Submitted by Peter Garnry of SaxoBank
Summary: Tesla shares have exploded this year burning short sellers and the last two trading sessions have been an outright short squeeze detaching Tesla from meaningful fundamentals. It is quite likely that the stock will normalize. How it plays out and when we don't know, but if investors want to play any normalization we go through the various options and the risks associated with them.
Tesla shares are up 36% in the last two trading sessions and up 111% year-to-date. We are observing a classic short squeeze where many short sellers are forced to reduce their position. The interesting math of short selling is that a short position increases in exposure (weight in the portfolio) as the position goes against you which is opposite of what is happening on long positions. So if a stock declines that you have short then you short even more to maintain the same risk exposure in the portfolio.
http://www.zerohedge.com/markets/saxobank-our-view-short-squeeze-tesla-shares?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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