[Ads-l] gamma squeeze

Dan Goncharoff thegonch at GMAIL.COM
Mon Feb 1 20:31:17 EST 2021


Ok.

But if the OED definition reads:

  “to effect a sale of stock or goods which the seller does not at the time
possess, but hopes to buy at a lower price before the time fixed for
delivery,”

Then it's insufficient. Yes, it can be modified.

On Mon, Feb 1, 2021, 5:45 PM Baker, John <JBAKER at stradley.com> wrote:

> Well, the OED’s definition of to sell short, “to effect a sale of stock or
> goods which the seller does not at the time possess,” is correct if you
> understand “possess” to mean “own.”  As Dan points out, usually a stock is
> borrowed and delivered to the buyer; while this is not definitionally
> required for a short sale, it is a legal requirement of American securities
> trading.  If you understand “possess” to mean to hold without necessarily
> having beneficial ownership, then the definition is incorrect.
>
> It is the particular shares sold short that the seller must not own.  The
> short seller may in fact own fungible shares of the security and class that
> are sold short, but nevertheless deliver borrowed shares rather than those
> that the seller owns.  This is known as a short sale against the box.
> There are various reasons why a short seller might do this.  For example, a
> broker that wishes to make a market in the security may need to own shares
> in order to be a market maker, but does not actually have any interest in
> ownership of the stock.  A short sale against the box will allow it to have
> shares for trading purposes while having a net neutral position.  Most
> commonly, however, this is done for tax reasons.
>
> The requirement to borrow and deliver shares that are sold short explains
> how GameStop could have aggregate short interest equal to 140% of the
> public float.  The buyer of borrowed shares receives shares exactly like
> any other outstanding shares and has no idea whether the seller delivered
> borrowed shares or not.  Accordingly, there is no problem with the buyer
> lending these shares out to short sellers, so the same shares can be sold
> short multiple times.
>
>
> John Baker
>
>
>
> From: American Dialect Society <ADS-L at LISTSERV.UGA.EDU> On Behalf Of Dan
> Goncharoff
> Sent: Monday, February 1, 2021 4:21 PM
> To: ADS-L at LISTSERV.UGA.EDU
> Subject: Re: gamma squeeze
>
> Just thought I would point out that the definition of selling short in the
> OED is not strictly correct -- most of the time you borrow the stock to
> deliver.
>
> Also, if delta is not in the OED, it probably should be, since it has
> become a common term in talking about anything with an option component,
> and lots of things do. Perhaps gamma has arrived also, but I think it's too
> early. Most people who talk about gamma don't really understand it.
>
>
>
> On Mon, Feb 1, 2021, 2:50 PM Baker, John <JBAKER at stradley.com<mailto:
> JBAKER at stradley.com>> wrote:
>
> > “Short squeeze” really should be in the OED. In this context, “short”
> > derives from the verb to sell short, which the OED defines as “to effect
> a
> > sale of stock or goods which the seller does not at the time possess, but
> > hopes to buy at a lower price before the time fixed for delivery,” and
> the
> > related adjective short, defined as “Having sold as yet unacquired stock
> > which the seller hopes can be bought at a lower price before the time
> fixed
> > for delivery.” (Incidentally, there is an error in the OED, where short
> > A.18.g, the adjective, should cross-reference short C.11, the verb, but
> > instead cross-references unrelated short A.11.)
> >
> > A short squeeze is financial difficulty experienced by a short seller
> when
> > the price of the security or commodity sold short then rises, so the
> short
> > seller then must pay more to purchase the security or commodity and cover
> > the short position. The price increase also increases the amount of
> > collateral that the short seller must post. The short seller’s purchases
> > will themselves tend to cause the price of the security or commodity to
> > rise, so when there are many short sellers (as typically is the case in a
> > large market), they can put pressure on each other. While the current
> > short squeeze is in common stock of GameStop Corp., early references tend
> > to be to trades in commodities. Here is an example from the St. Louis
> > Post-Dispatch (July 21, 1882) (ProQuest): “The “Short” Squeeze. D.P.
> > Rowland & Co. Strike a Snag, But Recover Again” (title). The text of the
> > article does not use the term “short squeeze,” but does have this
> > description of events:
> >
> > “The late heavy advances in grain found this firm on the short side,
> > principally in corn. They met all calls for margin up to yesterday, when
> > with further and heavier demands Mr. Rowland determined to suspend, as he
> > found he could not get in the money due his firm and consequently would
> be
> > unable to meet all the calls for margin made upon them.”
> >
> > I had not come across the term “gamma squeeze” until a few days ago, and
> > it seems to be a fairly new term. It’s a specialized term and probably
> > should not be in general purpose dictionaries like the OED. It derives
> > from “short squeeze” and from “gamma,” which is a measure of the rate of
> > change in the ratio of the value of an option (or other derivative) to
> the
> > underlying security or other asset. (Gamma is also not in the OED, and
> > maybe also doesn’t belong there.) A gamma squeeze is a short squeeze
> > caused by trades in options, rather than (or, in reality, in addition to)
> > trades in the security or commodity in question. Here’s the earliest
> gamma
> > squeeze I immediately see, from the Los Angeles Times (Sept. 8, 2020)
> > (ProQuest):
> >
> > “”The sheer scale of call buyers both institutional and retail cause a
> > ‘gamma’ squeeze situation for dealers, exacerbating moves in tech,” she
> > [sc. RBC Capital Markets strategist Amy Wu Silverman] wrote in a report
> > Monday. (“Gamma” is a term for option price drift that dealers often seek
> > to offset by buying or selling the underlying stock.)”
> >
> >
> > John Baker
> >
> >
> > From: American Dialect Society <ADS-L at LISTSERV.UGA.EDU<mailto:
> ADS-L at LISTSERV.UGA.EDU>> On Behalf Of
> > ADSGarson O'Toole
> > Sent: Sunday, January 31, 2021 9:18 PM
> > To: ADS-L at LISTSERV.UGA.EDU<mailto:ADS-L at LISTSERV.UGA.EDU>
> > Subject: gamma squeeze
> >
> > External Email - Think Before You Click
> >
> >
> > "short squeeze" is the old lameness
> > "gamma squeeze" is the new hotness
> > "pump and dump" is the perennial; soon to regain popularity, I expect
> >
> > OED does have an entry for the stock market sense of "pump and dump".
> > It does not have entries for "short squeeze" or "gamma squeeze". This
> > is specialized vocabulary, but it is becoming more widely known.
> >
> > An entry for "gamma squeeze" was created for Wikipedia on January 23,
> > 2021‎.
> > https://en.wikipedia.org/wiki/Gamma_squeeze<
> https://en.wikipedia.org/wiki/Gamma_squeeze><
> > https://en.wikipedia.org/wiki/Gamma_squeeze<
> https://en.wikipedia.org/wiki/Gamma_squeeze>>
> >
> > Website: The Motley Fool
> > Article: What Is a Gamma Squeeze?
> > Author: Chuck Saletta (TMFBigFrog)
> > Timestamp: Jan 28, 2021 at 12:00PM
> > https://www.fool.com/investing/2021/01/28/what-is-a-gamma-squeeze/<
> https://www.fool.com/investing/2021/01/28/what-is-a-gamma-squeeze><
> > https://www.fool.com/investing/2021/01/28/what-is-a-gamma-squeeze<
> https://www.fool.com/investing/2021/01/28/what-is-a-gamma-squeeze>>
> >
> > The OED first cite for "pump and dump" is excellent, i.e., I could not
> > antedate it.
> >
> > pump
> > PHRASES P1.
> >
> > [Begin excerpt]
> > pump and dump n. Stock Market (originally U.S.) a fraudulent scheme
> > in which a person or company promotes a low-value stock in order to
> > profit by selling shares at inflated prices; chiefly attributive.
> >
> > 1988 Wall St. Jrnl. 2 Feb. 1/6 For most promoters, the preferred
> > scam is ‘pump and dump’—pump up the per-share price with hot air and
> > hype, then dump the stock on duped investors for immense profits.
> > [End excerpt]
> >
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