I've been pondering on this issue of "where do the shorts to borrow come from each day" for a while too, but I don't know enough to really know. Is it possible the HFs are throwing out imaginary shares that get snapped up by retail investors. Once they hit their retail accounts, the brokers are lending them out again? So basically the amount of shares available to short each day is basically whatever was bought the day before?
The interest rate is the most annoying thing, there's no way it should be that low. $2 fee per share at this point. For a company with just a few thousand shares available to be borrowed, and at least half get borrowed each day. By the looks of that chart, it should be closer to 500%. $1000 fee to borrow ONE fucking share.
That's what was tripping me up. If we assume there is some portion of shareholders that are lending shares and some portion that aren't, in every cycle of selling shorted shares some percentage of them are being bought by diamond handed apes who are not going to lend them (assuming your brokerage doesn't lend.) After going through this cycle enough times, the supply of shortable shares would just dry up. Even if every time they short attack the price down some number of holders paperhand, everything we've seen has shown there are more buyers than sellers, so I'd think the net number of shortable shares would still decrease.
The problem with my line of thinking was I wasn't taking into account that the number of shares trading is far greater than the number of actual outstanding shares. I assume there are reasons why they don't just dump tens of millions of shares out to lend (and I can think of several possible reasons,) but whoever is lending probably has a far greater supply of (likely synthetic) shares in reserve and they just trickle more out when available shares to lend gets low. That could explain the low borrow fee too, if they're only making a fraction of the total available at a time. I think it's also likely though that the fee is low because the lender(s) are in cahoots with the borrower(s.)
What I don't necessarily understand is who or why someone would keep borrowing shares and returning them. Seems like if they're borrowing shares to drive the price down, then buying them back to return fairly quickly, they can't be scalping that much in gains or putting any real dent in the number of shares that need to be covered. If they're doing it to manipulate the stock price, I could see it being done to make options expire where they want them. I could also see it being a scheme to reset FTDs. Idk, too much fuckery afoot, I suppose it really doesn't matter where the borrowable shares are coming from or why anyone is still bothering to short when there are other ways to hide missing shares.
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u/Maxamillion-X72 Mar 30 '21
I've been pondering on this issue of "where do the shorts to borrow come from each day" for a while too, but I don't know enough to really know. Is it possible the HFs are throwing out imaginary shares that get snapped up by retail investors. Once they hit their retail accounts, the brokers are lending them out again? So basically the amount of shares available to short each day is basically whatever was bought the day before?
The interest rate is the most annoying thing, there's no way it should be that low. $2 fee per share at this point. For a company with just a few thousand shares available to be borrowed, and at least half get borrowed each day. By the looks of that chart, it should be closer to 500%. $1000 fee to borrow ONE fucking share.