has been steady, and not so fast that the shorts can't meet their legal obligations to cover (aren't they required to have a certain amount of cash to backup their short position?). Without a large catalyst in the next week, I don't think this will change. However, it may be smart to recall shares before ER and 2017 guidance. If Elon guides for $15-20 Billion in sales (very likely), there could be a steep climb since that is twice what the "analysts" are predicting for 2017....

The whole point is that we don't know what could cause a massive uptick. Are the chances small? Yes.
Is it worth losing the stock for the mouse nuts they are currently paying in interest? No.
Could TSLA increase in value over 2%/day for multiple straight days? Yes.
So prudent course of action would be to recall shares and not loan out.

So again, I'm with Chickenlittle. Not worth the chance. Plus my 5000 shares were in fact lent out. So now IB has to borrow shares from someone else to return mine. If only 40 people with similar balances to me who have loaned shares out would recall their shares that would wipe out the 200K shares IB currently has available to short.

 

[1kEE]

$252 would have been the dip to buy in LOL.

I agree.... I jumped the gun and my days DCA buy was in the high 253s. I got carried away, that happens often when I day trade. Will sell some in the mid 254s now and unload rest later.

 

[MXWing]

I agree.... I jumped the gun and my DCA buy was in the high 253s. I got carried away, that happens often when I day trade. Will sell some in the mid 254s now and unload rest later.

Hard to time with that level of precision my friend. We don't know what the bottom is until it passes.

Any buy under $280 seems reasonable to me. Tesla is a more valuable company with more upside than when it hit the all time high in July 2015. (Shoot me down if my analysis is wrong)

 

[1kEE]

Hard to time with that level of precision my friend. We don't know what the bottom is until it passes.

Any buy under $280 seems reasonable to me. Tesla is a more valuable company with more upside than when it hit the all time high in July 2015. (Shoot me down if my analysis is wrong)

Oh I'm not complaining! But there is only so much margin that I like utilizing and me buying dips then having to buy more to DCA down gets me a bit overextended. I wouldn't sell so quick if it wasn't for that.

I say we close a tad in the green, but just below 255.

 

[tander]

I do not consider myself a member of forum anymore but feel the obligation of warning about something I previously recommended. I suspect a developing short squeeze. May not pan out but if it does anyone loaning out shares are at risk. If shorts default there is collateral reserved based on previous days price to back up your loan and you would get cash but not shares. You would be left trying to buy shares with rapid appreciation in share price. This risk does not seem worth the 1% interest rate paid for the shares

I do not know how they allocate defaulted shares to each investor loaning out shares. I suspect there is a pool of shares loaned and yours are not loaned to a tracked short. So there would be discretion by brokerage of whose shares were defaulted if true I suspect the non institutional loaners would be hit. For comparison, I always thought there was a identified buyer of every call option I sold but there isn't. Sometimes in the money calls at expiration are not not called or options in the money are exercised prior to expiration. The brokerage will assign these to arbitrary option sellers (supposedly) without bias. They do not allocate these by percentage of calls sold either

Thanks for the heads up, I hadn't thought of that. Just called my broker to get the shares back, he asked if I'd heard something someone was typing on an Internet forum and said multiple people had called today to do the same.

 

[MikeC]

Thanks for the heads up, I hadn't thought of that. Just called my broker to get the shares back, he asked if I'd heard something someone was typing on an Internet forum and said multiple people had called today to do the same.

And chickenlittle's devious plan to get more than 1% from Fidelity for his shares is unfolding exactly as planned...

 

[dakh]

I'd sell some shares and buy some J19 LEAPS. I'd buy strike prices of about $240-$260.

If the SP goes up to only $280-$300 by mid 2018 that will be a wildly profitable strategy.

Um, that doesn't compute. The short squeeze is an abrupt and violent event. If it hits, it'll hit fast. You hope to actually be around and catch it unfold? I'd assume the answer is exactly the opposite -- take profits on anything leveraged and either sit out for a bit or just buy stock.

Personally I have a hard time wrapping my head around what to do in taxable accounts if this happens. I'm guessing that'd be close enough calls to exercise the rest, so at least some of it isn't a taxable event. Gonna be ugly, tax-wise, either way just maybe not as bad.

 

[TrendTrader007]

Thanks for the heads up, I hadn't thought of that. Just called my broker to get the shares back, he asked if I'd heard something someone was typing on an Internet forum and said multiple people had called today to do the same.

is your broker Fidelity, because i did call them today to get my shares back