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Hi JK. There seems to be some confusion amongst some posters about how shorting works, so I will try to explain it in a simple way from my understanding. If it's not quite right I'm sure someone will correct the record.
1. Lets say a big institution is accumulating say a tech company involved in AI using SNN. It could be any company which has commercial hardware available, so feel free to pick any one!
2. So the large fund / insto has a sh1t load of these AI shares and they say. Well we have all these shares sitting here, we can just sit on them and wait for them to go up or is there some other way to make money from them. I KNOW! Let's lend them to some shorter. We charge them an upfront fee and a percentage of their value to lend them out for a pre-arranged maximum time ... with the proviso that we can call them in at any time if the sorters position looks challenged.
3. The shorter then, now has a sh1t load of borrowed shares. As a shorter here is my tactics. Firstly I dump a whole bunch of the borrowed shares on the market at a critical time - usually following a recent rise while running down the shares to produce negative sentiment.
4. Some holders will have a stop loss in place and because of the sudden drop in the market these stop losses are hit, prompting a further drop in the market.
5. Other retail holders see the share price dropping, panic and also sell. As the prices fall the shorters step back in and buy back the shares for much less than what they sold for. They then return the shares with the interest from who they borrowed from, and pocket their profits.
6. Of course, if the price goes up instead of down, then the shorters get caught in a short squeeze. They still have to buy back the shares to return them, but they pay more rather than less.
Someone mentioned most off the outstanding shares shorted were brought for around .90? if thats the case I can see the sp heading back to that region again to try and cover there losses, let’s hope we bounce after filling this gap at just over the $1 mark, but I had noticed the shorter has placed their sell positions all the way through the sell side and I think we will see an attack of the $1 today with no resistance until 0.85 unfortunately.
Nasdaq down overnight ain’t going to help either plus another high interest rate rise might just see this plan out, but let’s just hope the market sees the 0.5 to 0.75 rise in interest rates as a positive sign like the American markets did.
Come on baby bounce you know you can do it
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