Short Selling Picking Up I've been following this stock for a few years now. I've rarely seen this stock reach such a high level of short interest. According to ShortSqueeze they are currently short 27.7 million shares as of 1:30 pm. This is an increase of 2 million shares from the day before. It will currently take 11.1 days to cover all the short positions.
For those who don't follow short sales and days to cover, it simply means that if the people who are short needed to close their position because the price started going higher it would take 11.1 days at current volumes just to fulfil their obligation. That's with no one other than the shorts buying shares. Put simply, a rally in the stock price would be a nightmare for anyone who had sold naked calls, bought short term puts, or just plain shorted shares.
I've never shorted shares of a stock directly, but I've read that sometimes shortsellers will limit their losses by buying calls with a strike price a few dollars higher than their entry position. Going with the presumption that they've purchased a very conservative $4 strike for December expiration, any breakout to the upside in the price of the stock should provide some very interesting entertainment over the next month. There would be heavy resistance as the stock approached $4 with all the open interest there (currently 5992 open contracts accounting for almost 600,000 shares).
I have shorted a stock indirectly by buying puts, but usually I've bought them with expiration dates of a year or more to give myself time to be 'right' about the direction I feel the stock will go. I'd be very hesitant to bet against Thompson Creek at this point; it's already been bled out and the share price reflects it. There's limited gain potential shortselling at this point; 75 cents down is the 52 week low and pretty strong support. I'd be looking for the shorts to start giving up their positions if the stock got down in the $2.60 range.
I understand the losses over the last year; the've stopped turning a profit and have accumulated massive debt to finish their Mt. Milligain project. All that being said, unless you're betting they will go bankrupt, how much more blood can you squeeze by going short? The book value of the company is currently over $11 per share (according to TDAmeritrade/TheStreet research), over 3 times the current price! If moly prices hold stable they should pull through this and return to profitability in the next few years.
This stock is getting my attention again; I hope a buying opportunity presents itself in the next few weeks.
Disclosure: I've traded this stock (held for 30 days or less) several times in the last 3 months. I plan to do so again if the price is right and the technicals look good.