Questions tagged [shorting-securities]

Short selling of stock involves borrowing shares that one doesn't own with the intention of repurchasing them at a lower price. Short selling of an option involves selling an option without having an equivalent position in the underlying security.

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64 views

Understanding mortgage backed securities

The investment banks called these bundles "mortgage back securities or MBS". and they sold these MBS's as bonds and stocks to anyone who wanted to invest in them. Source I don't get it, how ...
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Hedging a portfolio by shorting index - Margin calculations

I wish to run a long-only portfolio of stocks and hedge it during turbulent times by shorting a correlated index. I'd rather short an index ETF for hedging instead of flattening my position. My ...
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Why is "Short interest" not the interest of short to pay, but the volume of short shares?

English is not my native language and I'm so confused to this term Short interest. Why is it not the interest that you need to pay (when you borrow stocks from others), but the volume?
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How to calculate a trailing stop loss for a gamma squeeze?

I'm pretty sure AMC is going to hit crazy prices in a couple of weeks to months. A Korean AI traded fund just dumped Facebook and Wallmart for AMC. Plus, I got in a pretty big fight with some ...
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What's the incentive for a broker to allow short selling?

I was researching how short selling worked and I was wondering what are the advantages for the broker to allow this. Why would the broker lend out stocks with the expectation that they will get it ...
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Short selling, take the analogy of a car being borrowed and sold a step further and describe what happens when the car and the IOU are sold

I read this exchange and the borrowing a car, creating an IOU and selling it made sense. However, can you take the scenario a step further and help fill in more details? On Monday: Car owner A has a ...
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Who sets the stock loan costs in U.S. markets?

The market "fee rate" (a.k.a. borrow cost ) for borrowing stock shares to sell short can run very high. (One source for the current borrow cost is a list published every 15 minutes by ...
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Calculating % profit on my investment of a short sale based on % loss of the stock price

Basically, when a stock price goes down by 50%, my profit is 100% of my sell price. When a stock goes down by 75%, my profit is 300% of my sell price. I'm curious what the relationship is between the ...
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Is It easy to buy back a put-option on its expiry date?

Say I sold a BABA put expiring 5/24 . The usual advise is to close at 50% profit. What If I leave my position open until the expiry date. The put option will be expiring with no value for the other ...
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1answer
45 views

Will I receive an RT call or am I safe?

I just opened a position on WeBull to short a stock with a market value of $1,554. The total amount of cash in my account is $5200, but my day trading and overnight buying power is saying 0 after I ...
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Why short (German) government bond futures?

Today, mainly out of curiosity, I went to a major ETF comparison website and sorted the short ETFs by market value. I was surprised when among the first few places in the list I found an ETF (LYX0FW) ...
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How prices in stock market changes in accordance with demand and supply [duplicate]

Let's assume there is a listed company x. Currently it has 100 shares issued to trade in free float market. Current price of stock is let say 10. Now please let me know if I purchase one share of ...
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If I short cryptocurrencies, why don't I get the money immediately?

The academic definition of shorting is to borrow someone else's asset such as stocks, sell it now and repay it later. So I assume that when I short the stocks, money is credited to my account from a ...
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Is there something like a covered call for futures?

I am making my first baby steps in learning about future contracts. In the option market there is something like a covered call, where one can limit the upside risk to the loss of the shares one ...
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231 views

What happens when a market maker goes bankrupt during / as a result of an over-extended unsupported position?

The meme stocks have me thinking about the exchange backend. What happens when a market maker / money maker has an extreme position in a stock that is now unsupported by shares, just derivatives and ...
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Does Canada have regulations regarding "shorting against the box"?

If you hold a long position in a stock and believe it will go down but don't want to realize any gains, you can a open short position in that same stock to hedge against any drops in the price. This ...
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Is it bad for a stock to be on the Regulation SHO threshold list?

I have been reading up on Regulation SHO, and I have found some lists of stocks on the Regulation SHO "threshold list": SEC: Fails-to-Deliver Data, and OTC Markets: Reg SHO Data. However, I ...
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What is the formula for rebalancing a portfolio?

I have a portfolio of two assets. I've invested X% in asset A and Y% in asset B. Here, X and Y are weights. So, for example X = 50, Y = 50 would be a long equal-weighted portfolio, whereas X = 50, Y = ...
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Can selling naked calls create counterfeit shares?

I understand that illegal naked shorting can lead to FTDs since same share can be loaned out and shorted multiple times. This can lead to a situation where >100% of a stock's float is shorted (Ref: ...
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What happens to cost of carry when a commodity is short-sold?

Say investor B has a gold bar, and must pay 1 dollar per day to store it. Investor A shorts gold, borrowing the gold bar from B, and selling it to investor C. What I want to know is, what happens to ...
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What does "short positions exceed float" mean?

From the 2/18 GameStop hearing: Rep. Andy Barr: (02:01:32) [...] But Melvin lost $6 billion in 20 trading days. Let me ask you about your risk management. Did your short positions exceed float? What ...
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Who earns the interest during a naked short sell, where the shares haven't been located yet and fails to deliver

When someone naked short sells, who do they pay the interest to? If they never locate the shares, then there isn't a shareholder to pay. Do they pretend to pay interest? Do they actually pay interest? ...
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Options trading: buy/sell to open/close terminology

I want to buy put options as I believe the price of the underlying asset is going down. In the linked video here at around 1:10 there is a bit saying that for short positions, you 'sell to open' to ...
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1answer
174 views

Effect of short selling the stock on the buying power and cash position

Hypothetical situation: If I have 25000$ cash in my account and the margin offered by broker is 50%. So, the cash I can use is $25000, my margin amount is $50,000 and my buying power is $75000. I ...
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I know it's possible to have >100% of shares held via shorts, but how can institutions hold more than 200% of shares?

I understand, mostly, when a share of stock undergoes a short trade exchange that both the lender and lendee can in effect claim ownership. If this was done for every share of the stock, I would ...
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Percentage calculation of a short position

I am getting confused when calculating the percentage profit (or loss) of a short position and I don't know which version is the right one: version 1: // I enter a short position with entry price 8 ...
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What is the difference between margin trading and short selling?

In margin trading, you borrow money from a broker to purchase securities. In short selling, you borrow securities to sell them. Still, in both cases, you are borrowing from the broker. Is the only ...
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5k views

Why would collateral be required to make a stock purchase?

I've been reading this page on the recent GameStop short squeeeze. It mentions that at one point Robinhood and other brokers prevented their clients from purchasing shares of GameStop (GME): On ...
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For an individual brokerage account user, what is the cheapest way to take a short position in a stock?

As far as I know, if I want to sell short, say, $100 worth of stock I need to post $150 in cash collateral and pay some fees each day. Another way is to buy a put option. In that case, I need to pay ...
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Buying To Cover And Protecting Profits from Short Sell

I sold covered call options, and I would like to buy to cover when the market opens on Monday. For this particular instrument, trading volume is a bit thin, and I would like to "hide" my ...
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Does the stock price rise when short-sellers buy back the shares they need?

This question is mainly based on GME (though applies to any short example) and whether there’s logic in retail investors holding their long position. Is there logic in this thinking: “I’m going to ...
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Does exercising an option move the price?

This is a follow up question to this one. Summary: There are deep in-the-money puts at strikes of $800 being traded for an instrument whose price is much below that (in the ballpark of $225 at the ...
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How does short interest influence the borrow rate when shares can be relended ad infinitum?

According to, (https://www.investopedia.com/terms/s/stock-loan-fee.asp) , as more shares are shorted, the total supply of lendable shares is decreased since fewer shares are available to borrow. But ...
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What are the consequences of heavily regulating shorting? [closed]

The GME short squeeze was very interesting for me as a newbie trader because it had unexpected effects despite not holding that position: some platforms forbid their user to buy some stocks or ...
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Are counterfeit shares and the "short ladder attacks" purporting to use them, real?

Are counterfeit shares and the "short ladder attacks" purporting to use them, real? Hi, long-time SE user here. As I would like to attract users with actual industry experience or expertise, ...
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GameStop Short Squeeze - a moral component? [closed]

From the headline coverage, the options trading is made out to be a Main Street vs Wall Street phenomenon: or even sensationalized to average Joe vs banksters. But it seems that the hedge fund keeps a ...
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Did GME short sellers unwind by buying back shares, or in some other way?

A few weeks ago, short interest in GameStop (GME) was around 140%. Float is around 47 million, so total tradeable shares would have been about 113 million. According to reporting I have seen, it has ...
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Why does short ratio use "average daily trading volume"?

I understand what short interest is (% of shares borrowed but not covered yet). My understanding is that once a share is borrowed, it can't be borrowed again (legally, anyway). This would lead me to ...
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Deep in the money put options

I'm trying to make sense of this option: Type: put Expiry: 2021-02-05 (= this week's Friday) Bid: 580.4 Ask: 584.9 Contract size: 100 Strike: 800 The underlying's last price is $225. Buying this put ...
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GME counterfeit shares?

There's an article which claims that short sellers + brokers + DTCC sometimes manufactures counterfeit shares through legal and less-than-legal means to attack vulnerable companies and profit from ...
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How come shares of GME or AMC are not available to borrow for short selling during a short squeeze?

The principle of a short squeeze is that it makes it difficult to buy stock, so that people who want to cover their shorts have to pay a premium and make the price go higher. Conversely, that should ...
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Why can't GameStop split their stocks?

I'm trying to understand the short-squeeze situation happening with GameStop. From what I understand, the basic idea is that as people continue buying up the available stocks, the short sellers are ...
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Why aren't there automated systems already in place to recognize potential short squeezes and capitalise on them?

The whole Gamestop debacle has proved how profitable short squeezes can be. It essentially allows you to pressure large hedge funds who shorted too hard. So I was wondering, why aren't there already ...
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234 views

How can you short more shares than what is available? [duplicate]

I'm trying to wrap my head around the recent events of NYSE:GME, that quote the short interest to be 140.3%. I have not been able to find any satisfactory explanation as to how this is possible or ...
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What are the possible outcomes of GME situation assuming that GME investors hold their positions indefinitely?

I am a newbie investor and the GME situation is very interesting for me. I have read many articles about it and could not find an answer to a simple question: What happens if investors simply hold GME ...
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Dividend impact on accumulating inverse ETFs

This is a pretty straightforward clarification question. For inverse ETFs tracking an index which are tagged as "accumulating", what this actually means is that we are not tracking the ...
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367 views

Where did the money go in the recent GME short squeeze?

Recently the GME stock moved in an extreme way, though there is more to it, these steps appear to have happened: A hedge fund had a large short position Many retail investors bought the stock, ...
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How can I look up a public company's short-stock position? [duplicate]

I understand what has brought so much attention to GameStop's stock is someone noticed that it has strong finances but was being heavily shorted, i.e., other people took heavy bets that the stock ...
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3answers
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What happens if a short position can't be covered?

This question does a nice job of answering what it takes for short position to exist in the first place, how that can result in "owning" >100% of a company and what happens when shorters ...
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What is the actual reason the short sellers of GME can't just hold their positions until the price goes back to normal?

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 ...

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