macrocephalopod

$TSLA am not an expert on shorting stocks, just your average Joe with a Casio calculator. But for the 1st time ever, the time looks ripe for a short. Let me elaborate. To start, if you read my previous post, it established a troubling fact pattern that is a good premise. (1/N)

Help me understand the passive selling argument. If Tesla share price falls it will have a lower weight in the index, but it falls as a proportion of existing passive fund holdings as well, in exactly the right proportions ... so why would they need to sell?

If we consider ETFs that do sampling in their replication process- as the weight in the index decreases, the stock will contribute less to the tracking error, hence ETFs might as well get rid of it But if we consider full physical replication I don't see how you could be wrong..

I see, you mean a fund that deliberately doesn’t track its index like iShares R2k vs SPDR R2k? Yeah that could have an impact for some small stocks. But most large cap index funds try for perfect replication, and TSLA is one of the biggest stocks in the index!

What I am getting from this is that the “passive funds will need to sell if the price falls” argument does not work. At all.