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High Short Interest Stocks

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Re: High Short Interest Stocks

#161

Post by thatguy0900 »

Triv888 wrote: post #139
lxbky wrote: post #138

Earlier quoted context omitted.

[deleted]

Don't put all of your eggs in the same basket. I have no clue how anyone, especially edge funds, could get majorly impacted by just one stock moving the wrong way. I have stocks in my portfolio that move 25 to 50% the wrong way almost everyday and I still get about 1% overall gain daily in this bull market (which is probably not great in this economy).

Shorts are a little unique in that the risk is technically infinite. Stocks you own can only lose whatever value you bought them for. Stocks youve promised to buy later from someone else, though, can lose you however much money they decide to charge you when you have to buy. They could have thousands of profitable positions and lose 2 billion off one very unlucky short call because of a meme.

Re: High Short Interest Stocks

#162

Post by cbozeman »

thrwn_frthr_awy wrote: post #135
dcolkitt wrote: post #108

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.

This was one scenario were the shorts really did have it wrong. GameStop's financials were and are pretty solid. There was no reason to short the stock so heavily, which is why they're in the trouble that they're in right now.

You should watch Roaring Kitty's video from June 2019 I believe (maybe its 2020?) on YouTube about this. He goes into great detail, with something like an hour of analysis on why $GME is a reasonable investment.

Remember also, Dr. Michael Burry was buying into $GME (it was 5% of his fund in fact). Other big institutional investors like BlackRock, etc. had major positions as well.

Re: High Short Interest Stocks

#163

Post by KMag »

koolba wrote: post #125
ls612 wrote: post #111

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.

They can also trade run of the mill securities in large quantities without moving the market or making known that a large position shift is happening.

> They can also trade run of the mill securities in large quantities without moving the market or making known that a large position shift is happening.

For US public equities, dark pools are still required to print all trades to the public consolidated ticker. They hide potentially huge volumes of hidden orders waiting in their order books, but they don't hide actual position shifts (trades).

Re: High Short Interest Stocks

#164

Post by cbozeman »

PragmaticPulp wrote: post #159
thrwn_frthr_awy wrote: post #135

Earlier quoted context omitted.

It turns out an online community can stay irrational longer than a hedge can solvent.

These situations tend to blow Up both sides, more or less. 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.

Hedge funds are down $70 billion over this, so I'm pretty sure there's some accuracy. And no, its not all GameStop, but $GME is a driver.

https://www.reuters.com/article/us-retail-trading-shortbets-...

Re: High Short Interest Stocks

#165

Post by pengaru »

supernova87a wrote: post #33

But the question is, how do you mobilize enough people to act on something that causes market movement? As I understand it, the new thing wasn't lots of short positions, it was that a bunch of people coordinated to make something dramatic happen. Isn't that the problem?

It's relatively easy to move the price on a low interest stock.

The problem with GME is it was shorted something like 140% of the available floating shares. If the shorts hadn't shorted the stock so excessively, we wouldn't be talking about GME today, it's what left them exposed to so much risk. The blame lies squarely with the shorts, or the lack of regulations preventing absurdity like 140% short interest.

Re: High Short Interest Stocks

#166

Post by imagica »

themihai wrote: post #149

GameStop Corp. NYSE 138.08% interest rate. And people wonder why hedge fund managers with short positions on GME are scared by the squeeze! They will do everything they can to stop retailers buying GME. They got caught naked!

Not everything is lost, they will learn a thing or two from this.

Re: High Short Interest Stocks

#167

Post by Triv888 »

thatguy0900 wrote: post #161
Triv888 wrote: post #139

Earlier quoted context omitted.

Don't put all of your eggs in the same basket. I have no clue how anyone, especially edge funds, could get majorly impacted by just one stock moving the wrong way. I have stocks in my portfolio that move 25 to 50% the wrong way almost everyday and I still get about 1% overall gain daily in this bull market (which is probably not great in this economy).

Shorts are a little unique in that the risk is technically infinite. Stocks you own can only lose whatever value you bought them for. Stocks youve promised to buy later from someone else, though, can lose you however much money they decide to charge you when you have to buy. They could have thousands of profitable positions and lose 2 billion off one very unlucky short call because of a meme.

Good point. Maybe they will learn something?

Re: High Short Interest Stocks

#168

Post by hardwaresofton »

tinyhouse wrote: post #75
plaidfuji wrote: post #24

Earlier quoted context omitted.

The current candidates being floated by WSB are Nokia, AMC, Ericsson and Blackberry. Even though Virgin Galactic is second on this list, my impression of the WSB crowd is that they look for companies that are both high-short-interest and some nostalgic notion of being “worthy of saving”... Virgin would probably not fit their MO given the high-profile billionaire owner...

Nokia and Ericsson are not highly shorted. Nokia short ratio is less than 1%. I have no idea why WSB picked them. Also, both companies' market cap is greater than 20B so it's not easy to manipulate the stock price to the GME levels.

It's more likely that WSB did not pick NOK, they have been battling infiltration and spamming from hedge funds since last week -- the hedge funds have been trying to shift the focus of the subreddit to any other ticker that they could. The original suggested tickers are: BB, AMC, and NOK.

I won't get into it too much but the first 2 (BB and AMC) have had some material good news lately (AMC got 900M in funding together and bankruptcy is likely off the table, so that warrants a fundamental pop), but the last one is the obvious trap -- NOK has not had any super significant good news lately, and is not highly shorted. It might gamma squeeze, but I think that it's a trap to push retail into so they can actually dump it, so much so that I bought puts on NOK that I was up on (but suffered a bit from IV crush).

I know HN is just getting to this story, but WSB has been dealing with this for the last like... ~2/3 weeks.

Re: High Short Interest Stocks

#169

Post by shrimpx »

dcolkitt wrote: post #108

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 sounds like in the case of Melvin, their aggressive and continued short-selling likely drove down the price. It sounds like powerful and aggressive short-sellers can parasitically drive a company's value down and then make a killing at the bottom.

If that's the case then yes, you don't want to be on the other side, because they're manufacturing their desired outcome.

Re: High Short Interest Stocks

#170

Post by omgwtfbyobbq »

dcolkitt wrote: post #142
optimiz3 wrote: post #123

Earlier quoted context omitted.

Works until it doesn't. Exhibit TSLA.

I'm old enough to remember people saying the exact same thing in 1999. The four most dangerous words in investing are: "This time is different"

"This time isn't different" too.

Back in 1999, people weren't very hot on Amazon.

https://www.thestreet.com/opinion/net-stock-horror-stories-r...

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