Badog,
Let me explain again, but this time including the backstop concept and why T+3 matters for both short sellers and long-term investors:
T+3 is important because that’s when margin calls hit short sellers. A margin call happens when the short seller’s position drops too low, and their broker forces them to buy back shares at any price to cover losses. This forced buying often causes the stock price to spike, creating a buying frenzy as short sellers scramble to cover.
Now, regarding the backstop—this refers to a guaranteed minimum price (like from a dividend or buyout) that investors know they will receive. This means that investors won’t sell their shares for less than the backstop price. When there's a backstop in place, long-term investors have no incentive to sell early (like on T+1 or T+2) because they know they’ll get that guaranteed price or higher by waiting.
By waiting until T+3, the short sellers are forced to buy back shares, which can drive the price higher, and since the backstop guarantees a certain price, it doesn’t make sense to sell for less before then.
In summary:
T+3 is the day margin calls force short sellers to buy back shares, often pushing the price up.
The backstop ensures a minimum price, so long-term investors are in no rush to sell before T+3.
Waiting for T+3 is about maximizing the return when short sellers are forced to cover, and the price is likely higher.
It’s not about getting a head start; it’s about using the backstop and market forces to everyone’s advantage.
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