Stocks and Trading Thread - Channeling your inner Mono

[Josquius]

Elon Musk tweeted on the Gamestop thing and it shot up
It is said by random internet commenters that the guy being attacked by this assault on shorts has been shorting tesla for years so Musk is really enjoying it.

Except there's no deadline on a short sale.  You can run one indefinitely, as long as you pay the interest (which is very low based on my shares that have been borrowed) and you post the collateral.

Didn't you explain before about expiry et al?
Again, this isn't something I know anything about, but all I've read suggests a bazillion (or more than there is existing stock) short options expiring on Friday. Its basically the same sort of thing as Volkswagen in 2008.

[Tamas]

I am half-convinced this madness is partly because of the blanket stimulus checks being spent by young people to do crazy bets.

[DGuller]

You pump up the price for the shares, and then sell them to those who must buy them at any price to cover their short position?

Except there's no deadline on a short sale.  You can run one indefinitely, as long as you pay the interest (which is very low based on my shares that have been borrowed) and you post the collateral.

I think there can be.  Someone can ask for their stock back, in which case you have to procure it somewhere else in order to have something to give back.  I think that's how the VW squeeze worked, the short sellers had to buy the stock at any price because they needed to have it right that moment no matter what.

[Sheilbh]

I think there can be.  Someone can ask for their stock back, in which case you have to procure it somewhere else in order to have something to give back.  I think that's how the VW squeeze worked, the short sellers had to buy the stock at any price because they needed to have it right that moment no matter what.

And presumably it's something that you're holding on your book anyway that you need to hold capital against? So at some point you either need to sell it or close it if it reaches a certain point, no?

[DGuller]

I think there can be.  Someone can ask for their stock back, in which case you have to procure it somewhere else in order to have something to give back.  I think that's how the VW squeeze worked, the short sellers had to buy the stock at any price because they needed to have it right that moment no matter what.

And presumably it's something that you're holding on your book anyway that you need to hold capital against? So at some point you either need to sell it or close it if it reaches a certain point, no?

I imagine collateral requirements get updated from time to time.  If the property I borrowed increases tenfold in price, the collateral should move accordingly.  That said, I find it so hard to wrap my head around stock short selling mechanics, in every other facet of life it's a dick move to sell something you borrowed.

[Josquius]

I think there can be.  Someone can ask for their stock back, in which case you have to procure it somewhere else in order to have something to give back.  I think that's how the VW squeeze worked, the short sellers had to buy the stock at any price because they needed to have it right that moment no matter what.

And presumably it's something that you're holding on your book anyway that you need to hold capital against? So at some point you either need to sell it or close it if it reaches a certain point, no?

I imagine collateral requirements get updated from time to time.  If the property I borrowed increases tenfold in price, the collateral should move accordingly.  That said, I find it so hard to wrap my head around stock short selling mechanics, in every other facet of life it's a dick move to sell something you borrowed.

Fixed.

I am half-convinced this madness is partly because of the blanket stimulus checks being spent by young people to do crazy bets.

Yes. From comments I've seen being bored at home with nothing to do combined with this does seem to have prompted a lot of them into it.

[DGuller]

I think this reinforces my view that asset bubbles form because people who have extra money have nothing to do with that money.  You don't have inflation, because people with extra money have all the goods they need and don't want any more, or because of Covid they can't blow it in restaurants or such.  That money sits there and burns a hole in people's pockets, and they decide to gamble with it.  That's probably why the stock market shot up after early shock, despite the economic fundamentals being highly questionable.

[Habbaku]

I am half-convinced this madness is partly because of the blanket stimulus checks being spent by young people to do crazy bets.

That's a good portion of the "Boredom Markets Hypothesis" that Matt Levine subscribes to, yes. 

[Habbaku]

The whole thing has a theme song now:

https://youtu.be/rejpDqQUcV0

[Admiral Yi]

Didn't you explain before about expiry et al?
Again, this isn't something I know anything about, but all I've read suggests a bazillion (or more than there is existing stock) short options expiring on Friday. Its basically the same sort of thing as Volkswagen in 2008.

Call and put options expire.  A short sale is not an option.

I think you and DGuller are confusing a "short squeeze" with the ability of the lender to call back the stock at will.  A short squeeze is any time the price rises after a short sale.  If the short seller believes the price will continue to rise, they will buy stock at the elevated price to cover their short sale and cut their losses.  This will have the effect of magnifying the price rise.

I've never heard of any ability to call back lent stock.  As I mentioned, some of my stock has been lent and I'm pretty sure I don't have the option to call it back.

I took a look at GME and decided not to buy a put.   No way to know how long this will last.

[Sheilbh]

I really enjoyed this piece:
https://www.buzzfeednews.com/article/amberjamieson/gamestop-reddit-stock-shares

And we've seen what the internet has done to the media, to politics and I feel like maybe we're now about to see it happen to markets. This is just the first example of some of the weirdness we'll see

Edit: At the very least it feels like trading houses probably need to start to monitor bits of social media for weirdness like this and implement that into how they trade.

[DGuller]

I've never heard of any ability to call back lent stock.  As I mentioned, some of the stock has been lent and I'm pretty sure I don't have the option to call it back.

What if you want to sell the stock that you lent?  Surely the borrower can't keep your stock until they decide to give it back.

[Admiral Yi]

What if you want to sell the stock that you lent?  Surely the borrower can't keep your stock until they decide to give it back.

The terms that I agreed to said I can still sell lent stock.  Don't ask me how that works.

[DGuller]

What if you want to sell the stock that you lent?  Surely the borrower can't keep your stock until they decide to give it back.

The terms that I agreed to said I can still sell lent stock.  Don't ask me how that works.

Can I ask Habbaku?

[Habbaku]