I wish Elon would sell $2B in SpaceX stock and gift the money toward China's gigafactory. That would destroy the shorts
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Elon Musk vs. Short sellers
- Thread starter jesselivenomore
- Start date
I wish Elon would sell $2B in SpaceX stock and gift the money toward China's gigafactory. That would destroy the shorts
I disagree that short selling helps price discovery or is beneficial any more than the standard buying and selling of shares.
Menifeer
Member
Short-sellers couldn't agree more. They just have a different opinion about the company's stock price.
Had you shorted TSLA near its recent highs and covered today, you'd have a lot more money to invest in TSLA...
JRP3
Hyperactive Member
And if you put every cent you had into the IPO you wouldn't care.
adiggs
Well-Known Member
I'm not in the financial industry, and though I've lent out my shares and studied short selling from that point of view, I'm not a short seller and don't intend to, ever.
That being said, its clear to me that short selling is an essential component of price discovery. If nothing else, here's a quote from:
Short Selling: An Important Tool for Price Discovery and Liquidity in…
I.e., when you expect the price to go down.
The inverse of that would be "buying is a trading strategy investors use when they believe that shares of a particular stock .. is underpriced.
If the only mechanism available to the market is to buy, then the only direction for a stock price to go is up - there's only one direction investors can use to express their opinion. Price discovery is the union of all the investors opinions about the price of a stock.
Put and call options are a different vehicle for investors to express their opinions in both directions. But behind the scenes, market makers need to be able to hedge those options to make themselves neutral to changes in the market (else they're being forced to take the opposite opinion from the trader, and if the trader is right, then the market maker is on their way out). And getting to neutral on the options requires the ability to short sell the underlying stock to the market.
I sadly don't have access to this article, but here's a promising sounding research article tackling this question:
https://www.researchgate.net/publication/265726679_Short_Selling_and_the_Price_Discovery_Process
The abstract:
I think of this as the market having access to a pushing process to go with the pulling process. If all you can do is pull, it's hard to reset one's position. But if you can push AND pull, then all the different pushers and pullers will tend to find a constant dynamic balance. The market has to make both available to reliably and most rapidly find and maintan balance.
JRP3
Hyperactive Member
No, you can choose not to buy, or you can sell if you've already bought.
adiggs
Well-Known Member
Using the push/pull idea, that translates to you can choose to push or not push, but you can't pull.
That happens to be my personal choice to not short sell (or in this push/pull analogy, no pulling), and I believe a wise choice for most investors. But for a functioning market, inability to short sell takes away a valuable market signal.
To the bit that you quoted of mine - I got the idea I was trying to articulate partially correct. The push/pull analogy for a dynamic balance expresses it better. Yes, you can push or not push, but to establish a dynamic balance more quickly, and to maintain it more effectively, being able to both push and pull works better / faster / more efficiently. There are times where balance is lost and not pushing isn't enough to restore balance - you need to pull to get the balance back.
There is a different dynamic at work with $TSLA that we care about here, having to do with bad actors who also happen to be using the mechanism of short selling. As much as I dislike what they're doing, I don't advocate eliminating short selling as a market mechanism. I DO however very much dislike the opaqueness that the short selling market has been able to establish and maintain.
I would like to see better day to day short sales information published - not just volume of shares involved in short sales (though that's helpful), but the net change in short positions.
I would like to see short positions of some size, equivalent conceptually to the 5% stock ownership increments, being identified by name. If you take out a big enough short position, directly or indirectly, then there is paperwork to file with the SEC to declare that position.
I'm sure people in the industry have plenty of additional reporting / transparency ideas. To me the idea is to make the short side of the market as transparent as the long side of the market. Transparency is the second best disinefectant
JRP3
Hyperactive Member
Your implied assumption is that "faster" is "better". I don't believe that is necessarily the case. Imagine no short selling. People will want to buy or sell based on perceived value of the stock. If more people want to buy than sell the price will go up. If more people don't want to buy than sell the price will go down. What does short selling add to that equation other than possibly exaggerated movement?
Go back to First Principles: What does “investing” mean? Once you think about and understand that, you should realize that neither short-selling nor utilizing options is investing. Those can be ways to make...or lose...money, but all - corporations and investors alike - would be better off were those instruments not a part of money management. My opinion, of course, but it is a considered, experienced, and deeply held one.
By the way, there are bourses in which such instruments are not available. They have the reputation of being unsophisticated capital markets...but that is the Goldman Sachs View Of The World (surprise, surprise).
When we get to Mars and I’m Mr. Musk’s Treasury Secretary, neither short-selling nor options on capital instruments will be available.
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it’s me, can’t believe it took everyone this long to figure out i’m really just a cute golden retriever with an obsession for cars, rockets, and pretty much all cool stuff that nobody else has the stones to undertake!!
no i think audobon is just saying that he/she doesn’t agree with what some propose is the “valid side” of short selling. also, that options being the lazy way out, as in no work put in/skin in game, but looking for quick buck.
while i trade options (i have tesla stock, and options) i see where AB is coming from.
derivatives can be destructive tools when used in ways other than originally intended...especially left unregulated (financial crisis, anyone?).
the origination of futures...
What is the history of futures?
basically the original uses ...and what derivatives markets have evolved into present day. its a black box. and just about anybody can play. except the big boys still drive the ship, and there’s little oversight. that’s why the blowups keep getting worse and worse.
and as far as second post.
1 - of course they’re going to scoff and call them unsophisticated, that’s because those markets won’t let the GS’s of the world in to manipulate, exploit, and destroy them hah
2 - if i make it there with you, i’ll gladly just hold stock
But I can confirm that a certain TMC poster’s name is an anagram for “one nerd”, whereas the best one for Mr Musk’s first name is “Lone”.
Esme Es Mejor
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jhm
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JRP3
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jhm
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