Tesla shorts feel a lot hurt as they lose $6.08 billion amid 11-day TSLA rally

Tesla shorts sellers have lost a substantial $6.08 billion on a mark-to-market basis since the EV maker’s recent winning streak started. The update was shared by S3 Partners, a financial data, analytics, and services firm.

This was a blow to those betting against the company. Short sellers borrow shares and sell them, hoping that the price will go down. They then buy the shares back at a lower price, return them to the lender, and pocket the difference.

With this in mind, Tesla’s rally, which has seen the electric vehicle maker’s stock rise by around 35% since May 24, has proven to be particularly painful for short-sellers.

S3’s head of predictive analytics Ihor Dusaniwsky noted that Tesla is the most shorted stock in the world so far, with a total of $22.43 billion worth of shares sold short. And despite their mounting losses as Tesla’s shares surged, short sellers have continued to add to their bets.

Dusaniwsky is referring to the actions and mindset of short sellers in a particular market. Short sellers are investors who make a profit by betting against a stock or security. They sell borrowed shares with the expectation that the price will decrease, allowing them to buy back the shares at a lower price and return them to the lender, pocketing the difference.

Dusaniwsky suggests that these short sellers were skeptical about the sustainability of the long buying price support. The “long buying price support” refers to a situation where investors were actively purchasing and driving up the price of a particular asset. However, the tesla shorts sellers were not convinced that this upward trend would continue indefinitely.

According to Dusaniwsky, these short sellers believed that a price retracement, or a reversal in the upward movement of the price, was inevitable. They anticipated that the price would eventually fall, allowing them to profit from their short positions.

This statement highlights the differing perspectives of long buyers and short sellers in the market. While long buyers were optimistic and confident in the price support, tesla shorts sellers remained skeptical and saw an eventual price decline as inevitable. These differing opinions and strategies contribute to the dynamic nature of the market as participants take positions based on their assessments of future price movements.

According to a Reuters report, in 2023, traders increased their short positions on Tesla by an additional 15.3 million shares, with a total value of $3.6 billion. Moreover, over the past 30 days, bearish bets on Tesla have expanded further, with an additional 1.3 million shares worth $303 million being sold tesla shorts. This indicates a 1.4% increase in short bets against Tesla, despite a significant 39% rise in the stock price.

The statement refers to the observations made by Dusaniwsky, who likely tracks short selling activity in the market. Despite the stock price of Tesla experiencing a substantial increase, there are still traders who remain pessimistic about the company’s future performance and have increased their short positions accordingly.

Short sellers are betting on a price decline in Tesla’s stock. By selling borrowed shares, they hope to profit by buying them back at a lower price in the future. These short positions suggest that there is a segment of the market that believes the current stock price surge is not sustainable and anticipates a potential price retracement.

The information provided highlights the ongoing dynamic between bullish investors, who are optimistic about Tesla’s prospects, and bearish traders, who are skeptical and continue to bet against the company’s stock. It reflects the diverging opinions and strategies within the market, as participants take positions based on their assessments of Tesla’s future performance.

The recent rise in Tesla’s stock price can be attributed, at least in part, to two factors mentioned in the statement. Firstly, the momentum surrounding Tesla’s North American Charging Standard (NACS) has contributed to the positive market sentiment.

This standard has gained further traction as it has been confirmed that major automotive companies like Ford and General Motors will adopt it for their upcoming electric vehicles. This endorsement from Detroit auto giants indicates a growing recognition and acceptance of Tesla’s charging infrastructure, which is seen as a positive development for the company.

Secondly, expectations are high regarding the announcement of the highly-anticipated Project Highland update for the Tesla Model 3.

his update is anticipated to bring significant improvements or new features to the Model 3, generating excitement among investors and enthusiasts alike. Anticipating positive news about the update, market participants have been optimistic about Tesla’s future prospects, leading to increased demand for the company’s stock.

These factors, combined with other market dynamics and investor sentiment, have contributed to the recent surge in Tesla’s stock price. Momentum from the NACS adoption and the upcoming Project Highland update have added to the positive narrative surrounding the company, generating enthusiasm and driving investor confidence.

Tesla shares closed up 4.4% at $245.08 on Friday, after earlier hitting their highest level since early October.

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