General Question

crazyguy's avatar

Is there some way of telling if shorts are launching an attack on a stock?

Asked by crazyguy (2936points) 2 weeks ago

I am fairly active in holding Tesla stock, and writing calls against the stock (covered calls). Every once in a while I see a trading pattern that suggests to me that there is a co-ordinated effort to hold the price at some level. Is there any research on this subject?

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10 Answers

zenvelo's avatar

A “coordinated effort” is not legal. That is price manipulation. Such acts are picked up fairly easily in surveillance reports, investigated and prosecuted.

It is not at all uncommon for a stock price to be “pinned” to an options strike price with large open interest. That happens from many traders using the same strategy, especially at expiration.

Back in the 1900s, expiration was only once a month, Now expiration is every Friday in many names, especially active names like TSLA.

You don’t say how long the price is held at some level. It would not be at all odd for a price to be held for a portion of a trading day if an institution is filling a very large order.

crazyguy's avatar

@zenvelo Thank you for a thorough answer.

One follow-up. TSLA volume on a typical day is $20–30 billion. Do you really think any group of individual investors can make even a small dent in the price?

zenvelo's avatar

@crazyguy No, that’s why your speculation about a coordinated attack is not realistic.

Response moderated (Unhelpful)
elbanditoroso's avatar

Those recent ‘attacks’ on GME and others dealt with stocks that had been driven artificially lower by hedge funds and speculators doing the shorts.

Tesla, on the other hand, is not far from all time highs, and few (some of course) are selling it short planning for dramatic declines. In fact, just the opposite, it is going up almost every day and has recovered from the hundred point dip last month.

So – Tesla would be a poor choice for any sort of a short attack. It’s not weak and it’s not being undersold.

And at its current price ($736) it is far too expensive for the Reddit-level fanboys to play with. Those guys are happy to screw with shorted stocks that are selling for $10 or $20/share – the price of admission for Tesla is 35 times higher.

crazyguy's avatar

@elbanditoroso Thanks for your reply. While I agree with your math, keep in mind that Tesla short interest in Nov 2020 totaled over $22 billion! I do not believe SI in GME ever exceeded that.

kritiper's avatar

If they’re riding up then they are totally launching an attack.

RedDeerGuy1's avatar

My news gives me a warning of when sites like Reddit are mass buying a stock. Like GameStop.

crazyguy's avatar

@RedDeerGuy1 How about if a stock is being mass sold?

RedDeerGuy1's avatar

@crazyguy I watch BNN Bloomberg and it it helps. They don’t have too many breaking news on stocks though. I have never bought stocks. I just watch business news for fun.

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