1. Investing and the Tesla
Short Squeeze
https://profitableinvestingtips.com/profita
ble-investing-tips/investing-and-the-
tesla-short-squeeze
2. By
www.ProfitableInvestingTips.com
Tesla is on a tear with the stock
price up nearly three-fold in the
last year. While some see this
as a vindication of their faith in
Tesla over the years, others see
the most recent surge in Tesla’s
stock price as a classic short
squeeze.
3. By
www.ProfitableInvestingTips.com
While Tesla has been going up, many
traders have shorted the stock in
expectations of a substantial
correction. When that has not
happened and they have had to buy
the more-expensive shares to cover
their positions, this has driven the
stock price even higher. Here are our
thoughts on investing and the Tesla
short squeeze.
5. By
www.ProfitableInvestingTips.com
In just a month Tesla stock has gone
from $450 a share to $900 a share.
For a stock that sold for $17 a share
when it opened a decade ago, this is
an impressive success story. Many
who have invested in Tesla over the
years firmly believe that electric cars
are the future of the auto industry
and that Tesla will be the leader.
However, Tesla has rarely made a
profit and carries about $13 billion in
debts.
6. By
www.ProfitableInvestingTips.com
They had severe production
delays a couple of years ago
which took the stock down from
the $400 range to about $200
before it started to recover in
light of meeting production
quotas and eking out a profit.
7. By
www.ProfitableInvestingTips.com
None of this prepares us for the
stellar run-up of Tesla’s stock
price in the last month. The Wall
Street Journal looks at this
situation and compares it to oil
and bitcoin bubbles. They note
that it has the characteristics of
a short squeeze.
8. By
www.ProfitableInvestingTips.com
The gains are proving to be a thorn in
skeptics’ side. Despite some short-
covering over the past few weeks,
there is still some $14 billion in short
interest against Tesla, making it the
most shorted U.S.-traded company,
according to financial analytics firm
S3 Partners. Short sellers borrow
stocks and sell them, profiting if they
are able to repurchase the shares at
lower prices.
9. By
www.ProfitableInvestingTips.com
“The situation is a textbook short
squeeze, albeit on an unprecedented
scale,” said Matt Weller, a market
researcher at Gain Capital. Last fall,
short interest in the stock was about
25%. As the price went up, those
traders were forced to sell their
stock, which drove the price up. That
forced others to sell, which further
drove the price. “And so on,” Mr.
Weller said.
12. By
www.ProfitableInvestingTips.com
A short squeeze is a situation in which a heavily
shorted stock or commodity moves sharply higher,
forcing short sellers to close out their short positions
and adding to the upward pressure on the stock.
Short sellers are being squeezed out of their short
positions, usually at a loss. Short squeezes are
generally triggered by a positive development that
suggests the stock may be embarking on a
turnaround. Although the turnaround in the stock’s
fortunes may only prove to be temporary, few short
sellers can afford to risk runaway losses on their
short positions and may prefer to close the position
even if it means taking a substantial loss.
13. By
www.ProfitableInvestingTips.com
In short, if you will forgive the pun,
Tesla is currently the most-
shorted stock and many short
sellers have been forced to get
out of their positions by
purchasing a higher price which
in turn drives the price even
higher.
14. By
www.ProfitableInvestingTips.com
These situations typically correct
themselves when the stock
finally heads back to its intrinsic
stock value. We may have seen
the start of that dynamic at the
end of yesterday when Tesla fell
by about $100 at the end of the
session.
