The main impression I get from Rich is that the market basically leaves these things up to other market participants, and is simply hoping that enough front-running has happened. I personally feel strongly that it hasn't, and I believe Fact Checking talked on Twitter about the fact that Hedge Funds only have so much money available for plays like this. This inclusion is truly of unprecedented size. I wonder if front runners that wanted to play the TSLA inclusion put all the money they wanted to dedicate to this play into TSLA in the first 2-3 weeks after inclusion, and whether the pool of HF money might just simply not be enough to provide adequate liquidity for an inclusion of TSLA's size.
Based on my prediction model, I really think that at this level a lot of large TSLA shareholders have to be willing to dump a Cybertruck-load of shares in order to satisfy demand from indexers. I continue to believe there's more likely than not significant upside from $650. If not this week, then during the next week or two. I could be wrong, but we'll find out very soon.
If I read this right, the way it'll work is regular limit orders are also considered in the closing cross, so say if there's a bunch of sell orders at $1K limit, the price discovery that starts at 3:55 will keep bumping the price up until those are triggered as well. It might get ugly in how high it'll have to jump but hopefully "liquidity providers" are prepared with adequate amount of shares and we'll just see the final smaller adjustments to the closing price.
So overall I see a few scenarios playing out with fairly distinct action items:
1. Adequate liquidity is sitting there waiting to be deployed, there will be a slight adjustment to the stock price in the last 5 min for the final fine-tuning of the balance, huge volume at close and it is all over. Nothing to do here.
2. Substantial sell side deficit, but still adequate liquidity available. Price spikes 5 min before close, enough shares change hands at that price to satisfy index funds, and price returns roughly back to pre-3:55 levels on Monday. This means one would need to participate via on close order or within ~4 min of close time to take advantage of the price spike.
3. Inadequate liquidity, price spikes last 5 min, but also stays high on Monday opening cross and possibly through Monday with big volume. This means there will be a substantial time frame to participate in an elevated stock price, at least both Fri close and Mon open.
4. You say it's not very likely, but listing it here for completeness: buy side deficit, price drops into close. Probably stays down on Monday? Not sure.
Personally I don't see how #3 is likely, price will simply have to keep going up coming into close since it's a simple arbitrage, even if the price is $10K at 3:57 it still makes sense to buy if Nasdaq cross data still says there's not enough sellers. You can then be sure that if you turn around and place a sell MOC order on those shares it'll settle at higher than $10K. The only way I see #3 happening is that entities with a lot of shares that would be willing to sell at a certain outrageously high price simply aren't set up to participate in the closing cross.
EDIT: now that I think about it, we can easily tell which scenario is it going to be at maybe 3:56. If it stayed the same/ went up/went down and stabilized, it is respectively scenarios 1, 2, 4. If it went up and kept going up all the way to 4PM, we're in #3 since that means the closing cross is still out of balance. There's of course also the opposite of #3 where it goes down and keeps going down, which would indicate a gross oversupply on the sell side.
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