What is the flaw in the understanding of shorting?
If you assume that new short positions are being opened - and at the recent prices, that's not an entirely unattractive thing to do - then the short interest staying steady suggests some positions being closed and others being opened, and tells you little about single actors.
And anyone opening short positions at today's prices is basically "resetting the clock" on how long you'd need to squeeze to get them to back down... so if I were to sell it short now, I'd be betting that some folks making some of their first investments ever to ride the hype train are going to be more likely to blink first than I am.
They're basically loudly signalling that they will not sell until the short float is down.
I've never heard of WSB being linked to Qanon/trump/alt right until all this short drama started.
The original GME investment groupthink (Reddit always works this way, it’s lovingly called “the hivemind”) was based on complex, but logically-sound technical reasoning. A lot of due diligence was done. QAnon, as far as I know at least, was based on a post on 4chan with no verifiable evidence whatsoever. WSB’s GME buying was motivated by logic and evidence at its core, and many aspects of this logic have happened exactly as predicted (for example, the multiple gamma squeezes). Unlike QAnon, the more you learn about this, the more it makes sense (though, very obviously, the price is going to crash eventually, and these people know it). Respectfully, I think it’s disingenuous and below-board to try to baselessly compare something you don’t understand well to an alt-right hate group. Show me the solid due diligence and technical analysis that underlies QAnon, and maybe I’ll give your comparison a closer look.
So if you carry a 9mo short with 80% borrow rate on a stock that realizes 0 vol, you played yourself.
If you don't want to deal with borrow, you can buy a put and sell a call on the same strike (usually slightly higher than ATM) which comes with an implied borrow rate that is locked in.
But the hedge funds in question closed out their short positions days ago. The stock right now is being propped up by simple (and misinformed) speculation. And effectively all of the purchase price that people are paying right now is going to end up being transferred to the people with earlier positions who are getting out at the peak of the bubble.
[1] A naked short is a short sale where no underlying stock was borrowed first. This is a crime, but only possible for certain very privileged traders with control over the various tracking records. Leverage over 100% just means (for example) that you borrowed a share, sold it, then later went to the same buyer and borrowed it again. You end up owing them "two shares", but not necessarily the same share twice. In practice what happened is that as the stock started rising, Melvin closed its position buy repeatedly buying and returning shares to the tune of 140% of the capitalization. (Edit to add: it seems likely that it did so in combination with a bunch of loans and favors from other hedge funds with the ability to buy and hold GME across the inevitable collapse. The WSB folks complaining about hedge fund corruption and insider dealing aren't wrong.)
I have asked people about this. They accuse me of buying into corporate media propaganda. Melvin must still be in and be near exploding in their minds.
https://old.reddit.com/r/wallstreetbets/comments/l8539h/cnbc...
They don't do that, basically. This is a conspiracy theory.
I keep seeing over and over again that hedgefunds MUST buy stock if the price goes up, and that 100% shares short is some sort of trigger that means everyone must buy.
There is another common misconception that stock cannot be created, that there is some finite supply. People should take note that AMC has (shrewdly) issued a lot of new shares in response to their stock price climb.
Then of course as it goes up and they bump up against their personal (or their brokers' personal) risk tolerance, they're forced by them to buy.
There is at least one other group that is likely benefiting massively through all of this: Those who have been selling options. There are a lot of levels here, but when this is all done I suspect that the aggregate spent by retail traders on premiums for options that expired worthless will eclipse the final market cap of GME.
When there is this much volume, you have to remember that someone is in the middle of it taking a tiny fraction in order to facilitate it. These people are likely doing a very good job limiting their risk, and just printing money right now.
I suspect that overall we'll end up with "Hedge Funds" (as an aggregate) in likely the same positions, intermediaries and market makers wayyyy up, and Retail (as an aggregate) way down. Which, I guess is the system that people are virtual-rioting over.
If you mean a tradeable index so you can invest in market makers... I doubt it. Their entire business is making money for themselves, and likely don't need or want public shareholders that they have to report to.
Individuals buying now are more likely to get screwed. On a self-interested side, they could be wanting as few retail investors to lose as possible to minimize the calls for new regulations
That's as on the face farcical as saying that a lion didn't eat a deer because it felt like being a good guy that day.
In your example, if I understand it, I go to Alice, take her share and give her an IOU. I give the share to Bob, and take his money. Then I go to bob, take his share and give him an IOU. I give the share to Christy, and take her money.
I have two people's money, and two people have my IOU's. If ten shares exist and these are the only shares that changed hands, it would be 20% shorted - or am I misunderstanding already?
Assuming I'm not, I would think I need to buy any two of these ten shares to give one each to Alice and Bob, and it could be the same one if Bob or Alice sell it back to me after I return it for my IOU. Okay, so far so good for a 20% short position.
If the shares were 140% shorted, that would imply that I've sold each of the ten shares once, and four of them twice. This sounds like the same situation in theory except that now rather than having the option of buying a share from someone whom I've just returned it to for an IOU I now have to do that - four times at least in total. The difference practically though seems to be that people know I don't have much bargaining power. If ten of the twenty-four people who own either a share or one of my IOU's conspire to not sell me a share back at any price, I'm in a world of hurt - and the more shares I've sold, the higher the odds that enough of the people owning these shares would want to do exactly that.
Am I misunderstanding something?
No they haven't, because they are literally running ads on CNBC telling people that right now. Why would they spend money doing that if they no longer have skin in the game?
Source?