Image credit: Bloomberg
Prominent short-seller Jim Chanos said he transformed his Tesla (NASDAQ: TSLA) short into a put position, he told on CNBC's "Fast Money Halftime Report."
A put option is a contract giving the owner the right, but not the obligation, to sell – or sell short – a specified amount of an underlying security at a pre-determined price within a specified time frame. This pre-determined price that the buyer of the put option can sell at is called the strike price. A trader buys a put to enter a bearish position, or sells a put to enter a bullish position.
In early December 2020, Chanos said he had cut the size of his short position in Tesla. He told Bloomberg that he had never met Tesla's CEO Elon Musk or spoke to him. When asked what he would tell him if he did, Chanos said: “I’d say, 'job well done so far.'”
In 2020, short-sellers suffered colossal losses of $40 billion on Tesla, which is gradually forcing them to cut their short positions. While short-sellers don't always directly admit they were wrong about Tesla, the facts speak for themselves.
In early April 2020, Chanos said his firm had warned customers that the Tesla rally, which ran from November 2019 to February 2020, would no longer last. But we have all heard such statements many times before, which in the end turned out to be false, and simply did not reflect reality. Now, Chanos' actions indicate that he has changed his mind about Tesla, and intends to change the team he plays for. The ranks of short-sellers are noticeably thinning.
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Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.