SAVA might squeeze and market maker is not ready!
They say you have to be right only once…I do agree with this, however, it’s challenging to find that one right decision and go all in. As we all can agree, it takes courage perseverance and most importantly it takes conciseness. To be there is good and bad…well, it’s beyond epic.
Short squeeze definition
Short selling refers to the sale of a security that the seller does not own, where the delivered security is borrowed by the short seller. The intention is to buy the security at a lower price than that at which the security was sold short. When the price of the security rises, the short seller can incur significant losses as the downside potential due to a price rise is unlimited.
In order to lock-in a profit, or avoid further losses (where the price of the security has gone up), short sellers need to cover a short position. This involves buying securities in the market and returning the borrowed stock to the lender. The short seller may also be forced to cover positions due to failure to meet a margin call or when the security lender recalls the stock. The resulting buying pressure can drive prices higher in a phenomenon known as a short squeeze.
While fears of a short squeeze may act as a constraint on short sale activity, particularly in the event of manipulative short squeezes by original buyers who would benefit from inflated prices, the role of short sellers is considered a vital market practice to keep stock prices in-line with fair value.
The actual occurrence of a squeeze is a debatable subject. One such issue arises from general
informed market trading activity which can easily be misconstrued as a short squeeze. As such, there is a clear need to identify specific characteristics to isolate their existence. However, many differing definitions are used in practice, forcing the need for a systematic identification process.
Naked short sales (where the security has not been located and/or borrowed in advance) are now banned in most jurisdictions across the globe. As a result, short sellers almost always need to borrow stock, and as such the resulting lending data provides a close proxy for short selling volumes.
Securities lending is a market practice whereby securities are temporarily transferred by the lender to the borrower. The borrower is obliged to return the securities either on demand or at the end of any pre- agreed term. Securities lending operates as an over the counter market.
As Elon said:
u can’t sell houses u don’t own
u can’t sell cars u don’t own
u *can* sell stock u don’t own!?
this is bs – shorting is a scam
legal only for vestigial reasons
The following explains how a “naked” short sale occurs:
When investors call a broker to arrange to borrow stock to short, they are aware that short sales are subject to a standard three-day settlement period. This means the sell-side broker has three days to deliver the shares to the investor.
The broker is supposed to locate shares available to short prior to executing a short sale and make a determination that the shares will be delivered to the investor within the three- day settlement window. However, there are certain exceptions to that rule.
Some shares are on an “Easy to Borrow” list. For a stock on that list, investors can execute a short sale and the broker does not specifically have to locate, or contact the source of the shares that are being shorted. The broker has a “blanket” assurance about the borrowing capability for that security.
There is also a “Hard to Borrow” list for securities that are difficult, or unavailable, to borrow. To short stocks on the “Hard to Borrow” list, brokers have to take additional steps to ensure that the stock is available to be shorted.
If, for whatever reason, the shares are not delivered within the three-day settlement window, this is called a “fail to deliver.”
That “fail to deliver” essentially leaves the short- seller “naked,” meaning he did not actually possess the shares he has sold.If shares have not been delivered for 13 days after a transaction has occurred, the broker must buy them back.
When SAVAges buy many out of the money call options, this can trigger gamma squeeze. When a market maker sell a call option, they often hedge their risk by going long the underlying stock. Prices of out of the many option moves less than the underlying stock. You sure how the option price will move given a move in stock price is called Delta. Options fat out-of-the money have low delta (option doesn’t move until it creeps closer to in the money) but in-the money options have high delta’s since they will move in lock step with stock (other things equal).
In SAVA case, once price moves we will have many OTM calls. Since SAVA calls will be far out of the money, market makers will assume that they are safe and not fully hedge their positions. In others words they will think that this is just a fluke. Basically, any out of the money call you buy, market maker will be “naked” on, they won’t hedge and they will collect the premium (or so they think).
Once stock moves up GAMMA will kick in. Gamma is a measure of how fast Delta is accelerating and as the stock got nearer and never to the strike price, gamma moves dramatically, and market makers will be left scrambling to cover these naked positions. In addition you have to add short interest to this.
Market maker will be caught in and short squeeze and a nee too long the stock at any price. As market maker buys stock and the short cover, price will explode.
Take a min to see real MOASS Volkswagen!
SAVA is 10.3m short, and has 0 shares available to borrow...if you want book squeeze looking at it.
Breakdown per S3 data
IV is very high, this will move quick, and shorts will have to cover quick.
Options are coming in nicely
My position is in shares and options. This is not an advice, I like SAVA, I feel that I am helping find cure, and making money, both great things. Past success is not indicator of future success, but sure as well bad past doesn't determine future!