If enough people buy TSLA puts could there be a long squeeze? Opposite of short squeeze.

Submitted by autistictheory t3_z7hhw2 in wallstreetbets

So i remember back with the big short squeeze of you know who stock (clue: deepfuckingvalue) one of the reasons it squeezed was because when tons of people buy calls in a short time the market makers have to buy the shares in order to hedge their own short call position they sold.

So if tons of people started piling on TSLA puts would a similar thing happen that hedge funds would have to sell the stock or short it, causing a big cascade downwards?

Just an honest question. I just have some TSLQ and am considering buying TSLA puts.

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VisualMod t1_iy6l2u8 wrote

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VisualMod t1_iy6l3ov wrote

>Yes, it is possible that hedge funds may have to sell their positions or short Tesla stock in order to protect themselves against the sudden increase of put buyers. However, this would depend on how large and quick the surge of people buying puts was. It also depends on whether there are enough market makers willing to take up these hedging contracts - if not then they might be forced into more direct action such as selling/shorting TSLA shares itself which could cause a cascade downwards

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loldraftingaid t1_iy6lvms wrote

Theoretically, yes. We arn't close to that point though.

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TriumphITP t1_iy6uzk4 wrote

Even trying to go in the same direction, tsla market cap is 500b range vs 7b for that other co.

Plus lots of funds will "buy" it in order to buy s&p500

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wildwardy3 t1_iy6vj2v wrote

Let’s see, bunch of fucking morons buy a bunch of puts, forcing market makers to avoid stock dropping below certain value, market makers just buy enough shares to cause max pain and watch outs expire worthless, and the great transfer of wealth continues

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Such-Wrongdoer-2198 t1_iya9s6j wrote

This wouldn't work.

In a short squeeze the "squeezee" is short TSLA calls. The way to hedge a TSLA call is to buy the TSLA shares you might be forced to deliver.

Additionally if you are short TSLA stock, then you have a carrying cost and a margin requirement, and must cover both. These will increase if the market moves against you.

If you are long TSLA you don't have a margin requirement (without margin), your only carrying cost is your cost of capital, which for many investors is conceptually zero.

As for the puts, if you are short TSLA puts that means you are essentially short cash. To offset your short position you have to raise cash, but it's not rational to assume that you would do so by selling TSLA shares, nor could you be forced to.

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Chikentendies42069 t1_iyayn98 wrote

Just delete your Robinhood account now before you hurt yourself

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