Quote:
Originally Posted by bimmer pleaser V2
I'd really appreciate some answers on these:
- Mathematically, how is possible to short 140% of anything? If I have 100$, how can someone borrow 140$ of it?
- I am assuming the short positions can be extended (indefinitely?), and this is how the shorters have been dragging this on? And there are fees/interest paid to the share lenders until the position is closed?
- Why do Hedge Funds get cash infusion from their peer? Aren't they competitors?
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1. Suppose there is only 1 stock that A owns. B borrows it from A and sells it to C. D then borrows it from C and sells to A. Now A has 2 stocks, B has -1, C has 1, and D has -1. The total is still 1, but 200% is shorted and 300% is long. Similar things happen with cash by the way. If you have $100 and deposit it in a bank, the bank could then lend $90 (due to Fed requirements they can't lend 100% of it) to another person, thus increasing the total amount of money that people have to $190.
2. Yes and yes.
3. It's just an investment like any other. If you think someone has a profitable position that they just can't maintain due to capital issues, you can make a deal with them to lend them capital and get a percentage of the future profits.