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The interest can be over 100% if they didnt expire today. However that has no relation to other shares they own. If they short at 150 they are underwater. But they could have went bull after that and bought at 200, 250, 300 and ride the trend up. Limiting their total loss. Then they are hoping to buy on the way down to settle the short if it has a future expiration date. If the shorts settled a lot this week and trade restrictions on retail didnt hit until mid session on thursday. A lot of that short is probably retail. And I stand by the fact it will be retail vs retail bloodbath soon
What are you talking about? Short interest is the number of shares sold short as a percentage of the float.
As of this morning, there were 57.83M shares sold short. Meaning short sellers borrowed and sold 57.83M shares into the market. But there are only 51M shares available to trade on the market. So yes, the short interest CAN be higher than 100%.
There is no expiration on short positions. You can hold it for as long as you're solvent.
Given your premise is wrong, the rest of your statement is also wrong. You seem to be mixing it up with options, and many options did apparently expire today. How they will be settled I have no idea. The data suggests that all call options issued are in the money and all put options expired worthless. When exactly this get's executed, I have no idea. Maybe it happens on Monday. But options and short interest are NOT the same thing.
And no. Most of the options were not written by retail. Probably most are being held by retail, but they have no risk if they expire worthless. The underwriter is the one who bears the risk.
I dont think anyone is underwriting the call options without having 100% of the stock posted as collateral.
Yep Im brain dead today
There's also a 'borrow' cost. Which I suppose you may also have confused with short interest. We pay 'interest' on loans which is denoted as a % of the value of the outstanding balance. The borrow cost, or fee, when shorting is also a percentage of the value of the stock, but it's not called 'interest'. Currently the borrow fee on $GME is 20-30%. That's annualized. Meaning it's very very expensive to maintain a short position. Whoever is lending the shares is able to make A LOT of money.
As for how you can short >100% of the stock... well any owner is allowed to lend out their shares in theory.
So let's say you want to short a my company. I lend you my stock, and you pay me a small % for that privilege. I then buy that stock from you. I now have 1 share i've lent out, and 1 share I have access/control over. You owe me 1 share. But I can lend you that same share again and buy it from you again. Now I have 2 shares loaned out, and 1 more than I hold and you owe me 2 shares.
So very whoever is lending out the shares, currently 113% worth, is making ~20-30% yr. Short sellers are paying ~$5-6B/yr to maintain their positions. Or ~$16M/day in fees.
If insiders who control large swathes of the stock are able to milk fees by lending out their stock, they will have no incentive to sell their stock. The fees only rise with the stock price. And for context, if they can maintain this price and short interest indefinitely, they will make ~$0.5B/month, which is roughly where there market cap was less than 6 months ago.
Is this really how it works? If this was how it worked then they are endlessly making free money off the fees aren't they? They could endlessly lend stocks, rebuy them (losing only a tiny bit of spread) and endlessly make money off fees with minimal risk.
Nope, still days to go. Frankly speaking, this is not a stock market in any sense of the word anymore. I can't imagine how it will end up, and it's hard to anticipate the chain reaction. The amount was so large they couldn't cover it in hours, Time is on WSB's side, but Wall Streets owns humanity, information, and government (law, Justice etc. you name it ), so it is impossible to predict.
Technically yes, it could.
If you own shares and you're allowed to lend your shares out to short sellers, the next buyer would also be allowed to lend those shares as they own it. You can do what you like with your own stuff. So the mechanics of how short selling works allows for an infinite number of shares to be sold short in this way. But then you have enormous risk because ultimately you need to buy not only all the shares issued by the company, but all the synthetic shares floating around. So you'd have to be a complete moron to short a company with more than 100% short interest. And this is why the guys over at WSB are pumping the stock and buying it. They have a theoretical infinite money printing machine. This is a 'bug' in the design of the system, which exists because hedge funds and institutions don't give a damn about risking other people's money as they always get bailed out any way.
We do not know WHO is lending out the shares. Most retail investors do not have the ability to lend shares.
But if we do a thought experiment for a moment. If you have a group of actual owners who own 100% of the stock, and the hedge funds think it's overvalued, the owners can lend their stock and the hedge funds sell it to the retail investors. As they sell it, the price drops and so on paper the hedgefund's position grows more profits. They keep on doing this until the original (real) owners have lent out ALL of their shares, and so now there is 200% of the company floating around, and the stock is super cheap because hedge funds just kept selling below value. But they want to keep boosting their balance sheet and want to sell yet more shares. Demand for shares to short is increasing! So now the original owners are thinking, damn, we're making good money lending out our shares, if only we had more. We're getting a damned good return! So they buy more from the hedge funds with the sole purpose of lending it out again.
So in this scenario, you have the original owners actually technically owning >100% of the company, receiving fees, paid daily, by the hedge funds who borrowed your stock. When short interest is extremely high, the fees can be >30%. So if you've lent out 110% of your company for example, and you're getting 30% fees, but your stock is up 100x, then you can just sit collecting fees at an effective 3,000% above the actual value of your company. Actually 3,300% because now you're lending out more shares than exist. This is LITERRALY how it works, and is one of the mechanisms that should actually stop short sellers from taking on this bet. So if they still decide to take the bet, then they're idiots!
But at the same time, the original owners won't want to buy more shares from the hedgfunds at the inflated price because it will take them ~3-4 yrs to recoup their investment in fees alone. And the risk is that if the retail investors start dumping in fear, the hedge funds could buy back cheaper, thus losing money. Also, by buying back their own shares from the people who borrowed it from them, one could argue this is a form of market manipulation and 'cornering' the market. So it's safer to just sit back do nothing and collect fees. You cannot be accused of dumping, or stock price manipulation if you're not doing anything with your stock. By lending it out you add liquidity and youre fulfilling demand. Nothing more. Great situation to be in.
Yes. The system is rigged against retail. They already halted retail from buying, suspended trading hundreds of times during the trading session. Allowed hedge funds to dictate the price printed on the ticker by only allowing them to actually 'buy' and 'sell'. But this case is so different and so transparent now, it's hard to imagine how they plan to exit. Most of the margin accounts have already been liquidated, and at some point, if all the $GME held by retail is outright owned, and without margin, then even manipulating the ticker price won't save the hedge funds. You eventually need to go back and buy. The only thing that can save them now is GameStop the company agree to issue more shares in a capital raise. But why GameStop would want to help short seller hedge funds who have been attacking them for years, I don't know.
GameStop has a total debt of $1.2B and cash equivalents of $500M. They could wipe out their debt with a cap raise of just $700M, which is now only ~3% of the company. So even an aggressive (but reasonable) capital raise will not save the short sellers. It would need to be an unreasonably high capital raise, and one that will hurt the share holders. So why would GameStop do that?
There's going to be a movie made about this. It's too damned interesting.
If anyone is interested, you can see what the asking borrow fees are on $GME is right now.
https://iborrowdesk.com/report/GME
Most are in the 30+% range.
Some are in the 50, 60 and 80% ranges. Crazy expensive to short this stock. And yet, people are willing to pay.
How exactly are the fees calculated? Is it percentage fixed, then the fees based on the value of the stock which is subject to change?
I only have 8 GME, I will probably ride it out for a few weeks at least.
GameStop cannot do that.
1. They do not have time, every day cost... IDK how much.
2. Accounting rules do not allow this.
As far as I understand, which may be mistaken as I am not able to lend out my own shares, the fees are calculated daily. So the 30% rate is the annualized rate, which I suppose is around 0.08%/day. If you actually try and short a stock, you are normally quoted an overnight fee as most such trades appear to be in the form of CFDs.
The way it works depends greatly on circumstances. How retail pays, and how much they pay is very different to how institutions pay. There are actual trading desks you can go to on Wall St to find and negotiate stock borrowing opportunities. Usually there is a discount to short a lot, and a premium to short a little.
They can. But it just takes time and probably requires shareholder approval. How long it takes is usually weeks or could be months. They can do an at the market offering to bypass the underwriters that usually take handle the sales for cap raised on behalf of the company.
What rules? Companies raise capital all the time. Sometimes even to pay off debt. Puts the company in a better financial position, usually at the expense of their shareholders who get diluted. So something that usually requires shareholder approval.
@randvegeta
Search "rules 105".
And with such huge volatility, it is not possible to calculate an appropriate issue price either.
This rule does not prevent them from raising capital when the stock is at or near all time highs. The rule is in place to prevent the stock from being artificially pushed down. So not really applicable here.
The demand for the stock is high so a stock offering is actually highly appropriate.
And the volatility is irrelevant. They can raise by themselves without an underwiter. So called "at-the-market". They can sell at whatever price they see fit.
This is like...
They haven't cover the shorts yet. It's gonna keep going and going to the moon.
They can't cover when they're shorting > 100%, that's just simply math.
This has never happened before. And its very interesting to see how this will play out.
I think it will end with a lot of mistrust coming from small players. The system can not be trusted, because big players make the rules in their favor. There is no freedom here.
I have a feeling there's a lot more owners of Tesla cars on LET than I previously would have guessed.
lmao
Lol. Why? Though I do own like 7 working Teslas and another 3 broken ones 🤣
it has. maybe not on that big scale, but for sure similar things happened.
and the end is easily predictable. it WILL come down, no matter what. it is a question of time and yeah it might go on a while and maybe even take out some hedge funds on the way.
however, apart from those who started the thing and either have been in early or the very few that understand what is going on at all, the regular small guys jumping the bandwagon (too late) will lose not only trust but also their money over it.
the number of (professional) gamblers/day traders will rise simply because of the volatility that allows for it. and when those positions grow the range of up and down movement increases. regular small guys will get nervous at some point, starting to cash out, which might lead to the chart go down triggering stop loss calls and so on.
oh. and on the fast way down, shorts suddenly will work again, guess what.
there will be a few hedge funds left damaged or destroyed, there will be few regular guys with right timing to get rich by this. there will be a big amount of small players losing their money. there will be a few hedge funds newly born or getting rich as well in the end.
I say this is inevitable, it's just a matter of time.
TL;DR; HODL didn't work for the masses in crypto. it won't work here just because people want to make money from it either way and not go to the moon in reality.
https://music.youtube.com/watch?v=GOSTlT691O8
This is to be expected, What is really hard to predict is the resulting chain reaction.
Finance crisis or riots.
nah, I say that's overestimation or even wishful thinking from those who started it. despite the unusual size and type of "crowdfunding" it will stay a storm in a teacup.
around easter holidays it will be gone from the news, probably faster.
>
around easter holidays it will be gone from the news, probably faster.
Maybe, but it's important to note that we are still in crisis mode, and unlimited QE has made the market extremely sensitive, just one last match away from an explosion. And a small crisis will be amplified enough to make many people jump already . The $GME is a gray rhino that we cannot ignore.
@elliotc I don't disagree. it is a good example of what can happen, what might be wrong with the system from the start and so on. and of course it shouldn't be ignored.
sadly I am not so optimistic about the real impact it might have even after another so called financial crisis or market correction or whatever.
people like to gamble, people like to take high risks. young traders and groups like wsb etc. are not so different from hedge funds after all.
they only are pissed about not being on the same highground 🤷♂️ other than that they just want to win in the same game eventually doing the same bets if only they could.
Why? Because no one should have seven Tesla's. Elon probably has three.
Seriously though, the name of the forum...