Tracking short interest

Does a high short interest keep the stock price artificially suppressed?

Am I understanding this correctly? When one shorts one share they essentially create a share that doesn't really exist for someone else to buy. Then at some point that share has to be bought back this collapsing the expanded number of shares?

Mathematically what I think shorting does.

Abc inc has 100 shares. Bob decides to sell 10 shares short. Now there are 110 shares available for people to buy. Bobs broker says the stock has risen too much you can only be 5 shares short. So now bob has to buy 5 shares from someone, reducing the available shares to 105.

Is this right?

No,
I believe the way it works is this...., ABC inc has 100. Bob decides to sell 10 short, he BORROWS 10 shares through his broker from someone who owns the shares, and sells them in the open market. When stock goes up really high-->margin call, bob goes back to the open market and buys shares back, replacing the ones he borrowed. I don't think it leads to artificial suppression...just the short squeeze we are found of.

Theshadows said:

Does a high short interest keep the stock price artificially suppressed?

Am I understanding this correctly? When one shorts one share they essentially create a share that doesn't really exist for someone else to buy. Then at some point that share has to be bought back this collapsing the expanded number of shares?

Mathematically what I think shorting does.

Abc inc has 100 shares. Bob decides to sell 10 shares short. Now there are 110 shares available for people to buy. Bobs broker says the stock has risen too much you can only be 5 shares short. So now bob has to buy 5 shares from someone, reducing the available shares to 105.

Is this right?

Click to expand...

Yes, shorting a stock increases supply by artificially creating a share that didn't exist before.

mershaw2001 said:

Yes, shorting a stock increases supply by artificially creating a share that didn't exist before.

Click to expand...

Yes, I agree with that. If not for high short-interest, the price would be even higher as shares will be even scarcer.

tslafan123 said:

Yes, I agree with that. If not for high short-interest, the price would be even higher as shares will be even scarcer.

Click to expand...

I actually called my brokerage (TD Waterhouse) because I wanted to find out if they were lending out my shares to short-sellers. I was told that if the shares are paid for fully such as in a retirement account, cash account, or some other non-margin trading account, those shares cannot be lent out to short sellers. So I wonder where everyone is keeping their hoard of shares :wink:

CaptainKirk said:

I actually called my brokerage (TD Waterhouse) because I wanted to find out if they were lending out my shares to short-sellers. I was told that if the shares are paid for fully such as in a retirement account, cash account, or some other non-margin trading account, those shares cannot be lent out to short sellers. So I wonder where everyone is keeping their hoard of shares :wink:

Click to expand...

I can imagine that quite a few people are buying TSLA (and other stocks) on margin throughout this bull market run we've had the past few years.

mershaw2001 said:

My oh my, isn't this surprising, the short interest is near the record high. Ok, time to buy those home run calls soon.
31,295,800
Read more: http://www.nasdaq.com/symbol/tsla/short-interest#ixzz2vgkzewya

Click to expand...

this is is an amazing stat and very surprising to me in a very good way. This is the day this comes from (trades done on 2/25 settle 3 business days later on 2/28)

Trade Date | Open | High. |Low. | Close. |. Volume
02/25/2014 | 230 | 259.2 | 228.45 | 248 | 32,648,710




I think it must be even higher right now from the past couple weeks with more shorts piling in today from the NJ news. I am super psyched to see what the TSLA short interest published on March 25th will be as that will be based off of the short positions at the end of the day today (that settle in 3 business days on March 14th.


my guess will be 33mm shares which I believe would be a record

Sorry, just to be clear.... you are saying this 31 million is from after the run to 259, right???

arashlzy said:

No,
I believe the way it works is this...., ABC inc has 100. Bob decides to sell 10 short, he BORROWS 10 shares through his broker from someone who owns the shares, and sells them in the open market. When stock goes up really high-->margin call, bob goes back to the open market and buys shares back, replacing the ones he borrowed. I don't think it leads to artificial suppression...just the short squeeze we are found of.

Click to expand...

I think you pretty much said the same thing as Theshadows. The reason it depresses the stock is that there are short-sellers wanting to sell the stock, so they'll do it at pretty much any price, and the effect of that is to drive the price lower, which is exactly what they want!

Of course, equity investors have the same effect, but in the opposite direction, with two differences: One is that they tend to buy and hold, so the effects are more spread out over time; the other is that equity investors tend to run out of cash, since they're paying full price, so they simply can't match the trading volume of the short sellers.

TSLAopt said:

this is is an amazing stat and very surprising to me in a very good way. This is the day this comes from (trades done on 2/25 settle 3 business days later on 2/28)

Trade Date | Open | High. |Low. | Close. |. Volume
02/25/2014 | 230 | 259.2 | 228.45 | 248 | 32,648,710




I think it must be even higher right now from the past couple weeks with more shorts piling in today from the NJ news. I am super psyched to see what the TSLA short interest published on March 25th will be as that will be based off of the short positions at the end of the day today (that settle in 3 business days on March 14th.

my guess will be 33mm shares which I believe would be a record

Click to expand...

Yeah, I agree. Looking for a record short # on March 25th.

mershaw2001 said:

Yes, shorting a stock increases supply by artificially creating a share that didn't exist before.

Click to expand...

theoretically, there could be an infinite supply of shorts:
-Let's say there are only 10,000 shares outstanding of XYZ stock.
-I own 5,000 shares and you own 5,000 shares.
-you don't want to lend out your shares but I decide (or my broker decides for me if I'm borrowing cash on margin) to lend out my 5,000 shares to a Doug Kass who wants to short it (ie sell the shares now and buy them back later at some point to give them back)
-Doug happen to sell all these 5k shares to John Doe
-John Doe can lend out these 5k shares and Doug Kass happens to borrow them again to short again, etc.

this can go on forever theoretically.

- - - Updated - - -

mershaw2001 said:

Sorry, just to be clear.... you are saying this 31 million is from after the run to 259, right???

Click to expand...

Yes, this is from the end of that trading day...it was all the combined short positions at the end of the trading day Tues Feb 25th to be exact (I believe this may have been the morning that the MS upgrade came out????)

- - - Updated - - -

DaveT said:

Yeah, I agree. Looking for a record short # on March 25th.

Click to expand...

Im very tempted to close out of some stock and buy a ton of new Sept options in my IRA acct to possibly make a killing off another possible short squeeze...hmmmm...

Whoah, I was not expecting 31 million shares short after the rise after earnings. I might be going back in tomorrow. What happens on the 25th?

marvinat0rz said:

Whoah, I was not expecting 31 million shares short after the rise after earnings. I might be going back in tomorrow. What happens on the 25th?

Click to expand...

That is the next reporting date for short interest. That report will show short interest as of March 14th.

any predictions for today's short interest report (as of march 11th trade date)? i'm going to guess 32.9 million shares.

surfside

surfside said:

any predictions for today's short interest report (as of march 11th trade date)? i'm going to guess 32.9 million shares.

surfside

Click to expand...

yes, I guess over 33mm shares. I'm salivating at getting this stat.
Anything above 30mm I'd be happy with but have a feeling this could be a new record.

34. Just a shot in the dark.

33 762 285 million shares sold short :wink:

Larken said:

33 762 285 million shares sold short :wink:

Click to expand...

33,763,015:biggrin:

TSLAopt said:

- - - Updated - - -


- - - Updated - - -




Im very tempted to close out of some stock and buy a ton of new Sept options in my IRA acct to possibly make a killing off another possible short squeeze...hmmmm...

Click to expand...

Just bought some Sept 240 calls.

even though the number of shares shorted will be high , 33M +?, the days to cover is what really helps when it comes to short squeeze time

arashlzy said:

even though the number of shares shorted will be high , 33M +?, the days to cover is what really helps when it comes to short squeeze time

Click to expand...

Days to cover stat is very misleading and practically meaningless in this age of electronic trading since we don't know the percentage of TSLA avg daily volume that is "REAL" trading vs. algo and day trading volume ("BOT" trading).
When I say "REAL" trading volume that means volume from someone who's owned TSLA stock for at least one day and selling it, or from someone buying TSLA stock who will be owning it for at least one day before selling. This "REAL" trading probably only constitutes somewhere between 10-40% of TSLA avg daily trade volume.
All other trading volume (60-90%) in TSLA now is high frequency trading, algos, and day traders/scalpers. Let's call this "BOT" trading to keep things simple:


-The "REAL" trading is what influences the stock price up or down each day.

-The "BOT" trading is competing with the REAL trading (and other elements of this "BOT" trading) for a few pennies here and there on very short term trades (from a few seconds to perhaps a couple hours in the case of day traders).

-"BOT" trading typically starts with a position of zero TSLA shares to start the day and ends the day with zero shares of TSLA as well...they are neutral TSLA stock and only help to influence movement (provide 'liquidity' some would say) in the TSLA stock price up or down when the "REAL" trading is being done.


Conclusion:
For or the above reasons, this "days to cover" ratio is very misleading these days and practically meaningless because the short interest stat constitutes "REAL" trading only. We don't know what the avg daily volume of "REAL" trading in TSLA is. With my 10-40% guesstimate then it would be between 900k - 3.6mm shares of "REAL" trading each day, but this is a complete guesstimate from my personal knowledge/experience and books I've read about electronic trading (ie. "Dark Pools" and "Automate This" for example).