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

[humbaba]

Is it politically correct to use that term, or only if you're actually LGBT yourself?

Well, dang, Apple's New Oxford American Dictionary isn't up to the task so maybe it is more obscure than I'd've guessed. But it is someone who is asking a question. If I'm to believe Merriam-Webster, it comes from quaerent-, quaerens, present participle of quaerere to seek, ask

 

[elasalle]

Cheers to the Phantom Shares
Added some Jan 21 Calls, next week is gonna be exciting

 

[Boomer19]

ihor from S3 saying short now roughly 10.6mm in their estimate

as of 7/31 it was around 11.945m shs reported by nasdaq/finra

for what little value it’s worth. maybe there is some short covering

No, again you have missed the point. I should have left out the hypothetical. It was an exaggeration to try to get across the point that the broker will borrow the shares on Susan's behalf at the time of the split, whether she realizes it or not, whether she approves or not.

oh. i see what you’re saying.

if she is short 100 pre-split ,they are already borrowing on her behalf. they then adjust the contract with the lending broker post-split to 500 shares. they don’t create a new 400 share contract with the same broker (or another one)
so there’s no shares created per se
she’s shorter, and now borrowing more

 

[M|S|M MYP]

Less than 2050 is their desire. Even if it is only 1 cent.

0.02

 

[MTL_HABS1909]

$2049.98....I’m shocked!

 

[StarFoxisDown!]

Lol that closing price

 

[Dancing Lemur]

Less than 2050 is their desire. Even if it is only 1 cent.

Missed it by that much.

 

[wipster]

Well that's how to get your 2 cents back at the end of the week...

 

[StealthP3D]

Indeed. This is a monthly options expiration day, i.e. more interest than a typical Friday. It was just today that TSLA option strikes at $5 increments were added above $2000, between where they had been at only $50 increments. So still a relative desert between multiples of $50.

TSLA call option open interest and trading volume is heavy at $2050. Big option writers (mainly hedge funds and market makers) would want to keep the share price under or near $2050 (at least for today) to retain their premiums at the close.

Haha! That was done very "professionally"! LOL!

It looked like they had to work at it which makes me think we'll have a good open on Monday.

 

[SOULPEDL]

Monday's gonna do that pop thing again... huh?

 

[Johann Koeber]

On Fridays the stock seems to love round numbers.

Sold a 2050 Put at 21:46, bought back at 21:54 for a $568 profit. I know, less than one share. But just wanted to try it out.

If it would have messed up, I could have rolled it one week out and down $50 for a profit.

 

[Curt Renz]

TSLA All-Time Intraday and Closing Highs

Other major US automakers again closed down.

 

[Runarbt]

$2049.98....I’m shocked!

My "shocked face" :

 

[StealthP3D]

Monday's gonna do that pop thing again... huh?

You have to factor in economic news, etc. so who knows?

But I know a "win" when I see one, new, all-time closing high, so congrats to all TSLA longs!

 

[Dancing Lemur]

Haha! That was done very "professionally"! LOL!

It looked like they had to work at it which makes me think we'll have a good open on Monday.

I bought a single lotto weekly for 8/28 at 3:59 pm, thinking the same thing.

 

[Steve m]

Thanks for providing an easy-to-reply-to post. First, two comments for @Boomer19:
1) your example scenario is way too complicated to reply to.
2) the DTCC only gives new shares in the amount of 400 and 800, not the 500 and 1000 you said.

Back to @Steve m:
I don't think you are correct about not needing to provide shares until the position is closed. The broker who borrowed the shares from the guy in the first place is on the hook to make sure he is, and remains, whole. The broker does this by ensuring that she (Susan) is able to return the shares when necessary, which can be for a number of reasons: (1) the lender (Len) sells his (borrowed) shares, (2) Susan closes her position, (3) the value of the shares increases past Susan's margin limits. (There may be other reasons.)

Hypothetically, Tesla announces on battery day that batteries are no longer necessary, they have a working Mr. Fusion. Stock goes from $420 up to $10,000. Now Susan, who has only ever borrowed one share, needs to return $50,000 worth of shares. If she can't, the broker has to instead, and they don't want to be in this situation. So, at the time of the split being effective, the broker would have borrowed the extra shares on Susan's behalf. Susan doesn't notice; before the split, she had borrowed $2,100 worth of one share, and after the split she has borrowed $2,100 worth of 5 shares @$420. So, no margin call or anything at that time. Now when Mr. Fusion comes along, the broker just takes everything they can get their hands on of Susan's, until they can satisfy her debt (or they assume the part she can't cover). Edit: meant to stress here that at least they have the shares to return to Len, because they were already borrowed. This prevents contributing to a short squeeze over and above the margin calls. End Edit.

Of course the hypothetical is ridiculous, unless it isn't, but the reality is that TSLA could easily climb 100% in a couple of weeks, and there is no way that the broker would assume responsibility for that situation. As I said, they address it by borrowing on Susan's behalf at the time of the split, not later when it becomes necessary. They can do this, because it's part of the agreement Susan signed when she applied for permission to trade on margin and sell short.

It ain't that complicated. The short is on the hook but only when closing the position.

There is no free lunch for anyone.

The contracts just get multiplied by five.


How Do Stock Splits Affect Short Sellers?
Stock splits do not affect short sellers in a material way. There are some changes that occur as a result of a split that affects the short position, but they don't affect the value of the short position. The biggest change that happens to the portfolio is the number of shares being shorted and the price per share.

Understand the What and Why of Stock Splits.

 

[Skryll]

Because a 1:5 split is the same as a 4:20 split. A 1:10 wouldn't be any fun.

Also to threaten the market makers with another one coming whenever it seems they try the same shenanigans again.

 

[ggr]

“MM” stands for “market manipulation”

Sometimes, yes, and sometimes it's the same entity, but really MM stands for "Market Maker". These are big companies, often affiliated with banks or brokers, whose entire job is to make sure that options exist so that they can be traded. If you look at all of the available options, you will see that there are lots that have 0 "open interest" and yet there are bids and ask prices listed. The market maker will serve up the option contract if you want to buy one. This is why they have the famous "Madoff Exemption", that allows them to sell uncovered calls.

we have been disciplined and sell half our shares if the stock doubles

I use this myself but only for relatively short term options (because one day their value might go to zero), and only to get my initial investment back. If you diligently apply this rule every time the price doubles, you linearize what is fundamentally an exponential process... you get back the number of times the price doubled instead of the product of the doublings.

 

[llirk]

So, price action looks like capping and damage limitation from the Market Monkeys. Perusing the open interest we see the most volume on $2100, but as the dust settles, $2000 is off the menu - puts piling up there, $2050 is painful (for them), so capping in the $2050/50 range with a push-down to below $2050 seems the the best they can hope.
View attachment 578991

This aged really well... called it at noon.

 

[Nocturnal]

Closed 2 cents under 2050, then pops right back up to 2050. If only we had a government agency that looked for manipulation of the stock market. What a joke.