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I attempted to put in a small short sell order for GME (since I believe the price is currently way overvalued at >$300), but it said the order could not be performed because there are no available shares to borrow. How can this be? Is it because of the current (volatile) situation with GME? Have brokerages placed temporary restrictions on short selling GameStop? FYI, my brokerage is Schwab.

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    In case it goes up to $2000 do you have a spare $1700 in your account?
    – user253751
    Jan 29, 2021 at 18:24
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    For that matter, in case it goes up to $100000 do you have a spare $99700 in your account?
    – user253751
    Jan 29, 2021 at 18:30
  • to your first question yes, to your second, nope.
    – Eric33187
    Jan 29, 2021 at 18:31
  • In case it goes up to $2000 do you have a spare $1700 in your account? It's even worse than that. At standard Reg T 30% margin maintenance for shorts, a share price increase from $300 to $2,000 would require about $2,150 more margin per share. And if the broker imposes a stricter margin requirement, even more. Jan 29, 2021 at 19:45
  • @S Spring - Buying options when the implied volatility is 300% to 500% is a fool's game. Jan 29, 2021 at 19:45

2 Answers 2

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I can't know why your brokerage, specifically, disabled shorting, but the reason seems very obvious to me, like common sense.

Nobody knows how high the stock will go, especially not you. A month ago it was about $20, and it certainly wasn't ever going to be $50. But now it's $300. A 15x increase. Are you prepared for another 15x increase, where it goes up to $4500? Will you be able to cover that short?

And don't forget, the stated intention of this flash mob is to buy up all the shares so that no short seller can re-buy at all. It doesn't matter what the "real" value of the stock is, what matters is how much you have to pay to get one. You may end up obligated to buy a share from someone who's like "lol haha f**k you, gimme a million bucks or go f**k yourself". Got a million bucks to spare?

There are already rumours that short sellers won't be able to re-buy at all and that the reason various brokerages and clearinghouses stopped letting people buy the stock is to avoid their own bankruptcy from having to cover these defaulted shorts. (Meta: this section could be deleted if this is unfounded)

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    Gamestop can just issue shares. There is no "squeeze to infinity". At some price, the owner of the stock will just cash in for themselves. AMC already sold more than a billion dollars worth of their stock and are planning on doing that again soon. GME can eat a 2% dilution on their current imaginary price and double their real price pre-bubble as a result. It's in the interest of all their pre-bubble shareholders so they'll just go ahead and do it. Jan 29, 2021 at 18:44
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    @DavidKaram the moment Gamestop announces any intention of issuing shares the stock will crash. Reddit will reverse their position and be all "SELL NOW TO F**K GAMESTOP MANAGEMENT". These are just stock market games, nobody actually thinks Gamestop has that much value.
    – user253751
    Jan 29, 2021 at 18:53
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    @DavidKaram: You're neglecting the fact that the Redditors who bought shares now have voting rights too. The fact that the pre-bubble shareholders could have approved such a thing, if they had voted on it before the bubble, does not mean that they still can. They have either sold or had their stock (and the voting rights) borrowed away from them by short-sellers.
    – Ben Voigt
    Jan 29, 2021 at 18:59
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    I don't think it's realistically possible to have no one selling GME. And if there are no sellers, the price could not continually increase. I would have had to sell farrrr before the price reached anywhere near a high enough amount that there could theoretically be no more sellers.
    – Eric33187
    Jan 29, 2021 at 19:00
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    @BenVoigt Realistically none of those redditors will cast a single vote, but I don't know if there's a minimum number of votes required for such an action (not just a percentage)
    – user253751
    Jan 29, 2021 at 19:00
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It is not a rare thing for shares to become hard to borrow or even non borrowable. Brokerage firms publish their hard-to-borrow lists daily.

I can't speak for all brokers but mine also lists the number of shares available for borrowing. It's not a good idea to short the stock if that number is low because the likelihood of getting a forced buy in is higher and that can be somewhat more painful with a stock like GME which has a wide B/A spread.

I don't know what Schwab's restrictions currently are (google for details) but as of yesterday they made GME non marginable (for use as collateral)and raised the margin requirement on GME stock and options.

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