4 ms·
I don't get it, how?
by edoceo 6y ago
I 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.