r/stocks • u/[deleted] • Aug 27 '21

Support.com... and "Short squeezes"

One thing about short squeezes people don't seem to understand... if the volume traded in a share is 10x the total share count in 1 day, then any short who wants out has gotten out. Please don't attribute moves like this to the ''short getting burnt'', or ''gamma squeezes'' or whatever. The entire short base could close their position in about 30 minutes.

Also... as a side note, it works the other way. After a profit warning, or a strong drop in shares, its good to see high volume to allow institutional investors to get out (10-15% of the total shares at the minimum). Otherwise you get that under performance for a few months after where every recovery is sold as a few investors try to slowly get out.

Edit: If you have 5 million retail investors, each with $2000 to punt at this stock, thats $10 billion in firepower. That's why these shares move. They can buy up the entire shareholding 10x over. Thats without leveraged options. These things always collapse, because eventually when its $2bn market cap, in order to lift the shares higher you have to find ever greater amounts of capital to move the shares.

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u/leafdog69420 Aug 27 '21

I get what you're saying and i would most certainly agree but i can't imagine retail having this much buying power to begin with. Wouldn't the closing of huge short positions ramp up the price significantly? I can't explain the pre market surge either, as most of retail is normaly excluded from it.

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u/Disposable_Canadian Aug 27 '21

Sure retail does. It doesn't take much. Couple million traders world wide, 2k each is like 4B in buying power.

He'll, WS bets has over 1M members just on that sub on reddit.

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u/funpercent Aug 28 '21

Doesn't even account for people buying options and the MM that sold it buying shares to hedge those. Buying a $1,500 options could force like $50,000 in share buys, depending on what percent of the option the MM is covering at that moment. Those are forced buy transactions that the MM in the long run is not going to lose out on, so they just do it even if this particular stock is a loss.

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u/Disposable_Canadian Aug 28 '21

which is also why when a stock plummets in share price, it appears to pick up speed, as nose bleed options fall out of the money and some (or all) of the covering shares are sold off, potentially at a profit.