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Thread: Cost to Borrow Tesla Shares for Shorting Hits 85%

  1. #1
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    Cost to Borrow Tesla Shares for Shorting Hits 85%

    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%
    Last edited by luvb2b; 03-26-2013 at 06:54 AM. Reason: add history

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    Member Zzzz...'s Avatar
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    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.
    "They laughed when I said I was going to be a comedian. Well, they're not laughing now." Bob Monkhouse

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    Quote Originally Posted by Zzzz... View Post
    Could you tell me exactly how rebate calculated in this case?
    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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    Member Zzzz...'s Avatar
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    Quote Originally Posted by luvb2b View Post
    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.
    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
    "They laughed when I said I was going to be a comedian. Well, they're not laughing now." Bob Monkhouse

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    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.

    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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    Quote Originally Posted by Zzzz... View Post
    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
    It went up from 4% to 6% last week...

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    Tesla Short Interest: Another Record High

    Date Short Interest Avg Daily Share Volume Days To Cover
    3/15/2013 32,316,654 1,626,135 19.873291

    Read more: http://www.nasdaq.com/symbol/tsla/sh...#ixzz2OgBzNjOt

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    Member Zzzz...'s Avatar
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    Quote Originally Posted by luvb2b View Post
    Date Short Interest Avg Daily Share Volume Days To Cover
    3/15/2013 32,316,654 1,626,135 19.873291

    Read more: http://www.nasdaq.com/symbol/tsla/sh...#ixzz2OgBzNjOt
    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
    "They laughed when I said I was going to be a comedian. Well, they're not laughing now." Bob Monkhouse

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    Not surprised based on the comments from this Market Watch story: Tesla stock jumps after Elon Musk tweets big plans - The Tell - MarketWatch

    There are still a lot of haters out there with bad information that are as confident as ever that Tesla is on its last legs. That's good for us.

  10. #10
    Senior Member wycolo's Avatar
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    > 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.
    --
    Last edited by wycolo; 03-28-2013 at 10:21 AM.

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