Message:

<p>[QUOTE=&quot;NorthKorea, post: 1295391, member: 29643&quot;]There are 300 shares sitting long and 100 shares sitting short. The net is still 200 shares long.</p><p><br /></p><p>Think of it in terms of the actual transaction sequence.</p><p><br /></p><p>Short seller decides they don&#039;t like a company, assuming that the price will be lower in the future. They decide to borrow some shares to sell.</p><p><br /></p><p>Short holder is comfortable with the company, so they are willing to lend their shares to the short seller. The holder is then paid a portion of the margin fees collected from the seller.</p><p><br /></p><p>So, the transaction sequence is:</p><p><br /></p><p>In the past Holder bought 100 shares.</p><p><br /></p><p>Holder has 100 shares.</p><p>Seller has 0 shares.</p><p><br /></p><p>Seller borrows 100 shares.</p><p>Holder lends 100 shares.</p><p><br /></p><p>Net result:</p><p><br /></p><p>Seller has 100 shares.</p><p>Holder has 0 shares.</p><p><br /></p><p>Seller now sells the 100 shares to a third-party, the long buyer.</p><p><br /></p><p>Sellers sells 100 shares.</p><p>Buyer buys 100 shares.</p><p><br /></p><p>Result:</p><p><br /></p><p>Holder has 0 shares.</p><p>Seller has 0 shares.</p><p>Buyer has 100 shares.</p><p><br /></p><p>The idea of a short squeeze has nothing to do with two individuals thinking they own the same 100 shares. It is rather a result of the short seller having an obligation to return the 100 shares to the holder. So long as the seller is willing to allocate cash to cover the &quot;repurchase&quot; of the shares, they can continue to borrow the shares.</p><p><br /></p><p>So, in your scenario, there are only 200 ounces of silver being held long: Person A has 100 shares and Person D has 100 shares. Person C, does not possess any shares. Rather, they own an obligation from Person B to deliver 100 shares.</p><p><br /></p><p>There would never be a scenario under which Person C is unaware of their shares being lent. That is why you have to agree to allow the brokerage holding your shares in trust to lend them.</p><p><br /></p><p>Short squeezes are simply a matter of &quot;who&#039;s holding the bag?&quot; after a short-term run-up in prices. Short squeezes in SLV would not be enough to drive the underlying metal above the margin squeeze created by the regulators.</p><p><br /></p><p>To be honest, if they really wanted to get speculators to stop being long on metals, the market makers should lower the margin costs related to the short end of the ledger, rather than increasing costs related to the long end. This would be similar to how sport-books determine the odds/line on games.[/QUOTE]</p><p><br /></p>

Your name or email address:

Do you already have an account?

• No, create an account now.
• Yes, my password is:
• Forgot your password?

Stay logged in