I was watching CNBC today when news came that some hedge funds were caught and crushed today while trying to short VW stock.
VW Shorts sellers trapped
Seems they were shorting the VW stock and Porsche was buying up the stock from the short sellers. In the end there were more shorts than there were stocks available for sale. VW stock rose by 100%. That means that the short sellers were probably wiped out completely.
If my math serves me correctly if you have a stock being shorted that increases in value by 100%, then the short seller must pay for that increased value in order to buy the stock and give it back to the owner of the stock. This creates a very interesting scenerio that looks like a short seller trap. If Porsche originally owned the stock and borrowed it to the short seller who promptly sold it hoping that the stock would drop in value and if Porsche bought the stock from the short seller and then sat on the stock and refused to sell it back... the stocks price then jumped and in this case by 100%. Meaning that if Porsche borrowed the stock to the short seller, bought the stock from the market, held onto the stock and then sold it back to the short seller at the height of the market then Porsche made a 100% profit and also got its stock back at the end of the day. The shorts were really slaughtered.... or something like that.
The question I have then is whether there is (or was) a hedge fund or group of hedge funds responsible for the Wall Street chaos? economic terrorism? or economic warfare?
Looks to me like these guys were trapped and slaughtered?
Now, is it coincidence that within hours of these short sellers being trapped and killed off, the DOW rose by over 800 points?
VW Shorts sellers trapped
Seems they were shorting the VW stock and Porsche was buying up the stock from the short sellers. In the end there were more shorts than there were stocks available for sale. VW stock rose by 100%. That means that the short sellers were probably wiped out completely.
If my math serves me correctly if you have a stock being shorted that increases in value by 100%, then the short seller must pay for that increased value in order to buy the stock and give it back to the owner of the stock. This creates a very interesting scenerio that looks like a short seller trap. If Porsche originally owned the stock and borrowed it to the short seller who promptly sold it hoping that the stock would drop in value and if Porsche bought the stock from the short seller and then sat on the stock and refused to sell it back... the stocks price then jumped and in this case by 100%. Meaning that if Porsche borrowed the stock to the short seller, bought the stock from the market, held onto the stock and then sold it back to the short seller at the height of the market then Porsche made a 100% profit and also got its stock back at the end of the day. The shorts were really slaughtered.... or something like that.
The question I have then is whether there is (or was) a hedge fund or group of hedge funds responsible for the Wall Street chaos? economic terrorism? or economic warfare?
Looks to me like these guys were trapped and slaughtered?
Now, is it coincidence that within hours of these short sellers being trapped and killed off, the DOW rose by over 800 points?
Last edited by Diesel_dyk (2008-10-28 22:39:14)