>> most of the institution loan their shares out to shorters to generate additional income.
Not so. Pension funds are typically not allowed to do so. As well, most 401K money is in a cash account. And there is hardly any mutual fund that uses margin. The one case in which you are right, is when a stock goes on special. This means that it is in such a short supply, that the shorts agree to pay extra money to the fund manager in order to barrow the shares. It is rare for a stock to go on special. Otherwise, the institutions don't make any money off the shorts.
>> Once an upward momentum develop in this stock, then the short position might become important
You are absolutly correct here. And I agree with you that just calling the shares is unlikely to cause a short squeeze. However, stock market is a matter of playing the odds. *IF* you think that this stock is undervalued and is poised for a big up move within the next two months. And *IF* you consider the short position to be large enough as a percentage of the float. Then calling your shares in or moving them to a cash account will increase your chances of a greater than expected up move *when* it arrives. Since it costs nothing to move the shares in a short account, then if you intend to hold on to your shares, calling them in is your best risk/reward action.
BTW, IMO without strong support from Intel and if a rival technology comes into play, RMBS will go into 20s. On the other hand, it is hard to believe how Intel can justify selling high end processors without advances in memory technology. So if you believe that in 3 years time 80+% of DRAMs will be RDRAMs, then RMBS is a screaming buy here and you should ignore the noise.
good luck,
Sun Tzu |
