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What to do if (epic?) short squeeze takes place?

Discussion in 'TSLA Investor Discussions' started by Bonken, Apr 25, 2013.

  1. Bonken

    Bonken Member

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    What should longs do if the potential short squeeze finally materializes? Should we try to time the peak and then sell or whats the best strategy? What does normally take place after a short squeeze, does the stock start to tumble back to around 40 again or does it stay at elevated levels? Im relatively new to this so thank you all for your input!
     
  2. DonPedro

    DonPedro Member

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    My few points on this:
    1. Anyone who pretends to know is lying.
    2. By definition, only a few of us will hit the peak.
    3. Everyone else will be second-guessing their decisions afterwards.

    A short squeeze may be highly visible (Google the VW/Porsche squeeze). Or it can just be an "extra boost" to the share during a given period that is indistinguishable from rising on positive news and sentiment (until afterwards, at least). To hit the peak you would have to know at which prices the various shorts will be forced to cover, and be able to follow short interest in real time. Obviously we have little of this information.
     
  3. avatar

    avatar Member

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    #3 avatar, Apr 25, 2013
    Last edited: Apr 25, 2013
    There is one theory on this board that the "squeeze" will be more like a hug than a squeeze over several months that will force out the shorts with a gradual rise in price. I find this hard to believe with such a high number of shorts. I am more inclined to believe that there will be a very disorderly unwinding of short positions. I expect several circuit breakers to fire and halt trading when all this comes to a climax.

    Updated:

    I also should add: I have no idea how to deal with this situation. these types of squeezes are quite rare. Sell when the price is right I suppose. :)

    - - - Updated - - -

    http://seekingalpha.com/article/103073-volkswagen-saga-major-short-squeeze
     
  4. deonb

    deonb Active Member

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    Is there a place to find real time information of short interests? So that way at least you can decide to get out when short interest has dropped sufficiently low. The number Ameritrade lists is a week old :(.
     
  5. DonPedro

    DonPedro Member

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    If you look at the stock price around the VW short squeeze, it had actually been falling for six consecutive trading days, when Porsche suddenly announced that they had tied up so many shares that there was not enough float left for the shorts. That led to a spike of less than two trading days, followed by a sharp drop towards normal levels. Had not Porsche scooped up all the float, there would quite likely not even have been a short squeeze at all (given that the stock price was trending downwards at the time).

    The VW squeeze is probably the biggest in history, unique, and therefore unlikely to inform what will happen in TSLA.
     
  6. K5ING

    K5ING MegaMiler

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  7. Cwin

    Cwin Member

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    I am unsure as to what to do as well. The good news is that the VW squeeze had a rise in price over a 4 day period, so when it happens you might have time to react to it :).
     
  8. mitch672

    mitch672 Active Member

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    VWs price increased 5 fold in 2 days, so if you see TSLA trading at $250/share, that could be a reasonable time to take some profits :)
    Of course for this to happen, most of us must REFUSE to sell, thereby constraining the supply, driving up the price.. But that's unlikely to happen, people will be selling on the way up, so it probably won't be as dramatic as the VW squeeze.
     
  9. avatar

    avatar Member

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    Here why I think there will be a massive disorderly unwinding of shorts. Tesla shares are held in roughly this propotion:

    Elon&Directors = 113,780,000 × .4
    LargeFundsThatWon'tSell = (113,780,000 - Elon&Directors) × .7
    FreeFloat= 113,780,000 - Elon - LargeFundsThatWon'tSell

    Or FreeFloat is only 20,480,000.

    Think about that. There is no way there are enough shares to prevent a massive rise in price.
     
  10. ShortSlaver

    ShortSlaver Member

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    There's been so much pub about this that I just don't think it's likely to happen. Anyone with short positions has to have had bought enough call's to hedge themselves at a somewhat reasonable rate. I wouldn't get into TSLA assuming that something like this will happen - but who really knows? The market is a dynamic, unpredictable place.

    Some might argue we're sort of in one now, a bubble at least. Yesterday there was a really big selloff early in the day and the stock took a really small fall all things considered and rebounded with ease. The bear was mighty but the bull fought it off. This lends me to believe there some stability and a lot of support right now. This is good.

    Find a price that if it happened within a certain amount of time you'd have to take profits and be happy. For some people that might be $60.00 in the next 10 days. It might be something like if we see a 20% jump in an hour, set a limit (20% higher or 5% lower from that mark) that you can sell to. Or maybe just have an alert be sent to you so you can actively monitor the situation.

    I think any decent spike will see profit taking, preventing an all out squeeze to hundreds of dollars. But who really knows?

    I do know I don't feel sorry for anyone I'd be taking profits from. :)
     
  11. Johan

    Johan Took a TSLA bear test. Came back negative.

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    The one ingredient for a true spectacular squeeze is not here, like in the VW situation: The long positions here are made up of smaller and larger investors all with different goals and limits for profit taking. For a true spectacular squeeze to happen the long positions would have to be controlled by only one or a few investors who could just hold and hold and hold as the price skyrockets (kind of how it was with the WV-Porsche situation).
     
  12. avatar

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    Unless of course daimler has indeed more control of TSLA stock than publicly known. :)
     
  13. ckessel

    ckessel Active Member

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    I asked about this once and I think it was our ever wise Citizen-T (apologies if it wasn't him) that said something like set multiple sell triggers, like 20% at $60, another 20% at $70, etc. You won't sell all at the peak, but you'll sell some near the peak and some just at a handy profit.
     
  14. Nicu.Mihalache

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    If you count all calls in existence (OI), it is somewhere in the 10-12M shares equivalent (that indeed increased dramatically during the month). There were more than 30M shares sold short on 4/15.
     
  15. luvb2b

    luvb2b Member

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    +1 Johan.

    the articles about a spectacular squeeze are stupid. you can have a squeeze, but it would be a pretty orderly one like we're seeing.

    more likely is that the stock behaves like a low float stock. although there are 114 million shares outstanding, i estimate that between fidelity, elon, daimler, toyota, & panasonic holding arount 55 million shares that there are only 60 million or so shares left in the available float. that's not very many shares when you consider that tesla is likely to get added to several indexes in the next year, that there are a number of green funds that have to own it, a number of growth funds who will have to own it, and a number of tesla owners who also own it.

    low float stocks tend to move easily with small volume, generally have high volatility, and are a shorts worst nightmare should they end up short at the wrong time. that's pretty much what we're seeing.
     
  16. vgrinshpun

    vgrinshpun Active Member

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    Another significant difference between the current TSLA situation and the one that preceded VW short squeeze is that VW float was only about 5%, while TSLA float is 63.6% (of the outstanding stock). It seems that there is still a chance of a spike in TSLA under "perfect storm" scenario, but it is unlikely to be even close to 5x spike of VW stock.

    High Short Interest Stocks

    My gut feeling is that TSLA will swell to somewhere between the first and second market cap milestones included in 2012 CEO compensation package ($7.2B - $11.2B). If the max swell is close to the first milestone ($7.2B), the massive pullback after the Q1 and "5 part trilogy" announcements is less likely. If the swell approaches second milestone of 11.2B, the massive pullback is likely.

    Ultimately, though, nobody can predict what will happen in the next 2 - 3 weeks...
     
  17. kenliles

    kenliles Active Member

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    I agree. The only reason people are drawing the analogy is because they both make cars- there's no short squeeze structural relationship between the 2 cases. Not even the reason for shorting is in common-

    I think TSLA will see a long slow squeeze of a year's time, that will occasionally flare, but will generally provide a nice put under the pull backs for us longs
     
  18. Cwin

    Cwin Member

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    I wouldn't saw they are stupid. Even if the notion of a spectacular squeese is outlandish, even the remote possibility of it will still drive the stocks value up in the short term.
     
  19. PureAmps

    PureAmps Model S P85 (#2817)

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    I agree with luvb2b, et al., we are not going to have an explosive short squeeze that causes the stock price to rocket up in a short period of time.

    Just look at the history of short interest compared to the stock's trading history. For example, we had a reduction in short interest between 12/14/12 to 1/15/13 of 2.9M shares, most of which occurred the last week of December in which the stock was basically flat. As the shorts are presented with more and more evidence of Tesla's longevity they will slowly abandon their positions, lick their wounds and move on.
     
  20. avatar

    avatar Member

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    Awww shucks :( so no tesla at $80?
     

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