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So it seems the issue is that people have borrowing agreements that can be recalled early (seems like it functions like a margin call in a way). Call it half-naked shorting, I guess. Still seems risky. I feel like they could've just bought call options and called it a day instead. Maybe that's too naive or call options are hard to find/pricey for Gamestop?

That still doesn't explain how you know folks aren't naked shorting. Maybe you can read the trades?

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I don't know they aren't, but it's illegal. Large hedge funds are unlikely to be breaking the law, and I haven't seen any evidence that they are which wasn't based on a misunderstanding of the free float numbers.

Stock borrowing is very very commonly done and renewed per-day, in the vast majority of situations this works fine.

I appreciate the explanations, thanks. I don't have the trading context. Seems like tail risk or Black Swan events yet again. I hope they made enough money on these shorts that it wasn't "picking up pennies in front of steamrollers". If not, then I wish there would be better rules to prevent the short squeeze, like requiring calls instead of stock borrowing (maybe this is too expensive). When the liability is theoretically infinite, it just seems really risky to count on the hope that you can keep borrowing the stock (which works great the vast majority of the time but every now and then you lose billions).

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