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Tesla Motors, Inc. Message Board

  • psychtrader10 psychtrader10 Mar 28, 2013 12:08 PM Flag

    Important Warning to those Lending TSLA Stock

    It can be very smart for those lending out TSLA stock call in their loans in advance of major news announcements, such as this coming Tuesday's announcement and all earnings announcements. The lost interest for one or two days is minimal and the potential forfeited gains from having the stock out on loan is enormous. The reason is that the collateral for the loan just barely covers the pre-news market price of the stock. Furthermore, the interest on the loan paid by retailer brokers, unlike the premium for a put option, does not adjust properly to the actual loan value of the stock for a day on which news is expected. In the case of unexpectedly good news, you have no collateral protection for a sharp increase in the price of the stock. In a situation where shorts not only fail to meet their margin calls, but exhaust the capital in their accounts, you will not receive any of the increase in the stock price, just the price prior to the spike upwards. Of course, benefiting from price spikes is the reason for owning the stock in the first place. On normal trading days, this is not a significant problem, but ahead of news it can be. In summary, it is easy to revoke your loan and then reinstate it after the news and for most retail investors it may well be a wise course of action.

    Sentiment: Buy

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    • Institutional brokers are paying between 20-30% in the last 1 month for borrowed TSLA shares. Not only brokers warranties the shares, but also a separate reputable bank. It is a risky stock and that is why the premiums are hi.

      Place your bets: With Elon Musk or with the shorts!

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