Short squeeze explained

Discussion in 'General Precious Metals Discussion' started by mmm....shiney!, Feb 1, 2021.

  1. Number 47

    Number 47 Well-Known Member

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    I thought I'd read that they own a $#it ton of silver ? That's cool, I'm getting use to being wrong :D
     
  2. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    JPM stores/holds a lot of silver for other people

    Much like 100% of gold at perth mint belongs to its paper owners, mines (creditor x day term), government and dealers (yet to recieve its gold, though paid upfront) if fact perth mint actual outright ownership of gold might be a fraction of its gross assets but PM will state it has X tons of gold
     
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  3. leo25

    leo25 Well-Known Member Silver Stacker

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    That's news to me. I was under the impression that shorts are perfectly fine but naked shorts were not. (Even though naked shorts are part of the system) :confused:

    Gamestop is a perfect example of traders naked shorting shares that they do not possess and have no intention to recover/balance later in time. (since they expected the company to fail)
     
    Last edited: Feb 1, 2021
  4. jultorsk

    jultorsk Well-Known Member Silver Stacker

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  5. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    There is three main kinds of shorting

    1. Short Hedge -> Shorting share that entity owns
    2. Shorting shares that one has borrowed
    3a. Illegal Naked shorting, if the entity has not borrowed the shares or are long on stocks.
    3b. Legal Naked selling - writing both puts and call option that negate each other but offers a spread.

    In the case of 3a. Naked short selling of stocks are impossible to police in real-time but if forensic search is performed on trades which are ALL time stamped, it is easy as A B C to find. Only a mad person or entity will intentionally have billions of dollars of naked shorts over weeks or months especially if they don't want to be sued and put in jail, if they make billions of the trade of a tiny stock like GME. However a billion on Tesla or Amazon might not be noticed.

    In the case of 3b. Looking at one side of options ledger in play, can lead to uninformed to sum the options and state naked shorting is occuring. This involves writing than selling calls and/or buying puts where the numbers of shares cancels out the need to own or borrow shares but can win or lose on the movement of the spread. This type of option play are usually "cancelled" closed out well before expiration dates and is only feasible in the most liquid stocks..
     
    Last edited: Feb 1, 2021
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  6. wrcmad

    wrcmad Well-Known Member Silver Stacker

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    You are both correct.
    I maybe should have used the term not always illegal.
    Where there are exemptions, there is a way to make it mainstream.
     
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  7. 66rounds

    66rounds Well-Known Member Silver Stacker

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