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High Short Interest Stocks

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Re: High Short Interest Stocks

#181

Post by worker767424 »

epistasis wrote: post #64
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 is fairly rare for stocks to be so heavily shorted. It doesn't necessarily take a bunch of people to make the price move up, but it does take a lot of money, enough to capture most of the floating shares of stock. And in particular these folks banded together to use call options to amplify their money (and risk) as they purchased stock to drive the price up. The only thing new is that rather than a few dozen wealt…

I assume hedge funds know when a short squeeze looks viable, so they know how to do it and turn a profit. If they didn't do this, that means they didn't think it could turn a net profit, so there's a decently chance people late to the party will lose a lot.

Re: High Short Interest Stocks

#182

Post by torben-friis »

cbozeman wrote: post #162
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.

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 reas…

>This was one scenario were the shorts really did have it wrong. GameStop's financials were and are pretty solid.

Honest question: do you really think that rational analysis of the viability of a stock is relevant at this point?

It seems to me that gme just happened to end up being the battlefield in which the wsb people acted

Re: High Short Interest Stocks

#183

Post by edgyquant »

andi999 wrote: post #176
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.

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)

They’re bleeding because others are holding, no? There are premiums at play.

Re: High Short Interest Stocks

#184

Post by KMag »

worker767424 wrote: post #180
KMag wrote: post #177

Earlier quoted context omitted.

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?

I don't know much about the structured product particulars or the details of the hedging. I'm not sure if the actuarial derivatives are mostly options or futures. I think they're mostly over-the-counter products, and rather large contract sizes. So, I think trading actuarial derivatives involves passing some certifications, getting a few million dollars, and cold-calling a bunch of large financial institutions to see what they currently have on offer, and convincing them that you're not going to go bankrupt in the next 30 years.

But, I don't really know. I know a bit about making the computers go fast, and I talked with the structurers enough to know very generally what was going on.

Funny story poking around exotic financial models: a big part of the collateral a shipping company can offer is its ships. I saw "cape size" show up in a model for the value of a ship, and imagined ships dressed up like Superman or the Green Lantern. It turns out that for the same carrying capacity, ships that are dimensioned to fit through the Panama and Suez canals are worth significantly more than those that are forced to round the Cape of Good Hope or Cape Horn ("cape size").

Don't misconstrue this as investment advice, but be careful about taking the short side. If you happen to randomly be short Hungarian lives, and genocide breaks out, and you make 3 billion dollars out of pure happenstance, there will be double-digit percentages of the population believing in conspiracy theories about you for hundreds of years. Very few people will want to live in the same city or even sell a hamburger to the alleged architect of the Hungarian Genocide. This isn't investment advice; it's life advice. It's possible to be 100% right, for the wrong reason, and lose 1000%.

Re: High Short Interest Stocks

#185

Post by jgtrosh »

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.

The motive I've seen most prominently displayed is “buy to hurt hedges, expect 100% loss”. Of course, many individuals will be upset at the results, but this wasn't touted as anything other than a risky bubble, even by those who believe in gme.

Re: High Short Interest Stocks

#186

Post by teekert »

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.

Does that make them rational again?

Re: High Short Interest Stocks

#187

Post by andi999 »

edgyquant wrote: post #183
andi999 wrote: post #176

Earlier quoted context omitted.

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)

They’re bleeding because others are holding, no? There are premiums at play.

That would be virtual bleeding (which could be the case though), but if you bleed real money then somebody else has to receive it. If you hold a stock money doesn't come to you (except as annual profit distribution but that is a different issue). I read the fees for borrowing a stock for shorting are coupled to the market price (not sure). So if you fund lost a few billion real money (so they have to sell other assets to pay that) then somebody else has to get these billions now.

Re: High Short Interest Stocks

#188

Post by konjin »

KMag wrote: post #184
worker767424 wrote: post #180

Earlier quoted context omitted.

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

I don't know much about the structured product particulars or the details of the hedging. I'm not sure if the actuarial derivatives are mostly options or futures. I think they're mostly over-the-counter products, and rather large contract sizes. So, I think trading actuarial derivatives involves passing some certifications, getting a few million dollars, and cold-calling a bunch of large financial institutions to see…

I wonder if Coca Cola has an instrument like that, the more they sell in any place the lower the life expectancy will be.

Re: High Short Interest Stocks

#190

Post by pg_bot »

blondie9x wrote: post #140

Why the hell would iRobot have 40% short interest? I love my iRobot. I swear to you if they make these things talk or take commands like Siri iRobot will be the ultimate consumer electronic item.

My guess would be that this space has become way more competitive in the last few years. If you haven't noticed, there are a lot of robot vacuum cleaners on the market now with more coming soon.

https://www.amazon.com/s?k=robot+vacuum&ref=nb_sb_noss_1

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