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0 pointsdpiers5y ago0 comments

Call it a scantily-clad short then. A share that is already lent out to a short seller should not be eligible to be lent out again for the same reason I can't get two mortgages to buy the same house - the underlying collateral would be owed to multiple parties.

0 comments

3145y ago

This is not true. Party A has a contract that party B owes them a share - not the share that they originally loaned. The whole idea is for party B to buy a share later to balance the trade.

A better analogy to understand why short interest can rise above 100% is fractional reserve lending and the effect that it has on money supply.

rokobobo5y ago

A share is a share is a share. You can’t tell which one was loaned out and which one wasn’t. And it’s not used as collateral, money is posted as collateral instead.

ZephyrBlu5y ago

This is ok because all instances of borrowing the share don't need to be settled simultaneously.

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