Short squeezing... synthetic longs?Goldcorp (GG particularily) seems to have been victim, and in large volume since Wheaton, to a reverse conversion strategy. Institutionals and hedge funds seem to utilize the strategy heavily on gold stocks and the underlying commodity itself.
The fund will short the stock in question, then also sell puts and buy calls (a synthetic long position - also achievable with warrants) - which helps explain the short positions and also open interest and depth in options... (the amount of money you make doing this of course depends on the borrowing costs shorting and the put/call premiums - which seems thin on Goldcorp when comparing to say - Newmont)
As an investor in both Goldcorp warrants and GG calls I see this as a double edged sword as the squeeze hits these funds - the potential for a short-term gain is huge, but ongoing use of the strategy makes it harder for small investors to be synthetically long...
... or perhaps it's time to start looking at those puts once the cabal reverses this trend...
;)