Or you just borrow shares from Blackrock to sell to everyone else who wants shares.

Aka: short selling. Yes, short-selling creates "virtual new shares". Its only an issue if the company gets acquired. The name of the game is to buy low sell high. Short selling inverts it by selling high and then buying low at a later date.

They're still short roughly 100% of float.

That's almost 23 billion dollars. With this much short interest the borrow fee must be close to 100% APY [edit: 35% APY]. There's really no good way to wait it out for the shorties. They're getting squeezed by the borrow rates, margin, and WSB.

> They're still short roughly 100% of float.

My overall point is that looking at the float is almost meaningless.

Days to cover is arguably a more important figure (how easy is it to buy / sell GME? Since GME has such high volume in the past few days, its not really hard at all to find shares right now).

You're right that the borrow-rate is also important to look at, but the short-float doesn't necessarily correlate with the borrow rate. You absolutely can't state facts like:

> With this much short interest the borrow fee must be close to 100% APY.

That's... just not how this works.

EDIT: I looked up some public information: https://iborrowdesk.com/report/GME

Seems to be 35%/year right now for GME shorts. If a GME short borrowed at $300, the stock price needs to fall to $200 by 2022 before they lose money. Do you really think GME can be propped up above $200 for a whole year?

If they short sold months ago at lower borrow costs, they've basically would be in the position to wait it out longer than most bulls who are just messing with 3-month call options.

> There's really no good way to wait it out for the shorties.

Selling ITM calls (and maybe hedging slightly by buying an OTM call) seems to be the obvious bear trade that would be doing well under these circumstances. The theta on these call options are ridiculous. That brings theta over to your side.

35% year doesn't sound so bad until you realize that a lot of shorts are heavily leveraged--they borrowed money to have the "capital" to make a bigger trade than they could really afford. This would multiply their earnings if it works out, but it also multiplies their losses and the interest they pay. I assure you if a hedge fund could just wait out the crowd they would do that rather than take a billion dollar loss, but if they are leveraged it requires their lender's cooperation.

Ameritrade wouldn't let me write covered calls (for calls expiring today) unless I called up their trading desk. Which had a 700 person line in front of me.

> Seems to be 35%/year right now for GME shorts. If a GME short borrowed at $300, the stock price needs to fall to $200 by 2022 before they lose money. Do you really think GME can be propped up above $200 for a whole year?

Are you factoring in the cost of the call option that prevents their entire portfolio from getting nuked if GME keeps going up for some reason?

Go back a bit more, you'll see the 80 percent on borrow fees too.

Not all short sellers entered their position at $5. Many have come in at $100 and $200, etc. They will not necessarily not face the same short squeeze, but you're right they will probably still face the same borrow rates.

why would blackrock lend you their shares so that you could tank their value?

If fidelity, blackrock, vanguard etc aren't selling right now they must believe the squeeze will be real and they'll make obscene cash off it.

> why would blackrock lend you their shares so that you could tank their value?

Because Blackrock commonly does whole-market index funds. They have to hold onto those shares as long as people are buying their mutual funds.

Might as well collect some interest while waiting. They wouldn't lend all their shares away: they just lend away all the shares that they expect that their mutual fund won't sell this year.

Without assuming naked short selling, how could the 71M of shares sold short find "locates" for their positions?

I would imagine that a short seller locates the shares, borrows them, then sells them. That is say 100 shares on loan. The other side of that trade - the buyer - now owns the shares. That buyer can lend those same shares out to another short seller - say 100 shares again. Now we have 200 shares on loan.

I don't see why someone necessarily has to lose money unless you introduce credit risk (which in the non-theoretical case you absolutely should). Wouldn't you just have to unwind each of these loans?

Sure. The way to unwind the loans is for the people who loaned them to give them back, and then the people who bought them to sell them back. So shortSeller2 gives back his loaned shares to Buyer. But Buyer sells them back to shortSeller1 - and he doesn't have to sell them back for the same price he bought them, and he doesn't have to sell them to the same person. So he actually sells them to whoever will pay him the most. ShortSeller1 is paying $1/day to borrow the shares, and he sold them for $20. It's 5 days after the sale, and today Buyer1 is asking for $40. ShortSeller1 promised to return the shares after 7 days. What can he do to not lose money?

>That leaves us with 6M shares, and with a short interest of 71M held short and ETFs like XRT buying them, it is likely there aren't enough shares.

This is a non-issue, see sibling comment: https://news.ycombinator.com/item?id=25961536

XRT has not been buying this week: the AUM are down 80%

https://www.bloomberg.com/news/articles/2021-01-29/the-games...

>> That leaves us with 6M shares, and with a short interest of 71M held short and ETFs like XRT buying them, it is likely there aren't enough shares

50M shares traded today. Monday and Tuesday it was 180M.

That is normal. Algos, HFTs and trading desks are trading the same shares over and over again.

Not sure what your point is. Do you think that if there are 71M shares short there need to be 71M shares tradeable to close out those positions?

Nice to see the half of RH holds GME factoid still in circulation.

> The only way to resolve this is i) Gamestop issue more shares/shelf-offering. ii) shorts go bankrupt and/or clearinghouse/brokers take the bill.

No.

You just need one entity, say Blackrock, that is a) long, b) has lent their shares out to short sellers, and c) is willing to reduce their long position (to realise profits, say), then 1 share circulating is enough for the shorts to close their position.

Basically, the shorts can buy a few shares, return them to the whoever they borrowed it from, then buy it again from them, and return it, buy it, etc.

Here's how it works:

1. Initial position

Blackrock long 27 (27 shares), random people long 20 (20 shares)

Note: net share supply = 47

2. Shorter A come in, borrow 26 shares from Blackrock

Blackrock long 27 (1 share, 26 lent to short A), random people long 20 (20 shares), shorter A flat (26 shares, 26 borrowed)

3. Shorter A go short by actually selling to random people

Blackrock long 27 (1 share, 26 lent to short A), random people long 46 (46 shares), shorter A short 26 (0 shares, 26 borrowed)

4. Shorter B come in, borrow 45 shares from random people

Blackrock long 27 (1 share, 26 lent to short A), random people long 46 (1 shares, 45 lent to short B), shorter A short 26 (0 shares, 26 borrowed), shorter B flat (45 shares, 45 borrowed)

5. Shorter B actually go short by selling 45 shares to redditors

Blackrock long 27 (1 share, 26 lent to short A), random people long 46 (1 shares, 45 lent to short B), shorter A short 26 (0 shares, 26 borrowed), shorter B short 45 (0 shares, 45 borrowed), Redditors long 45 (45 shares)

Note: longs 27 + 46 + 45 = 118, shorts 26 + 45 = 71, net 118 - 71 = 47

And, redditors with their 45 shares won't sell, and won't lend.

You say: > The only way to resolve this is i) Gamestop issue more shares/shelf-offering. ii) shorts go bankrupt and/or clearinghouse/brokers take the bill.

I suggest:

There is one random guy that still has a share (all the others have lent them out). So:

6. Shorter B buy a share from that random person with a share (they're happy to sell it at this high price):

Blackrock long 27 (1 share, 26 lent to short A), random people long 45 (0 shares, 45 lent to short B), shorter A short 26 (0 shares, 26 borrowed), shorter B short 44 (1 share, 45 borrowed), Redditors long 45 (45 shares)

7. Shorter B return the 1 share to the random person they've borrowed it from:

Blackrock long 27 (1 share, 26 lent to short A), random people long 45 (1 shares, 44 lent to short B), shorter A short 26 (0 shares, 26 borrowed), shorter B short 44 (0 share, 44 borrowed), Redditors long 45 (45 shares)

8. Shorter B buys the 1 share from the random person they've just returned it to:

Blackrock long 27 (1 share, 26 lent to short A), random people long 44 (0 shares, 44 lent to short B), shorter A short 26 (0 shares, 26 borrowed), shorter B short 43 (1 share, 44 borrowed), Redditors long 45 (45 shares)

9. Now, return steps 7+8 43 times:

Blackrock long 27 (1 share, 26 lent to short A), random people long 1 (0 shares, 1 lent to short B), shorter A short 26 (0 shares, 26 borrowed), shorter B short 0 (1 share, 1 borrowed), Redditors long 45 (45 shares)

10. And have short B return the final share to random person. Then shorter B is flat, and out.

Blackrock long 27 (1 share, 26 lent to short A), random people long 1 (1 shares, 0 lent to short B), shorter A short 26 (0 shares, 26 borrowed), Redditors long 45 (45 shares)

11. Now, have shorter A to the same game with 1 share from Blackrock 26 times - Blackrock is probably also happy to sell at these prices:

Blackrock long 1 (1 share, 0 lent to short A), random people long 1 (1 shares, 0 lent to short B), shorter A flat (0 shares, 0 borrowed), Redditors long 45 (45 shares)

12. Endgame.

Shorters are out, despite the fact that redditors were holding 45 out of 47 shares, and never let go of them!

Blackrock and random people have reduced their long exposure to 1 each. Redditors are stuck with 45 shares.

Note: how much the shorters lost depends: they sold in step 3 and 5, and bought back in steps 6,8,9,11. The price difference determines their loss. They probably lost quite a bit. Blackrock and random people probably won quite a bit. Redditors that are left with the 45 shares... depends for what price they can sell it.