Thinking about the current situation where GME has been shorted by more than the existing float, I think I have a basic understanding of short selling as selling shares you've borrowed. I've seen a number of reasons proposed for why the holders of these short shares may be forced to cover their shorts, but I've also seen each of these reasons called out for not being true. Here are the four reasons I've seen, as well as the counters:
- They pay nightly interest.
Counter: The interest rate is low, and much less than covering would cost.
- They must put up large sums of money as margin calls.
Counter: This is temporary, and better than the cost to cover.
- There is an expiration date, by which they must cover.
Counter: This applies to put options, but not to short sales.
- The loaner of the short shares can demand it back.
Counter: This is either not true, or not likely in this case
So which, if any, of these is actually true, (and conversely, which, if any, of the counters is not true)? Is it the combination of multiple ones?
- Are there other reasons why they can't hold their positions that I haven't listed here?
Or is it the case that they can in fact hold their positions as long as they're confidant the price will drop a lot, and that there is just a temporary cost of maintaining?
EDIT: I understand there is no guarantee that the price will go back down. However, for the sake of this question let's assume that at the very least the short sellers are confident that the price will be significantly lower (a tenth) in a couple months, than it is now. They desire to simply wait for that, can they do that, regardless of if they are wrong?