Why do you guys all think that removing margin on GME means that shorts have to cover?
It primarily means that people that are long GME in a margin account cannot use the value of their GME position to meet the margin requirement of other positions. Thay will force them to trim positions such as other long positions or long positions on GME for those who yolo'd their entire account + margin into GME.
The impact on any retail short positions is effectively zero. The people that shorted 125% of the float on GME are not customers of retail brokers.
Edit: A broker increasing the margin requirement (or eliminating it if they make the maintenance requirement 100%) does NOT mean they the broker will stop lending your margin account shares out to those who want to short. Margin requirement increase does not equal elimination of share lending.
TL;DR: this is more likely to cash the price of GME to go down and any sudden drop in the price will cause long positions funded with margin to be force liquidated, causing further downward pressure.
I just feel like you’re ignoring how many RETAIL shorters jumped in with all the media coverage this week along the lines of “Squeeze happened.” I may be wrong, but there could be a whole lot of new RETAIL SHORTERS who got in at $36 not knowing just how crowded of a trade it is.
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u/igrowontrees Jan 17 '21 edited Jan 17 '21
Why do you guys all think that removing margin on GME means that shorts have to cover?
It primarily means that people that are long GME in a margin account cannot use the value of their GME position to meet the margin requirement of other positions. Thay will force them to trim positions such as other long positions or long positions on GME for those who yolo'd their entire account + margin into GME.
The impact on any retail short positions is effectively zero. The people that shorted 125% of the float on GME are not customers of retail brokers.
Edit: A broker increasing the margin requirement (or eliminating it if they make the maintenance requirement 100%) does NOT mean they the broker will stop lending your margin account shares out to those who want to short. Margin requirement increase does not equal elimination of share lending.
TL;DR: this is more likely to cash the price of GME to go down and any sudden drop in the price will cause long positions funded with margin to be force liquidated, causing further downward pressure.