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Shorting and Indian capital markets

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Re: Shorting and Indian capital markets

#51

Post by lepton »

tikej wrote: post #42
ZephyrBlu wrote: post #36

Earlier quoted context omitted.

I'm pretty sure a mass buying of the stock would drive the price right into the floor. So the first few people will get an extremely high price because like you said, the shorts are forced to buy, but as the sell off begins the price will plummet.

But aren’t the shorts for like 140% of the GME stock? That means if everyone holds with prices, sooner or later the shorters will have to buy ALL that stock anyway at nearly any price to cover for the losses and give back shorted stock.

140% of stock /issuance/, not outstanding. Shorting stock creates new stock. Once all shorts are closed, the 100% of issuance is still outstanding and someone's holding it. Not everyone can get out!

Re: Shorting and Indian capital markets

#52

Post by xadhominemx »

dualthro wrote: post #49
xadhominemx wrote: post #43

Earlier quoted context omitted.

Buying GME is in fact not linked to destroying a hedge fund as the funds with large concentrated short positions exited the investment several days ago. The situation now is a bonanza for billionaires, as many have gone long the stock or are providing highly lucrative retail options market making services. The entire narrative about gme now being some sort of populist uprising is a sham perpetuated by those who want…

How come I continue to see posts talking about the short float for GME being in excess of 100%? disclosure: I have no investment in GME, but am hoping to see some hedge funds suffer

It probably is over 100%. That’s unusually high but 100% short interest is not some sort of special number. Shorting works by borrowing a share and selling it to someone else. There’s no reason the same share could not be borrowed multiple times, as the shares are all fungible.

Re: Shorting and Indian capital markets

#53

Post by TeMPOraL »

xadhominemx wrote: post #43
lovich wrote: post #27

Earlier quoted context omitted.

>rejecting the fundamentals 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 br…

Buying GME is in fact not linked to destroying a hedge fund as the funds with large concentrated short positions exited the investment several days ago. The situation now is a bonanza for billionaires, as many have gone long the stock or are providing highly lucrative retail options market making services. The entire narrative about gme now being some sort of populist uprising is a sham perpetuated by those who want…

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 that sold them in the first place —> price drops even more —> they keep doing that —> price drops lower every time —> but as long as we hold they weren’t able to exit any positions!!! Shorts are still up 120% percent. As long as we hold the squeeze is inevitable!! And if you don’t believe me, look at the GME after hour stock price!"

https://old.reddit.com/r/wallstreetbets/comments/l7oobr/4206...

Whether that's true or are they just driving themselves off a cliff? I don't know.

Re: Shorting and Indian capital markets

#54

Post by swiley »

mensetmanusman wrote: post #16

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.

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

Re: Shorting and Indian capital markets

#55

Post by midasuni »

xadhominemx wrote: post #52
dualthro wrote: post #49

Earlier quoted context omitted.

How come I continue to see posts talking about the short float for GME being in excess of 100%? disclosure: I have no investment in GME, but am hoping to see some hedge funds suffer

It probably is over 100%. That’s unusually high but 100% short interest is not some sort of special number. Shorting works by borrowing a share and selling it to someone else. There’s no reason the same share could not be borrowed multiple times, as the shares are all fungible.

So if two people owned one share, they could simply pass it between each other until their shorts are covered?

Re: Shorting and Indian capital markets

#56

Post by xadhominemx »

TeMPOraL wrote: post #53
xadhominemx wrote: post #43

Earlier quoted context omitted.

Buying GME is in fact not linked to destroying a hedge fund as the funds with large concentrated short positions exited the investment several days ago. The situation now is a bonanza for billionaires, as many have gone long the stock or are providing highly lucrative retail options market making services. The entire narrative about gme now being some sort of populist uprising is a sham perpetuated by those who want…

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’m sure some funds are still short GME but with small position sizes so they can absorb temporary losses. No way any large fund still has a concentrated short.

Re: Shorting and Indian capital markets

#57

Post by foolmeonce »

tikej wrote: post #42
ZephyrBlu wrote: post #36

Earlier quoted context omitted.

I'm pretty sure a mass buying of the stock would drive the price right into the floor. So the first few people will get an extremely high price because like you said, the shorts are forced to buy, but as the sell off begins the price will plummet.

But aren’t the shorts for like 140% of the GME stock? That means if everyone holds with prices, sooner or later the shorters will have to buy ALL that stock anyway at nearly any price to cover for the losses and give back shorted stock.

No one actually wants the underlying stock, so it is really just a bet on the value at the moment they theoretically need to hand over the stock between the parties in the contract.

I think the parties would just be exchanging money in lieu of stock and whoever bought the actual stock will have Gamestop stock, so after the utility for screwing the naked shorts goes away, people who bought in the rush will probably lose just like any other pyramid scheme.

Re: Shorting and Indian capital markets

#58

Post by TeMPOraL »

newswasboring wrote: post #45
TeMPOraL wrote: post #23

Earlier quoted context omitted.

Stock [purchased by] A [lends to] B [shorts to] C [lends to] D [shorts to] E ... 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).

This has been explained to me several times since last week. What nobody mentions is why is it done this way? It just feels unnecessarily obscure. What am I missing?

(Disclaimer: my expertise in stock trading extends to knowing how to spell "stonk", but I've been reading enough HN and Matt Levine to perhaps be better than a Markov chain at this.)

Why wouldn't it be? It sounds pretty straightforward mechanically. A short means I borrow a share from you and sell it to someone else today, buy it back some time later and give it back to you. That someone else has a bona fide stock, which they can lend to another shorter.

If you mean why the metric of "how many [shorts to] edges are active" is being tracked? I'm guessing it's the best proxy for how confident market is the stock is about to tank. Also, shorting as an abstraction is its own thing, so counting how many shorts there are is as useful as counting any other distinct market activity.

Re: Shorting and Indian capital markets

#59

Post by kybernetikos »

xadhominemx wrote: post #52
dualthro wrote: post #49

Earlier quoted context omitted.

How come I continue to see posts talking about the short float for GME being in excess of 100%? disclosure: I have no investment in GME, but am hoping to see some hedge funds suffer

It probably is over 100%. That’s unusually high but 100% short interest is not some sort of special number. Shorting works by borrowing a share and selling it to someone else. There’s no reason the same share could not be borrowed multiple times, as the shares are all fungible.

Sure, but when you short, you owe a share. If more people owe shares than there are shares for sale, you have a serious supply and demand problem depending on when those debts come due. If shorts are significantly over 100% of float, then it would seem that they are still vulnerable to further squeezing.

Further shorting is completely possible - nothing stops shares continuing to be lent, but doing so just makes the likely supply shortfall worse.

Re: Shorting and Indian capital markets

#60

Post by tonyarkles »

xadhominemx wrote: post #52
dualthro wrote: post #49

Earlier quoted context omitted.

How come I continue to see posts talking about the short float for GME being in excess of 100%? disclosure: I have no investment in GME, but am hoping to see some hedge funds suffer

It probably is over 100%. That’s unusually high but 100% short interest is not some sort of special number. Shorting works by borrowing a share and selling it to someone else. There’s no reason the same share could not be borrowed multiple times, as the shares are all fungible.

From what I understand, it is a slightly special number. Each one of those shorts is supposed to have some kind of contract in place that can be used to cover the position (e.g. a call option that would ensure that the stock could be purchased, even if the options contract isn't ITM). If there's over 100% short interest, then it's impossible for all of the outstanding shorts to be covered in that way (or, alternatively, the contracts to cover the short positions are naked, not the shorts themselves).

I'm by no means a finance guy and if I've misunderstood this, I'm happy to be corrected.

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