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Tesla Motors, Inc. (TSLA) Message Board

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  • rm1280 rm1280 Mar 7, 2012 7:36 PM Flag

    Response to nomore's question regarding a squeeze

    A number of points are entirely debatable.
    1.The only time a shorter will pay 10-25% to hold a short is if there is a serious immediate case for Ch11 or worse - say the day before a major existential lawsuit is to be decided. A few retail shorters might end up paying that but only if they ignore all advice, warnings and information from their broker.
    2.Institutional longs also have a problem during major price rises. A nicer problem than the shorts but a problem nevertheless. You simply can't dump 5-10% positions at a price. The price you hope to get never materializes, and the price for the second block isn't always more than the first. A first big block will move the market if a major long wants to cash out. So they have multiple targets and a liquidation program as the price moves significantly higher. A retail long can get lucky and try to time the best price, but they often have to use market orders and not limits.
    3. A big institutional holder like Fidelity may claim they are long term holders and they may not. And you may think they are long term holders and maybe they aren't. They don't have just one price for their holdings. They have multiple targets and each of the funds has a slightly different strategy. And these targets are likely revised based on their analysis on a weekly basis. You can be sure that if the price goes to $20 before it goes to $70 that they will be sellers and not holders. If it goes to $20 it has gone there for a reason, and it will not be good news. They won't hold and gamble that it will then recover and go to $70 before it goes to $0. That wonderful proforma target of $70 will turn into a real limit sell of $15.
    4. There certainly can be a squeeze on the shorts or a squeeze on the longs. The shorts are aware of this possibility because that is a fact of trading as a short. Naive longs typically aren't as aware and often don't have a structured trading plan in place to deal with sudden down movements. But as for a surprise trigger for a squeeze on TSLA, it's always possible, but the situation has been fairly well defined for many a quarter now. The short vs long view on TSLA is based on the success of the S. It was never on the roadster and it isn't on the drivetrain, electronics, battery or service agreements. If the S is a success then the stock valuation will comes into alignment with some more standard metrics, and that doesn't necessarily mean higher. If the S misses then the longs should ask their broker for a real paper stock certificate to hang on the wall.
    4. When the short position is as big as it is in TSLA you can't assume that it is underfunded naive retail shorts. There are a lot of well funded, well managed, well analyzed, well planned positions. Those don't get scared out because things go bad for a while. This is like trench warfare in WW1. Millions didn't mean anything in the short term. All that mattered was the end result.

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    • 1. You couldn't be more wrong. Stocks like TSLA are considered hard to borrow, and therefore you pay to be short actual shares. There are no exceptions. Yeah you can short blue chips like cat,wmt etc. and never be charged to be short, but I have never shorted volatile tech/small float stocks for free. The above info is from using at least a dozen different brokers throughout the years.
      2.ever heard of level 2/3? Lol
      3.irrelevant, planning your trades because of a large holder may be long or short is not too smart. Might as well flip a coin to see if you should buy or short a certain stock. Ha ha
      4. Determination of Success for the S is a long ways off. The better metric would be a launch on time in July.
      5.Hedge funds go broke all of the time. If they were as smart as you portray, everybody would be making money 100% of the time. The market is a zero sum game. For every winner there has to be a loser.

 
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