@garyblack00 1/
Gary, I don't have the investigatory tools to answer your questions about last Friday's disorderly closing cross definitely.
A potential explanation is that indexers wanted to avoid a close above $700 and abused the 10% circuit breaker rule.
Gary, I don't have the investigatory tools to answer your questions about last Friday's disorderly closing cross definitely.
A potential explanation is that indexers wanted to avoid a close above $700 and abused the 10% circuit breaker rule.
https://twitter.com/truth_tesla/status/1340043123670564864
@garyblack00 2/
There was a 15m shares shortfall of indexing shares, as indicated in the closing cross indicator.
But whoever was accumulating for big indexers, might also have written $700 calls to finance it.
There was a 15m shares shortfall of indexing shares, as indicated in the closing cross indicator.
But whoever was accumulating for big indexers, might also have written $700 calls to finance it.
@garyblack00 3/
At around 3:20, seeing the lack of shares, the big index accumulator started flooding the TSLA market with sell requests, overwhelming demand & triggering stop losses of retail & other investors.
The sell tick below alone was over 400,000 TSLA shares.
At around 3:20, seeing the lack of shares, the big index accumulator started flooding the TSLA market with sell requests, overwhelming demand & triggering stop losses of retail & other investors.
The sell tick below alone was over 400,000 TSLA shares.
@garyblack00 4/
This kind of immense artificial selling overwhelmed the order book and sliced through to around $629.
At which point the accumulator flipped the strategy to abuse the +10% SEC rule on the closing cross.
This kind of immense artificial selling overwhelmed the order book and sliced through to around $629.
At which point the accumulator flipped the strategy to abuse the +10% SEC rule on the closing cross.
@garyblack00 5/
The index accumulator picked up millions of shares from the artificially triggered stop cascade, then started buying aggressively at 3:50, when the lack of index shares became obvious to other market participants too.
The index accumulator picked up millions of shares from the artificially triggered stop cascade, then started buying aggressively at 3:50, when the lack of index shares became obvious to other market participants too.
@garyblack00 6/
In the closing cross, the index accumulator provided just enough shares (69m) to avoid a higher than $700 close: $695.
Then in after-hours ~45m shares were distributed to the index customers, in large block trades, at a $15 discount, to lower the indexing rebalancing cost.
In the closing cross, the index accumulator provided just enough shares (69m) to avoid a higher than $700 close: $695.
Then in after-hours ~45m shares were distributed to the index customers, in large block trades, at a $15 discount, to lower the indexing rebalancing cost.
@garyblack00 7/
The "official" closing price was $695 - and the ~45m shares distributed in after-hours lowered the cost basis of indexers by about $15×45 = $675m.
This $675m directly goes to the passive index fund bottom line. Where did it come from? From the assets of index fund customers.
The "official" closing price was $695 - and the ~45m shares distributed in after-hours lowered the cost basis of indexers by about $15×45 = $675m.
This $675m directly goes to the passive index fund bottom line. Where did it come from? From the assets of index fund customers.
@garyblack00 8/
But again, this is a hypothesis based on the disorderly price action that swung the price from $670 to $628 to $695, a +10% swing, within minutes.
But again, this is a hypothesis based on the disorderly price action that swung the price from $670 to $628 to $695, a +10% swing, within minutes.
@garyblack00 9/
I don't have the investigatory powers & tools to answer your questions.
But both those who sold at $628, and the index fund customers were harmed.
I don't have the investigatory powers & tools to answer your questions.
But both those who sold at $628, and the index fund customers were harmed.
@garyblack00 10/
If about 10m shares were accumulated anomalously in the disorderly artificial stop cascade the largest buyer (who had early insider information about the shortfall of indexing shares) caused about 10m shares to be sold at an average price of $635.
If about 10m shares were accumulated anomalously in the disorderly artificial stop cascade the largest buyer (who had early insider information about the shortfall of indexing shares) caused about 10m shares to be sold at an average price of $635.
@garyblack00 11/
If these 10m shares, bought artificially low, were sold to indexers at a weighed average price of $690, then the damage to affected Tesla shareholders was ($690-$635)×10m = $550m.
Total damage over 1 billion dollars.
If these 10m shares, bought artificially low, were sold to indexers at a weighed average price of $690, then the damage to affected Tesla shareholders was ($690-$635)×10m = $550m.
Total damage over 1 billion dollars.
@garyblack00 12/
Anyway, the more important question for next week is that despite the stop-cascade shenanigans, only 69m+45m = 114m TSLA shares were passed to indexers, indicating a potential 10-15m shares shortfall.
Anyway, the more important question for next week is that despite the stop-cascade shenanigans, only 69m+45m = 114m TSLA shares were passed to indexers, indicating a potential 10-15m shares shortfall.
@garyblack00 13/13
If true, then index funds will still have to buy TSLA shares in the next 3 days, to finish the S&P 500 rebalancing. The extra $600m+ in lower-price shares might be the funding for this.
Depending on macro conditions, this might set next week's TSLA price action.
If true, then index funds will still have to buy TSLA shares in the next 3 days, to finish the S&P 500 rebalancing. The extra $600m+ in lower-price shares might be the funding for this.
Depending on macro conditions, this might set next week's TSLA price action.
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