Has the Squeeze Been Squoze Yet?
isthesqueezesquoze.com
isthesqueezesquoze.com
Is there a way to know the amount of naked shorts that were sold? Wouldn't most folks (including market makers) agree that Naked shorts are obviously evil?
It's also unclear if naked shorting is actually happening here. It's entirely possible for the short interest to be far above 100%. Consider this setup:
- WidgetCo floats exactly one stock - Alice buys the one stock (short interest = 0%) - Alice lends the stock to Bob - Bob sells the stock to Carol (short interest = 100%) - Carol lends the stock to Dave - Dave sells the stock to Eve (short interest = 200%) - Repeat until short interest reaches the moon
Bob and Dave both legitimately borrowed a shared and sold it, so there's no naked shorting going on.
I suspect what's happening with GameStop is that the stock price is just so absurdly overvalued that short interest has reached a level that people previously thought was impossible.
To me the deviation from the abstract definition above almost Seems like a bug in the "borrow checker" ... I'm not totally clear on why the system is designed allow the same stock to be "loaned" multiple times in this manner ...
Why is this (not particularly sound) definition of "borrow" desirable ...? I suppose this scheme has the effect of making assets appear more liquid than they might actually be -- but -- why is that good?
Doesn't it seem like there's a kind of bias introduced by this "illusion of more liquidity". Saying this mechanism "increases liquidity" feels almost like putting grease on a slope and saying "the slope is steeper" ...
This is backwards. The stock was already over 140% shorted when it was valued less than the cash it had on hand. Plus there were a number of factors converging on a potential turnaround. That's how this all started; it was originally a strong value play with the short squeeze as only a possible cherry on top. You can check the old videos from Roaring Kitty on YouTube to see the original analysis.