151–160 of 286 posts
I’m surprised this sort of attack has never be carried out before. Is it just because no one ever thought there’d be a crazy army of retail investors that could be so coordinated and so irrational and large enough to matter?
Fair warning. Buying stocks with high short interest is, over the long run, a terrible investment strategy. Mountains of academic research has consistently found the most heavily shorted stocks to significantly underperform the market[1] (to the order of 10% per year). Heavily shorted stocks tend to be the companies with the most negative cash flow shocks[2], low quality earnings statements[3], negative earnings revi…
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Fair warning. Buying stocks with high short interest is, over the long run, a terrible investment strategy. Mountains of academic research has consistently found the most heavily shorted stocks to significantly underperform the market[1] (to the order of 10% per year). Heavily shorted stocks tend to be the companies with the most negative cash flow shocks[2], low quality earnings statements[3], negative earnings revi…
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Only fools stay short for a long time. Fees, theta, and margin interest will eat you alive.
Plus there's the near infinite downside if you're wrong.
Fantastic thread on shorting:
Earlier quoted context omitted.
(Edit: removed mostly wrong info, but here's an article on some stuff that goes on with voting rights and shorts that could potentially be used to vote for a capital raise and break the short squeeze by issuing new shares: https://www.wsj.com/articles/SB116978080268188623 )
> ... you generate a new fictional long position from the loaned shares which gets additional voting rights without any conservation law. That’s not how it works. Votes don’t magically appear. The lender gives their voting rights along with the stock to the short seller. The short seller gives it to whoever purchased the shares from them. So only the final purchaser gets to vote, the original lender lost their rights…
A bunch of shares are shorted, and the company announces a vote on something, which causes people to recall shares that they've loaned out (because they want the voting rights).
Earlier quoted context omitted.
A dark pool is just a private securities market. They don’t have to disclose much since the general public can’t participate but they can trade all sorts of exotic instruments without a lot of the “public focused” regulations.
what is an "exotic instrument"?
[1]: https://en.wikipedia.org/wiki/Interest_rate_swap#Extended_de...
Fair warning. Buying stocks with high short interest is, over the long run, a terrible investment strategy. Mountains of academic research has consistently found the most heavily shorted stocks to significantly underperform the market[1] (to the order of 10% per year). Heavily shorted stocks tend to be the companies with the most negative cash flow shocks[2], low quality earnings statements[3], negative earnings revi…
Works until it doesn't. Exhibit TSLA.
Earlier quoted context omitted.
Is it not also possible that the shorting itself influences the direction of the stock/performance of the company? I'm not sure you can make a statement like you're making. There, to me, is not a direct cause/effect relationship here.
How would short selling cause a company's next quarterly earnings to be disappointing?
Bought a bit of SPCE out of principle
Fair warning. Buying stocks with high short interest is, over the long run, a terrible investment strategy. Mountains of academic research has consistently found the most heavily shorted stocks to significantly underperform the market[1] (to the order of 10% per year). Heavily shorted stocks tend to be the companies with the most negative cash flow shocks[2], low quality earnings statements[3], negative earnings revi…
It turns out an online community can stay irrational longer than a hedge can solvent.
A few lucky Redditors will get out with profits. Most of the late entries are going to take steep losses. Those losing Redditors will be paying the winning Redditors.
The narrative that this is hedge funds losing to Redditors isn’t fully accurate.
Earlier quoted context omitted.
> Isn't that the problem? Shorts have finite payoff for infinite risk. If you buy into shorts when the interest is above 100%, you _immediately_ open the door for this type of counter position to become rational. Is it really a problem that a bunch of people on a message board collectively decided to act on a rational position?
The thought of GameStop stock going up to infinity (and never coming down) doesn't seem rational.
They took on unbounded risk and have no leverage if all of the stockholders refuse to sell for anything less.
The stock is less a company than a contract that can be purchased that says the other party has to pay you any price you set (assuming the stockholders are able to hold until the shorts must close their position).