4 ms·
It's what's driving TSLA's wild growth.
by rednerrus 6y ago
It's what's driving TSLA's wild growth.
- edoceo 6y agoI don't get it, how?
- kinghajj 6y ago1. Retail investors buy TSLA calls. 2. Market makers sell these calls, and so buy TSLA shares to cover their position. 3. Due to #2, TSLA shares appreciate, as well as the calls from #1. 4. Retail investors see all the money being made, and FOMO in to buy more calls; go back to #1, repeat.
- beezle 6y agoTSLA has a pretty small float which is a large part of that.
- im3w1l 6y agoWould this really happen be a relevant dynamic over long time periods? I would assume that at some point the market makers get nervous and stop selling calls?
- dilyevsky 6y agoWhy? they have cover and already pocketed fees
- objektif 6y agoIt does not have to be long time its up more than 5 folds in the last few months.
- im3w1l 6y agoBy long time periods I meant > 1 day. Maybe for a few hours some algorithm can do it's thing mindlessly, but then some real person will look at holdings with human judgement and start worrying. But I guess it depends who you think will be doing the marketmaking, and how stupid you think they are.
- colinmhayes 6y agotsla is up 22x in the past year and a half
- deleted 6y ago[deleted]
- edoceo 6y agoOk, I see so around #3 sell to close? Or do you take the underlying?
- overcast 6y agoSell to close before expiration, it's usually never worth getting assigned shares.
- zelly 6y agoIt's not. Tesla's stock price is driven by supply and demand. Even after a 5-for-1 split, there still is not enough float. Many shareholders are true believers.
- moltenguardian 6y agoUnlikely, for the gamma squeeze to work on TSLA, the Market Makers need to hold the shares after the options expire. Otherwise when the options close, they wouldn't need to maintain their exposure. For reasons we don't know, the shares remain high even after the expiration.