Direxion Daily Gold Miners Bull 2X (NUGT)

[DrContango]

What happens when the borrowed wants to sell her shares 1 day after they were borrowed out!! and the borrower does not have them because they were sold!!

Excellent question!!!

They become naked!! so guess what 5 more shares came to the pot!!

DILUTION!!!!

Purely idiotic response ;-(

John owns 5 shares of X.
Sue sells short John's 5 shares of X to Billy.
Billy now owns John's 5 shares, and Sue owes John 5 shares.

Billy now wants to sell his five shares and lo and behold they are not in his account; they have been loaned to Sue.

The first thing that happens in Stingray's example, is that Sue's stock broker tries to locate another 5 shares that he can borrow. If he finds those shares, he returns them to Billy's account so that he can sell them.

In the rare occasion that Sue's broker cannot locate other shares to borrow, Sue will suffer the dreaded FBI, forced buy in.

Frank thinks X is now a poor investment, so he offers for sale his 5 shares."

In this scenario, Sue would actually buy 5 shares on the open market, at whatever price that Frank demands. Her short position is closed, and those market shares are returned to Billy.

The total float remains 10 shares. Never was any dilution...


Doc

Are you related to Yogi Berra who once famously said?:

You better cut the pizza in four pieces because I'm not hungry enough to eat six.