I could use some clarification on shorting stocks. Specifically, at what price is a short borrowed and is there a way to find the price it was borrowed at? also, this maybe a dumb question. But, is there a way to “day trade” shorts?
At the time you short, there is a market price for buyers AND sellers. So you are shorting at the market price. And yes, you can day trade shorts. People like to take a shot shorting stocks that go up 100% in a day, for example. There's other kinds of stocks you can short in a day too.
Thanks for explaining. if you could answer something else for me? Since they are able to short on daily basis. Why can’t a short squeeze be prevented e.g. GME? The reason I ask, is because a lot of people believe AMC is going to squeeze. But, there are others that believe that it’s going to tank (hence) part of the reason why it’s being shorted so heavily. I’ve looked at a lot of data and it’s seems like there may be a squeeze but I just find it hard to believe Hedge funds would allow another GME situation to happen so soon after.
GME had something special where so many out-of-the-money calls were being bought that the hedge funds couldn't cover themselves. So the hedge funds that were previously shorting it, had to start buying shares. So that's a lot of sellers that got taken out. And other hedge funds were apprehensive (during that month) to short as well, because they knew others had to start buying because of all the calls. So that's more sellers that were not coming into the market just yet. If you look at the volume of shares traded during that short squeeze, it was immense, greater than the total number of shares that GME was floating. Now keeping in mind that sellers were disappearing, you see why it squeezed upward. In a more normal situation, to your question, it's possible for short sellers to try to hold market price down by absorbing buyers for a while. But remember that those big short sellers want to be hedged. If you look at GME from 2013 to 2020, that's 7 years, short sellers were able to push it down and were in control of that market.
Shares aren't borrowed at a price. If shares are borrowable, they can be sold short. It's just like buying a stock except that you sell first. Your broker obtains the shares from another in house account and if none available, the shares are borrowed from another brokerage firm. At settlement, he delivers the borrowed shares to the buyer.
A gamma squeeze was a large part of the short squeeze in GameStop (GME). When traders buy options, if the counter party is a market maker, he offsets the risk by buying or shorting stock. With GME, Redditors bought a huge amount of OTM calls. Market makers hedge short calls by buying stock. Gamma is the rate of change of an option's delta. As share price rises, delta and gamma rise which forces market makers to buy more shares, driving up share price. This adds a lot of fuel to a short squeeze 'fire'. As share price rises, many shorters cover their short positions. That means more buying of the stock, further increasing prices. More than 100% of GME stock was shorted by traders and investment funds. The combination of short covering and gamma squeeze is literally a chain reaction, driving share price up. The only way to stop a short squeeze is to commit more money to shorting shares so that net selling is as much as net buying and no one has such deep pockets, or at least would be willing to pony up that kind of cash when GME was meteorically rising from $20 to over $500.
I appreciate the explanation. is any of this data available to the public for all stocks and if so, what’s the place best place or platform to find it?
What specific data are you asking about? Short data? If so, you can get it on individual stocks at Yahoo Finance: https://finance.yahoo.com/quote/GME/key-statistics?p=GME Finviz.com has a number of screeners. The "Ownership" screener will provide Float, Pct Float Short, Short Ratio, etc. Other web sites as well: https://www.marketbeat.com/short-interest/ Google for more.
