Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[j6Lpi429@3j]

is this the dishwasher thread? what happened to the tesla investor thread?

 

[Tslynk67]

Hi,
Sorry,
I have to out-overachieve you guys:

My obnoxious wide screen together with my vintage HP 35.

Also I married an singaporian to get that experience as well.

Ah, the old Windows vs Mac debate - PC's are just so "messy", haven't you bunch heard of "cable management"?

 

[Tslynk67]

I sold 14 Aug 1620 calls. The problem with selling the shares Is the 20% tax I’ll pay as a long term capital gain.

Yeah, as others said, roll them, if you can. In my case I don't have a "roll" option with my broker, it just entails rebutting and selling another strike farther out to recoup your loss.

 

[LN1_Casey]

Ah, the old Windows vs Mac debate - PC's are just so "messy", haven't you bunch heard of "cable management"?

View attachment 576129

Mac's for the win. I have Windows at work though, so that's always a disappointment.

 

[Tslynk67]

Nice!

But I'll see your cliffs and raise you a mountain (Mt Hamilton):

View attachment 575981

(drink is out of view, sorry)

I begin to see a trend here...

 

[RobStark]

is this the dishwasher thread? what happened to the tesla investor thread?

The Tesla investor thread is right next to the "complain, bitch, and moan" thread.

I find the CBM thread to be the most useful thread on TMC.

 

[jeewee3000]

Ah, the old Windows vs Mac debate - PC's are just so "messy", haven't you bunch heard of "cable management"?

View attachment 576129

Let's stop this debate right now before we go off-topic for pages!

(p.s. a computer without a (decent) mouse, the horror!)

 

[Tslynk67]

Given what’s ahead in terms of S&P inclusion and battery day etc I don’t know if rolling over is a good option.

Not sure how much you sold it for but since this is 1620 strike price I think you should be able to buy it back tomorrow, maybe buy it back as MMs try their usual morning dip routine.

You made a mistake don’t compound it by rolling it over when there are so many other catalysts ahead of us. I’m saying this only because you don’t want to lose your shares. Just my 2 cents.

Apologies for the on-topic post...

Sure, but you can have those 100 shares called away now for $162k, or you could, for instance, sell (for example) a 18/9 c2350 for the same premium - so that's some way for the SP to rise in a month, plus if the shares do get called away, will be for $70k more.

In any case, premium for this call was only $20 as of close yesterday, will be less with time-decay today, that's not much money to lose, I've forked-out $20k in the past rebuying a call on expiration day to avoid the call... I realise our situations vary, but I personally wouldn't sweat over $2k

 

[Tslynk67]

Yeah! Unlike their auto parts, Bosch dishwashers are the best! We bought our first in 1994, and have bought 3 (for different places) since then.

Edit: since already OT, an anecdote! (It's great being an ex-mod, I can break all the rules I used to enforce!)

University Motorcycle club, in Australia, circa 1980. Two members come to the pub... I mean meeting, with a story.

Pete: We were just driving along...
Mal: minding our own business, weaving through the traffic on Concord Road...
Pete: When we got pulled over...
Cop (to Pete): You changed lanes without a blinker!
Pete: Sorry Constable, Ducati, Bosch electronics, I thought it was working, I'll get it looked at tomorrow...
Cop: OK, make sure you do. (goes over to Mal)
Cop (to Mal): You changed lanes without a blinker! I bet yours doesn't work either.
Mal: It's a f***ing BMW, of course it works!

Not verbatim, but true!

Yeah, but the Duke had a lot more soul than the Beemer!

+1 for Miele BTW, don't waste your money on any other brand, I leaned this the hard way - "you buy cheap, you buy twice".

 

[Tslynk67]

Let's stop this debate right now before we go off-topic for pages!

(p.s. a computer without a (decent) mouse, the horror!)

Track-pad on the new Macs are way better than mice, seriously good

 

[Artful Dodger]

Maybe @Artful Dodger can comment on this. It does seem like constant downward pressure could be applied to the share price with some type of circular shorting scheme that flooded the market with synthetic shares at key market moments. While there is a time limit on how long these synthetic shares can exist, maybe a circular scheme of some sort is used to continuously have large numbers of synthetic shares in circulation. Perhaps the mechanics of the split could temporarily halt their ability to keep these synthetic shares circulating (and this would of course create buying pressure and probably big losses for those running the scheme).

I have suspected this for years. FINRA reports on about only half of NASDAQ's total trading activity which occurs on any given trading day (lot's of trading not reported by FINRA). Further, it is mostly those large brokers and hedge funds who DO NOT report through FINRA, making them more likely to be short sellers. There's a lot of secrecy involved.

But it's grammar-school easy to imagine a scheme where two market makers collude to evade the 13-day FTD reporting requirements:

• Broker 'A' sells naked shorts on Day 1
• by Day 12, Broker 'A' has still not located shares
• instead of covering, Broker 'A' buys more shorts from Broker 'B'
• after a while Brokers 'A' and 'B' are routinely swapping naked shorts
  
• the 13 day reporting clock is reset indefinitely, thus the rule is nullified

After a legimate short sale, the share count is supposed to be preserved and trackable. But MMs violate this requirement via their short sellers exemption to do their own proprietary (for profit) trading. Let's use an example to see how this problematic short selling can be broken up:

• before a short sale, let's say there was exactly 1 share total available to borrow
• in a legimate short sale, the share count is supposed to be preserved and trackable
  
• after such a short sale, there are 2 legitimate share owners and a 1 debtor:
  • the original owner (the lender), and
  • the purchaser of the borrowed share (although this fact is hidden from the new owner), and
    
  • 1 borrower (the short seller) who has a contractual arrangement to purchase a share to replace the one they borrowed through their broker
    
  • they have a margin arrangement or capital reserve requirement with their Broker to enforce this commitment
  • Share accounting: 2 shares - 1 promise = 1 share
  • thus the share count before and after a legitimate short sale is 1
• MMs can use their privileges to do problematic naked short selling: (the case not just when a broker fails to locate a share to borrow, but when they personally engage in propriety trading by conducting short selling on their own behalf):
  • there is no borrower, no 3rd party with a separate capital reserve
    
  • share count is violated, since the Broker never attempts to locate a share
  • the role of the law of Supply and Demand is circumvented in setting the share price by skewing the Order Book always to the down side
    
  • Brokers can create infinite synthetic shares over the short term, but always a long enough term to break up a rally (say a few hours or days)
  • all of this is done in secrecy, away from the view of the SEC or reporting requirements

So, how does a 'Stock Dividend' break up such a scam? Although any MM who has a large, unreported backlog of synthetic shares created to support their own proprietary trading (with the express goal of depressing the SP), they CAN NOT use their market maker's exemption to create new shares (they only have the right to borrow shares 'in the blind' with the understanding that they will eventually locate them).

This will not be the case after a 5:1 split. With 12 million shares sold short (as of July 31st), after the split their will be a need to identify 48 million new shares to attach to the existing shorts. This is an accounting problem of enormous magnitude for Broker's that have outstanding FTDs on their books.

It will be like a game of 'hot potato', where other MMs will suddenly be unwilling to swap naked short shares as they scramble to locate shares for their own accounts.

Again, this will not be a problem for any MM that has been conducting their business of short selling properly. It will however be a huge problem for any TSLA market maker who has been engaging in proprietary short selling using their 'Madoff exemption', and without a 3rd party to cover those shorts. It will be their own capital reserves that will determine if they can survive the stock dividend, and the relative size of their short position at risk.

I expect some of the 28-odd market makers in TSLA will not survive this. It's notable that Deutsche Bank has recently announced that they are abandoning their role as MM for TSLA, since they were one of Tesla's most vocal critics and had some of the lowest price targets on the street.

TL;dr no MMs will be harmed by the TSLA stock dividend unless they have been acting improperly. We are about to get a glimpse behind the curtain of secrecy on Wall St.

Cheers!

@avoigt @SpaceCash @Hock1 @Boomer19 @Fact Checking

 

[Tslynk67]

I have suspected this for years. FINRA reports on average only about half of the shorting activity which occurs on any given trading day. Further, it is those larger brokerages and hedge funds that DO NOT report at all through FINRA, making them more likely to be short sellers. There's a lot of secrecy involved.

But it's grammar-school easy to imagine a scheme where two market makers collude to evade the 13-day FTD reporting requirements:

• Broker 'A' sells naked shorts on Day 1
• by Day 12, Broker 'A' has still not located shares
• instead of covering, Broker 'A' buys more shorts from Broker 'B'
• after a while Brokers 'A' and 'B' are routinely swapping naked shorts
  
• the 13 day reporting clock is reset indefinately, this nullified

After a legimate short sale, the share count is supposed to be preserved and trackable. But MMs violate this requirement via their short sellers exemption to do their own proprietary (for profit) trading. Let's use an example to see how this problematic short selling can be broken up:

• before a short sale, let's say there was exactly 1 share total available to borrow
• in a legimate short sale, the share count is supposed to be preserved and trackable
  
• after such a short sale, there are 2 legitimate share owners and a 1 debtor:
  • the original owner (the lender), and
  • the purchaser of the borrowed share (although this fact is hidden from the new owner), and
    
  • 1 borrower (the short seller) who has a contractual arrangement to purchase a share to replace the one they borrowed through their broker
    
  • they have a margin arrangement or capital reserve requirement with their Broker to enforce this commitment
  • Share accounting: 2 shares - 1 promise = 1 share
  • thus the share count before and after a legitimate short sale is 1
• MMs can use their privileges to do problematic naked short selling: (the case not just when a broker fails to locate a share to borrow, but when they personally engage in propriety trading by conducting short selling on their own behalf):
  • there is no borrower, no 3rd party with a separate capital reserve
    
  • share count is violated, since the Broker never attempts to locate a share
  • the role of the law of Supply and Demand is circumvented in setting the share price by skewing the Order Book always to the down side
    
  • Brokers can create infinite synthetic shares over the short term, but always a long enough term to break up a rally (say a few hours or days)

So, how does a 'Stock Dividend' break up this scam? Although MMs who have a large, unreported backlog of synthetic shares created to support their proprietary trading (with the express goal of depressing the SP), they CAN NOT use their market maker's exemption to create new shares (they only have the right to borrow shares 'in the blind' with the understanding that they will eventually find them.

This will not be the case after a 5:1 split. With 12 million shares sold short (as of July 31st), after the split their will be a need to identify 48 million new shares to attach to the existing shorts. This is an accounting problem of enormous magnitude for Broker's that have outstanding FTDs on their books.

It will be like a game of 'hot potato', where other MMs will suddenly be unwilling to swap naked short shares as they scramble to locate shares for their own accounts.

Again, this will not be a problem for any MM that has been conducting their business of short selling properly. It will however be a huge problem for any TSLA market maker who has been engaging in proprietary short selling using their 'Madoff exemption', and without a 3rd party to cover those shorts. It will be their own capital reserves that will determine if they can survive the stock dividend, and the relative size of their short position at risk.

I expect some of the 28-odd market makers in TSLA will not survive this. It's notable the Deutsche Bank has recently announced that they are abandoning their role as MM for TSLA, since they were one of Tesla's most vocal critics and had some of the lowest price targets on the street.

TL;dr no MMs will be harmed by the TSLA stock dividend unless they have been acting improperly. We are about to get a glimpse behind the curtain of secrecy on Wall St.

Cheers!

Are these naked sales registered with the exchange (or whatever you call it)? Otherwise, the buyer of a naked "synthetic" share sold short - of which they are completely unaware - won't party to the stock split? I mean how does that work in this case?

 

[Tslynk67]

Finally something we and TC can agree on!

 

[Artful Dodger]

Are these naked sales registered with the exchange (or whatever you call it)? Otherwise, the buyer of a naked "synthetic" share sold short - of which they are completely unaware - won't party to the stock split? I mean how does that work in this case?

Yes, I think that's how/why this comes to a head, and I think this is the intention of the 'Stock Dividend'. @StealthP3D noted upthread that this 'MM crunch' didn't happen previously when other companies declared stock divendends, noting that those companies also did not have the level of short interest to which TSLA is subjected.

Cheers!

 

[MD70]

Talk of naked short selling reminds me of this story:

A Stock Analyst Lost $1 Million on a Penny Stock. He Spent the Next 10 Years Investigating How.

The guy lost a million on paper and started investigating and discovered a lucrative scam involving naked short selling of penny shares involving a large firm and UBS. The upshot is no real actions been taken and it will be interesting to see if the MM can get away with it in Tesla’s case.

 

[FrankSG]

I have suspected this for years. FINRA reports on average only about half of the shorting activity which occurs on any given trading day. Further, it is those larger brokerages and hedge funds that DO NOT report at all through FINRA, making them more likely to be short sellers. There's a lot of secrecy involved.

But it's grammar-school easy to imagine a scheme where two market makers collude to evade the 13-day FTD reporting requirements:

• Broker 'A' sells naked shorts on Day 1
• by Day 12, Broker 'A' has still not located shares
• instead of covering, Broker 'A' buys more shorts from Broker 'B'
• after a while Brokers 'A' and 'B' are routinely swapping naked shorts
  
• the 13 day reporting clock is reset indefinately, this nullified

After a legimate short sale, the share count is supposed to be preserved and trackable. But MMs violate this requirement via their short sellers exemption to do their own proprietary (for profit) trading. Let's use an example to see how this problematic short selling can be broken up:

• before a short sale, let's say there was exactly 1 share total available to borrow
• in a legimate short sale, the share count is supposed to be preserved and trackable
  
• after such a short sale, there are 2 legitimate share owners and a 1 debtor:
  • the original owner (the lender), and
  • the purchaser of the borrowed share (although this fact is hidden from the new owner), and
    
  • 1 borrower (the short seller) who has a contractual arrangement to purchase a share to replace the one they borrowed through their broker
    
  • they have a margin arrangement or capital reserve requirement with their Broker to enforce this commitment
  • Share accounting: 2 shares - 1 promise = 1 share
  • thus the share count before and after a legitimate short sale is 1
• MMs can use their privileges to do problematic naked short selling: (the case not just when a broker fails to locate a share to borrow, but when they personally engage in propriety trading by conducting short selling on their own behalf):
  • there is no borrower, no 3rd party with a separate capital reserve
    
  • share count is violated, since the Broker never attempts to locate a share
  • the role of the law of Supply and Demand is circumvented in setting the share price by skewing the Order Book always to the down side
    
  • Brokers can create infinite synthetic shares over the short term, but always a long enough term to break up a rally (say a few hours or days)
  • all of this is done in secrecy, away from the view of the SEC or reporting requirements

So, how does a 'Stock Dividend' break up such a scam? Although any MM who has a large, unreported backlog of synthetic shares created to support their own proprietary trading (with the express goal of depressing the SP), they CAN NOT use their market maker's exemption to create new shares (they only have the right to borrow shares 'in the blind' with the understanding that they will eventually locate them).

This will not be the case after a 5:1 split. With 12 million shares sold short (as of July 31st), after the split their will be a need to identify 48 million new shares to attach to the existing shorts. This is an accounting problem of enormous magnitude for Broker's that have outstanding FTDs on their books.

It will be like a game of 'hot potato', where other MMs will suddenly be unwilling to swap naked short shares as they scramble to locate shares for their own accounts.

Again, this will not be a problem for any MM that has been conducting their business of short selling properly. It will however be a huge problem for any TSLA market maker who has been engaging in proprietary short selling using their 'Madoff exemption', and without a 3rd party to cover those shorts. It will be their own capital reserves that will determine if they can survive the stock dividend, and the relative size of their short position at risk.

I expect some of the 28-odd market makers in TSLA will not survive this. It's notable that Deutsche Bank has recently announced that they are abandoning their role as MM for TSLA, since they were one of Tesla's most vocal critics and had some of the lowest price targets on the street.

TL;dr no MMs will be harmed by the TSLA stock dividend unless they have been acting improperly. We are about to get a glimpse behind the curtain of secrecy on Wall St.

Cheers!

@avoigt @SpaceCash @Hock1 @Boomer19 @Fact Checking

Great post! A mod should add this to posts of particular merit imo.

But 2 questions that I was unable to Google the answer to:

1. What is the relationship between the naked short seller and buyer? I believe that usually shares have to be delivered within 3 days, or there will be a FTD (Failed to Deliver). You're saying this is 13 days in the case of a naked short sale? So the relationship between a naked short seller and buyer is different than the relationship between another (short) seller and buyer? So buyers of naked short sales are aware that they are buying naked shorts, because the delivery deadline of those shares are 13 days? Or are you saying that naked short sellers literally have the ability/privilege to create real shares out of thin air and deliver them to the buyer, as long as they cover or report their position within 13 days?
2. Who records all TSLA shares on the 21st and exactly how are these recorded? If this is somebody other than Tesla, is there any chance that real shares created, sold, and delivered to a buyer by the naked short sellers will be included in this count, and that instead of perhaps 185M outstanding shares get 4 dividend shares each, 195M outstanding shares get 4 dividend shares each?

 

[WarpedOne]

>> naked short sellers literally have the ability/privilege to create real shares out of thin air and deliver them to the buyer, as long as they cover or report their position within 13 days

Yes, unimaginable but true.

 

[FrankSG]

>> naked short sellers literally have the ability/privilege to create real shares out of thin air and deliver them to the buyer, as long as they cover or report their position within 13 days

Yes, unimaginable but true.

Then my question #2 is very important. Who records all TSLA shares on the 21st, and how will they be recorded? Any chance that these extra shares in circulation due to naked short selling will be included in the count and also receive a 4 share dividend each? If so, the naked short sellers can continue their business as usual.

Might be useful to know how this works in the case of a cash dividend. I can't imagine AAPL spreading a cash dividend out over more shares than should be out there. But then how do they determine which of the shares do not get a cash dividend? Or are market makers responsible for paying the cash dividend to whom they sold their naked shorts? Then if the cash dividend comes from an entity other than AAPL, you'd imagine the owner knows that his share was sold to him by a naked short seller.

There has to be some sort of difference between a regular sold share and a naked shorted share. Imagine this scenario:

• AAPL pays a $10 dividend per share
• Official outstanding shares is 1B
• Short interest 10M
• Shares sold short naked 2M
• Actual owners of AAPL stock 1.012B

The dividend will be paid to 1B shares by Apple. The short sellers will pay the dividend to an additional 10M owners. But who pays the interest to the remaining 2M shares? And how do people know who own these 2M shares?

@Artful Dodger

 

[MD70]

The article I mentioned shows how for penny stocks the brokers found a way of never having to deliver the naked short shares. Is their any way this can be done for larger companies ?

>> naked short sellers literally have the ability/privilege to create real shares out of thin air and deliver them to the buyer, as long as they cover or report their position within 13 days

Yes, unimaginable but true.

 

[Tslynk67]

Pre-pre-market going a bit crazy - and against the futures too, which are slightly down, no-doubt based on the unexpected 1.1% drop in China retail sales.