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Topic | Stock Topic 36 |
red sox 777 04/14/22 6:20:20 PM #310: | Note that in the second example, if Funds A-Z collude with each other, Funds 1-25 are absolutely screwed and will have to pay whatever is demanded. This is how a good deal of pre-1940 corners worked. If Funds A-Z do not collude but independently come to the conclusion that the MOASS is inevitable, Funds 1-25 are also screwed. The effect is the same as if the long funds had colluded. If, however, the long funds do not believe a squeeze is coming, the chain of synthetics can grow arbitrarily long. If the underlying stock is actually worthless, and one of the long funds tries to trigger the MOASS by having diamond hands, that fund will be left holding the bag as the other long funds will sell at some price to covering shorts while the diamond handed fund will be left with worthless stock and no squeeze. So the significance of the 140% reported SI in GME is not that such a level of short interest guaranteed that there were not enough shares for shorts to cover - there were, since the total number of long shares including synthetics was probably well north of 200% of the number of real shares- it's that it made the market believe that the shorts were unable to cover. The other important thing is that a lot of the shorts were apparently naked shorts without a hedge. --- September 1, 2003; November 4, 2007; September 2, 2013 Congratulations to DP Oblivion in the Guru Contest! ... Copied to Clipboard! |
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