This Man Called Tesla's Massive Short Squeeze When It Was $40/Share

Following the highly-publicized unveiling of the Model 3 and with Tesla Motors Inc (NASDAQ: TSLA) now trading at above $260 a share, it's easy to forget that Tesla’s stock was priced around $40 three short years ago. What followed was a huge upside explosion fueled by the large number of traders that had made bets against Tesla.

Trader Brian Shannon recognized the potential for a massive short squeeze in Tesla back in April of 2013.

“Short sellers can be tenacious and fight to hold the stock back, but at some point they reach their pain threshold and repurchase the stock rather than stubbornly hold as the stock continues higher,” Shannon explained.

Related Link: Stratechery: Tesla Brand Is Key To Model 3's Success

“The market is a game of supply and demand and those 31 million shares represent a lot of potential demand,” he said of Tesla’s short position.

Since April 1, 2013, Tesla’s revenue has tripled, but the short squeeze that Shannon predicted has sent its share price soaring more than 375 percent.

Shannon says it’s impossible to predict accurately what will happen with share prices in the future, so the key to successful trading is an awareness of the market situation and the potential catalysts for a stock.

“The things that will motivate people to act—maybe on a fundamental basis, earnings report or whatever—be aware of those,” he advises.

Disclosure: the author holds no position in the stocks mentioned.