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Shorting and Indian capital markets

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Re: Shorting and Indian capital markets

#111

Post by ZephyrBlu »

bluGill wrote: post #105
treis wrote: post #102

Earlier quoted context omitted.

No, because the shorts aren't due all at the same time. Say that 15% is due each day for the next 10 days. On day 1 those shorters will buy 15% of the stock and return it. The people they return it to then can sell it to the shorters that need to cover on day 2. Those people then return it and it's sold to the day 3 shorters and so on.

Shorts are rarely due at all. If those who hold the shorts have enough capital then they can just hold until the market loses interest, and then cover their shorts at $2. Or better yet, even with a sky high stock price gamestop could be forced to declare bankruptcy by their creditors. If I had shorts on gamestop I'd be looking to get all the companies bonds I could so that when the bankruptcy goes to court I can say…

I think the whole deal here is that people buying $GME wanted to jack the price up exactly to force the shorts into a margin call, and therefore liquidation.

Alternatively, I think a lot of people believed a chunk of put options were expiring soon which would cause a lot of contracts to be executed (I.e. forced stock buying).

Re: Shorting and Indian capital markets

#112

Post by mavelikara »

rtx wrote: post #98
batmenace wrote: post #85

Earlier quoted context omitted.

Destroying a hedge fund is also not a 'fundamental value', no matter how satisfying it might sound. Also, as I've said before, often the largest investors in hedge funds are pension funds or similar pooled vehicles, so screwing an investment fund like this doesn't always just stick it to the rich guys...

To further your point, things like these trigger a domino effect that ultimately hurt ones at the bottom.

Trouble is, the ones at the bottom already feel that they are hurt so much and won't mind a new round of hurt.

That probably is not a verifiable truth, but the fact that this impression prevails for enough people to do this is probably where the real corrective actions should be directed at.

Re: Shorting and Indian capital markets

#113

Post by ZephyrBlu »

wrkronmiller wrote: post #39
ZephyrBlu wrote: post #37

Earlier quoted context omitted.

Which I believe is due to them having shorted over 100% of the float making it impossible for the shares which were shorted to be purchased.

> There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts…

This seems like textbook naked shorting.

"Ordinarily, traders must borrow a stock, or determine that it can be borrowed, before they sell it short. So naked shorting refers to short pressure on a stock that may be larger than the tradable shares in the market"

https://www.investopedia.com/terms/n/nakedshorting.asp

Re: Shorting and Indian capital markets

#114

Post by jmcqk6 »

JumpCrisscross wrote: post #82
swiley wrote: post #54

Earlier quoted context omitted.

Put options let you take a bearish position without short selling. IMO it's a way less crazy way to do that.

> Put options let you take a bearish position without short selling Put options can’t be written at scale without shorting.

All a put option needs is cash backing it in order to write it. It doesn't require any stock.

- Me, a long time wheel runner

Re: Shorting and Indian capital markets

#115

Post by pgAdmin4 »

I am naive here, can someone explain what is the economic utility of a stock market ?

For example, its easy to understand utility of food, cloths, car, house, money. But I am not able to find a reason about stock market existence for day-to-day trading, where secondary stocks are traded daily after IPO. It seems none of the day-to-day trading money/profit ever goes back to business to help them to improve that business.

Re: Shorting and Indian capital markets

#116

Post by R0b0t1 »

ZephyrBlu wrote: post #35
WJW wrote: post #15

Earlier quoted context omitted.

Eventually, either the Wall Street "hive mind" (really though, WS contains thousands of funds and many would be overjoyed to see some competitors fall) or the retail buyers of these companies will be proven wrong. What happens next is way more interesting than the current situation. Even if it turns out that GME can be short squeezed until there is not a single share shorted anymore, the retail investors will then co…

> There is no way everyone can get out at the top, so a lot of people will have to sell at very low prices. This is even true if the original thesis of "we can pump this stock to $1000" is true This is what I've been thinking about the whole time. They can definitely pump the stock if they keep HODLing, since sellers effectively set the price when the short positions have to be closed. Someone still has to be the bag…

>Someone still has to be the bagholder and end up holding near worthless stock at the end of this though.

The hedgefunds are filling this niche. Trading slowed yesterday because brokers were afraid of going bankrupt.

Re: Shorting and Indian capital markets

#117

Post by lovich »

threedots wrote: post #65
TeMPOraL wrote: post #53

Earlier quoted context omitted.

The loudest opinion on WSB currently is that the hedge funds didn't actually exit their shorts, but are lying about this, and, well, quoting from a random WSB post: "They didn’t exit any of their short positions! You can look it up!!! The fund sold their shares to other funds, which made the stock algorithm think the stock is being sold —> price goes down —> the found that bought sells those shares again to the fund…

I don't understand why people think Melvin would do this. Sure they might be prepared to flout SEC rules if they thought they could get away with it but whether they sold is trivially verifiable and they would be guaranteed to get caught. Exiting the position was probably also a precondition of the new investors putting money in. The comment you pasted is incoherent rambling. It's honestly like something from a qanon…

It’s not trivially verifiable for the average person and the average person is used to the rich just flaunting the law with trivial or no consequences.

Saying “but that would be against the rules!” means almost nothing for the rich. This is one of the downsides of not having a strong rule of law and the rule of law has been degrading steadily in the US

Re: Shorting and Indian capital markets

#118

Post by cardiffspaceman »

kgwgk wrote: post #22
mschuster91 wrote: post #18

Earlier quoted context omitted.

> If there were another way to incentivize finding these types of companies without short selling, I would be interested. In ye olde times before the invention and institutionalization of short selling and other financial instruments, this kind of research was the responsibility of the media (to raise the alarm) and the SEC/police (to investigate claims with the authority of the government, and prosecute offenders).…

Short selling is older than the SEC.

True. All this stuff was old-hat when the Tulip Mania "ended" in the 17th Century. There is even a tale about olive presses that reads a little like a futures contract's lifetime [1].

[1] https://www.thestreet.com/opinion/a-brief-history-of-stock-o...

Re: Shorting and Indian capital markets

#119

Post by cardiffspaceman »

pgAdmin4 wrote: post #115

I am naive here, can someone explain what is the economic utility of a stock market ? For example, its easy to understand utility of food, cloths, car, house, money. But I am not able to find a reason about stock market existence for day-to-day trading, where secondary stocks are traded daily after IPO. It seems none of the day-to-day trading money/profit ever goes back to business to help them to improve that busine…

The utility comes from the utility of having the chance to sell your IPO shares on the day and date of your choosing. That liquidity makes the shares more valuable to the buyer, who might find herself in a "oops I have to sell now" situation.

Re: Shorting and Indian capital markets

#120

Post by cardiffspaceman »

twic wrote: post #38
seanhunter wrote: post #20

Earlier quoted context omitted.

Market makers are incentivized to provide liquidity by the fact that they earn half the spread on average every time they trade. If a stock trades for 10 bid 11 offer then the market maker makes 1 every time they buy at 10 and sell at 11. They do this a very large number of times a day. I'm not sure this still happens, but Marketmakers (and broker dealers) also used to earn rebates from new venues to incentivise them…

To expand on this a little for anyone interested, the problem with classical market-making is that you only make money as long as the trades are crossing back and forth around a stationary price. If the market moves suddenly, you end up losing money. In your example, if a huge sell comes in at 10, and the market then moves down to 8 bid, 9 offered, the market maker has a position they bought at 10, but can only sell…

The market needs the retail investors but if bad things happen to retail investors often enough, they will retire from the fray. Enjoy your always-toxic trades.
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