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So if there isn't one entity short 140%, is it that there are multiple chains of shorting, like shorts on top of shorts that leads to the 140% target? Not tota
by auto 6y ago
So if there isn't one entity short 140%, is it that there are multiple chains of shorting, like shorts on top of shorts that leads to the 140% target?
Not totally familiar with all this, just trying to understand.
- manigandham 6y agoYou buy a share. You now rent it to someone else. They sell the share again (and hope to buy it back later at a lower price). Same share has been sold twice. The 2nd buyer of that share can then rent it again to another seller which increases total short interest.
- cl42 6y agoYes. If I short a share, I’m selling the share to someone and planning to buy it back later. That person who bought the shares from me can then lend them to someone else... so now two shares are being shorted when only one real share exists.
- text70 6y agoSo, closing the loop back to the original analogy, you shouldn't be able to sublet an apartment with an occupancy rate of 4, out to 8 people.
- djoldman 6y agoCorrect. It's akin to fractional reserves [https://www.thebalance.com/what-is-fractional-reserve-banking-4590236 https://www.thebalance.com/what-is-fractional-reserve-bankin...]