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by throwaway-571
1962 days ago
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The gamma squeeze also works going down, if they had to load shares on the way up they have to unload on the way down, accentuating a down trend. When you drive the price of the stock up you increase the interests the short have to pay on the shares they borrowed to sell, or maybe increase the capital requirements they need to maintain this position on their books, reducing their upside. If the interests or the capital requirements for maintaining the position get too high, or the owners of the shares want them back, they might have to exit their position, "no matter the cost" hence the "squeeze" part. (I'm writing it down to see if I understood it all correctly) |
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It is as if the option seller (who is short gamma) follows a momentum strategy - when price goes up, they buy, when price goes down, they sell.
As for the short squeeze - why would the owner of the shares want them back from the shorters? Well, presumably to sell them.
The conversation would go like this: BlackRock to Melvin: give me my shares back! Melvin: why? B: the Price has gone up to 300! It’s insane! We are a traditional fundamental investor and bought them at at 15. We want to sell them and lock in our profit! M: ok, how about I buy the whole bunch of you, and we call it even? B: done.
All the redditors that hold on to their shares for dear life: what just happened?