Thread by @SqueezeMetrics

At just 30mm shares, $TSLA short interest is pretty low for a company that many smartish folks believe is minutes from bankruptcy.

Why?

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The answer is that many of the $TSLAQ cadre have chosen to express their opinions specifically by means of OTM puts, which have low cost, but also low probability of profit. For "betting on zero," though, they are the ideal instrument, allowing for maximum leverage.

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Interestingly, these puts foist a hedging obligation on $TSLA option dealers. If share price falls, they will need to short more shares to re-hedge -- and as "bona-fide market-makers," they are permitted to short naked (i.e., without securing a borrow).

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Judging by the persistence of $TSLAQ, it does not seem likely that these OTM put holders would be interested in taking quick profits on their puts, either (hence the "Q").

This means that option dealers will be stuck with lots of short gamma if things get hairy. Yikes!

4/5

So, ultimately, demand to short $TSLA shares is huge, but latent. The demand is conditional on the stock's performance.

It also means that, despite Reg SHO, investors can get someone else to naked short on their behalf by simply buying puts.

What a wonderful world.

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