S3 Analytics: Tesla at $420/share Might Send Tesla Shorts Up in Smoke

Tesla Inc.’s (TSLA) Chairman/CEO/Co-founder Elon Musk tweeted “Am considering taking Tesla private at $420. Funding secured.” and within an hour Tesla’s stock price steaked up to over $370/share, up +8%. The $12.8 billion of Tesla shorts, who were down $2.6 million in mark-to-market losses this year, and down $5.1 billion in mark-to-market losses since 2016 have taken another shot to the ribs today. With Tesla at $367.25/share shorts are down $884 million in mark-to-market losses today, bringing August losses to $2.4 billion, year-to-date losses to $2.6 billion and losses since 2016 to $6 billion.

Tesla short sellers are still in the red even after a strong July. Tesla’s stock price is down -0.50% today, generating +$52 million in mark-to-market profits. This follows a very strong July when Tesla’s stock price fell -13% and short sellers made +$1.53 billion in mark-to-market profits. Short sellers’ year-to-date mark-to-market loss on their Tesla short exposure is now down to -$118.6 million, or -1.11%.

Today’s earnings call will either embolden short sellers and spur them on to increase their short exposure to the $11 – $12 billion levels we saw mid-year or trigger a Tesla rally which may squeeze out the less tenacious shorts and provide a buy-to-cover kicker to the rally. With shorts not increasing or decreasing their positions prior to the call there is does not seem to conviction in either direction which is confirmed by the large amount of out of the money call and put option buying, possibly putting on straddle or strangle trades. Option investors might not be sure which way Tesla’s stock price will go, but they are pretty sure it will be a volatile move.

Want deeper insight into the above analysis?

Contact: Ihor.Dusaniwsky@S3Partners.net

Managing Director Predictive Analytics, S3 Partners, LLC

For more information on S3’s reporting, data and analytics solutions, email us at sales@s3partners.net

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