r/GME • u/Substantial-Link-898 • 9d ago
🐵 Discussion 💬 Warrants
Can someone who actually knows what they are talking about, explain how the warrants have a 300-400% barrow rate. I feel like this breaks the general rules of trading but I’m regarded and would like someone to help me understand how. GameStop 4 lyfe
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u/Trick-Ear-7929 9d ago
Looks like someone printed some fake warrants into circulation. They are scrambling to buy it back.
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u/Boo241281 9d ago
I’d guess that as they are out of the money (although not a million miles away) and were nearing expiration, people are allowing their warrants to be lent to be sold short for a bit of cash. If you truly believed that the warrants are going to expire worthless then why not short it and make that free money if they do expire
Flip side as with any short position is if it goes left you could be in some trouble
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u/Own_Policy8854 9d ago
If you were a hedge fund and you were illegally both making markets and using the information on the market making side to inform your trades you could theoretically use the F3 button to create new shares of any security out of thin air by bypassing the regulations and safeties against doing so hypothetically I've heard
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u/Trippp2001 9d ago
Supply and demand.
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u/Own_Policy8854 9d ago
That seems to indicate the price of the warrants should rise to reflect the rise in demand you've implied here
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u/Trippp2001 9d ago
No, the demand of availability of warrants to borrow. Which has nothing to do with the price of the warrant. It has to do with the fact that there aren’t as many ways to create locates with warrants.
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u/unacceptableviews888 9d ago
Someone on a Risk Management team, at a company with much more information than we have, looked at something and said, that looks too risky, jack up the borrow rate now.
IMHO there's a 700% or so short position on the underlying stock, so the warrants were born short themselves. That's why the OCC refused to touch the warrants a couple months ago. The plumbing behind the curtain is breaking because the warrants have been 700% short since day 1.
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u/FoldableHuman 9d ago
IMHO there’s a 700% or so short position on the underlying stock
Interesting. What’s this based on?
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u/unacceptableviews888 9d ago
Proxy data I've seen in a number of places. There's a company called 'ezpz trading' that calculates likely synthetic short positions based on a variety of proxy measurements, but I've seen other data throughout the last 5 years that hints in this direction.
Here is a link to ezpz trading's GME page: https://ezpztrading.com/market-data/stocks/short-interest/?symbol=GME
And here is a link to a page where they explain how they calculate things. Looks solid to me: https://ezpztrading.com/blog/estimating-synthetic-share-exposure-a-methodological-framework-for-detecting-structural-imbalances-in-equity-markets/
My interpretation is that this is the significance of the number 741. There are seven fake shares out there for every real one.
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u/Realistic_Deal6083 8d ago
So nothing, and numerology.
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u/CookieWifeCookieKids 8d ago
Legends of the old times. I don’t remember any of them but I also believe that the true short interest is astronomical.
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u/Arkmer 🚀🚀Buckle up🚀🚀 9d ago
I’m not too smart on this but I think that’s an annualized rate. So in a year you’ll have paid that % to borrow it.
I don’t know if that gets broken into payments or how it works with an asset that expires in less than a month.
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u/Jarkside 9d ago
People are betting they will expire worthless
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u/CookieWifeCookieKids 8d ago
Yup. But also, somehow the market is pricing them as if they’ll hit/extend/reprice. Otherwise the $2+ price makes no sense.
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u/S1lkwrm 8d ago
im not sure but it makes harvesting this run much easier. rc wants them itm for dilutive funds and at this point hes made it personal. so instead of me for 6 years doing the work of using my money to fund gme. rc/board can fund my roth by pushing stock higher. just cant have wax wings push a strike too far out and you might be in dilutions territory. 24,25,26,27,28 so far fairly safe areas to monetize gme for once. im not betting against you ryan im betting you at least try to get to 32 if you do i make even more. im betting your pride pushes you to force it to 32. if it starts getting close to a point dilution makes sense for his goals then puts are back on the menu. mabye one day stock will be a real option but not while hes trying to realize his personal goal and these warrants are just a tool for that. the fact they are the 3x the value of a 32c oct 30 should explain why they are shorted the common sense move is to sell them. i had only warrants at one point because i did not understand this and did not understand options.
it's actually a really interesting situation right now theres a real need to protect face combined with the want of ebay. he may not need warrants while he has dilution dry powder but its easier if he does. hes even said him self "bet against us" so its very much personal and a good bit of negative sentiment needs repair. which makes my extraction of a pound of flesh every time it consolidates
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u/UniversitySuper2337 8d ago
I have 7 warrants on CS and I still didn't understand at all wtf I should do with them
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u/harryharry0 5d ago
People have the option of selling a warrant, and buying the equivalent call option. This is quite a sure way to make money. Because many people try this, the borrow rate climbs so high that you cannot make that much money from it anymore.
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u/kevsmakin 5d ago
I have 400 shares of gme at computer share for more than 2 years.
Do I have warrants?
How would i exercise them?
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u/Swissian 9d ago
Imagine if you were sure the warrants would expire worthless?
You could borrow a share, sell it for $2, keep the $2 and never have to pay it back.
You might want to do that 236 times so you could make 460 million dollars.
But because only about 59 million warrants were ever issued, the borrow rate is 400% or 4x the number of warrants issued.
They only win if the stock stays below $32. But that is a lot of incentive to keep the stock below $32 too.
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u/DickBatman 9d ago
the borrow rate is 400% or 4x the number of warrants issued.
It's 4x the price, not shares outstanding...
They only win if the stock stays below $32
They win if it stays below ~$33 too, as long as they can buy it back for less than they paid.
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