Questions tagged [short-selling]

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How do short selling restrictions impact security prices?

Various markets have restrictions/bans on short selling certain securities. Since no-arbitrage pricing arguments breakdown once it is impossible to short (e.g. to hedge or otherwise), the price of the ...
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2 answers
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Are risk-free-rate bonds and cash fungible?

I had a thought experiment: suppose you wanted to borrow an equity security from me (perhaps to short sell it). I ask you for collateral and a borrow fee, and in exchange you get the stock. If you ...
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3 votes
1 answer
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Gamma squeeze - mathematical explanation

I am trying to understand from a mathematical and financial point of view the mechanism behind the so-called gamma squeeze. Is there a good source to read about this/ My questions are: what are the ...
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2 votes
1 answer
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How to correctly explain the current price action in a trading chart with the Hurst Exponent found?

I watched this video tutorial to learn how to estimate the Hurst Exponent using an Excel spreadsheet and a time series sample of 1025 data. I decided to use futures 1H markPriceKlines data from ...
1 vote
1 answer
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What limits the maximum possible returns when shorting crypto?

I'm new to finance and crypto and this question is more of a thought experiment so I would like to hear both theoretical as well as practical considerations. Suppose I would like to short a particular ...
1 vote
1 answer
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Is it possible to short publicly traded mutual funds?

I'm curious whether it's possible to short mutual funds in any way? I have given it some thought and I guess that in principle, it is possible using a total return swap. However, I'm sure that the ...
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How do financial analytics firms estimate the earnings from short sellers on an ETF or stock?

I read on https://www.reuters.com/markets/europe/russia-etf-draws-meme-stock-like-trading-frenzy-2022-03-02/ (mirror): The ETF's tumble has been a boon for bearish investors. RSX shorts are up $299 ...
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Theoretical returns are not matching empirical ones in my backtest

I'm trying to implement a Backtest for my quant strategy but the calculated theoretical returns are not matching the returns from my implementation. Here's the example: On a given day I have 1 million ...
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73 views

Calculation of log returns of a short position with two instruments

The usual method for calculating short log returns would be ln((selling price - fees) / buying price). But how does this apply to a trade with two instruments, e.g., a bond breakeven trade? E.g., the ...
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1 answer
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Strategies for trading on a forecast

I have been experimenting with multiple methods of forecasting the daily high and low for a certain security. I have found a very basic ensemble of several common forecasting approaches is, well, ...
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-1 votes
1 answer
403 views

Is it possible to calculate logarithmic return for short position? [closed]

In the book "Python for Algorithmic Trading" by Yves Hilpisch, it calculates the logarithmic return by summing up all the log values. When calculates the profit for long position: log(...
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Maximum Adverse Excursion Formula - Short Trade Position?

Is the formula for the Maximum Adverse Excursion for a Short Selling Trade the (Open - High) / Open, or (High - Open) / Open ?
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1 answer
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Basic stock shorting question [closed]

So im just a little cloudy on how shorting a stock drops the share price. I understand that you borrow, or set aside shares from your brokerage to then buy later at the origional price. My guess was ...
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1 answer
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How can short-interest ratio be decreasing when price of a stock is decreasing and amount shorted is increasing?

So I am looking a particular amount shorted of a stock on bloomberg. The first panel clearly shows that SI ratio is decreasing on the last data point. Also simultanously it shows the price of the ...
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1 vote
2 answers
277 views

Stock borrow cost timeseries

I am looking to increase the robustness of some equity strategies that I am working on. Apart (maybe) from brokers is there anywhere online (and preferably for free) that has historic stock borrow ...
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-1 votes
1 answer
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What does Short Volume in FINRA RegSho actually measure?

When reading RegSho, I see a table like this: ...
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1 answer
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Enforcement method of short contract

A stock short seller promises to pay back a stock at a certain date, but what is the mechanism that actually forces them to buy the stock? I've read that it is the broker who will do a margin call and ...
9 votes
2 answers
3k views

Without Bloomberg, how can retail investors know how many shares have been shorted daily?

Many friends can't afford a Bloomberg terminal, particularly when the pandemic has unemployed some of them. This answer can't assist them. How else can amateur investors determine the number of ...
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17 votes
7 answers
6k views

Why do institutional Traders prefer Short Selling instead of Buying Puts?

Why is it more common for Institutional Traders to short sell stocks when they have a bearish stance instead of Buying Puts? The limited loss potential of Buying Puts seems like a better choice.
1 vote
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What happens to a short seller if there are no shares available for sale under any price when it is time to return the shares they borrowed?

Assumptions: There is a limited number of shares in any given company. Someone that holds shares cannot be forced to sell them if they don't want to. In theory, it's possible for someone to buy out ...
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4 votes
1 answer
492 views

How can anyone know how many shares have been shorted?

(Disclaimer: I'm not in finance. I'm just curious) Some news sources were saying today that 140% of GameStop shares have been shorted. How can the journalists or anyone else know this number?
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1 answer
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Why is naked short selling "difficult to measure"?

The Wikipedia article on naked short selling says It is difficult to measure how often naked short selling occurs. Fails to deliver are not necessarily indicative of naked shorting, and can result ...
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1 vote
2 answers
183 views

How quickly can someone pull out of their short?

Investors who short a company might get into trouble if a group of passionate online day traders (who like the shorted company) decide to boost its stock value by coordinated investments. How quickly ...
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2 answers
122 views

Derivatives to short municipal bonds based on cryptocurrency [closed]

Can you short municipal bonds with a cryptocurrency derivative? This is notoriously impractical in traditional finance, but there could be a crypto-based derivative designed around it. Is this a thing?...
1 vote
2 answers
440 views

Standard deviation formula with Short selling- Markowitz model

I have 2 fast quastions. Before I begin I want to show you that I found minus before SD of bills in the book Principles of corporate finance(1.screen). I know SD of bills is zero and minus in this ...
1 vote
0 answers
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Can arbitrage arguments be rearranged to avoid selling? (Hull, Chapter 5)

Suppose forward contracts are traded on a consumption asset, so there aren't necessarily people ready and willing to sell the asset to jump on an arbitrage opportunity. Suppose the asset has no yield, ...
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4 votes
1 answer
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Portfolio Optimization sum of weights constraint with short selling

For mean-variance portfolio optimization with short-selling allowed I have seen 2 ways to specify the portfolio constraint. In most resources I've seen, such as https://www.coursera.org/learn/...
2 votes
1 answer
197 views

Backtesting short-selling strategy using pandas dataframe

I would like to make a simple backtest for one of my short-selling strategies. I am using pandas dataframes. So I have a dataframe like the following, that indicates how many positions to open/close ...
1 vote
1 answer
68 views

Normal VaR for short bond

So I'm short a GBP denominated zero-coupon bond which has a face value of 1 million pounds and a remaining maturity of 6 months. Furthermore, I have to assume that the daily return of a 6-month zero ...
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1 vote
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How do Hedge Funds account for returns from short selling?

I was going over my notes from an Asset Pricing module yesterday and came across something interesting I hadn't thought about in a while. It was how Hedge Funds can over inflate their performance by ...
3 votes
1 answer
230 views

short squeeze basic questions

I have a question that might appear simple for the more experienced here. I'm trying to understand the concept behind short squeezes and i'm a little lost. From what I understood: Short selling ...
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Modeling short-selling accounts

I am having trouble modeling short selling mechanics in my backtesting system. When I sell stock short, I make the following changed to account variables: Credit Balance += 200% of the stock value ...
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99 views

Market neutral without short selling

Would it be possible to design a market neutral strategy without short selling? According to Investopedia: Market-neutral strategies are often attained by taking matching long and short ...
0 votes
1 answer
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Is this the present value of a short position on an option?

Consider a European put option, whose price at time $0$ is $\Pi_0$. Set: $$\mathcal{L}_0=\Pi_0 - P(0,t_M)\Pi_{t_M}$$ where 0 < $t_M$ and $P(0, t_M)$ is the discount factor from time $0$ to time $...
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2 answers
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European Call option combined with Short selling

How would I calculate the abitrage profit from a combination of buying the $10 European call option and short selling X number of shares at t=0 and the coming out with a profit at expiry no matter ...
1 vote
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Can scientific discovery be used to short stock without being considered insider trading?

Let's say you make a scientific discovery that destroys the business model of a publicly traded company, for example you find a way to factor large integers in polynomial time (destroying the business ...
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2 answers
84 views

How and why is there a restriction on short sales?

I'm taking a course on the fundamentals of financial mathematics. This is my first quantitative finance course, so I'm still getting acquainted with a lot of the ideas. We covered the notion of a ...
4 votes
1 answer
275 views

Futures short interests vs open interests

I came across this article talking about "short interests" in VIX futures. My question is what does "short interest" even mean here? My understanding is that the futures are not "issued" (opposite ...
2 votes
0 answers
53 views

Cheapest instrument choice for low frequency long/short equity

I am trading a market neutral long/short equity portfolio. Right now I am trading cash equities, but I am interested in replacing some or all of the cash equities with derivatives, either single stock ...
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Short Interest for CBOE

Does anyone know why websites (yahoo finance, morningstar etc) do not show short-interest for CBOE after Sept 14th 2018?
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1 answer
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How equity dilution could be profitable for short sellers?

I am trying to understand the concept of dilution. According to https://www.investopedia.com/terms/d/dilution.asp, dilution is Dilution is a result of a reduction in the ownership percentage of ...
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1 vote
0 answers
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Comparing short selling profits across positions

For academic purposes I try to estimate the profitability of a short position while not knowing the margins and cost associated with shorting, thus I am only interested in the gains or losses made ...
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2 votes
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How did this after hours massive NFLX short/long strategy make a profit? [closed]

I’ve seen thus market action 2 times now in the past few months. The first was before ADBE earnings release, and most recently was NFLX release. The setup: Earnings release pending after hours ...
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1 answer
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Short sale and zero investmest strategy

Suppose I want to build a pairs trading strategy. Theory says that we can create a zero-investment portfolio by going long stock A and short-selling stock B, given a certain hedge ratio. My question ...
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1 vote
2 answers
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Compute allocation given long-short portfolio weights

The amount of capital allocated in each asset given long only weights is calculated as $allocation_i \ = K\cdot w_i$. ...
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1 vote
2 answers
479 views

Short position returns with negative NAV

I am using data on the opening, change and closing of short positions, but I am interested in when the profit/losses are made. Hence, I calculated daily the value of the short position by taking the ...
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1 vote
1 answer
569 views

How to hedge a short VIX position with SPY

Assuming it's Nov 15th, and the SPY is trading at 217.2. Suppose I sell 11 contracts with Dec. 21 maturity. How many shares of SPY do I buy to hedge my VIX futures position?
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1 answer
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If by selling short assets, you get extra capital for your longs, can you actually be dollar neutral?

I have a strategy where I short index ETF worth 80% of my portfolio, it shows up in leverage because I've borrowed the asset to short, but now I have 1.8 times the initial capital because of short ...
1 vote
1 answer
56 views

Short selling limits and institutional ownership

Why is Institutional holding considered a proxy for short-sale costs? In other words, Why are firms with lower institutional ownership more likely to be a subject of short-sale constraints? For ...
0 votes
2 answers
702 views

How does short selling affect the leverage of a portfolio?

I know that if you short a stock you borrow it from a broker, immediately sell it, and then buy it back at (hopefully) a lower price. But I don't understand how it impacts the leverage of a portfolio....
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