And this is how the derivatives market got so esoteric in the subprime crisis Im not sure why derivatives are fucking legal to begin with.
How is that not naked shorting? https://www.investopedia.com/terms/n/nakedshorting.asp Is it a case that they borrowed the shares, and then allowed the funds to short them? That sounds like a nuanced difference from shorting shares you know you don't have, in that you can say "hey, I borrowed them, so assumed I had them when I sold them short".
If you borrow them, you possess them, so it's not a naked short because you can deliver them to the buyer. All shorts are in a sense "naked" on the back end when it comes time to return them to the loaner, but that's why there are usually mitigation measures built in where they can make a call on you if your short's position is too ugly.
But they can't though.... it's 140% short. They shorted more shares than exist. Hence the squeeze. So how could they borrow and posses nonexistent shares?
Oh man, the tranches in the mortgage CDOs were an amazing bit of mathematical ingenuity that ignored one fundamental truth: mortgages defaults are not independent events.
I was just addressing the case where shares were actually borrowed. I wouldn't be surprised to find actual naked shorting going on in this case.
Right... which, to me, is surprising, as hardly anyone is pointing at the 140% naked shorting which is illegal... it's more that the Retail Retard got in the way of them getting away with it.
Just be aware of taxes owed. I did day trading a bit in college over a semester and doubled my money but come tax time they wanted theirs. So you need quite bit better than razer thin margins to actually net money after taxes and trade fees.
I guess I'm still confused, because that still sounds like naked shorting. It makes sense, but I still don't see how that's not illegal based on the little bit of legal shit I read and pretended to understand.
How it basically worked was this. I can tell my broker I want him to short a stock. He tells me, I'll allow it, but I need money in your account to make sure you can cover your losses. I agree and the transaction is made. I then go into the options market and buy some put contracts on the same stock I just borrowed. I've now doubled my short position while only REALLY having one short position. In the case of the first transaction I've borrowed shares that actually exist, but had to put up collateral in case something went badly. In the second, I didn't have to put up any collateral because I'm just buying a contract with the possibility of buying stock at a later date, I'm not forced to. What happened to Melvin is they rang up a giant actual share short position as well as a short option position and although I can't see their books, I'm sure they actually naked shorted some of their actual share position by "borrowing" stocks from other brokers who borrowed actual stock. Yes, you are allowed to borrow someone's borrow. This is why you saw Citadel come to the rescue yesterday with a few billion dollars. They most likely were in on this trade in some fashion and it was in their best interest to keep their side of the trade from taking massive losses as well, plus I'm sure they are making out like bandits from fronting the money out to companies in need and then churning the stock all afternoon.
Well, this is interesting... quoted from WSB: Thomas Peterffy, CM Interactive Brokers, just said on Bloomberg short squeezing is ILLEGAL, and they CLOSED OUT POSITIONS FOR THEIR CLIENTS, most of which were SHORT. This is just ADMITTING MARKET MANIPULATION? Don't allow BUYERS, but still CLOSE HEDGE FUNDS SHORTS? https://streamable.com/ycdec9
"Chadmath" and AOC will be streaming on Twitch tonight. Here's the link to her channel if you want to see what they have to say about this. https://www.twitch.tv/aoc
Wow... he admits to closing tens of thousands of positions because he said they were involved in an "illegal" short squeeze. What a fucking gong show.
I don’t understand. Isn’t the “squeeze” part when the investors with the shorts have to buy up shares to cover their losses? Or is he arguing that retail traders buying regular shares is illegal?
In that interview, he basically says that anyone who would pay $300 for a small corner store knows it's not a valid investment so you must be in it to fuck over the shorts, so therefore it's illegal, so therefore they closed their position. I'm paraphrasing, but that's what he said. Basically, anyone who invested at any value higher than the short target is involved in an illegal short squeeze.