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Hogfighter
Professional Lurker
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
The short seller needs to return the share he borrowed and sold immediately after borrowing it (thus effectively making a bet on the price later going down so he could buy it back cheaper later on, returning it and pocketing the difference). As the price goes higher after the short position is opened the short seller is now looking at a larger and larger potential loss that sooner or later he's going to have to face as he will be required to return one stock for each he borrowed. And his broker will require more and more collateral as the potential loss increases - these requirements are called margin calls.
Tomorrow there will be many margin calls seeing how more or less any short position will be in the red after today's gains.
Now that the chat has settled a bit, can someone please tell me if this is correct?
If it is correct, I plotted this on an excel spreadsheet to see where the highest profit would be. Since we don't know when the move to privatization would be, I continue to choose J20s options.
if you buy J20 210, the price is 179.98x100. If you are able to exercise the option when the SP is 420, the cost will be
(179.98+210) * 100 = 38,998
The payout will be 42000, meaning a profit of 3002 per call option. Can someone please verify? I'm still upset I was hesitant over the Solar City deal and lost out on a lot of potential money, so I don't want to make the same mistake again.
hacer
Active Member
It might not be possible to close out. If the holder exercises tonight, you will have sold your stock for $300 before the market open tomorrow.
If we know Tesla is on it's way to become a trillion dollar company, T Rowe, Fidelity and many more also know that.
For one scenario, some large funds view this as the last opportunity to have a 30% stake in the Private Tesla (who wouldn't want a 30% in SpaceX, but they can't). They could start to buy shares from the open market. By the time the deal goes though, 160% of shares want to be in the private company. Who is responsible to supply the extra 60%? - shorts. But where will they get the shares when the deal close?
I remember a guy said the best advice he got in his life was "never sell something that you don't own". You think you can get it later at a cheaper price, what if later the thing you sold is not available at any price?
2h2 hours ago
$TSLA shorts down $1.3 billion in mark-to-market losses today as #Tesla rallied 11% on Elon Musk's tweets. If $TSLA hits $420/share shorts will be down another $1.4 billion, bringing YTD loss to $4.45 billion. Resarch Note: https://www.s3partners.net/Research/TSLA17.php …
8 replies22 retweets56 likes
It’s in a field, somewhere, getting dusty...
A short squeeze could push the price well above $420 and force Elon to raise the buyout bid.
In the event that happens and the deal falls apart or shareholders don't vote for it, wouldn't the stock then quickly plummet?
I'm actually curious on this. While a short squeeze would raise the value of the stock, it only has that effect as long as the squeeze continues. Couldn't Elon just wait out the short squeeze until all shorts have covered and then proceed at the lower value?
hacer
Active Member
It's a lot more like just selling the stock (which protects against big drops!). Since you said big drops, this means you sold it recently, while it was DITM. So consider your stock sold because selling a call definitely protects against big gains which you just presumably missed. I feel your pain. I sold an Aug 10 345 strike call (and 345 put, it was part of a straddle) this morning for a net $12.00. Lost out on all but $12.00 of the big move on 100 of my shares. Fortunately I have more shares that were not covered. Of all the days to sell a straddle. At least the call side was covered.
Possibly, assuming the price then settles back under $420. But they may never happen.
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
You're forgetting that a short squeeze could occur in parallel with big capital investors hurrying to aquire stock on the open market ahead of the company going private. They may well value Tesla as a privately held company at more than 420.
Seems obvious - you either sell during short squeeze if it happens or go private.
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