Short Sellers of Tesla Stock Were Put Under More Pressure After the Most Profitable Trade In 2022

Tesla Stock

Tesla Stock (NASDAQ:TSLA)

Short sellers on Tesla stock (NASDAQ:TSLA) are putting extra pressure on the electric car manufacturer helmed by Elon Musk, fresh off their most lucrative year ever.

According to statistics compiled by analytics company S3 Partners, short sellers (those who sell shares they have borrowed in the hopes of repurchasing them at a cheaper price) have expanded their short holdings on Tesla stock to over 79 million. This is a rise of about 4%, or $325,000,000, in new short sells, over the preceding 30 days.

Following the precipitous plunge in Tesla’s stock price, short interest has decreased to $8.76 billion, or roughly 3% of the share float, from $14 billion a month earlier.

In 2017, Tesla’s stock price dropped by around 65%. The drop intensified after Musk’s purchase of Twitter, which was seen as a diversionary tactic by the billionaire CEO. During Friday trading, Tesla shares dropped as much as 7.9% to $101.81, hitting a new 52-week low, before recovering to close up 1.2% at $111.69. So far this year, the stock price is down around 9%.

According to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, “it appears like shorts believe the stock has some further downside risk.”

“Short sellers will begin closing their bets once the stock price reaches its target price. Not yet, at least not in Tesla, “His words.

According to S3 statistics, shorting Tesla in 2022 was the most lucrative bet in the U.S. market, netting investors $15.85 billion in paper gains. Even though it was the most incredible year ever for Tesla short sellers, they have only recovered roughly $20 billion of the $60 billion losses expected to incur between 2010 and 2021.

“Some shorts are definitely cashing out their profits while fresh shorts may be cycling in on the expectation that the decline continues,” said Evan Niu, an analyst at Ortex, which monitors real-time short-interest data.

Pricing in Tesla options indicates that pessimistic bets are more popular than bullish ones, with a 53% likelihood that Tesla would decline more than 12.5% over the next three months. Refinitiv data indicated that options posture suggests a 31% chance that the shares would climb by more than 12.5% during the same time.

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About the author: I'm a financial journalist with more than 3 years of experience. I have worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan.