Short-sellers are increasing their bets against Tesla as the automaker's stock rallies to new highs.
Tesla is poised to become the first company to have $20 billion in short interest, according to data from financial analytics firm S3 partners. Recently, the value of shares of Tesla that have been sold short climbed to $19.95 billion, S3 data show.
Tesla has also maintained its position as the largest equity short in the domestic market, Ihor Dusaniwsky, managing director of predictive analytics at S3, wrote in a Thursday note.
Both Tesla and Nikola, a competitor in the electric vehicle industry, are solid candidates for a short squeeze, according to Dusaniwsky. A short squeeze is when short-sellers are forced to close their positions because a stock's price has gotten too high. If many short-sellers exit the trade at once, it can drive the share price even higher.
Tesla could see a short squeeze due to the stock's blistering rally - it's up 233% so far this year.
"If Tesla's stock price continues to trend upward, we expect even more short covering as mark-to-market losses accumulate," said Dusaniwsky. "Traders can expect a squeeze on their shoulder from their controllers to trim or close out their positions as their Tesla losses breach risk limits."
Nikola could face a short squeeze due to high borrowing fees, according to S3. Stock borrow fees to bet against the company have hit the 600% level on outstanding short positions, while new stock borrows have a fee between 850% and 950%.
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July 10, 2020 at 10:39PM
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Tesla is close to becoming the first stock with a $20 billion short bet against it (TSLA) - Business Insider
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