Thứ Hai, 26 tháng 12, 2016

Cost to Borrow Tesla Shares for Shorting Hits 85% part 1

  • Mar 26, 2013
    luvb2b
    got this tidbit from a broker this morning. the cost for a short seller to borrow shares of tesla is now 85% annualized. wow. that may not be the cost all year, but it is the cost now. ouch ouch and double ouch.

    Name Tesla Motors Inc
    Number of Lenders with Inventory 3
    ISIN Code XXXXXXXR1014
    Country United States
    Available 75000 shares
    Rebate Rate -85.3478%

    here's the recent history

    26-MAR-13 -85.35%
    25-MAR-13 -75.84%
    24-MAR-13 -60.69%
    23-MAR-13 -60.69%
    22-MAR-13 -59.51%
    21-MAR-13 -54.77%
    20-MAR-13 -49.85%
    19-MAR-13 -49.04%
    18-MAR-13 -44.88%
    17-MAR-13 -43.94%
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  • Mar 26, 2013
    Zzzz...
    Could you tell me exactly how rebate calculated in this case?

    If share cost $37, to borrow for one year at 85% short will pay $31.45? To make money short should hope for shares will trade below $5.55?

    That is VERY unreasonable, and could not be the case. I mean short could get Jan '14 $23 puts for $1.50, and all he would need to make money is for shares to go below $21.50, not below $5.55...

    So this is why I'm wondering what those percentages represents.
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  • Mar 26, 2013
    luvb2b
    my understanding after talking to my broker is that it is an annualized rate with interest calculated daily. the rate fluctuates daily with supply and demand. so if some shorts cover, it may go back down to 40-50%. if more shorts pile on, it could go over 100%.

    Example
    the charges start when the shares are settled. so for example, let's say i open a short on march 19. settlement is t+3 which is march 22nd.

    now the charges start:

    date tesla close interest factor x rate = cost
    3/22 36.62 1/365 59.51% .0597
    3/23 36.62 1/365 60.69% .0609
    3/24 36/62 1/365 60.69% .0609
    3/25 37.53 1/365 75.84% .0780

    so the total cost to be short the last 4 days would be around 26 cents. if it goes up to 85% today and the close is $38, today's carrying charge will be: $38 x 0.85 x 1/365 = .0885, or about 9 cents. the worst will be if the rate stays high into the long weekend, because that means they'll pay 3 days of carrying charges at a really high rate.

    i can't remember the last stock i saw like this. a short that wants to hold through the next earnings report is going to pay almost $2.63 in carrying charges assuming 60% annualized carry cost.

    O U C H!
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  • Mar 26, 2013
    Zzzz...
    Ohh I see how it works.

    This makes sense for very short shortings, one borrow just for a few days max, ok may be few weeks, paying $2.63 for 45 days in hope that shares would drop at least $2.63+. This is comparable with put option, May 18 2013 $37 puts cost $3.10

    - - - Updated - - -

    I'm wondering how much Schwab paying to Tesla investors for letting Schwab to borrow TSLA shares:cool:
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  • Mar 26, 2013
    luvb2b
    last time i looked schwab was paying 6%. imo this situation is unsustainable. even the puts are starting to get quite expensive. think about that may put - the stock has to go down 10% just to break even!

    someone should tweet @elonmusk & @teslamotors and mention that the cost of borrowing shares of tesla to short is up to 85% and that people are paying up for the privilege of betting against him bigtime. :biggrin:

    the situation is unsustainable imo. especially with what i expect will be a huge earnings, revenue, and margin beat. i think a couple good news positive gaps and there could be some sustained momentum here.

    just for reference, here's some other stocks and how much they cost to borrow. keep in mind many of these companies are highly suspect and/or have had disasters for earnings reports. all of them are multiples cheaper to borrow than tesla which has rapidly growing revenues and should have an excellent eps report.

    hlf which is insanely shorted costs 4% to borrow.
    crm is less than 1%.
    svu has 37% of the float short it's only a 10% borrowing charge.
    jcp 30% of the float short costs only 2% to borrow.
    bks with 40% of the float short? only 3% to borrow.
    mcp with 30% of the float short? 3% to borrow.
    ddd with 30% of the float short? 18% to borrow.
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  • Mar 26, 2013
    kcveins
    It went up from 4% to 6% last week...
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  • Mar 26, 2013
    luvb2b
  • Mar 26, 2013
    Zzzz...
    Nice! Shorts are not going away - new all time record! They are pumping up more $$$ into pockets of investors, ones that let their shares to be borrowed plus they lower prices for those who still investing:tongue:
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  • Mar 27, 2013
    Citizen-T
  • Mar 27, 2013
    wycolo
    > ones that let their shares to be borrowed [Zzzz...]

    Only margin 'owned' shares can be shorted. But the broker is the actual owner in that case.

    Cash account stocks cannot be shorted against your will.
    --
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  • Mar 27, 2013
    Zzzz...
    This is not true.

    Check Schwab.com. Or even this thread: Willing to let someone borrow your Tesla shares?

    There are ways to lend shares and make some money of shorts for investors.
    �
  • Mar 28, 2013
    Nicu.Mihalache
    Thanks for this great insight. Could you please update that info from time to time?
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  • Mar 28, 2013
    luvb2b
    i can try to update it, not a real high priority for me though. if you want to keep tight track of it call your broker and ask them how much it costs to short tesla, they should be able to tell you. that said, here's the latest:

    we're still hovering around 80%. which means anyone who is short and stays short through the weekend is going to pay almost 1% just to hold the short:

    thurs,fri,sat,sun nights = 4 nights. 4 / 365 x 80% x 38.2 = $0.33

    shorting tesla is a very expensive proposition!

    28-MAR-13 -85.82% <--- not finalized yet
    27-MAR-13 -77.29%
    26-MAR-13 -85.35%
    25-MAR-13 -75.84%
    24-MAR-13 -60.69%
    23-MAR-13 -60.69%
    22-MAR-13 -59.51%
    21-MAR-13 -54.77%
    20-MAR-13 -49.85%
    19-MAR-13 -49.04%
    18-MAR-13 -44.88%
    17-MAR-13 -43.94%
    �
  • Mar 28, 2013
    Nicu.Mihalache
    Thanks.

    My broker (ETrade) does not allow me to short Tesla (I tried at $50 or so to check availability and I may try it for real as a hedge against my calls if there is a short squeeze). Actually, ETrade could not borrow TSLA shares to short since Nov. 2011.
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  • Mar 28, 2013
    luvb2b
    with the cost of borrowing as high as it is, it makes no sense to hedge calls by shorting common. if you hold 1000 shares tesla short over the weekend it's probably going to cost around $350 to hold the position (around 35c per share). every business day that the short is held costs around 8c per share at today's rate. the rate may not stay this high, but if it did for even one month it's going to cost $2.40 per share to hold the position (30 days x 8c per day). that should far outweigh the benefit of using shorts to hedge.
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  • Mar 28, 2013
    kenliles
    probably true in any normal situation; but if you're holding LEAPS which carry a trade cost (sell and re-buy large spreads), but get an extreme short squeeze- you could participate in the pullback while holding your LEAPS. But I agree with you, it's an expensive risk; Might be better to buy some puts instead
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  • Mar 29, 2013
    Nicu.Mihalache
    Sorry, I should have explained better. I am talking only in the event of a short squeeze. Say I have $40 calls. Stock goes to $60. I short at $60 to effectively lock $20 in profits. If it goes up and down a lot during the day, I can cover at $50, short again at $65 etc. - all the time being covered by the calls and I do not have to worry much about implied volatility and bid / ask spreads for the calls. That would be the strategy for at most 25% of the calls. Another chunk can be "replaced" by higher strike (so effectively selling the bull call spread $40 - $50 for example), and another chunk just sell the calls, buy them back if they get a lot cheaper. Another way to lock in gains is to buy cheap puts when the stock is very high, but this may be a little less efficient than just shorting the stock.
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  • Mar 29, 2013
    Nicu.Mihalache
  • Mar 29, 2013
    luvb2b
    i guess this article basically recycled my post into a seekingalpha piece. his added opinions about the options are 100% accurate.

    seekingalpha pieces are usually garbage. this author has the facts and circumstances outlined clearly and correctly.
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  • Mar 29, 2013
    kenliles
    he's a regular poster there and usually of decent quality
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  • Mar 29, 2013
    Nicu.Mihalache
    Your post went to traderhood.com from where I posted a link on SeekingAlpha and he noticed that and got some ideas :)
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  • Mar 29, 2013
    hcsharp
    Paulo Santos? His articles about Tesla are usually based on poor quality research - certainly not "decent quality". Some of his other stuff isn't bad.
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  • Mar 29, 2013
    kenliles
    that's true enough and common with almost everyone for that matter;
    I was more referring to the quality of his trading practices etc.- they're usually flat on bias, but pretty well targeted
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  • Mar 29, 2013
    mulder1231
    I find that shameless. At least he could have given you some credit.

    Next time, make a slight change to one of the numbers in your post, that way you can point out where the source was coming from. I believe Elon tried something similar years ago to find a leak in the company.
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  • Mar 29, 2013
    luvb2b
    it is funny to read all the comments that are "spot on!" and "thanks for helping us understand" and etc. etc. etc.

    since it seems he's reading this thread maybe i should point him to my pieces talking about a huge q1 revenue beat.

    or, maybe i should post another piece of my original research and see if he copies that too? hahaha... that sounds like more fun.
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  • Mar 29, 2013
    hcsharp
    My new short thesis

    I've been trying for weeks to figure out who is taking all these short positions. Hedge funds? Insiders who know of some kind of impending doom? Petersen / Broder types? None of these make any sense. The cost to borrow shares is too high for any hedge fund. Calls are virtually a free option at this point. The Petersen and Broder suckers are too trendy and would have gone away by now. Everyone's been expecting a short squeeze for almost 2 years but the shorts don't seem to be swayed by that danger, or by the ridiculous cost to borrow. That has to be a clue.

    So who would continue to short regardless of cost and potential danger from short squeeze? Your typical short players would be gone by now. I think shorting Tesla is providing another benefit that we're not aware of for these investors. What would be in it for an oil giant? Or a big automaker? Tesla threatens every oil company if the revolution they started keeps gaining momentum. There are some very powerful interests at stake. The only thing I'm not sure of is how all these short positions can hurt Tesla? I'm not an options expert so... help me here if you have any insight.
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  • Mar 30, 2013
    NigelM
    The short answer is that it's a very expensive way to hurt a company but at the top level here's the general impact:

    1) Depressing the stock price undermines confidence. That can impact vendor negotiations, finance costs, cause customers to be questioning and divert management attention.

    2) Hit the wallet of the CEO (who, in the case, is famous for leveraging himself). If you can make him unhappy, maybe he'll get distracted.

    3) Cause all the executives who are the share option scheme to question what they are doing and whether they should remain with the company.

    I don't really buy into a big oil conspiracy theory, there are any number of aggressive hedge funds that often make outlandish bets and when one of those bets pay off it can easily be enough to cover a myriad of lost bets. Looking at the above points I can see that point 1. might be valid for Tesla but points 2. and 3. would be seriously underestimating the commitment of the management team to "change the world one car at a time".

    (I put that last quote in because it's something I've heard different employees mention).
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  • Mar 30, 2013
    luvb2b
    on who the shorts are, i suspect there are a number of hedge funds and long/short equity funds that are in the name. that's because on fundamental metrics tesla is a disaster. roe is negative, p/e is non-existent, price/book is off the charts, debt/equity is high, revenues had been non-existent. any computer model would look at such a stock and say it's going to be game over there soon. even though the short positions are large relative to the float, 32 million shares at $38 = $1.2 billion. a dozen large hedge funds ($5 billion+) that shorted $100 million of tesla could account for the entire amount and yet maintain less than a 2% portfolio weighting. the short charges will matter to them, but they will probably hope there's some normalization in those high costs.

    the short positions are quite logical. especially after the last earnings report. on the last call, production had fallen far short of estimates. margins on the most expensive models were miserable. and we know generally this management has had expectations of production that have always been too optimistic. so when they said, "4500 units, mid-teens gross margin, breakeven non-gaap & cash flow", even i had doubts. heck i can confess to selling part of my position because i couldn't figure out the math they were sharing based on their q4 report. then shortly after that the 10-k is delayed? oh my god as a short you had to be salivating, you'd probably add to your position. which they did. a lot. and the short interest jumped by 5 million shares in a month. it was very fortunate for us longs that the 10-k was delayed, because imo the shorts really pressed their bets too hard during that time.

    but then the 10-k came out, and the mystery is solved. $15000+ in credits per vehicle, and with that much in excess profit, all of the math works just fine. everything makes sense. but who would have expected the credits were that high? not one article i read had ever predicted anything above $5000-7000 per car.

    that was just the recent increase in short interest. now think about a few of these questions for a few moments, and after a while you start to wonder why would tesla succeed?

    1. what's the last automaker that started from scratch and became profitable and successful in the usa? how many years has that been? how many have tried and failed? if i remember correctly the answer in the last fifty years is zero have succeeded.

    2. even looking at the ones that are successful, what kind of profits do they generate, what are their earnings multiples? ford has a p/e of 10 and toyota a p/e of 15. at this time it's hard to imagine that next year tesla generates $2+ in eps to justify a $30+ stock price.

    3. look at the short history on http://www.tesla-short-interest.us . 2/3rds of the shorts have been around since the early days, when it wasn't even clear if tesla could make it to manufacturing this car. the company ipo'd as basically a one-product company with a concept. wall street is littered with carcasses of companies that started like that.

    4. as all the critics point out, tesla's book value has steadily eroded, cash flows have historically been highly negative, working capital was in question. how many companies in a condition like this attain critical velocity to break up and out of the downward spiral? frankly it's not that many.

    5. now think about the one time risks. imagine a product fire like fiskar had. or a major safety issue with the battery pack. or a structural defect with the frame. or stuck pedals like toyota. remember all the stuff that tesla is using is all new. any one major failure could be a significant dent to their reputation. and when you're burning $90m in cash each quarter with only $200m in the bank, well you just don't have a lot of room to have such mistakes. as a short you could even bet that heck there would be one major issue somewhere, that a startup couldn't possibly go from zero to perfect production. as a shareholder, that's the main thing i worry about when i go to bed each night: a major recall / product defect.

    6. even if tesla executes everything else perfectly, what if the economy turns down or interest rates shoot up? luxury car sales have always fallen off a cliff in those circumstances. tesla would have a very hard time surviving another economic rough patch.

    7. prior to model s, which electric cars have gained enough traction to make it seem like industry is viable at all? none. the safe bet would be the trend will continue, the shorts would say.

    i'm sure you could think of many more logical reasons to be short tesla based on numerical data and historical precedent.

    it's very difficult to quantify the drive and passion of a ceo and employees who are hell-bent on achieving a mission. imagine if you had a ceo who was paid to lead tesla, not leading tesla to achieve a personal mission? would you be as interested in the company?
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  • Mar 30, 2013
    kenliles
    excellent analysis luvb2b.
    There are good arguments on the other side- but to your point, these are compelling for short-bets and help explain their prevalence.
    Then again, many of the original short arguments have been vacated by near perfect performance; I guess that's what has the stock price over-valued currently (from a by-the-book perspective);
    but one more year of similar performance (reaching profitability) I suspect will force half the shorts out. Not sure we'll ever get a true short squeeze, but they will provide a strong put underneath while they meet 2013 targets;
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  • Mar 30, 2013
    hcsharp
    Thank you for this great analysis. Very helpful. I knew that Tesla had a negative balance sheet and the intangibles are just another pie in the sky to most hedge fund computers. I assumed that they would react differently when it became so expensive to borrow that you can buy free options. Given that 2/3rds of the shorts have been there since the early days, it's probably unlikely that we'll see a significant short squeeze unless the fundamentals change dramatically. Is that safe to say?

    While I also have concerns about a recall or similar damaging event, I'm much more concerned about this last question of yours. I've met countless Tesla employees who go to work every day feeling like they're part of a movement. I've heard stories of engineers sleeping in the shop so they could get the first prototype done before a critical deadline. We've had Rangers sleep at our house after staying up until 1 AM working on our car so they could get to the next customer on time. Can you imagine that happening at GM or Toyota? The "quants" are not used to quantifying this. I wonder how often the board talks about life insurance and other contingency plans.

    Many thanks for your contributions to this forum.
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  • Mar 30, 2013
    Shorty
    Cash account stocks can and do get shorted all of the time. Brokers use a formula to determine what percentage of stocks that they can safely loan. The only certain way of preventing your stock from being loaned out is to take possession of the certificate.
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  • Mar 30, 2013
    CapitalistOppressor
    I honestly had forgotten about the credits before the earnings call (which caused them to have more revenue than I expected) but I had done a lot of research on them back in July and August when I was making my decision to invest. The $5-$7k number is per credit, but the Model S is unique amongst EV's because it gets 3 credits per car. The credits were based on cars like the Volt or Leaf, but Tesla went and made a car with a battery 3 times that size.

    I pointed that out to John Peterson in response to one of his stupid doom and gloom posts back in August, but after asking me for my research I never heard back from him again. It was a pleasant surprise to be reminded during the conference call :)
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  • Mar 31, 2013
    luvb2b
    whatchootalkinboutwillis?

    well i would luv it if you shared your research with me. i have been trying to figure this out a while.

    according to my calculations what you say, $15-21k per qualifying car ($3-5k per REIT x 3) is nearly impossible.

    just take 2012 results as an example. they earned around $15k per car average in credits. but not all cars were sold in qualifying geographies. with only about a dozen states in the zev program, taking into account population and selling bias i guessed probably only 40-50% of cars qualified for zev credits. that implies you got $30k++ per qualifying vehicle in credits going on. man that's a big gravy train.

    i had a hard time understanding the whole credit thing. this presentation dumbed it down for me. refer to pg 46.
    from this it looks like model s is 3-4 credits? or maybe 5-7 if it qualifies as fast refueling with superchargers? regardless i never found good data to tell me what the credits were worth. and how about the ghg credits? no clue for me on those either.

    the whole tesla plan makes sense in light of this. the 8000 vehicle cash flow break even probably assumes selling cars only in zev states. 8000 x $90000 x 15% margin = $108m gross profit. add 8000 x $25000 = $200m in credits. that's $308m in cash flow from operations to cover expenses. few people took credits into account at this level, that's why 8000 unit breakeven looked like a pipe dream.

    tesla gains a huge first mover advantage because once they are making enough zev cars the marginal value of a zev credit goes to zero. by then tesla will have already streamlined operations for profitability without credits. a new entrant will face huge financial hurdles without an extra $100-200 million in credit revenue to offset startup costs.
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  • Mar 31, 2013
    kenliles
    and if I remember right, Elon specifically said the 25% margin goal was without credits.
    If they reach that by year end and maintain with, Europe-Asia and Model X coming on; 2014-15 could be excellent.
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  • Apr 1, 2013
    luvb2b
    if you were short from last monday you're paying 82% annually to borrow the shares, and have to fork over 60c (1.5%) for the week. thank you!

    here's the latest updated history.

    01-APR-13 -84.45% <--- not finalized yet
    31-MAR-13 -84.45%
    30-MAR-13 -84.45%
    29-MAR-13 -84.45%
    28-MAR-13 -82.66%
    27-MAR-13 -77.29%
    26-MAR-13 -85.35%
    25-MAR-13 -75.84%
    24-MAR-13 -60.69%
    23-MAR-13 -60.69%
    22-MAR-13 -59.51%
    21-MAR-13 -54.77%
    20-MAR-13 -49.85%
    19-MAR-13 -49.04%
    18-MAR-13 -44.88%
    17-MAR-13 -43.94%
    �
  • Apr 1, 2013
    Oyvind.H
    That 1,5% for a week is nothing compared to what they`ll loose in total :)
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  • Apr 1, 2013
    Robert.Boston
    Remember that Tesla "sells" many of its cars in California, even when they are then immediately shipped to the new, out-of-state owner. That's how I got my car in MA before Tesla secured its Class 1 Dealer license, and how all sales to TX still work. I'm not sure how the REIT rules work in this case.
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  • Apr 1, 2013
    Nicu.Mihalache
    I think the interest our friends, the shorts, have to pay today is just about to leave the mesosphere and approach orbital heights :biggrin:
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  • Apr 1, 2013
    kenliles
    yes- I imagine some were soiling their shorts today - and maybe again tomorrow;
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  • Apr 1, 2013
    K Hall
    12 millon shares traded so far. A lot of action today guanteed.
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  • Apr 1, 2013
    DJ Frustration
    luvb2b, any thoughts on your post from a couple days ago in light of the sales press release from 3/31?

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  • Apr 1, 2013
    luvb2b
    all useful comments i have are in the thinking about q1 2013 earnings thread. you could read through those and get an idea.
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  • Apr 2, 2013
    luvb2b
    here's the latest updated history.

    02-APR-13 -85.00% <--- not finalized yet, but a new record if it holds!
    01-APR-13 -83.00%
    31-MAR-13 -84.45%
    30-MAR-13 -84.45%
    29-MAR-13 -84.45%
    28-MAR-13 -82.66%
    27-MAR-13 -77.29%
    26-MAR-13 -85.35%
    25-MAR-13 -75.84%
    24-MAR-13 -60.69%
    23-MAR-13 -60.69%
    22-MAR-13 -59.51%
    21-MAR-13 -54.77%
    20-MAR-13 -49.85%
    19-MAR-13 -49.04%
    18-MAR-13 -44.88%
    17-MAR-13 -43.94%
    �
  • Apr 2, 2013
    hershey101
    I don't understand why the cost to borrow is so high. With so many shares traded yesterday, and such a big jump in price, you would think that people would start cashing out some of their profits and selling some of their holdings, or letting the short sellers borrow the stock.
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  • Apr 2, 2013
    Nicu.Mihalache
    A share that is lent to someone else for shorting cannot be sold (otherwise, what does it mean to borrow it?). So if I sell my shares, either they were not lent at all or somehow I just got them back. As the share price is soaring, shorts will split into two camps: those who are scared / stopped out and cover and the others who perceive it as a good opportunity to short more (and hope to get longs scared). In any case, the more people selling their shares to take profits, the harder is for shorts to borrow them to sell short.
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  • Apr 2, 2013
    kenliles
    and if you are told by your broker you are free to sell your loaned shares anytime- that's common practice at the broker level; Nicu's description is still accurate, loaned shares can't be sold, but typically the broker develops a pool so those that want to sell immediately can, then the broker replenishes the pool or take other action to accommodate the sell order.
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  • Apr 2, 2013
    Blurry_Eyed
    Nicu, is this an urban myth or is this true? : I've heard that if you put a limit order to sell on your stock, your broker cannot take your shares and lend them out. If it's true, then another way to shrink the supply of shares available to lend out for short sales would be to put limit sell orders on shares you own.
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  • Apr 2, 2013
    luvb2b
    myth -not true.

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  • Apr 2, 2013
    kenliles
    Yeah, total myth. Your broker agreement to lend your shares pays you interest. if you sign that agreement, then choose to sell loaned shares, limit or market, the sale simply removes them from your interest return. There's no differentiation in how you sell them and before your shares are even lent, you must sign an agreement with your broker explaining all of that. Caveat, there may be some smaller brokers that require a time period to sell the loaned shares, but the majors allow sale anytime via the short pools I described above
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  • Apr 3, 2013
    luvb2b
    cost of shorting still elevated... it's costing the shorts 60c a week now to stay short. that's why we're starting to see the naked shorting taking place that i described yesterday. when the sec fails-to-deliver data is finally released i'm sure we'll see lots of failures to deliver too.

    03-APR-13 -84.98% <--- not finalized yet, but a new record if it holds!
    02-APR-13 -82.25%
    01-APR-13 -83.00%
    31-MAR-13 -84.45%
    30-MAR-13 -84.45%
    29-MAR-13 -84.45%
    28-MAR-13 -82.66%
    27-MAR-13 -77.29%
    26-MAR-13 -85.35%
    25-MAR-13 -75.84%
    24-MAR-13 -60.69%
    23-MAR-13 -60.69%
    22-MAR-13 -59.51%
    21-MAR-13 -54.77%
    20-MAR-13 -49.85%
    19-MAR-13 -49.04%
    18-MAR-13 -44.88%
    17-MAR-13 -43.94%
    �
  • Apr 4, 2013
    luvb2b
    something not well understood about tesla is that it is basically a low float stock. start adding up the key "core" holders of the stock, those who are unlikely to sell any time soon:

    elon musk 27.2 million
    +fidelity 17 million
    +daimler 4.9 million
    +toyota 2.9 million
    +panasonic 1.4 million
    =============
    53.4 million shares total with tight hands

    114.5 million shares outstanding
    - 53.4 million in tight hands
    ======================
    61.1 million shares in the float

    with 32 million shares shorted, it means that there is demand for 50% more shares than exist today.

    when you look at institutional holdings ex-fidelity, that number is 58.9 million shares. meaning, anyone who wants to borrow shares is as at the mercy of the institutions to secure inventory. some of the institutions i know aren't allowed to loan their shares. some won't loan them. some will loan them but only if they are well paid.

    assuming tesla can keep executing, i'm pretty sure we'll see days of extreme pain for the shorts. 25 million shares traded the last three days. a lot of new investors in the fray i'm sure. but that 25 million shares is 40% of the available float! hopefully some of these shares found their way into strong hands.

    - - - Updated - - -

    cost of shorting still above 80%. there's finally shares available to short, first time that's happened in a couple days.

    04-APR-13 -84.47% <--- not finalized yet
    03-APR-13 -82.24%
    02-APR-13 -82.25%
    01-APR-13 -83.00%
    31-MAR-13 -84.45%
    30-MAR-13 -84.45%
    29-MAR-13 -84.45%
    28-MAR-13 -82.66%
    27-MAR-13 -77.29%
    26-MAR-13 -85.35%
    25-MAR-13 -75.84%
    24-MAR-13 -60.69%
    23-MAR-13 -60.69%
    22-MAR-13 -59.51%
    21-MAR-13 -54.77%
    20-MAR-13 -49.85%
    19-MAR-13 -49.04%
    18-MAR-13 -44.88%
    17-MAR-13 -43.94%
    �
  • Apr 4, 2013
    DonPedro
    ...of course, this does not mean that 40% of the float changed hands. There would be a significant component of daytrading with fast cycle times, so whether 10%, 20%, 30% or 39% of the float was in play is anyone's guess.
    �
  • Apr 5, 2013
    luvb2b
    shorts got some relief.
    06-APR-13 -57.34% <-- not finalized yet
    05-APR-13 -60.92%
    04-APR-13 -75.23%
    03-APR-13 -82.24%
    02-APR-13 -82.25%
    01-APR-13 -83.00%
    31-MAR-13 -84.45%
    30-MAR-13 -84.45%
    29-MAR-13 -84.45%
    28-MAR-13 -82.66%
    27-MAR-13 -77.29%
    26-MAR-13 -85.35%
    25-MAR-13 -75.84%
    24-MAR-13 -60.69%
    23-MAR-13 -60.69%
    22-MAR-13 -59.51%
    21-MAR-13 -54.77%
    20-MAR-13 -49.85%
    19-MAR-13 -49.04%
    18-MAR-13 -44.88%
    17-MAR-13 -43.94%

    note source is interactive brokers
    �
  • Apr 5, 2013
    blakegallagher
    so since there was a big drop in the cost to borrow can we conclude that there were a lot of shorts that covered ? or is it not always a direct correlation?
    �
  • Apr 6, 2013
    luvb2b
    correct blake. it's not always direct but the most likely scenario is some short covered. you may also have had a large institution join the lending pool.

    i'm sure some of the shorts have used the 10+% drop from the highs to cover positions. shorts have been on a media blitz lately. they usually do this when they get more desperate, calling reporters and alerting them to the "story". most reporters aren't too creative; they need this kind of "information" to develop "original" content.

    look at the recent news flow. i left out all the negative stuff about customer financing, which i agree was overhyped but is also necessary to increase demand. cnbc dissed it, even the guy who assigned to be the bull said he "wouldn't by the stock with your money". bloomberg cory johnson has been dumping on it incessantly. add benzinga, ft, and a several analysts that had negative comments after they announced an earnings beat to the mix. i added one positive article below, because it's a video with a customer interview. the guy absolutely loves it.

    i don't mind seeing all this negative news, as usually it means expectations are pretty toned down among the big investors. the ft article i linked below is really pretty great at highlighting the negativity: "The consensus is that Tesla will need to sell at least 35,000 of its flagship Model S sedans a year to be sustainable... Deutsche Bank estimates that 35,000 units will not be reached until 2015. Tesla shares now trade at above 10 times 2015 estimates of operating cash flow. With that kind of valuation based on results that are at least two years away, there is plenty of time for Tesla�s shares to plunge back down to earth." where do they get this stuff?

    "Tesla's Fundamental Flaw"
    http://www.benzinga.com/analyst-ratings/analyst-color/13/04/3475290/teslas-fundamental-flaw-no-ones-talking-about

    "Tesla Poised to Stall"
    http://video.cnbc.com/gallery/?video=3000159284&__source=yahoo%7Cheadline%7Cquote%7Cvideo%7C&par=yahoo

    "Tesla Defying Gravity" (also ran in ft / lex)
    http://nicosiamoneynews.com/2013/04/05/tesla-motors-defying-gravity/

    "Tesla Urged Customers to Make Q1 Targets"
    http://www.bloomberg.com/video/tesla-email-urged-customers-orders-to-make-numbers-Mz772B04RaSbBhGKFxHoMQ.html?cmpid=yhoo

    "Tesa Turns Profitable But Won't Say How"
    http://www.bloomberg.com/video/tesla-turns-profitable-but-won-t-say-how-0d2s1TXpRCq1Zp5CWcJ4wA.html?cmpid=yhoo

    "Model S Technology is 'Amazing', Humes Says"
    http://www.bloomberg.com/video/tesla-model-s-technology-is-amazing-humes-says-OKpOYTJpSDGV2e7JWkCO1g.html?cmpid=yhoo
    �
  • Apr 6, 2013
    Johan
    I absolutely agree with your opinions here that the news coverage has been overly negative and always very suspicious whenever there is undisputable progress/good news. Of course on forums like this there can be a tendency towards being overly positive, but the level of analyzis and insight on this forum is actually very high. So with all this in mind I feel that when these overly negative reports come flooding you have to just keep your calm and believe in your own analyzis and valuation togheter with the valuation of other people you respect (many of the board members here including you luvb2b) and in a way be thankful that others have not yet been able to understand the potential of TSLA.

    Also luvb2b thanks for giving me the final push in to starting some careful option trading in TSLA.
    �
  • Apr 6, 2013
    luvb2b
    oh my god lol. please don't blame me for that! if you do it long enough i can almost guarantee you won't be thanking me. :scared:
    �
  • Apr 6, 2013
    Johan
    Don't sweat it, I'm and adult and I will take responsibility for my own actions. I realize it's all gambling, but I like to think that in this particular case I may actually know/understand TSLA better than many of the other players. If I was to bet on sports and for some reason I had good reason to believe that I knew something vital about the game or one of the key players that was not publically known and was likely to influence the outcome of the game in a major way, I guess the reverse question is why wouldn't I bet some money (money I can afford to lose)?
    �
  • Apr 6, 2013
    hcsharp
    I would certainly not count on that. There are "other players" with millions worth of TSLA who are spending tens of thousands analyzing the stock using tools and data that we simply can't expect to match regardless of how many posts you read on TMC.

    There is a tendency on this board for people to get over-exuberant and easily dismiss much of the TSLA down side. Not saying you shouldn't invest, just don't get too caught up in the hype on TMC to ignore your own (and Tesla's) weaknesses.
    �
  • Apr 6, 2013
    Norbert
    Consensus of who? It's the first time I hear such a claim. Maybe it's coming from Deutsche Bank, but how can they put forward such a claim without putting some reasoning behind it?

    Some ratings by Deutsche Bank I found in a quick search:

    --------------
    August 9th, 2010, Deutsche Bank initiated coverage of TSLA with "hold" and a target of $17
    http://www.streetinsider.com/New+Coverage/Deutsche+Bank+Starts+Tesla+Motors+(TSLA)+at+Hold,+$17+Price+Target/5876175.html
    (Though saying a few positive things). Just a few months later, Nov 2012, TSLA peaked at $35, and a year later, share prices were mostly around $25 to $30.

    January 17, 2012: "Deutsche Bank maintains its Hold rating and $24 price target on Tesla Motors, which closed Friday at $22.79."
    Deutsche Bank Maintains Hold on Tesla Motors after Peter Rawlinson Departure | Benzinga
    (12 months later, price was around $35)

    December 3, 2012: "Analysts at Deutsche Bank Securities reiterate their HOLD rating on the shares of Tesla Motors, Inc (NASDAQ: TSLA). The 12-month target price is set to $28.
    Deutsche Bank Securities Reiterates HOLD Rating on Tesla Motors (NASDAQ: TSLA) | Finance Enquiry - Latest Analyst Ratings - Market News
    (Less than 12 month ago)

    Feb 2013 they issue a "hold" with a target of $35.
    Deutsche Bank Maintains Hold on Tesla Motors, Inc., Raises PT to $35.00 | Benzinga

    Meanwhile, two months later, we've been at $46 and are currently moving above $41.
    ---------------

    It appears that while Deutsche Bank kept saying nice things about Tesla, they had a "hold" rating for years and were plainly wrong with their price targets.

    No reason to give weight to their predictions in matters Tesla.




    - - - Updated - - -

    BTW, watch this to see Cory Johnson try to spin Tesla's profitability into something negatively charged:

    Tesla Turns Profitable But How Did They Do It?: Video - Bloomberg
    �
  • Apr 8, 2013
    Citizen-T
    Oh, I'm not so sure about that. I'd take the collective knowledge of the TMC forums over any hedge fund's analysis any day of the week.
    �
  • Apr 8, 2013
    Curt Renz
    Those "tools" are often oil industry propaganda spread by its mouthpiece Heartland Institute and its political and media co-conspirators. With the country so divided politically, those of extreme beliefs accept all sorts of nonsense uncritically. Deep seated emotions can cloud the reasoning and information selection of even well financed investors who have access to a wide variety of data. More level headed investors can take advantage of this.
    �
  • Apr 8, 2013
    ItsNotAboutTheMoney
    I remember reading an article by Saibus Research on Seeking Alpha (I know, I know). In comments they've bemoaned being "savaged by the Tesla cultists". Have a read of some of the comments last year on WEC (Wisconsin Energy):
    Saibus Research's Comments on WEC: Wisconsin Energy Corporation (Page 2) - Seeking Alpha
    . Now, who knows what individual wrote those comments, but when you see overt political language in comments from a supposedly independent research company on a public forum you have to question whether they're getting too emotional in their analysis.

    Sometimes reading these pieces is a bit like watching a TV show or movie which involves your field.
    �
  • Apr 8, 2013
    luvb2b
    Tragic Comedy of Tesla Shortsellers

    the high cost of shorting is taking its toll on the shorts it seems. some new fun stuff i found today.

    a twitter account run by "stan musa" who claims he bought a tesla had all kinds of problems and tesla never helped him.
    https://twitter.com/TeslaMotorHead

    so this guy is posting every negative article he can find about tesla, including this gem. part 1 of a 10 part documentary on tesla motors. it feels kind of like a north korea propaganda video. if you really know the facts on the tesla pack & the patents, it will become quite obvious how comically desperate this attack is.
    http://www.youtube.com/watch?v=cTqnP0McPcs&feature=youtu.be

    conveniently the video rehashes information from the boycott tesla blog. which has apparently been "out of print" since november 2012. :wink:
    http://boycotttesla.wordpress.com/

    another personal favorite, the anonymously uploaded "Tesla Truth Ticket"
    https://anonfiles.com/file/8da2ce24879ee054dcd06a8bf21a6e14

    this of course is just a sampling of what i think is a propaganda campaign buy the shorts. it's so unsophisticated and stupid it makes me wonder how dumb the guys on the other side of the trade really are.

    ok, now the punch line of this joke. this apparent short hedgie didn't realize one article he was linking required a subscription that the rest of us don't have.

    so this tweet:
    Stan Musa ?@TeslaMotorhead1h
    Sad Tesla things: http://davianletter.com/blog/2010/6/29/tesla-motors-risky-fendi-bag-highways �
    7:34 AM - 8 Apr 13 � Details

    should link to this article:
    [http:\\]davianletter[dot]com/blog/2010/6/29/tesla-motors-risky-fendi-bag-highways
    via this abbreviated link:
    [http:\\]t[dot]co/5sA6BOyoxv

    but instead ends you up at:
    http://thehedgies.com

    where i casually asked the support operator if it's a subscription service only.
    JackieHi there. Let me know if you have any questions!
    10:47 amClienthi
    is davian letter a part of your site, and is it a subscription product only?
    Jackieyes

    honestly you can't even make this stuff up.
    �
  • Apr 8, 2013
    avatar
    I don't understand how people expect an "orderly unwinding" of all short positions. With this kind of short % and cost to short it seems to be me that the unwinding is going to be quite disorderly. The timing of the short squeeze is a question mark but I can't see how there wouldn't be one. Every piece of good news simply adds pressure. It's just a matter of time.
    �
  • Apr 8, 2013
    Oyvind.H
    That kind of twitter account should be reported as spam. Guy must be mentally ill, or a desperate short...
    �
  • Apr 8, 2013
    scriptacus
    Interesting. If my understanding is correct what the twitter user is doing qualifies as libel, though Tesla would have to prove it caused harm in order to really do anything about it. I imagine that is quite difficult, if not impossible.
    �
  • Apr 9, 2013
    luvb2b
    updating
    09-APR-13 -55.22% <-- not finalized yet
    08-APR-13 -56.28%
    07-APR-13 -57.34%
    06-APR-13 -57.34%
    05-APR-13 -60.92%
    04-APR-13 -75.23%
    03-APR-13 -82.24%
    02-APR-13 -82.25%
    01-APR-13 -83.00%
    31-MAR-13 -84.45%
    30-MAR-13 -84.45%
    29-MAR-13 -84.45%
    28-MAR-13 -82.66%
    27-MAR-13 -77.29%
    26-MAR-13 -85.35%
    25-MAR-13 -75.84%
    24-MAR-13 -60.69%
    23-MAR-13 -60.69%
    22-MAR-13 -59.51%
    21-MAR-13 -54.77%
    20-MAR-13 -49.85%
    19-MAR-13 -49.04%
    18-MAR-13 -44.88%
    17-MAR-13 -43.94%
    �
  • Apr 9, 2013
    kenliles
    wow- although still high, that's come down quite a bit. Clearly some covering has occurred-
    thanks for the update
    �
  • Apr 11, 2013
    luvb2b
    Shorts capitulating... slowly

    the shorts are starting to give in it seems:

    11-APR-13 -38.47%     <-- not finalized yet
    10-APR-13 -44.23%
    09-APR-13 -49.97%
    08-APR-13 -56.28%
    07-APR-13 -57.34%
    06-APR-13 -57.34%
    05-APR-13 -60.92%
    04-APR-13 -75.23%
    03-APR-13 -82.24%
    02-APR-13 -82.25%
    01-APR-13 -83.00%
    31-MAR-13 -84.45%
    30-MAR-13 -84.45%
    29-MAR-13 -84.45%
    28-MAR-13 -82.66%
    27-MAR-13 -77.29%
    26-MAR-13 -85.35%
    25-MAR-13 -75.84%
    24-MAR-13 -60.69%
    23-MAR-13 -60.69%
    22-MAR-13 -59.51%
    21-MAR-13 -54.77%
    20-MAR-13 -49.85%
    19-MAR-13 -49.04%
    18-MAR-13 -44.88%
    17-MAR-13 -43.94%
    �
  • Apr 11, 2013
    hershey101
    If they are giving in, could it be that the lack of a potential short squeeze would limit the upside?
    �
  • Apr 11, 2013
    Curt Renz
    Keep in mind that those daily figures reflect the annualized interest rate for shorting the stock. The number of shares shorted is reported semi-monthly and has been fairly stable over the last three reports at a near record 31+ million shares.
    �
  • Apr 11, 2013
    luvb2b
    right, but usually the rate coming down with the number of shorts stable / down a bit indicates that either enough shorts have covered to drive down the cost of shorting or that more lenders have come into the lending pool increasing the supply of shares available for lending.
    �
  • Apr 11, 2013
    kenliles
    yep- and no doubt some of both, but my guess is much more of the latter; new lenders would have to be already be in margin accounts, generally non-institutional, etc. Not easy to add a lot of those very quickly
    �
  • Apr 11, 2013
    luvb2b
    cash accounts can loan stock too.

    institutions own the entire float according to yahoo, all you need is for more of them to be willing to lend out their shares.
    �
  • Apr 12, 2013
    kenliles
    ahh- did not know that; thanks

    institution loaning is rare though, at least in my worldview- and against the self inflicted rules of many (most?) institutional investors - but maybe my view of this is inaccurately skewed to my own experience
    �
  • Apr 12, 2013
    luvb2b
    au contraire amigo. many institutions get paid on performance. they can't resist making an extra 40-80% on one of their positions.

    well folks another weekend is at hand. a short seller has to decide if he wants to cover or pay 40% for the privilege of holding through the weekend.

    as longs, no such quandry for us. :biggrin:
    �
  • Apr 12, 2013
    kenliles
    thanks for the view correction- appreciated :)

    got that right-
    wish I was even longer (I'm talkin' stock here, no wisecracks)-
    �
  • Apr 12, 2013
    RABaby
    I once heard that placing sell orders (obviously at a price beyond which one expect would execute soon) would prevent the holding brokerage from using those shares for shorts. Is that true or false?
    �
  • Apr 12, 2013
    luvb2b
    rababy i'm pretty sure that's a myth. but you can call the brokerage and ask them, they should tell you.

    did anyone notice the 13,500 contracts of the jan 15 $30 puts that traded. someone paid $7 for them. holy cow that's a huge premium.

    they paid up bigtime to get into the trade too. kind of a messy execution. guessing it's the same institution that put on the 17,000 jan 15 $18 puts after the earnings report. they paid $3 for those.
    �
  • Apr 12, 2013
    Norbert
    So our brokerages are possibly making 40% annually from our TSLA stock, and we see nothing of that? ;)

    And on top of it, that reduces the value of our shares?
    �
  • Apr 12, 2013
    luvb2b
    over the past month i think it's averaged closer to 60%. some brokers will pay you some of it.

    generous schwab pays 6%.
    interactive brokers will pay half the going rate.
    some of the other big houses will pay 15-25% too.

    the main thing that sucks is your shares are effectively "gone" and replaced by an i.o.u. in a lot of ways it's similar to the scenes from dumb and dumber where the money is borrowed from the suitcase and replaced with the shorts' i.o.u.'s. of course the brokerage firm maintains adequate collateral on the short, but in the event of a broker failure many longs would be shocked to find out that they don't own shares any more that are covered by the sipc.

    google "fully paid share lending program" or "stock loan program" or similar terms.

    here's one good brochure:
    https://www.interactivebrokers.com/Universal/servlet/Registration.formSampleView?doc=Agreements/showSLDisclosure.jsp
    �
  • Apr 12, 2013
    kenliles
    that is a big premium- I'm looking to add jan 15 $30 calls, but wasn't noticing the put price; maybe I'll sell some puts to pay 40% of the cost- puts closed at $6.30 bid, calls $15.80 ask
    �
  • Apr 12, 2013
    gregincal
    Just so people aren't confused, they can't do this without your permission, correct?
    �
  • Apr 12, 2013
    kenliles
    agreement has to be signed with your broker to receive interest on borrowed shares;

    schwab has run a program in past that pays a smaller rate, but allows you to sell shares anytime (they front a poll that allows borrowed shares to be sold, then find more to replace)- not sure if they still run that program- but either way- yes, you have to agree to lend your shares
    �
  • Apr 12, 2013
    ModelS8794
    You will probably find, if you read through the paperwork you signed if/when you signed up for a margin account, that you have already agreed to allow your broker to lend your shares out.
    �
  • Apr 12, 2013
    kenliles
    That's true, it's often included in margin accounts. Although I think (at least it is with my broker) that margin account shares lent can be sold anytime. They become part of a broker pool and the broker manages the pool. Probably different for each broker I imagine
    �
  • Apr 14, 2013
    luvb2b
    updated table. even though the cost of shorting is down a lot recently, there are still very few shares available to borrow.
    14-Apr-13 -38.72%
    13-Apr-13 -38.72%
    12-Apr-13 -38.78%
    11-Apr-13 -38.97%
    10-Apr-13 -44.23%
    9-Apr-13 -49.97%
    8-Apr-13 -56.28%
    7-Apr-13 -57.34%
    6-Apr-13 -57.34%
    5-Apr-13 -60.92%
    4-Apr-13 -75.23%
    3-Apr-13 -82.24%
    2-Apr-13 -82.25%
    1-Apr-13 -83.00%
    31-Mar-13 -84.45%
    30-Mar-13 -84.45%
    29-Mar-13 -84.45%
    28-Mar-13 -82.66%
    27-Mar-13 -77.29%
    26-Mar-13 -85.35%
    25-Mar-13 -75.84%
    24-Mar-13 -60.69%
    23-Mar-13 -60.69%
    22-Mar-13 -59.51%
    21-Mar-13 -54.77%
    20-Mar-13 -49.85%
    19-Mar-13 -49.04%
    18-Mar-13 -44.88%
    17-Mar-13 -43.94%
    �
  • Apr 16, 2013
    DonPedro
  • Apr 16, 2013
    Citizen-T
    I certainly would be if I was short.
    �
  • Apr 16, 2013
    avatar
    I don't think we are there yet. I am very curious to see what will happen after the Q1 earnings report. I suspect it will be the proverbial match that ignites an inferno.
    �
  • Apr 18, 2013
    luvb2b
    updated table. no shares available at the moment according to my broker.

    18-Apr-13 -37.34%
    17-Apr-13 -37.59%
    16-Apr-13 -36.66%
    15-Apr-13 -37.34%
    14-Apr-13 -38.72%
    13-Apr-13 -38.72%
    12-Apr-13 -38.78%
    11-Apr-13 -38.97%
    10-Apr-13 -44.23%
    9-Apr-13 -49.97%
    8-Apr-13 -56.28%
    7-Apr-13 -57.34%
    6-Apr-13 -57.34%
    5-Apr-13 -60.92%
    4-Apr-13 -75.23%
    3-Apr-13 -82.24%
    2-Apr-13 -82.25%
    1-Apr-13 -83.00%
    31-Mar-13 -84.45%
    30-Mar-13 -84.45%
    29-Mar-13 -84.45%
    28-Mar-13 -82.66%
    27-Mar-13 -77.29%
    26-Mar-13 -85.35%
    25-Mar-13 -75.84%
    24-Mar-13 -60.69%
    23-Mar-13 -60.69%
    22-Mar-13 -59.51%
    21-Mar-13 -54.77%
    20-Mar-13 -49.85%
    19-Mar-13 -49.04%
    18-Mar-13 -44.88%
    17-Mar-13 -43.94%
    �
  • Apr 18, 2013
    kenliles
    thx- good data points- very helpful
    �
  • Apr 19, 2013
    luvb2b
    another weekend is upon us. the way it's going it will cost shorts $48.50 x 39% x 3/365 = 15.5c per share to stay short over the weekend. that's going to bring the total cost for the week to between 35-40c. plus the $5-6 increase in tesla's price. it's basically a disaster for a short.

    meanwhile the volume is still very low, which makes it really hard for them to cover.

    consistent with that, i am constantly seeing at most 10,000 shares available to short the last few days. a lot of times it's 0, sometimes 2000-5000. but never more than 10,000. most other stocks with a similar float usually have at least 100,000 shares available for shorting.

    in other stocks like gm and citi i have seen where institutions will use etf's to short. for example with gm when it was tanking it was still in the dow. it was almost impossible to get shares of gm to short, so what institutions would do is short the dia or the dow futures, and then buy the other 29 dow stocks. this used a lot of balance sheet capital, but allowed them to get short gm.

    with tesla it's not in any liquid indexes and the largest etf holders are totally illiquid too. so there's no way to short using that trick.

    the puts are pricing the high cost of shorting and now the volatility, so that's also really expensive for shorts.

    of course we have the 3 stooges doing their thing, but they are limited by the amount of open interest available at strikes with zero time premium. the total there is just a few hundred thousand shares, not nearly enough.

    for those who are wondering what the squeeze looks like, imo it has started. we're probably sometime in the first to third week of the process. i think the squeeze has really only started the the last 10 days or so, but regardless.

    luv says: "sound the tsunami alarms!"
    �
  • Apr 19, 2013
    DonPedro
    LOL, love this post (both because of well-written prose, and because I am SO long in the stock).

    One question: Would not a short squeeze be identified by more shares available to short (as the positions got covered)?

    - - - Updated - - -

    ...and: Do you have any thoughts on when the right time is to take profits in the squeeze? By nature, a squeeze takes the stock above fundamental value, so it is good to take advantage of it while it lasts.
    �
  • Apr 19, 2013
    Johan
    Yes this is the squeeze. It will be more drawn out than some believed but none the less a squeeze. I was able to buy some Jan14 and Jan15 calls last week (50 and 55 strike respectively) - feeling good about that. Also equally happen to not have taken any profit during this last rally. We won't see the 30's ever again.
    �
  • Apr 19, 2013
    Citizen-T
    I agree. This is a squeeze, whether it be THE squeeze or not, I do not know.

    This is pure luck, but as I mentioned elsewhere, I bought some May 18 '13 calls about a week ago for $1.85 and others for $2.40. Pure luck. I was only looking for about 25% gain. What timing.
    �
  • Apr 19, 2013
    mulder1231
    I just realized today, after my own little experiment with options trading, that the gain on the calls I bought yesterday currently is 15%, whereas if I had bought the shares outright, they are up only about 2% (currently at $48) for the day.

    Is that typically the case, or did I just get lucky? Looks like options trading might be more lucrative?
    �
  • Apr 19, 2013
    Johan
    Levarage. Hence also increased Risk.
    �
  • Apr 19, 2013
    gregincal
    It's typically the case that you either make greater gains or that you lose everything. The chance of losing everything in normal stock is slight (only if the company goes bankrupt). The chance of losing everything in options is totally normal (it can be just about timing). So both the risk and reward are much greater than normal stock trading.
    �
  • Apr 19, 2013
    luvb2b
    a lot of times the shorts rotate amongst themselves on the way up. the last part of a short squeeze is usually pretty spectacular, the craziest ones i remember had insane volume at the top. somehow i don't think that's going to happen in tesla any time soon. this feels like more the rolling rotational type of squeeze.

    the right time to take profits... lol. well what would i be doing here donpedro? if i knew that i would have retired many moons ago.

    "fundamental value" is an elusive concept. some stocks trade way above their apparent "fundamental values" for years, until their fundamentals catch up to the share price. wal-mart was like that, a high multiple high growth momentum stock for years. valuation was always high. the stock went sideways for a decade and sales & earnings crept higher to make it a reasonable value stock.

    - - - Updated - - -

    it could be more lucrative, or it could ruin your life. i think i've had both happen at different times.

    perhaps the worst thing that ever happened is i made money on my very first options trade. after that i was hooked.

    had i lost money and been spanked, maybe i would never have gone down this road.
    �
  • Apr 19, 2013
    kenliles
    @mulder1231
    One way to strike a balance is to use LEAPS. These would be options more than 6 months out (currently Jan2014 and Jan2015 expirations). Some (including myself) use these to augment/replace stock holdings. You can control your risk by adjusting the strike. Then at an appropriate time in the year you can roll them into the next year and continue forward as a long term bull much like owning the stock but levered up. I currently carry most of my TSLA long term investment this way. The time cost of owning the option accelerates when you approach 30 days or so from expiration, so count on rolling them to the next year well before that -

    - - - Updated - - -

    Boy, I resemble that remark. Be careful with options- they can be as addictive as gambling because they lay out any risk opportunity you wish to take. It's important to integrate the risk with your situation. Now used properly they can also be used to reduce your risk (by putting less money in the pot). But too many unburned people use it to leverage up the risk and equate $s in options to $s in stock. Better to equate shares, for example- if you would want to buy 100 shares on a fundamental bull belief, then use 1 LEAP option (100 shares) that tracks the stock (check the Delta for tracking guidance)- augment that with a few shares.<< That's just one of about million ways and just an example. But one that generally equates the risk to owning stock, but for less money in the game.

    In a TSLA situation, if you're really hoping to sell some on a squeeze- timing with options is nearly impossible imo (but potentially lucrative if you luck out). I'd be more of the persuasion to carry some extra long position that is available to sell and capture some if and when it happens in a big way- just my thoughts from both getting lucky and getting burned as luv describes - once you've been on both side of that yard, you tend to use them more correctly for your particular situation
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  • Apr 19, 2013
    luvb2b
    seems like the shorts aren't relenting yet. i see no shares to borrow and the cost to short is climbing into the close, current indication is 42% for the weekend. ouch.
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  • Apr 19, 2013
    avatar
    I don't think they will relent easily. there are millions of dollars at stake. I suspect at this point they are desperately holding on as long as they can hoping that some freak bad news will emerge driving the stock price down.
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  • Apr 19, 2013
    luvb2b
    or they will just create some bad news. that's probably faster than waiting.
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  • Apr 19, 2013
    blakegallagher
    And par for the course (Read Broder/Palin/Oreilly ... no coincidence the last two comments were one day to the next)
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  • Apr 19, 2013
    ShortSlaver
    This is about the best advice I've read. Absolutely true in every way! I'm no angel and have definitely learned lessons myself (hint: it's easy to lose at the options game!). In general - avoid. :) However, if you want that leverage and can afford the swing either way then put your money where your mouth is and go for it. Just don't take food out of your families4 mouth.
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  • Apr 20, 2013
    ggr
    I have a question about short squeezes and options and stuff. There seem to be at least three threads that might be appropriate for it, and I don't want to start yet a new one, so I chose this one to ask it.

    A few weeks ago (a very opportune time! :biggrin:) I decided to get my feet wet, and bought some calls that are now nicely in the money. They expire next month. Assume for a moment that the Q1 earnings come out a week or so before expiry, and the news is good, and the price goes up, and the shorts get squeezed, so the price goes up some more. Now I can sell my position, to realize whatever profit is in the current price. But might it not be better to actually exercise the call, and force some short sod out there to actually buy the stock to deliver, and hence add momentum to the short squeeze? Of course I'd have to have enough money to pay for the stock, so this might not apply to everyone, but in fact I do. I don't mind doing that because I have little sympathy for the shorters.

    By this logic, I might also be better to wait until the day of expiry, when the options will automatically be exercised. Looking at last Friday, it seems that maybe some of the price spike might have been automatic exercise of in-the-money options? Wouldn't this day pretty much have to cause a squeeze all by itself?

    Now, what if the short sod defaults, and can't or doesn't deliver the stock? My understanding is that his broker is on the hook to pay me cash instead (and then extract it from Sod somehow), is that correct?

    Lastly, what if I don't have enough cash or margin to exercise the call, but it's in the money and about to expire. My broker's FAQ just says they will exercise it. Do they sell enough to cover the cost of the exercise or something? Or do they, too, just deliver cash? This question is, for me, academic, but I still want to understand it better.

    TIA.
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  • Apr 20, 2013
    Norbert
    Not an expert (yet), but I think as long as the call is (and remains) in the money, whoever will own the option when expiration approaches, will exercise it in any case. So you might as well sell it sooner (in case you think that will give you a better return).
    �
  • Apr 20, 2013
    GenIIIBuyer
    Actually, due to the time value associated with the option, it would be more efficient (and cause a slightly larger squeeze) to sell your call options. Then immediately use the proceeds of this sale to buy shares. This is because you will be able to buy more shares than by simply exercising.

    For example, As of 4/19/2013: May 45 Calls, Bid $4.00 and Ask $4.20. The stock closed at 47.83.

    Selling the May 45 Call for $4 is like selling TSLA stock at $49. Then you can buy it back at 47.83. The ~$1.20 difference is the time value of the May 45 option. As you approach May expiration of the option the time value of the option will decrease.


    However, you should not think that your marginal purchase of shares will have any effect on the stock. Additionally, your long call position is already exerting upward pressure on the stock. About equivalent to owning the delta-weighted number of shares.

    It sounds like you should read up on option greeks to really understand your option position. Investopedia is a good place to start:
    http://www.investopedia.com/terms/d/delta.asp
    http://www.investopedia.com/terms/t/theta.asp
    http://www.investopedia.com/terms/v/vega.asp

    Your broker should provide a live-feed of what the delta, theta, vega and implied volatility of each of your options are.


    On the Rolling Naked Tesla Short thread it's been discussed that someone may be buying deep in the money calls with little time value and then exercising them to acquire shares. This is not the cheapest way to buy shares though, this is only being done because those shares acquired that day do not show up in TSLA's daily volume.
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  • Apr 20, 2013
    dmunjal
    A short squeeze might result in a blow off exponential top. We used to see sub $1 moves. Then $1+ moves. Now it seems we're seeing $2+ moves. If this continues, you'll see a $4 or $5 (or more) daily move. That would be the time to take profits.

    Once the shorts are cleaned out, you would return to a more normal market.
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  • Apr 20, 2013
    ggr
    Except that, as I understand it, the original seller can buy back the call to close the position. So it wouldn't ever turn into actually having to buy the shares. Again, though, I'm a neophyte...
    �
  • Apr 20, 2013
    DrJohnM
    I do not think that this will be the sort of exponential squeeze that was seen in the VW explosion of 2008. In that instance, there were only two real owners of stock. Porsche with 74% and the state of Lower Saxony who has 20%, leaving only 6% with others. The short positions totalled over 12% - over 200% of the 'other' positions. From memory, there was some restriction that prevented Lower Saxony from selling, so in effect, the only way that that 12%+ could be covered was if Porsche sold some of its VW position.

    The rules in Germany at the time did not require the declaration of shareholding above certain thresholds. When the market found out about the Porsche holding size, they went mad trying to cover with the remaining 6%. Porsche stopped the bleeding by making shares available*.

    The thing with Tesla is that there are a greater number of investors that will at some stage take the profit and in doing so, will afford relief to the shorts.

    There were lots of accusations that Porsche had manufactured the squeeze by announcing their intentions to take their position to 75% and in doing so, showed their hand and forced the squeeze. Then selling to make substantial gains. The view of those that lost their shirt was that Porsche had manipulated the market by building the position by stealth and then announcing in full knowledge that the shorts could not cover, driving the market. Porsche was making more money from the finance side of the organisation than from selling cars.

    http://static.seekingalpha.com/uploads/2011/9/1/761622-131486118267016-Nicu-Mihalache_origin.png
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  • Apr 20, 2013
    Norbert
    I think what matters in the end is whether *you* want to *keep* shares, and you would decide this by looking at the current market price. And then decide which way (exercise or not) is the best deal for you, which would be an independent decision.

    - - - Updated - - -

    Exactly my thinking. There are too many who want to take a quick profit when the stock goes up a bit. On the other hand, there is really a lot of shorts, so a lot would have to take profit if all shorts wanted to cover at the same time. But I guess that is unlikely. Still, I guess, it could create quite a surge if shorts get nervous.
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  • Apr 21, 2013
    Nicu.Mihalache
    Let me first give you an overview opinion on the situation. Then I will suggest a strategy to take profits AND keep exposure for the short squeeze (of course there are tradeoffs, there is no free lunch out there).

    First, do not act with your heart. You have to maximize you profits while minimizing the risk regardless of your sentiments towards the car, the company or the shorts. Your independent move against them is a grain of sand against the ocean. As an example, as GenIIIBuyer says, in the worst case, sell the calls and buy the shares, you are better off.

    Now, your options are for May and nicely in the money. Keeping them like that is very risky, if not for the initial investment, at least for you present position. You have to think that if they are worth say $10, is like having that in cash (you can sell anytime). Would you buy them back at this price? I hope not, it's too risky. Now, you also want to keep exposure for an eventual good Q1 report (remember, usually is buy the rumor, sell the news), you can do that with much lower risk. There may be hundreds of possibilities, but here is what I usually do (and did last week with J14 $40 calls):

    sell the call spread - example:
    you own May $30 calls which are (bid / ask) $17.40 / $18.10
    you may exchange them to $40 calls $7.70 / $8.10 by setting a limit spread : sell close $30 calls, buy open $40 calls

    this will put in your pocket at least $9.5 out of the theoretical maximum of $10 gain; this is because shorts are desperate and puts prices are distorted by the high interest they pay on borrowed shares

    you may even exchange higher strikes in the money - for long term options I like to have at least 60% of the theoretical max, but for short term 70-75% is quite doable; given the exceptional situation in TSLA options, you may aim for 80% for strikes that are close to the present price

    this strategy will put cash in your pockets, probably more than what you invested, but also keep your exposure almost intact
    as TSLA rises, you can repeat this as soon as your % of gains compared to max possible is attained

    do not hurry to spend this cash on more calls, realized gains are much better than possible future gains; and most of the time, the share price comes down enough so that you could reinvest those in long term calls, J14 or even J15, at unbelievably good prices (given that the cash was "free")

    best of luck, and do not hesitate to ask questions if my post is not clear, I'm a bit in a hurry

    - - - Updated - - -

    Institutional ownership just went down about 3.5M lately, and very few reported for Q1
    http://www.nasdaq.com/symbol/tsla/institutional-holdings#.UXO3SJUbj8s

    There is no way to know if the real short squeeze has started. About one year ago we were knocking on $40 and an overnight transaction of 7M share cooled off the price in the low $30s for several months.

    So hope for the best, but prepare for the worst (take lots of profits).

    - - - Updated - - -

    I really have to go, but I will bother you guys later with more comments. I got to read the recent MS report and I have some theories wrt Q1 report :)
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  • Apr 21, 2013
    luvb2b
    my 2c: as a general rule, don't trade options on what you can force the other guy to do. there are some exceptions, but they apply generally only to institutional investors (for example the 3 stooges theory i outlines in the rolling short thread). so you look at your own economics and your own reason for doing what you did.

    so why did you buy these calls? did you buy them to speculate on a little extra upside? if so, then definitely do not exercise them. by exercising you would be taking a limited risk bet you had taken for a specific time, and expanding the total dollars at risk for an indefinite time at a much higher price level for the shares.

    on the other hand, did you buy the calls because you wanted to buy more stock on a dip, but were afraid the price might go up? so the calls were insurance to make sure owned some more shares if there was no dip? if that's the case, then the dip hasn't happened, you didn't get your chance to buy a dip, and the options are the long exposure you wanted. in this case you would probably exercise the calls and buy the shares - because that's what you really wanted from the onset.

    again, don't try to game what will happen on the other side of the options. focus on your own economics.

    generally what happens with options trades is that the opposite end of your trade ends up in the hands of a market maker, or someone who was doing a buy write. in tesla, by the 3 stooges theory, there's some possibility that a short is using your options, but in any case it won't matter. here's why:

    as the options you own go in the money, the person on the other side of it has to make an adjustment based on the new reality. if they were doing a buy write, maybe they wanted to sell shares at a higher price and so they don't care that the options are exercised. if it was a market maker, he already adjusted his hedge ratios and he also won't care if you exercise because he already bought the shares he needed to deliver to you. and if it's one of the stooges, they don't care either because they saved a hell of a lot of money being short the call vs. being short the stock, and they expect you'll exercise too.

    as far as defaulting on the exercise, the options clearing mechanism is what makes sure that isn't going to happen. if the "short sod" can't find shares to deliver, his clearing firm is on the hook. if his clearing firm can't find them, they'll buy them at whatever price and deliver them. i wouldn't worry about options being "defaulted" unless we go into another market crash scenario.

    it depends on the firm. many firms will force you to reduce your position to something that your account can carry on expiration day, before exercise. some firms have an "exercise and close" feature you can use on expiration day, they will exercise the option and immediately sell shares on your behalf. some firms will allow you to exercise and give you a margin call monday if you don't have enough capital. the best firms deal with these situations proactively, making sure they aren't on the hook for too much. you will never be delivered cash unless they are cash settled options, which tesla options are not. i would call the options department at your broker, and explain your situation so you understand the firm's policies.

    a final note - in your situation you have at most 3-4, which makes life easy:

    (1) exercise the option as expiration draws closer and hold the common instead.
    (2) sell the option before expiration and pocket the gains.
    (3) roll the option to a farther expiration and/or a different strike.

    nicu was describing #3. you were asking about doing either #1 or #2. the correct choice for you is based on a combination of your intentions, your beliefs, and your economics. don't let thoughts about whoever made the mistake of selling you the call divert your focus on what's most important: you!

    - - - Updated - - -

    updated table.... ouch the cost for borrowing jumped by 10% over the weekend. shorts are standing firm it seems.

    21-Apr-13 -47.20%
    20-Apr-13 -47.20%
    19-Apr-13 -42.60%
    18-Apr-13 -37.34%
    17-Apr-13 -37.59%
    16-Apr-13 -36.66%
    15-Apr-13 -37.34%
    14-Apr-13 -38.72%
    13-Apr-13 -38.72%
    12-Apr-13 -38.78%
    11-Apr-13 -38.97%
    10-Apr-13 -44.23%
    9-Apr-13 -49.97%
    8-Apr-13 -56.28%
    7-Apr-13 -57.34%
    6-Apr-13 -57.34%
    5-Apr-13 -60.92%
    4-Apr-13 -75.23%
    3-Apr-13 -82.24%
    2-Apr-13 -82.25%
    1-Apr-13 -83.00%
    31-Mar-13 -84.45%
    30-Mar-13 -84.45%
    29-Mar-13 -84.45%
    28-Mar-13 -82.66%
    27-Mar-13 -77.29%
    26-Mar-13 -85.35%
    25-Mar-13 -75.84%
    24-Mar-13 -60.69%
    23-Mar-13 -60.69%
    22-Mar-13 -59.51%
    21-Mar-13 -54.77%
    20-Mar-13 -49.85%
    19-Mar-13 -49.04%
    18-Mar-13 -44.88%
    17-Mar-13 -43.94%
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  • Apr 22, 2013
    DonPedro
    Given today's action, I am sure that the shorts are very happy with their decision to pay the interest for carrying their positions through the weekend. :cool:
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  • Apr 22, 2013
    avatar
    I'm not sure I understand. Wouldn't a short have been better off exiting their position on Friday? Looks like anyone who held through the weekend woke up to a higher cost to exit. How is that a good thing for shorts?
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  • Apr 22, 2013
    kenliles
    he was being sarcastic
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  • Apr 22, 2013
    avatar
    Ah Ok - It's hard to read sarcasm sometimes on the board :)
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