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ValueAnalyst
Closed
Number of shares available to short at my largest broker is now zero. Shorts are digging their heels in once again.
Paracelsus
Active Member
Or perhaps the MM's are going to let TSLA run up a little......? I find the lack of consistency between number of shares available to short and the direction of price movement confusing at best
ValueAnalyst
Closed
I would agree with that statement. I'm not sure if there's a relationship at all. So if someone experienced can chime in, that would be very much appreciated.
adiggs
Well-Known Member
Shares available to short may be 0, but Fidelity at least has plenty of shares they can get their hands on to make available. I present show all of my shares as not being lent out - I suspect that is largely true for others in the Fully Paid Lending Program at Fidelity (it seems like as a group, our shares are lent out or they aren't).
I would expect we would also see an increase in the rate Fidelity is charging to borrow shares - my guess is a move from 1% to 1.5% - as part of bringing in the FPLP shares to lend out.
So shares to short may be 0, but that's also with a very low by historical standards rate to borrow shares at 1%. If Fidelity is seeing demand, they can start raising the rate they charge and bring a LOT more shares to borrow into the market.
Or thought of another way - by historical Tesla standards, I rate today's demand to borrow shares to short sell as low. The evidence being that Fully Paid shares aren't being used, and the rate paid to borrow shares is "only" 1%.
It's a light commitment and digging in of heels
Paracelsus
Active Member
Thanks adiggs. I am beginning to wonder if the brokerages reduce/quit loaning shares when Tesla sees strong, continued buying pressure in an effort to reduce their exposure to losses should a margin call be needed? Share lending rates have been extremely low yet shares have never appeared to have been fully available for lending during this very long sustained stock price increase. Clearly the larger firms would have been aware of Tencent's buying thus they/others may still be buying. Since you participate in the program do you see any possible connection from that perspective? (Perhaps a good discussion over some Hammerheads and Ruby's at the Edgefield next time I am in Portland?)Shares available to short may be 0, but Fidelity at least has plenty of shares they can get their hands on to make available. I present show all of my shares as not being lent out - I suspect that is largely true for others in the Fully Paid Lending Program at Fidelity (it seems like as a group, our shares are lent out or they aren't).
I would expect we would also see an increase in the rate Fidelity is charging to borrow shares - my guess is a move from 1% to 1.5% - as part of bringing in the FPLP shares to lend out.
So shares to short may be 0, but that's also with a very low by historical standards rate to borrow shares at 1%. If Fidelity is seeing demand, they can start raising the rate they charge and bring a LOT more shares to borrow into the market.
Or thought of another way - by historical Tesla standards, I rate today's demand to borrow shares to short sell as low. The evidence being that Fully Paid shares aren't being used, and the rate paid to borrow shares is "only" 1%.
It's a light commitment and digging in of heels
ValueAnalyst
Closed
Shares available to short may be 0, but Fidelity at least has plenty of shares they can get their hands on to make available. I present show all of my shares as not being lent out - I suspect that is largely true for others in the Fully Paid Lending Program at Fidelity (it seems like as a group, our shares are lent out or they aren't).
I would expect we would also see an increase in the rate Fidelity is charging to borrow shares - my guess is a move from 1% to 1.5% - as part of bringing in the FPLP shares to lend out.
So shares to short may be 0, but that's also with a very low by historical standards rate to borrow shares at 1%. If Fidelity is seeing demand, they can start raising the rate they charge and bring a LOT more shares to borrow into the market.
Or thought of another way - by historical Tesla standards, I rate today's demand to borrow shares to short sell as low. The evidence being that Fully Paid shares aren't being used, and the rate paid to borrow shares is "only" 1%.
It's a light commitment and digging in of heels
Thank you for that explanation. That's very helpful. How would you expect the number of shares available to short and the associated interest rate on borrowed shares to evolve as TSLA moves into a short squeeze?
Great read that should bring us back to earth at a moment like this and look things realistically for a second. Maybe just for a second...LOL https://www.nytimes.com/2017/04/11/...ecommendation&src=rechp&WT.nav=RecEngine&_r=0
Yet another critic who thinks the model 3 will be late. Sure, if you doubt they can execute then you should be scared and stay on the sidelines. When the model 3 is a runaway success you can buy in on a dip at $375.
ValueAnalyst
Closed
Do you really think a runaway success of Model 3 would increase the stock to only $375?
I think we may see that level before the earnings release tbh...
Well, I honestly do not have any doubt for TESLA as a long term investment and I'm don't intend to sell any shares at all just because of this article or any article. But realistically speaking, nobody can promise that the Model 3 will be on schedule, and even if it's on schedule, there's still a SLIGHT chance that it might not be a runway success as everyone expected. I know everyone here loves Tesla unconditionally, myself included, but sometime when the SP is so high, such as now, and when we all are on cloud 9, it doesn't hurt to bring in a new perspective and look at the matter from a different angle.
ValueAnalyst
Closed
It's surprising to me that oil sold off today following a normal/bullish oil inventory report.
I think investors may be waking up to the fact that Tesla Energy is changing the energy landscape quicker than anticipated.
If this is true, money may start flowing from the energy sector into TSLA.
If this is true, the correlation between TSLA and oil prices would decline over the coming months.
adiggs
Well-Known Member
I apologize in advance for the length
I would expect that in a short squeeze, we will see the interest rate Fidelity is charging to short sellers to increase. This is one lever Fidelity (and all other brokerages) have to decrease the number of shares lent out, and thereby manage their own exposure and risk. That interest rate may go up a lot, fast, depending on the severity of the short squeeze.
Of course I could be wrong about that - a fast rise in the share price could lead to shorts buying to close at a fast pace to get out, with the net result being lots of shares available for short sale, and little appetite for doing so. My thinking for making that prediction (rising interest rates to borrow), is that in a short squeeze, shorts are struggling to find shares they can buy to close their position. More broadly, the total number of shares beneficially owned are being shrunk as the shorts close their positions, making it harder to find shares, and thus the loop. Fidelity can manage that, to some degree, and mitigate risk as well, by increasing the rate they charge - weaker shorts will be driven out by the higher rates, and stronger shorts will pay more on a daily basis to maintain their position (thereby lowering the brokerage's risk).
I would expect to see supply of shares to be borrowed to increase, with our indicator being first that Fidelity is borrowing shares through their FPLP (Fully Paid Lending Program). With the recent program change, the rate paid by Fidelity is 60% of the rate Fidelity charges short sellers, so there are no longer any tea leaves to read between the 2 rates. Now the only thing to know is that shares are being borrowed from FPLP participants or not (my shares haven't been borrowed in close to 2 months - I miss the days of earning a little or a lot for shares I can reasonably expect to still own 10 years from now).
I recognize increasing supply is counter-intuitive. A more accurate statement would be to see an increase in RELATIVE supply, where the rate charged to borrow shares is an indicator of the current balance between supply of shares to short sell, and demand for shares to short sell. Even if the absolute supply is shrinking.
I view a short squeeze as an extreme imbalance between a bunch of market factors, not all of them directly or exclusively having to do with short sellers. One of them being the number of shares in the float that are reasonably easy to trade - a large number of strong longs entering the market will tend to shrink the float, and that reduces the ability of any particular short sale to be closed.
Incidentally, if we see decreases in the total number of shares short in the twice monthly report, while rates stay low, that indicates to me that the aggregate short position is being unwound in a stable and rational fashion. That's an indicator that we won't be seeing a short squeeze or market panic.
Some context:
As recently as 6 months ago, I was being paid more like 5% (so shorts were paying ~10%) to borrow TSLA. There was a glorious day or 2, I think back in August (maybe September), where I got paid 14% (short sellers paid ~25% that day I think). That's been my own, pretty recent and brief experience.
I'm far from an expert, but my understanding has evolved to this point of view.
1) Actual information relevant to short activity is intentionally delayed and kept opaque by the market. Thus we are left to pick through secondary measures to try and understand what is going on.
2) A close to real time (daily) view of demand is a composite view of:
- the shares available to borrow
- the interest rate paid to establish and maintain a short position
- the borrowing of shares brokerages in their Fully Paid Lending Program (brokerages make the least money on these shares, so they are the last shares lent to short sellers)
3) The best longer term view of demand is the actual number of shares short, reported 2x/month with a 2 week delay (hence my first comment about intentional obfuscation by the market).
4) I haven't seen anybody talk about this, but my own gut reaction and feel about the short market, is that it's awfully manual. I get the impression that Fidelity literally makes adjustments at the end of each day regarding the number of shares that are available, which shares to return to lenders, which shares to borrow from lenders, what rate to charge borrowers, etc.. The market adjustments are all just a bit clunky to be a fully automated market with bid/ask quotes and constant market changes.
SIDEBAR: In the bad old days, prior to about 3 months ago, Fidelity set the rate paid to borrow TSLA from me (and other FPLP participants) separately from the rate they charged shorts to borrow the shares from Fidelity. Today, Fidelity would pay me 60% of what they charge to lend out my shares, so that is one fewer seemingly daily adjustments they need to make.
The first bit of context, is that Tesla has a ridiculously large short position. Order of magnitude (I haven't looked up recent numbers) - something like 30M shares short out of 170M shares. So around 1/6th. Other companies are considered to have high short interest at 3 or 5% of shares outstanding.
(A second sidebar - even if I were somebody that sold shares short on occasion, the size of the outstanding short position would keep me out. The trade is crowded and in the event of a short squeeze ... well, let's just say that the theater is way too crowded to empty quickly when/if somebody yells fire. People are going to get hurt if that happens).
The interest rate paid to establish and maintain a short position tells us something about demand to borrow shares and establish (or maintain) short positions. At 1%, relative to Tesla's history, this is relatively low demand.
Meanwhile, whether brokerages are borrowing shares through their FPLP tells us something more about supply. The first thing to know is that very few companies are so heavily shorted that a brokerage will pay anything to borrow those shares. Of the dozen or so companies I own shares in, they are all eligible to be lent out via Fidelity's FPLP - only TSLA has actually been lent out (and TSLA was the reason I signed up in the first place).
Fidelity isn't currently borrowing my shares, so even if they are the last shares Fidelity wants to lend out, Fidelity also has no problem taking 2/5ths of 5% if shorts want to pay 5% to sell shares short. They probably prefer taking 2/5ths of 5%, because they're also getting all 5% on the rest of the shares they've lent out (they appreciate all you folks owning shares on margin!). This isn't currently happening, so while the short sale trade looks crowded to me, I also see lots of room for the market to accommodate more participants with little change in the cost to participate in the trade.
Who and why is someone selling 100k of stock in the last minute to limit the daily climb?
Maybe someone buys 100k all over the day to bomb the SP in the last minute? Is it worth? Is it worth the risk?
Maybe someone buys 100k all over the day to bomb the SP in the last minute? Is it worth? Is it worth the risk?
EldestOyster
Member
You missed the "on a dip" gag. He implied the stock would go much higher than that, and then you would be thankful to be able to buy in at $375 on the day somebody breaks off a door handle and the press goes nuts over it.
Ok, this probably belongs in the other thread. But I now think there is virtually no chance that the model 3 will be late. There are a lot of facts and hints I could list, but it comes down to this essential fact: The company hangs on the model 3 coming out, roughly in July. Everyone loves to point out the model X, but that is an invalid comparison, since it was a nice-to-have model and the S was doing well in the marketplace. With the X they used the time they had, rather than feeling any real pressure.
The prior release was the model S, which WAS an existential crisis, and they got it out on time.
Elon is itching to nail the M3 and move on to the next thing. Other factories, the semi, the truck, roofs etc. They need credibility. That is the one asset that they are in short supply. Too many people roll their eyes (hell even us fans do often) about his pie-in-the-sky plans. They need to do this to keep being able to raise capital and get favorable deals for land, big energy contracts, and supplier deals. They CANNOT mess this up. They CANNOT confirm the "Tesla can't execute" narrative.
They have been very vocal about how they designed the M3 to be easy to manufacture. I think they have made it REALLY easy to manufacture. There is a theory that they figured out how to the final assembly entirely with robots. That is consistent with Elon's plan to do exactly that and the fact that the open roof is part of the design. I think they figured out how to do the wiring with robots. I think they are planning on running a small line very fast.
The first cars are going to employees. If there are some due-bill items because the sun visors are late I think they will just ship them and fix it later.
Normally one has to consider the fact that a CEO doesn't really, cannot really, care about the stock price. But we are in those areas where the stock price really does materially affect the success of the company. If they botch the M3, my argument all reverses. The company survives but their plans are pushed out dramatically because the whole world will shift into wait-and-see mode on the model 3, which won't ship in really high volumes until Q1 or Q2 of next year.
With the model X, Elon gave them a nightmare: Make an impossible car with this list of ridiculous requirements. With the Model 3, Elon gave them a fat softball: Make a decent car (that's better than a BOLT, super low bars all around) that is cheap, fast and easy to manufacture. Instead of thinking of dual-hinge doors, Elon thought and said "the wiring install sucks. how do we fix that". The model X was a gift to buyers but kind of pain in the ass for shareholders. The model 3 will be a lesser product, but a gift to shareholders. A decent, profitable car that is designed to fly out like bullets.
The car will be out on time.
adiggs
Well-Known Member
Some of your question - I have no visibility into and would just be guessing. As a lender of shares, at least on occasion, the only information I have is that Fidelity is borrowing my shares (not who they are lending to), and how much Fidelity is paying me. I mentioned elsewhere - I view a lot of the short selling market as being intentionally opaque; intentional on the part of market makers and intentional on the part of short sellers.
As a market participant, I consider the opacity to be a strong negative, and a good reason to never short sell (maybe buy a Put if you want to stake out a position in that direction).
But managing the risk of the overall position is a big part of what the brokerages do, and reducing shares available for short sale sounds like an imminently practical thing to do at times. Mitigating this, is that there's a lot of money for brokerages to make lending out stock to short sellers. So they do like to lend shares too
I view the seemingly low daily shares available as more of an artificial scarcity thing. That's the number of shares Fidelity is ready to lend today at 1%. At the close of the trading day, Fidelity will take stock and make a decision on how many shares they are ready to lend tomorrow. Even if they actually have 5M shares, I don't think I've ever seen them have >1M shares available in @vgrinshpun's reports, and mostly more like 500k.
Maybe it's a mechanism they use to constrain the daily growth in the aggregate short position - so it doesn't get bigger, faster, than their daily manual update and decision making process can react to and manage. H'mm... (the idea that the market is managed as a daily manual update is my own idea and sense of things - not something I've seen anybody write down anywhere)
LoL Rick
Like Buttah
I thought parts of that NYT article sounded familiar. It was dated 4/11 and mentioned here last week.
NYT running a negative article on Tesla? I'm shocked!
NYT running a negative article on Tesla? I'm shocked!
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