Re:Naked shorting: The curious incident of the shares that d...
by arcticbull on Sunday January 31, 2021 @04:56PM
(#25982938)
It’s not a bank run, it’s poor risk management and the FDIC doesn’t insure brokerages, that’s the SIPC. Poor risk management is very much not covered by any federal program. Their liabilities are between them and their brokers, and if contagion spreads, their private insurers. This is why you can only short in a margin account and are required to put up collateral.
If you sold short 140% of float and bought calls to cover, then we wouldn’t be having this conversation. Play stupid games, win stupid prizes.
Similarly if I bought a bunch of stuff on margin and it went under overnight, RIP my account. You can lose money in both directions.
“140% of float” doesn’t really mean more shares were sold than exist. There are after all only 100%. It means the same shares were sold more than once by the same or different people, and buying them back cancels the debt obligation.
If you sold short 140% of float and bought calls to cover, then we wouldn’t be having this conversation. Play stupid games, win stupid prizes.
Similarly if I bought a bunch of stuff on margin and it went under overnight, RIP my account. You can lose money in both directions.
“140% of float” doesn’t really mean more shares were sold than exist. There are after all only 100%. It means the same shares were sold more than once by the same or different people, and buying them back cancels the debt obligation.