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WarGamer

(13,463 posts)
Thu Apr 4, 2024, 01:32 PM Apr 2024

Lots of people talking or asking about "Shorting" DJT/Truth Social

It's not that easy.

Some might think... short now and pile the cash all the way down.

Doesn't work that way.

https://www.morningstar.com/news/marketwatch/20240403272/why-shorting-trumps-djt-stock-could-cost-you-500

Keep in mind that to short a stock - the act of selling a stock without owning it on the expectation it can be bought back later at a lower price - that stock first has to be borrowed from someone who owns it and is willing and able to lend it. The fewer shares there are available to borrow, the higher the cost to borrow them.

"There is very little stock available to borrow to support new short selling - less than 50,000 shares - and with demand to short this stock extremely high, we are seeing stock-borrow rates at 500% to 600% fee levels," Dusaniwsky told MarketWatch on Tuesday.

Based on that data, to short 100 DJT shares at their current price, it would cost between $24,895 to $29,874 a year. That means the stock would have to fall about 1.4% a day just to cover the cost to short it. And if the short was held for a year, the bet would still lose about $20,000 to $25,000 even if the stock fell to $1. Basically, you can be very right and still lose a lot of money.

Given the cost and the fact that there are "no sizable stock borrows available to support new short sales," Dusaniwsky said he believes "there can be no new selling pressure brought on by short sellers."Keep in mind that to short a stock - the act of selling a stock without owning it on the expectation it can be bought back later at a lower price - that stock first has to be borrowed from someone who owns it and is willing and able to lend it. The fewer shares there are available to borrow, the higher the cost to borrow them.



The risks are immense. And the return is minimal. Only 50k shares available for borrowing... that's just $2.4m in shares. The fees are sky high.

And...

A short squeeze is more likely in the short term.

You see... it's a very low volume stock. Around 3-4m shares per day. Shorts can be burnt to the ground easily... And institutional investor, like the Saudi Sovereign Wealth Fund can send this to 100/share with just a few million dollars a day in purchases for a week or so.

And when short sellers get burnt... it's painful. Shorts lost BILLIONS in the GME fiasco in 21.

Fortunately that can't happen here because there are only 50k shares available to short.
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Hugin

(33,723 posts)
1. There's an article out there saying a short on DJT could cost up to 500%.
Thu Apr 4, 2024, 01:35 PM
Apr 2024

Due to... Trump.

There's few shares available for shorts.

SWBTATTReg

(22,788 posts)
3. Good write-up, WarGamer, on the process of shorting a stock. One of the best explanations I've read on shorting a
Thu Apr 4, 2024, 01:36 PM
Apr 2024

stock too, so my compliments to you. It is, as you say, very dangerous and one could lose, in theory, more than their initial investment (the stock could boom upwards by leaps and bounds) and the short sellers, being caught off-guard, would desperately trying to close out their positions.

brooklynite

(96,769 posts)
7. I'd argue that this is the opposite of a "meme stock"....
Thu Apr 4, 2024, 01:42 PM
Apr 2024

...It's essentially a meme short. The people who saw it as a money opportunity bought in months ago. The people thinking about it now are doing so because they hate Trump, just as the people who love Trump are buying and holding the available shares.

WarGamer

(13,463 posts)
9. but it's not really "short-able"
Thu Apr 4, 2024, 01:47 PM
Apr 2024

Because of the interest rates and availability of borrow-able shares.

And there just can't really be "selling pressure" because of the lack of short leverage.

Right now you're seeing short term traders cashing out who bought pre-merger at less than 20/share.

And some day traders buying/selling short term put options.

WarGamer

(13,463 posts)
10. Quick story that I told earlier on DU...
Thu Apr 4, 2024, 01:49 PM
Apr 2024

Being a daily trader... I was in on DWAC on day one... made a very nice profit and turned around and make a similar donation to ActBlue.

I documented the trade here on DU and was proud to do so.

BUY 100@12.80

SELL 100@119.00

a few hours of work.

brooklynite

(96,769 posts)
13. I would never day-trade...
Thu Apr 4, 2024, 01:56 PM
Apr 2024

I'm doing very nicely with the Apple stock I bought in 1996.

I burn off about 350 shares each year as charitable contributions, and somehow the value of my holdings remains the same.

WarGamer

(13,463 posts)
14. I've dabbled for many years... did a lot of trading when I was living in China
Thu Apr 4, 2024, 02:05 PM
Apr 2024

Babysitting a production facility...

But when I retired in 21 I started full timing it...

It's mostly for fun, I have a professionally managed portfolio, too...

calguy

(5,541 posts)
12. I don't know about their fee schedule
Thu Apr 4, 2024, 01:54 PM
Apr 2024

My broker has no commission fees, and a short sale incurs no fees just like any long sale. The problem is finding shares to short. I won't touch that stock with a ten foot pole, but I have checked, out of curiosity, to see if there if there were shares available, and there hasn't been since DJT started trading publicly.

So while it's easy and inexpensive for me to short, I can't if there are no shares. And you are right, this stock is so volatile right now that a short seller can easily be squeezed for heavy losses. My advice is to have fun watching, but don't touch it unless you have a high tolerance to risk.

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