Hopefully everyone isn't doing that. That would be some serious selling off in about 6 months.
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Are you also investing in Tesla?
- Thread starter Fr23shjive
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Hopefully everyone isn't doing that. That would be some serious selling off in about 6 months.
dmckinstry
Model X 2019
Hopefully everyone isn't doing that. That would be some serious selling off in about 6 months.
Well, I intend to sell off about an eighth of my TSLA in about 6 months. That's when that part is no longer short term. Of course, I won't be selling any if it's down. Barring a real disaster I would expect it to eventually recover. On the other hand, if it isn't up some, I don't think I can convince my wife to let me continue with the purchase.
Norbert
TSLA will win
Closed at $31.15 today, just for the record. The highest this year. Curious what will happen to the short sellers, ups and downs seem still very possible in the next half year.
EDIT: BTW, is there a way to tell within which time frame most short sellers will see the need to exit? Or could most of them be making a long-term bet?
Curious what will happen to the short sellers, ups and downs seem still very possible in the next half year.EDIT: BTW, is there a way to tell within which time frame most short sellers will see the need to exit? Or could most of them be making a long-term bet?
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Mycroft
Life happens
Remember, it was just early December that it was nearly $35. So if there were any skittish shorts, they would have already gone. I think the main shorts are totally betting against Tesla as a company. I also think they're going to find this bet very expensive.
Norbert
TSLA will win
Many of them might think that the Model S launch will have lots of problems, or that there will be problems soon after, for example Tesla not being able to make profit, causing the stock to go below $20.
Mycroft
Life happens
Norbert
TSLA will win
Not to be a negative nancy but they could be right. Any little problem could cause the stock to plummet. It'll probably rebound reasonably quickly but if there is any news of a recall or delay in shipments or production it definitely could cause the stock to drop. Its a volatile stock and people that are short and long could make money. Long term I think the stock is a sure thing but in the short term it's anybody's guess.
NigelM
Recovering Member
There are 2 ways to do this and I'll try to explain it so that anyone can understand (some here are maybe less experienced investors)...
1. The "simple" way is just to short a stock and take up to 30 days to deliver it. Essentially the shortseller is betting that he's going to be able to buy below his short price at any time in the next couple of weeks.
2. The "complicated" way is to make sale contract at a fixed price for some date in the future. For example: *A* promises to sell 100 shares to *B* at $30.00 on March 17th. This gives more time but requires a buyer to be there "betting" in the other direction.
The first method can be done by just about anyone who has some credit on their trading account and so tends to be the most common. This is where time could run out on the shortsellers if the stock keeps rising. Of course, they may also have hedged their bets by buying some as the price starts to rise (even though that may be counter intuitive to their bet!).
My gut feel is telling me that we may be heading for a squeeze in the second half of this month....
Norbert
TSLA will win
This sounds like in some cases it is just an offline sort-of-bet between two parties. But so far I've been assuming that selling short actually makes the stock price go down, and requires the short-seller to later buy the stock again, at which time this will make the stock price go up again (but overall often having the effect of driving the price down). Furthermore, if the stock goes up a lot, short sellers are often forced to buy in order to avoid an even worse case, for which they would not be prepared to deal with, hence the possibility of a "short squeeze" where the price may sky-rocket a bit since suddenly a lot of short sellers are forced to buy. So how much of this is correct?
NigelM
Recovering Member
That's a good way of describing it. Pretty high risk, but you can make money without ever putting out cash up front.
Well it can, but if done on a large scale in certain circumstances you could find yourself going to the big house. Basically short selling is legal but market manipulation isn't. If you went out tomorrow and shorted 10million TSLA at $20 the price would plummet, but you still risk it coming back up. Now imagine you're in a squeeze, so you short 20 million more to force the price back down...you'll very quickly find your trades under investigation and have to face the consequences.
Yup, could happen; however, a short squeeze forcing the price up is usually only temporary. The market will find the right price again pretty quickly.
Norbert
TSLA will win
I wasn't talking about market manipulation (although that wouldn't surprise me), but about the assumption that like normal selling of stocks, it would take the higher priced buy-offers out of the market, so that only the lower-priced ones are left. I'm not sure about whether you intended to confirm that. As, in the other direction, how would a short squeeze otherwise make the stock price go up to such a degree ?
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NigelM
Recovering Member
It's always a question of supply and demand. Short sellers are forced to buy sooner or later, if they wait until the last moment then they must buy at any price no matter what supply is available. If there are few sellers then the demand from short sellers will push the price up pretty quickly regardless of what other buy offers exist. It's a bit of an over-simplification, but price always comes down to how much stock is available and who needs to buy when. If supply exceeds demand then the price will drop and there wouldn't be a short squeeze (or at least it wouldn't be so tight).
The reason I'll take any analyst advice with a pinch of salt is that apart from close ties with the companies they might be promoting, I have seen one example of a stock that was hyped way past its reasonable value, only to then be shorted by a partner in the analyst firm.
Norbert
TSLA will win
For any time limit, can't the short seller just immediately re-short-sell the stock? I wonder whether there is a way to say more about the stocks current sold-short. Currently there are about $24 Million stocks sold short, which I'd expect means that when they buy back the stock, that could have a noticeable lasting positive effect on the stock (in addition to that the stock will likely already be going up at such a time). Is there any experience (from other stocks) in regard to at which point short-sellers usually buy back a stock for good, that is, at which point the total number of short-sold stocks should go down significantly?
That is, do they behave pretty much similar to anybody else possibly buying stocks, or is their rationale a bit different? I'd expect that in general they are more likely to buy back the stock as soon as the company analyst recommendations go from "sell" to "hold", whereas the average buyer is more likely to buy when the rating goes from "hold" to "buy". With Tesla, the strange thing seems to be that currently there are quite a few "buy" ratings, but at the same time a high percentage of short-sellers. It might be interesting to understand why that would be the case, if that is a good way of looking at it. My guess would be that with Tesla, the opinions about Tesla's future are unusually polarized. Which might change with a successful Model S launch, but might also be a longer lasting thing involving expectations of battery tech/price development, company-wide profit-ability or even political developments.
NigelM
Recovering Member
Norbert, I think you answer your own questions when you note that "opinions about Tesla's future are unusually polarized". TSLA is a volatile stock because (IMO) the market believes that Tesla will either deliver a great car in the Model S or they won't deliver at all. The nay-sayers short the stock, the believers buy it. Once a number of successful Model S deliveries are completed it would be fair to expect the total volume of shorts to decrease; if they decrease dramatically then the stock will see a lasting positive effect and I agree with your implication that TSLA will then start to be regarded with more standard measurements.
siry
Member
I don't think the short interest is generally tied to whether they will deliver the model S or not. Almost everyone assumes that's the case (as they should). The typical short is betting that Tesla cannot be profitable at volume. They differ in opinion as to whether it is primarily a gross margin issue, a long run demand issue, or both. They are thinking beyond the 2012 launch to what the gross margins and volume will look like in 2013.
NigelM
Recovering Member
Short-selling is by it's very nature a short-term proposition. Anyone shorting the stock now because they think Tesla won't achieve profitability in 2013 would be foolish. Today's sellers are shorting the stock because they think the price will go down in the near future. Someone who makes a futures contract on TSLA will be taking a massive risk if they are looking at 2013 and the upside would be limited, it's hard to see why anyone would think it worth it.
smorgasbord
Active Member
Actually, there are many people who have not seen a Model S in person and who believe Tesla will run into a variety of production issues, whether massive new assembly line failures, supplier problems, quality things such as NVH or paint, performance/economy things based on weight bloat, etc. Many of them appear to be people who have previous automobile industry experience. If Model S is delayed enough, many think Tesla will have to obtain additional funding. Some think Tesla has to get more funding just to scale Model S anyway. There's a guy on SeekingAlpha (you-all know whom I'm talking about) who has a public bet that XIDE and TSLA stock prices will cross before the end of this calendar year. XIDE's trading under $4 now, TSLA around $30.
At any rate, it would appear there's plenty of short term price decline expectations out there.
