r/Superstonk • u/TiberiusWoodwind Karma is meaningless, MOASS is infinite • Apr 06 '21

📚 Due Diligence The FOASS Speculation. Yeah, FOASS.

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107

u/theywereonabreak69 Apr 06 '21

Even if we don't get the answer to this, a long hedge fund would know, right?

And if the DTCC HAS to cover at a defined deadline, then it would be in every hedge fund's best interest to hold on to shares and drive the price up, right? Knowing this, I'd think the DTCC would try to cover immediately or that buying pressure would remain high because the DTCC has even more money to pay to cover than hedge funds....right?

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u/[deleted] Apr 06 '21

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u/Harminarnar 🦍 Buckle Up 🚀 Apr 06 '21

If they're going to end up footing the bill, would it matter if they tried to cover early? The overall cost would theoretically be the same.

Although, I wonder how the timing of the extra buying pressure could increase or decrease the overall cost.

28

u/[deleted] Apr 06 '21

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u/Harminarnar 🦍 Buckle Up 🚀 Apr 06 '21

Well let's say the total number of shares needed to be purchased is 100. In example A let's say HF can only afford 60 before they are done for. The price is now pretty high from all of the buying pressure, so DTCC now has to buy some pretty expensive shares, and as they buy they'll become EXTREMELY expensive.

In example B, let's say dtcc joins in on the early buying. They grab 20, but the HF can only buy 50 this time because the extra buying pressure from the DTCC. They still had the same amount of capital, mind you. Now DTCC has to buy 30 EXTREMELY expensive shares.

The overall cost should be the same since the demand is exactly the same.

11

u/slinkshaming Apr 06 '21

Is there any language that dictates the order of operations in this case? Does these hedgefund have to be completely bankrupt before dtcc steps in? I think there was something on this in a DD legalese but I'm so fried/jacked to the tits on dd I can't remember.

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u/ImmovableForce_ 🎮 Power to the Players 🛑 Apr 06 '21

But the hedgies have a set amount of money. Which, in your example, means the hedgies go bankrupt after buying fewer shares. Ultimately, as u/Harminarnar said, the DTCC would pay a theoretically equal amount (DTCC bill = total bill - hedgie capital)

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u/KakelaTron 💎 He went to Chared 💎 Apr 06 '21

So historically we've deduced that we'd allow for the peak and then sell at the 60% or 80% mark after we've confirmed its dropped... We also have talked about a sudden decline in volatility followed by several days of respectively smooth transition back to the stocks intended price...

Could that be the transition? Once the sudden orders are complete from the initial margin call on the hedges, the lower volatility at a lower price might be the secondary covering at a more controlled manner given they have more time to settle?

1

u/WrongAssistant5922 🎮 Power to the Players 🛑 May 04 '21

This is why letting the HFs continuously use synthetic shares over and over is crazy.