Hi Papa, that's not quite what I thought.
There are two distinct actors here.
1. Brokerages that have sold Tesla hedging calls - they may have been ones buying stock in the open market last few days, as much as delta hedging calls for at this level. As they sold 5 years options to Tesla for which there is no regular instruments, they have to manage this trade to completion, at this point through buying stock. Of course they can use options, and just manage Greeks, but stock is easier to understand. After all, this service is what they'll charge Tesla cool $100 or $200M.
As per hedging theory and delta of 5 years options, I expect brokerages will need to keep buying stock as price approaches 310 for the reasons of delta (and gamma?) hedging. At $310, delta should be close to 1, and they should be done, having equivalent of the full 100% position.
2. As SP crosses $310 upwards, buyers of bonds come into play - this is second set of actors. They're protected on the upside, so if they choose so, they can short Tesla, or they can sell calls to MM. MMs now owning thousands of calls would need to short stock in order to delta hedge, result is the same, both strategies result into selling pressure. If this selling pressure arrests move upwards and manages to drop SP under $310, bond holders can cover (or buy back calls they sold) at lower price, and lie it wait to rinse and repeat strategy. If they don't manage to arrest the price, this is likely one time barrier that gets overrun and forgotten. But the permanent effect seems as if there are few million shares permanently shorted, so it increases stock float.
Except it doesn't. Well, yes and no. Yes, there are shares shorted, but also there are few millions of shares owned by brokerage as a hedge against calls sold to Tesla. If brokerage carefully manages clients and has similar allocation of calls sold to Tesla and hedge funds owning converts, these two needs can indeed offset each other. Anyhow, overall effect on TSLA when SP is far removed from conversion price of $310 is neutral. When SP is around $310, it creates weird effects.
As Tesla approaches $310 from below, upward moment is driven quicker due to buying of MMs (increasing delta), this buying interest disappears at $310 and above $310 moments turns negative due to short-selling of bond holders. It's like elastic band effect, and then it snaps, once bond holders have full position and can't sell hedged short anymore (310-320-340-360?, don't know).
Now, second scenario, SP coming down towards $310 from higher levels, nothing happens until $310, assuming bond holders have had full position, but below $310, momentum picks up, as MMs start selling their stake (as per delta hedging), which at some point gets arrested as bond holders start covering, reapping profits. Unless they're ideological shorts, but in any case MMs stop selling at around $240, and are out of position.
I hope this makes sense. Word of caution, I understand hedging, but rest of the stuff is my speculation on market participants behaviours, not an intimate knowledge of any single actor strategy.
