Indeed. That tactic has worked so far. But Ralf, man, I gave you one job. Your job was to close the short position. You didnât get to keep kicking the can down the road.
Letâs start again. Whatâs your move assuming the squeeze has been triggered and the margin calls have started?
Thereâs no benefit in triggering the squeeze to anyone whoâs in the position to make it happen. Their best strategy is what I outlined above: keep taking interest payments until they have slowly acquired enough shares to cover their position.
Well, you could be right. Or maybe, instead of paying the interest and slowly covering, theyâve actually been digging the hole deeper. Time will tell.
we all know dem hedgies greedy. I spent many minutes fantasising about it.
We have covered this already. Geometric mean indicates that the total cost to cover at 150% SI would be likely be in the hundreds of billions. Is it a lot of money? Absolutely. Is it an impossible amount of money? No, especially when taken in context of the unprecedented margin debt (fig. 3) which has been created in the last 12 months. Last week 800 billion was wiped off the crypto market. Adjust your sense of financial scale.
Shorts cannot be ârenewedâ. If a short is not reconciled by the expiration date, it is counted as a Failure to Deliver. GME has an unbelievable number of FTDs.. FTDs can be hidden using some fairly sophisticated means, but all the time this is happening, you will be paying ever increasing interest. Eventually, this interest will bankrupt you (if you have watched the Big Short, you will be familiar with Michael Burry having to take on more capital to pay his short interest to save the firm from going under). This is not something which can be escaped.
The daily volume for GME averages for the last little while has been ~5m shares. The daily short volume has been around 70%. Outside edge calculations suggest there may be as many as 200m naked shorts in circulation. Buying shares over the market will drive the price up, bringing you to bankruptcy quicker. However, nobody is selling. Your short interest is growing.
Unless you get margin called. Or a share recall is initiated. Or one of the newly passed DTC rulings forces you to balance your books or be liquidated. Now you have to buy one share to cover every naked short youâve created. Bad news - that share you purchased canât be reused, all it did was cancel the synthetic share.
This is not how the market works. Your naked shorts have been purchased by individuals who refuse to sell under a certain value. Unless they sell you their shares, you cannot cover. The interest is too high or youâve been margin called, so you choose to start buying - or rather, the automated trading systems start buying for you. At any cost, because you are legally obligated to cover these short positions. Now the price is spiking. Congratulations, you failed to cover your shorts, your hedge fund is bankrupt, and your margin call triggered a short squeeze.
This is incorrect. You are looking at the financial system as if it is one coherent organisation with a single goal.
There are massive financial institutions on both sides of this battle with literally trillions of AUM and when one side (short side) is margin called and liquidated by the DTC, OCC or ICC, their assets will then be auctioned off to the other members to cover their margin. These other members (including new third parties like Blackrock due to changes in the auction rules) will be able to pick up literally hundreds of billions in securities for considerably less than market value. It is absolutely in their benefit for a squeeze to happen and bankrupt their competitors.
I donât mean to sound harsh @ralf, I am sure you mean well, but itâs important that people have an comprehensive understanding of the market dynamics in play here. While there are certainly elements which are wishful thing and rumours, there are also simple matters of fact, and ignoring those facts will just lead us in circles.
Youâre not thinking like a broker who loaned out way too many shares or his hedgie buddy⊠Imagine this hypothetical situation:
Shorter Wolf 1 - âhey mate, my buddyâs already mates with you. can I borrow N shares for a week, as it sounds like a good wheeze?â
Broker - âyeah, why not, everyone else is!â
Wolf 1 to Wolf 2 - âhey mate, hereâs dem sharesâ
Wolf 2 - âhey broker, see, I promised Iâd get them shares backâ
Broker - âkthxbaiâ
âŠ1 week laterâŠ
Wolf 2 - âhey, can I borrow some shares again?â
Broker - âas you asked so nicely, sure.â
Wolf 2 to Wolf 1 - âwhat time are we going to the pub? oh yeah, we snagged some more shares.â
Wolf 1 to Wolf 2 - âhigh five!â
Wolf 1 to Broker - âoh here are those shares as promised.â
⊠repeat âŠ
But yeah, I donât know what Iâm doing, so your version could be more likely.
My point was just that thereâs no point a broker margin calling someone when they know itâll bankrupt them, because if they go bankrupt they wonât get their money back OR the shares theyâre on the hook for. Sure, they might get something, but itâs better for everyone including them to just continuing loaning them out. And equally, it doesnât matter that they donât have the shares, because the owners are just sitting on them waiting for the price to go higher. When they decide to sell, the problem resolves itself and thereâs 2 days to sort out the mess.
I give up. Best of luck everyone. Remember to check your sources.
To be fair, Iâm fairly flippant on all this because not only do I not consider it likely to happen, I only have ÂŁ20 in GME, so I donât much care either way. Sorry if I came across as too flippant.
This bit sounds pretty interesting. Iâd actually never heard this before, was too busy writing the next screenplay⊠
This could be fun to revisit in a few months
Indeed.
Looks like Freetrade has quietly been working away on the âwhat if theyâre rightâ scenario. Updates to the transaction limits now coming into place.
Hi @Gemhappe @Freetrade_Team - Iâm trying to sell my GME position. It will only let me sell the fraction, and not the whole number of shares. Realise itâs hectic but unless this is a bug just for me, suspect this needs to be addressed
Sorry, my mistake. I had an active limit sell on the whole shares. My bad!
Feel free to delete the thread (or leave it up if helpful for other noobs).
All worked very slickly once Iâd figured my error, so thanks!
cant buy gme stock and my topic disccusiono gets closed when i try reply
Hi Liam
As we mentioned on the other thread, weâre working on it.
isnt it illegal to stop stock from being exchanged when the market opens? just because your bank provider doesnât want people to buy stock so they dont lose money on shorting.
I wanted a ps5, currys were sold out. Can I sue them? No. This is the same.
Preventing you from accessing/selling stock you own is illegal, not letting you buy isnât. They are working flat out to allow this, read all their messages, there is no conspiracy here.
ok well lets hope it gets resumed soon
Iâve read somewhere that the withdrawal limit should GME go to the moon and beyond is $25k. Will this limit be increased at all? Whatâs the deal with the limit, can someone explain please? Thinking of withdrawing and purchasing elsewhere if there is a limit.