[quantummagic]

Every single shorted stock, was purchased by someone else who is taking the long side of the trade. So there's as many people betting the stock will go up. This says more about volatility and volume of trading, than anything else.

[Terr_]

> Every single shorted stock, was purchased by someone else who is taking the long side of the trade.

> So there's as many people betting the stock will go up.

The first sentence is a useful reminder, but second has a error: A single person can have multiple bets, and not all bets are the same volume.

For example, Alice has a budget of $10 and believes the coin-flip will land Heads. Alice makes a $5 wager with Bob and a $3 wager with Carol and a $2 wager with Dan. The equilibrium is in money, rather than opinion-havers.

[quantummagic]

You're absolutely correct, and I should have been more precise. The value is always identical, but the number of participants, need not be the same for each position. Mea culpa.

[seanhunter]

That is true for the stocks but not options. Anyone with a brokerage account can write some calls and if they get exercised it’s up to them to find the stock to buy. Most pricing models assume the liquidity is always available but that’s not necessarily the case.

[maxcan]

true, but the other side of that trade is almost always an options market maker who will hedge their delta by trading the underlying stock. so, yes, buying a call doesn't directly represent share ownership, but it almost always results in a commensurate share purchase. not 1:1, but reflecting the delta of the option.

[WarmWash]

This isn't saying anything, anyone selling a stock is selling to someone going long.

[quantummagic]

That's exactly the point. The clickbait title wants you to forget that fact and draw an incorrect conclusion. It could have also been, "SPCX is the most purchased new stock", but that wouldn't have fed the desired narrative.

[WarmWash]

But the act of selling (and shorting) puts downward pressure on the stock. Those buyers are buyers at a lower price, not a higher one (like you would find in a stock with lots of buyers).

That's why saying "most shorted stock" is saying something and "every seller has a buyer" is not.

[quantummagic]

Yes, stocks go up and down; hardly revelatory. The point, regardless of the imprecise wording of my alternate title, remains. There are people who think they are getting a valuable investment, at the price short-sellers are willing to sell at. There's just as much optimism as pessimism about the stock, at that price. And that's my complaint about the title, it wants to only highlight one side of the trade -- for narrative reasons.

[WarmWash]

>There's just as much optimism as pessimism about the stock, at that price.

No, there isn't, because the price breaks in the direction that there is more optimism or pessimism. When the pessimists run out of optimists at $135/share, they start digging for them at $134/share. The price ran out of optimists and had to move down to find more. Otherwise the price would lock at a single point.

And abundance of pessimists indicates that a lot of "downward digging" is taking place, it's very relevant.

You're hyper focusing on the tree here and missing the forest.

[quantummagic]

People respond to market forces. When they see that there are other people making irrational valuations, they may wait to buy even lower. It's not a judgment about the intrinsic value of the stock at the current price, but of opportunities in the market.

It's still a hard fact that for every single trade, there is someone as fully optimistic, to perfectly match the pessimistic side. And people have to be pretty committed to a narrative to deny that fact.

[M3L0NM4N]

You're conflating two things though. Shares are being borrowed to sell in this instance, referred to as short-selling. These shares can theoretically be borrowed multiple times over to sell (ex. Gamestop fiasco). This is not current owners of the shares selling to new buyers, they are selling already-owned shares of SPCX.

[quantummagic]

It has nothing to do with the shares being borrowed. That's a separate transaction that comes with a fee. The point is that the share is then sold. It's sold to someone who is taking the long position. The original owner of the share, from whom it was borrowed, makes their money in fees, and by investing any security deposit given by the borrower. They are not taking a long or short position.

[M3L0NM4N]

Yes, that is how short-selling works, but you're claiming that the only reason the headline isn't "SPCX is the most purchased new stock" is for narrative reasons, which is patently false. Shorting necessitates that someone decides to sell a stock they do not own, which creates downward pressure on the price. Saying "there's always someone on the other end of the transaction" is true, but not at the same price. If what you were implying were true, the price of shares would never change. You probably understand this, but share prices decrease and increase due to the number of buyers and sellers. Hence, the more people that short-sell a stock, the lower the share price goes until it can find buyers.

[quantummagic]

I never intended to imply that the law of supply and demand was nullified. And I didn't say that the price was unaffected, just that there is as much money thinking they're getting a valuable long term investment, as there is as money shorting the stock. (By definition, since every sale is consensual, and of the opposite position)

[chuckadams]

Given the continued downward trend, it may be the buyers may just be disagreeing on how fast it drops, not necessarily taking a long term buy and hold position. I don't know much about option pricing, but aren't put options basically betting on the spread?

[quantummagic]

Regardless, you can't short anything without someone taking the opposite position. It's really independent of the overall downward trend.

[tpurves]

You are assuming there are not naked shorts out there.

[koolba]

There’s always a buyer on the other side of a short, naked or located. The question is whether the originating broker actually borrowed the shares.

They are supposed to verify that before they place the trade and generally do follow the rules. Because if they don’t, they will be not allowed to allow any short sales for that security.

[junto]

> They are supposed to verify that before they place the trade and generally do follow the rules. Because if they don’t, they will be not allowed to allow any short sales for that security.

SEC is clearly ignoring FTD’s and as a result allowing MM’s to reloan unlocated synthetic shares.

Which is exactly what happened in 2008 with mortgage backed securities and CDO’s.

[quantummagic]

They're illegal, and you can look at them just as the broker making a long bet themselves. Since they'll have to pay off the short seller, if the stock goes down.

[u1hcw9nx]

Almost all lenders are institutional funds like Vanguard and Fidelity.

As index funds they were forced to buy. They are not taking any view.