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Earlier quoted context omitted.
When you lend someone a stock you borrowed, it’s considered an additional ‘stock shorted’
And the entity that bought it from the short seller can lend it to someone else, leading to two short shares, etc... Also, there is a difference between 100% of the stock and 100% of the float. Because in theory the institutions holding could alter their positions or lend their shares as well.
I am glad they addressed the philosophical question of whether shorting the stocks should be illegal. I have more confidence in our equities markets because of the existence of short sellers. I’m glad to know there are people researching companies that are not being honest about their financials. If there were another way to incentivize finding these types of companies without short selling, I would be interested.
> 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).…
>>"In some of these stocks, the total quantity of stocks shorted (stocks borrowed and sold + using derivatives) is much more than the free float or the total number of shares held publicly. " So, they short more stocks that exist. OK, I will not ask why this is allowed, but how is this done?
There's one stock, but when people count shorts, they're counting the [shorts to] edges. That 140% ratio is essentially the (amount of [shorts to] edges) / (amount of stock in circulation).
> While everyone is celebrating retail traders winning over a large hedge fund in this case, it rarely ever plays out this way. Most commonly, retail ends up losing money when there is excessive speculation. This is the only passage anyone with too much at stake (than they can afford) in this short needs to read. Other than that, I believe industry insiders / traders are missing the mark in that the current dynamic i…
I think what is missing in many people's analysis is that there is a new fundamental value in this situation. Buying GME shares is now linked to destroying a hedge fund and ruining some billionaire's days. For many people, and I include myself in this group, that has a real tangible value that outweighs the actual dollar amount it costs to buy a few GME shares.
When the leaders of these brokerages and hedge funds ponder as to why people are throwing money at something that is likely to crash and burn when it will likely not make money and is just hurting the billionaires, they are staring the answer in the face
>>"In some of these stocks, the total quantity of stocks shorted (stocks borrowed and sold + using derivatives) is much more than the free float or the total number of shares held publicly. " So, they short more stocks that exist. OK, I will not ask why this is allowed, but how is this done?
When you lend someone a stock you borrowed, it’s considered an additional ‘stock shorted’
Madness?
(Anyway, my actual knowledge of the stock market is limited, but is my scenario a realistic one?)
>>"In some of these stocks, the total quantity of stocks shorted (stocks borrowed and sold + using derivatives) is much more than the free float or the total number of shares held publicly. " So, they short more stocks that exist. OK, I will not ask why this is allowed, but how is this done?
There are a few different ways to be short of a stock but the most common are to sell short in which case you have a few days to buy the stock or locate a borrow before the trade settles. Other ways to be short are to write call options which you can just do by selling that option to someone, or buy put options. In certain cases you can short a contract for difference or single stock future or short the return on the stock in an equity swap. For all of these you'll need your broker to facilitate.
Brokers don't work together which is how the aggregate position of all shorts can get larger than the total number of stocks in issue. This is obviously not a healthy situation but the brokers are relying on the collateral to enable them to make good any losses.
Finally some people may have a short as a partial hedge for an overall long position (eg "Crash put protection") so may be net long overall.
>>"In some of these stocks, the total quantity of stocks shorted (stocks borrowed and sold + using derivatives) is much more than the free float or the total number of shares held publicly. " So, they short more stocks that exist. OK, I will not ask why this is allowed, but how is this done?
You open a margin account and post some collateral (usually cash or treasuries). You sign a margin agreement (which is essentially a credit aggreement) committing to pay up for any losses. The broker can use the posted collateral to cover losses and you will be asked to put up more margin if losses deepen beyond a certain point. There are a few different ways to be short of a stock but the most common are to sell sho…
In those examples the price of the stock is just a reference point used to calculate the quantity of the cash payment between the two parties so although the short will lose money if the stock rises they are not "squeezed" in the sense they are not desperately searching for stock to buy at any price.