5 ms·

Every single shorted stock, was purchased by someone else who is taking the long side of the trade. So there's as many people betting the stock will go up. Th

Every single shorted stock, was purchased by someone else who is taking the long side of the trade. So there's as many people betting the stock will go up. This says more about volatility and volume of trading, than anything else.

tpurves 3mo ago
You are assuming there are not naked shorts out there.
- quantummagic 3mo ago
  They're illegal, and you can look at them just as the broker making a long bet themselves. Since they'll have to pay off the short seller, if the stock goes down.
- koolba 3mo ago
  There’s always a buyer on the other side of a short, naked or located. The question is whether the originating broker actually borrowed the shares. They are supposed to verify that before they place the trade and generally do follow the rules. Because if they don’t, they will be not allowed to allow any short sales for that security.
  - junto 3mo ago
    > They are supposed to verify that before they place the trade and generally do follow the rules. Because if they don’t, they will be not allowed to allow any short sales for that security. SEC is clearly ignoring FTD’s and as a result allowing MM’s to reloan unlocated synthetic shares. Which is exactly what happened in 2008 with mortgage backed securities and CDO’s.
chuckadams 3mo ago
Given the continued downward trend, it may be the buyers may just be disagreeing on how fast it drops, not necessarily taking a long term buy and hold position. I don't know much about option pricing, but aren't put options basically betting on the spread?
- quantummagic 3mo ago
  Regardless, you can't short anything without someone taking the opposite position. It's really independent of the overall downward trend.
seanhunter 3mo ago
That is true for the stocks but not options. Anyone with a brokerage account can write some calls and if they get exercised it’s up to them to find the stock to buy. Most pricing models assume the liquidity is always available but that’s not necessarily the case.
- maxcan 3mo ago
  true, but the other side of that trade is almost always an options market maker who will hedge their delta by trading the underlying stock. so, yes, buying a call doesn't directly represent share ownership, but it almost always results in a commensurate share purchase. not 1:1, but reflecting the delta of the option.
WarmWash 3mo ago
This isn't saying anything, anyone selling a stock is selling to someone going long.
- quantummagic 3mo ago
  That's exactly the point. The clickbait title wants you to forget that fact and draw an incorrect conclusion. It could have also been, "SPCX is the most purchased new stock", but that wouldn't have fed the desired narrative.
  - M3L0NM4N 3mo ago
    You're conflating two things though. Shares are being borrowed to sell in this instance, referred to as short-selling. These shares can theoretically be borrowed multiple times over to sell (ex. Gamestop fiasco). This is not current owners of the shares selling to new buyers, they are selling already-owned shares of SPCX.
    - quantummagic 3mo ago
      It has nothing to do with the shares being borrowed. That's a separate transaction that comes with a fee. The point is that the share is then sold. It's sold to someone who is taking the long position. The original owner of the share, from whom it was borrowed, makes their money in fees, and by investing any security deposit given by the borrower. They are not taking a long or short position.
      - M3L0NM4N 3mo ago
        Yes, that is how short-selling works, but you're claiming that the only reason the headline isn't "SPCX is the most purchased new stock" is for narrative reasons, which is patently false. Shorting necessitates that someone decides to sell a stock they do not own, which creates downward pressure on the price. Saying "there's always someone on the other end of the transaction" is true, but not at the same price. If what you were implying were true, the price of shares would never change. You probably understand this, but share prices decrease and increase due to the number of buyers and sellers. Hence, the more people that short-sell a stock, the lower the share price goes until it can find buyers.
Terr_ 3mo ago
> Every single shorted stock, was purchased by someone else who is taking the long side of the trade. > So there's as many people betting the stock will go up. The first sentence is a useful reminder, but second has a error: A single person can have multiple bets, and not all bets are the same volume. For example, Alice has a budget of $10 and believes the coin-flip will land Heads. Alice makes a $5 wager with Bob and a $3 wager with Carol and a $2 wager with Dan. The equilibrium is in money, rather than opinion-havers.
- deleted 3mo ago
  [deleted]
- quantummagic 3mo ago
  You're absolutely correct, and I should have been more precise. The value is always identical, but the number of participants, need not be the same for each position. Mea culpa.
u1hcw9nx 3mo ago
Almost all lenders are institutional funds like Vanguard and Fidelity. As index funds they were forced to buy. They are not taking any view.

tpurves 3mo ago

You are assuming there are not naked shorts out there.

quantummagic 3mo ago
They're illegal, and you can look at them just as the broker making a long bet themselves. Since they'll have to pay off the short seller, if the stock goes down.
koolba 3mo ago
There’s always a buyer on the other side of a short, naked or located. The question is whether the originating broker actually borrowed the shares. They are supposed to verify that before they place the trade and generally do follow the rules. Because if they don’t, they will be not allowed to allow any short sales for that security.
- junto 3mo ago
  > They are supposed to verify that before they place the trade and generally do follow the rules. Because if they don’t, they will be not allowed to allow any short sales for that security. SEC is clearly ignoring FTD’s and as a result allowing MM’s to reloan unlocated synthetic shares. Which is exactly what happened in 2008 with mortgage backed securities and CDO’s.

chuckadams 3mo ago

Given the continued downward trend, it may be the buyers may just be disagreeing on how fast it drops, not necessarily taking a long term buy and hold position. I don't know much about option pricing, but aren't put options basically betting on the spread?

quantummagic 3mo ago
Regardless, you can't short anything without someone taking the opposite position. It's really independent of the overall downward trend.

seanhunter 3mo ago

That is true for the stocks but not options. Anyone with a brokerage account can write some calls and if they get exercised it’s up to them to find the stock to buy. Most pricing models assume the liquidity is always available but that’s not necessarily the case.

maxcan 3mo ago
true, but the other side of that trade is almost always an options market maker who will hedge their delta by trading the underlying stock. so, yes, buying a call doesn't directly represent share ownership, but it almost always results in a commensurate share purchase. not 1:1, but reflecting the delta of the option.

WarmWash 3mo ago

This isn't saying anything, anyone selling a stock is selling to someone going long.

quantummagic 3mo ago
That's exactly the point. The clickbait title wants you to forget that fact and draw an incorrect conclusion. It could have also been, "SPCX is the most purchased new stock", but that wouldn't have fed the desired narrative.
- M3L0NM4N 3mo ago
  You're conflating two things though. Shares are being borrowed to sell in this instance, referred to as short-selling. These shares can theoretically be borrowed multiple times over to sell (ex. Gamestop fiasco). This is not current owners of the shares selling to new buyers, they are selling already-owned shares of SPCX.
  - quantummagic 3mo ago
    It has nothing to do with the shares being borrowed. That's a separate transaction that comes with a fee. The point is that the share is then sold. It's sold to someone who is taking the long position. The original owner of the share, from whom it was borrowed, makes their money in fees, and by investing any security deposit given by the borrower. They are not taking a long or short position.
    - M3L0NM4N 3mo ago
      Yes, that is how short-selling works, but you're claiming that the only reason the headline isn't "SPCX is the most purchased new stock" is for narrative reasons, which is patently false. Shorting necessitates that someone decides to sell a stock they do not own, which creates downward pressure on the price. Saying "there's always someone on the other end of the transaction" is true, but not at the same price. If what you were implying were true, the price of shares would never change. You probably understand this, but share prices decrease and increase due to the number of buyers and sellers. Hence, the more people that short-sell a stock, the lower the share price goes until it can find buyers.

Terr_ 3mo ago

> Every single shorted stock, was purchased by someone else who is taking the long side of the trade. > So there's as many people betting the stock will go up. The first sentence is a useful reminder, but second has a error: A single person can have multiple bets, and not all bets are the same volume. For example, Alice has a budget of $10 and believes the coin-flip will land Heads. Alice makes a $5 wager with Bob and a $3 wager with Carol and a $2 wager with Dan. The equilibrium is in money, rather than opinion-havers.

deleted 3mo ago
[deleted]
quantummagic 3mo ago
You're absolutely correct, and I should have been more precise. The value is always identical, but the number of participants, need not be the same for each position. Mea culpa.

u1hcw9nx 3mo ago

Almost all lenders are institutional funds like Vanguard and Fidelity. As index funds they were forced to buy. They are not taking any view.