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Strategies & Market Trends : Waiting for the big Kahuna

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To: yard_man who wrote (15043)	3/15/1998 8:27:00 PM
From: Lazarus_Long	Read Replies (1) of 94695

Actually, a short interest higher that 100% of stock issued is possible and has happened before. (0) You and I both use Broker A (1) You buy the stock on margin (2) I put in an order to short it (3) Our broker takes your stock and lends it to me for the short sale (4) Mr. X, working through broker Y, buys the stock in a margin account (5) Mr. Y, also using broker Y, enters an order to short the stock. (6) Broker Y takes Mr. X's stock and lends it to you for the short sale. So the same stock has been sold short more than once. This can, of course, produce a squeeze that is a sight to behold. I don't remember the details but there was a (in)famous incident involving just this problem and Daniel Drew and Erie Railroad ("The Scarlet Woman of Wall Street") stock. Drew trapped the shorts and had to be persuaded not to skin them alive.

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