How does that work, what Fidelity is doing? I'm pretty new to stock trading and have stayed away from options. Trying to understand how options influence stock prices. Why would you short TSLA at the moment with the big upward momentum?
All Fidelity is doing (at least that we're talking about right now) is making some of their institutionally held shares of TSLA available for borrowing by shorts.
Fidelity's various funds own a lot of TSLA, and so on any given day,
@vgrinshpun and others are attempting to track for us how many shares are listed as 'available to short'. We've seen evidence in the past that the number Fidelity lists as 'available to short' is fairly wishy-washy and changes at their whim (as well as when shorts actually borrow some of whats been made available), and so its a bit interesting when, like today, the number made available is abnormally high. By itself, it doesn't really mean anything - Fidelity isn't shorting the stock themselves, after all. But in past when we've seen abnormally high availability, it corresponded to some non-public knowledge event like a secondary offering.
As for options - the basics are pretty simple, an option is simply a contract which allows you to buy (calls) or sell (puts) the underlying security for a fixed price at a later date. Most of the time, it is a market maker you're buying an option from or selling one to. There is a theory called maximum pain, in which because the market makers have significantly more clout than us retail investors, and because they're not interested in being exposed to the actual fluctuations in the market, they will attempt to steer the underlying security to maximize their profit on the options they've sold.
Why to short TSLA right now? Your guess is as good as mine. Obviously, because they think this is a bubble that is about to pop, usually because of some misguided notion like the suggestion that TSLA should not have a market cap larger than that of F, since F sells many times more vehicles per year. To my mind: all the developments in the last few weeks, like the cap raise, and Tencent, and Model 3 progress are showing definitively that the execution risk here is the lowest its ever been for TSLA.
