Posted on 04/18/2024 8:07:18 AM PDT by zeestephen
Trump Media, in an update to a FAQ on its website, provided tips to shareholders on how to avoid their stock being loaned out for short selling...The tips come as the share price of DJT has plunged since March 26, when the company that owns the Truth Social app began being publicly traded...Trump Media's biggest shareholder is Donald Trump...
(Excerpt) Read more at cnbc.com ...
"Short selling is the practice of borrowing shares of a company's stock, and then quickly selling those shares...The short seller then waits, hoping that the share price will drop...so that they can then repurchase the same number of shares and give them back to the lender, pocketing the difference..."
Shorting is expensive.
When you "sell" the shares you borrowed, the money placed in your account is a "margin loan."
There is a daily interest fee, so your block of loaned cash is depreciating every day, unless the stock price is falling, in which case you are making money.
If the stock you borrowed does NOT decline in price, or increases in price, the short seller gets hit with a "margin call."
Specifically, the short seller must keep enough cash in his account to cover the cost of buying back ALL the loaned stock and returning it to the original owner.
Here is the stock chart for DJT (Nasdaq). Click on the one month chart ("1M").
https://www.cnbc.com/quotes/DJT?qsearchterm=djt
Now let’s talk about “naked shorting”.
And it’s working!
Nothing wrong with shorting
Not sure exactly what this is about
I was a SOUS trader long ago
The price of the stock was hugely inflated. It was not worth what it came onto the market for. I bought two hundred shares on the way up and sold for a nice profit. I had a stop loss in place so I would not get burned on the way down. No way I would invest in it now.
make a movie
There’s a kind of perfect disdain in your comment. 🤨
All that you said, PLUS there is no theoretical limit to the downside in a short sale. In other words, if you buy a stock, your loss is limited to the price you paid and your “upside potential” is infinite. When you sell a stock short, your gain is limited to the price you paid and your possible loss is theoretically infinite.
simply hold in a cash account, not a margin account. easy peasy.
Direct register shares with the transfer company for the stock. Once you do that your shares aren’t available for lending. Of course this does nothing if the practice of naked short selling is occurring....
It’s a thing. A very bad thing.
According to finviz, the short float is 14.84%. The price action could get very interesting.
What is a SOUS trader?
Bing and Google are just as baffled as I am.
SO = Stock Option not sure of the other
Re: Short float is 14.84%
Re: Current price - $30.15
From memory - as long as the price is above $17, Trump holds almost 80% of the shares.
I assume Trump has to distribute shares to the company and to the underwriters if the price drops below $17.
My point - current total float is only about 20%.
If your shares in a street account are lent by your broker to a short seller and sold, and the buyer in that transaction holds them in his account, by the same rules his “long position” can be lent to a second short seller. And so forth. So the same share of stock can have many (N) people who consider themselves long that share and (N-1) people who consider they are short it.
Also, If the broker has borrowed your stock and lent it to someone who sold it, you still expect your dividends. Well the brokers have to pay you, which they can get from the high margin interest the short seller pays. But it may not be a dividend as far as the IRS is concerned. It is something in lieu of a dividend, so it may not get the same tax advantage as qualified dividends, for example.
Another nasty little detail, loaned shares may not be covered by SIPC (brokerage account insurance) so you are relying on other security that has to be provided by the Brokerage. (The brokerage that has gone bust.) Not as reassuring.
I have been trading since the 1960s.
Never came across "SOUS Trader" before.
US probably means USA Options.
Good points. Thank you.
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