RE:RE:high sell orderYukonJezza wrote:
what gets me is the fact that the Sec and iiroc aren't investigating why banks lent out more shares to shorters to short than the company owned. This is highly fraudulent and and illigal. ( Naked shorting) yet no mention of this in the news.
Can a stock be shorted more than 100%
Sure. You can actually short a companys stock many times over. Lets use a hypothetical example to demonstrate (numbers are exaggerated for simplicity and effect). WeakCorp has issued 100 shares, and they are current trading at $100 a share. But the sharks are circling. NastyMoney (our antagonist hedge fund) thinks that the stock price is overvalued, and will fall. So NastyMoney decides to short the stock. On 1 January NastyMoney borrows 40 shares in WeakCorp from their prime broker, returnable on 30 January. NastyMoney immediately sells those shares in the market at $100 per share. On 10 January the stock price has fallen to $80 a share. But NastyMoney is puzzled. They thought it would fall further. So they decide to double down, and go back to their prime broker, borrow another 40 shares (returnable on 10 February), and immediately sell those in the market. On 20 January the stock price has fallen to $60 a share. NastyMoney still thinks this is overvalued. So they go back to their prime broker a third time and borrower another 40 shares (returnable on 20 February), and immediately sell those in the market. So, at this point in time NastyMoney have shorted 120 shares - or 20% more shares than WeakCorp has issued in total. But because the shares are recycled through the market this is perfectly possible. When NastyMoney sells the shares someone is buying them. And those shares are (normally) deposited with brokers who can re-lend them. Now NastyMoney does have to return a total of 120 shares to its prime broker - but here is the key: not all at once. Continuing our story. On 30 January the stock price of WeakCorp has now fallen to $40 a share. That suits NastyMoney nicely because they now need to return the shares borrowed in the first stock loan. So they simply buy 40 shares in the market at $40 per share, and return those 40 shares to their prime broker as contractually agreed. Given they bought those 100 shares back for $60 per share less than they sold them (back on 1 January), they make a substantial profit. But by 10 February WeakCorps stock price has started to rebound. Now it is trading at $70 per share. So NastyMoney is still okay. They sold that batch of shares for $80, so they are still making $10 per share when they buy them back to return them to their brokers. By 20 February WeakCorps stock price is up at $90 per share. So when it comes time to repurchase the shares relating to the 20 January short, NastyMoney is losing out. They sold those shares for $60 a share, but have to buy them back at $90 per share to return them to their prime broker. So they are actually losing $30 per share on that short. However, during the period of time from 20 January to 30 January NastyMoney had shorted a total of 120 shares, even though WeakCorp had only issued 100 shares in total. So they had short sold more than the total number of shares in issue. However they are still able to meet those delivery obligations because they dont all fall due on the same date. Disclaimer, this is not my words, this is in no way financial advice because I'm way too retarded to give that. I just copy pasta from an actual financial derivatives lawyer, Colin Riegels, who posted on quora. https://www.quora.com/Can-a-stock-have-100-of-its-shares-shorted?top_ans=263290604