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High Short Interest Stocks

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Re: High Short Interest Stocks

#171

Post by nullc »

bo1024 wrote: post #98
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?

My understanding is that GameStop was the perfect storm. - huge amounts of short positions at like $5 (months and months ago) - some people disagreed and went long - good luck #1 for game stop: some big investors (also months ago) - good luck #2: activist investor joins board, overhaul seems likely (this month) - shorts refuse to close position, stock at $15-20 (early this month) - at this point, short squeeze is app…

People have been trying to pump this trade since at least September: https://files.catbox.moe/2cp8f9.jpg

It's only recently that its caught fire, as you note.

Re: High Short Interest Stocks

#172

Post by thatguy0900 »

Triv888 wrote: post #167
thatguy0900 wrote: post #161

Earlier quoted context omitted.

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?

Well, I can't imagine we'll see any stocks shorted to 128% for a very long time. Probably not much else

Re: High Short Interest Stocks

#173

Post by omgwtfbyobbq »

mike00632 wrote: post #128
optimiz3 wrote: post #123

Earlier quoted context omitted.

Works until it doesn't. Exhibit TSLA.

Give it a few years. I'm still skeptical that Tesla should be worth more than all the other auto companies combined.

You mean their market value right? Tesla's enterprise value (EV) is pretty high thanks to their market value, but they have a ways to go before they surpass the EV of everyone else combined.

Also, they're an energy company too, which means at least some of their speculative valuation is in energy, which is a totally different market.

Re: High Short Interest Stocks

#174

Post by hardwaresofton »

xwdv wrote: post #10

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?

Be careful not to fall into the narrative the mainstream US media is selling, though it shifted drastically yesterday -- this is not a coordinated attack. WSB is full of people shilling all types of tickers for all types of reasons, but there is a large amount of people there who understand (or at least pretend to) the dynamics of a gamma + short squeeze, and are in it for that reason.

The person who posted one of the earliest bull case research for this (referred to by his YT channel name RoaringKitty or his reddit username u/deepfuckingvalue) has been into GME since last year. He was holding LEAPs (long-dated call options) and shares and has been holding for the last year. He was ridiculed in the original post, because everyone still believed Gamestop was Blockbuster v2. Gamestop is not Blockbuster v2 (I used to think it was), but what's happening right now is not about fundamentals (and if you see anyone arguing that, they are trying to trick you by reframing), it is about the mechanics of a combination of a gamma and short squeeze happening at the same time.

Hedge funds do this kind of attack when they realize the opportunity is there -- you don't hear about it because it doesn't make the news, and because the news makes up a rationalization. Here's an example -- a bunch of stocks that were essentially left for dead (heavily shorted) popped yesterday and the rationalization was retail jumping in. That makes sense, unless you take a second and think about it -- how can the retail that's all still all-in on GME be simultaneously moving huge amounts of market cap of smaller companies? Yes those companies were cheap but they're cheap because they were shorted -- this means anyone could move them. Don't forget that ~90% of all stocks are owned by the top 30% or something like that. Retail can possibly cause gamma squeezes (see TSLA last year), but institutions have to take part for it to go anywhere.

It is 140% the fault of the short sellers that didn't take profit last year (assuming some rode GME from 45 to 5, this is a ~10x position If i understand correctly) that this short squeeze had the chance to happen. Greed got them.

Re: High Short Interest Stocks

#175

Post by krrrh »

mike00632 wrote: post #145
option wrote: post #134

Earlier quoted context omitted.

In addition to making cars people want, Tesla also makes their own software, chips for AI inference and training, batteries, charging network, home energy solutions (solar+ battery). All of these not just related products but a cohesive strategy with sum much equal to its parts. Which other automaker does that? Edit: Having said that, I bought them long ago at their IPO price and sold long ago when they were around 3…

I agree. I even own Tesla stock. But Tesla 1) still has a lot of scaling to get through before they reach anything close to the sales volume of their competition. Elon talks a lot about scaling but Tesla is still microscopic compared to other manufacturers. The business operations of a much larger company will present challenges in communication, structure, quality assurance, legal liabilities in various jurisdiction…

The competition has electrified. America is just behind the trend.

https://twitter.com/asymco/status/1352335793025650695?s=20

Re: High Short Interest Stocks

#176

Post by andi999 »

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.

So currently some hedge Fonds are bleeding money, true? So who is the counter party who currently gets this money (can't be the community since they hold)

Re: High Short Interest Stocks

#177

Post by KMag »

potsandpans wrote: post #150
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.

what is an "exotic instrument"?

An exotic instrument is basically any contract more complicated than a simple put or call option.

For a slightly fictionalized version of why these might be useful in the real world, let's say a Finnish life insurer is selling life insurance in Hungary. So, they're doing their accounting (the numerare) in Markka (FIM), taking in payments in Forints (HUF), and exposed to changes in Hungarian mortality rates. So, for the next 30 years, this insurance company wants some secondary protection against adverse shifts in the Hungarian mortality curve, but to make that insurance less expensive, they only want protection if those losses in HUF, converted to FIM exceed 100 million FIM.

So, this insurance company goes to the structured products desk of large multi-national firm and gets a very bespoke option created. The multi-national sells this single contract to the insurance company, and hedges the individual FX components using FX options and the actuarial risk with actuarial derivatives. There's basically no market for this stuff, so the large multi-national basically commits to hedging out the other side of this contract for the next 30 years.

I've worked with optimizing risk modeling for exotics, because it turns out that for some of the more complex exotics, the daily computational costs get very expensive for basically re-calculating a first-order multidimensional Taylor approximation (the risk components) of these contracts. Every day, we then take these risk calculations and buy/sell a bunch of simple options to bring the first-order partial derivatives (risk components) back close to zero.

Re: High Short Interest Stocks

#178

Post by worker767424 »

mike00632 wrote: post #128
optimiz3 wrote: post #123

Earlier quoted context omitted.

Works until it doesn't. Exhibit TSLA.

Give it a few years. I'm still skeptical that Tesla should be worth more than all the other auto companies combined.

Depends if they can have profit margins a lot higher than other auto companies. They probably can't, but higher profit margins are one way to justify a valuation.

Really, it's priced higher because people like the brand, even if it's run by someone easily distracted who used shareholder money to bail out his cousin's solar business who goes around making 420 tweets, and that's when he's not calling people pedophiles. Oh, and their hubris kills people.

Re: High Short Interest Stocks

#180

Post by worker767424 »

KMag wrote: post #177
potsandpans wrote: post #150

Earlier quoted context omitted.

what is an "exotic instrument"?

An exotic instrument is basically any contract more complicated than a simple put or call option. For a slightly fictionalized version of why these might be useful in the real world, let's say a Finnish life insurer is selling life insurance in Hungary. So, they're doing their accounting (the numerare) in Markka (FIM), taking in payments in Forints (HUF), and exposed to changes in Hungarian mortality rates. So, for t…

So I can like buy an options contract on arbitrary Hungarian deaths?
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