Short-Term TSLA Price Movements - 2013

[smorgasbord]

Somebody has to enlighten me.

Good news results in people buying the stock, which increases the price. Old shorts need to cover, so they buy the stock, which increases the price, which makes even more shorters need to cover, etc. As the stock goes up, new short positions are established. But, establishing those positions doesn't result in any stock trades, just people with stock lending it. Covering does require a stock trade.

 

[mitch672]

Somebody has to enlighten me. I don't get this short squeeze. Everybody is talking about this as a short squeeze, but as long as there are no more stocks to short, doesn't that mean that there are still as many shorts today as before the "squeeze"? A short squeeze is created when the shorts have to by back their shares, which creates a lot more buyers than sellers, right? But here we have just as many sellers as buyers because the stock is still heavily shorted. The new shorts should create a downward pressure equal to the upward pressure from shorts covering, or am I misunderstanding something here?

It's more complex... The shorters who shorted at $30, $35, $40, where likely forced to cover. Nothing prevents "even smarter" shorters from shorting at $70, $80, $90, so old shorters are being replaced with "fresh blood", why these people must be absolute geniuses, or have massive steel gonads. Why they just KNOW Teslas gonna crash and burn. It probably is going to have a small pullback, but probably not at the levels it once was, too many longs supporting it now looking for buying opportunitys.

 

[erha]

Good news results in people buying the stock, which increases the price. Old shorts need to cover, so they buy the stock, which increases the price, which makes even more shorters need to cover, etc. As the stock goes up, new short positions are established. But, establishing those positions doesn't result in any stock trades, just people with stock lending it. Covering does require a stock trade.

Thanks, but don't you "sell a stock short"? A stock you just lend. Why would you have to buy back a stock if you haven't sold one first?

 

[Zythryn]

Thanks, but don't you "sell a stock short"? A stock you just lend. Why would you have to buy back a stock if you haven't sold one first?

My understanding is when someone 'shorts' a stock they are borrowing a share (more accurately a group of shares).
They then need to actually buy a share themselves in order to return that share.

So if they borrow a share at $90, then wait for the stock to go down to $70, they can then buy it at $70 in order to return it. Since it only cost them $70 they made $20 dollars.

This is overly simplified as there are interest and other costs involved, but it gives you the basic idea.

 

[marvinat0rz]

The details of this stuff is handled transparently by your broker when you click the sell button, but in principle this is what happens:

You borrow a share of Tesla for $90, which you immediately sell. (This is the "short sale" which puts some small downward pressure on the share price). The money is put in your broker's account. You promise to return the share to the lender at some point in the future, or when the lender wants it returned. Then, at a later point, say if Tesla fell to $50 a share, you buy a share from the market for $50. This share is returned to the initial lender, and you are left with a profit of 90-50=40 dollars. The lender has been long the whole time and didn't need the share in the meantime. A short squeeze happens if the number of shares available to be bought when buying back the share from the market when closing the position is too small.

Naked shorting involves a similar scheme where the first part doesn't happen - the shares to be sold short aren't actually borrowed before they're sold. How this works in practice I'm not sure about, maybe someone with more knowledge of the architecture of the stock exchange can tell. I'm guessing it has something to do with brokers being allowed a negative amount of shares on their account in exchange for collateral, or something like that. Being temporarily allowed to hold a negative amount of shares is something I'm guessing that at least market makers have to do as part of their regular business.

 

[Curt Renz]

Thanks, but don't you "sell a stock short"? A stock you just lend. Why would you have to buy back a stock if you haven't sold one first?

Yes, the borrowed shares are immediately sold through the market to a new buyer who then owns the shares. Eventually the short seller will have to buy back shares through the market to return the borrowed shares to the lender. Of course brokers through their computers handle all of this manipulation, and the humans involved don't have to worry about the details.

 

[aronth5]

Sold about 2/3 thirds of my holdings today @ 89.50 which will fund a good portion of my anticipated Gen3 purchase. Hopefully by the time Gen3 is actually available I'll make enough to fully pay for it. Amazing and a nice retirement gift to myself:smile:

 

[FredTMC]

If we knew the answer to that question, we'd all be retired by now. If the "three stooges" theory holds up, it certainly could be higher tomorrow. By feeding these "short trolls", you give them life. Don't sell, I don't really see a need to, you can make short term money using options, keeping you core long holding seems to make sense. Will it really matter with TSLA trading at multiples of the current price if you maximize every up/down movement?

+1. Don't feed the bears

 

[ShortSlaver]

Sold about 2/3 thirds of my holdings today @ 89.50 which will fund a good portion of my anticipated Gen3 purchase. Hopefully by the time Gen3 is actually available I'll make enough to fully pay for it. Amazing and a nice retirement gift to myself:smile:

Good work and congratulations! I'm so happy for all of us here who have ben able to book some profits or just hold onto shares as no matter what happens they're going in the right direction.

 

[Citizen-T]

Fellow investors, I need you to vet this theory for me: A Theory on this Week's Announcement

 

[InTheShadows]

Silly me, I thought we were going to get a buying opportunity this am at 80.xx, so much for that.

 

[carrerascott]

Why do you say that?

 

[FVO]

Looking on the pre-market activity, i think it's gonna be an active day (again)...

 

[bhuwan]

I was hoping to get In too.

 

[DonPedro]

+1.

 

[Norse]

Dropping?

Seems like there might be a chance afterall

 

[Zorba]

Ouch, it hurts!

 

[FVO]

+3$ the first 20 minutes.
What is going on?

 

[deonb]

+3$ the first 20 minutes.
What is going on?

Elon was thinking about tweeting.

 

[Citizen-T]

+3$ the first 20 minutes.
What is going on?

Don't read much into the first hour of trading. Looks like the bull is back.