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SodaStream International Ltd. (SODA) Message Board

  • jillian_dancer jillian_dancer May 6, 2013 10:43 AM Flag

    Short Squeeze Questions

    If short sellers are supposed to target companies with poor performance whose expectations for the future are very low, why do they choose to remain against SODA even after it has become appareant that it is not a fad? And why do I feel so terrible that they could lose their life savings by stubbornly hanging on?

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    • Long time student of short selling mechanics here.
      Key points to understand......
      - You almost never have to close a short position.
      - You can avoid paying taxes until you die (only if an individual, otherwise avoid indefinitely).
      - Multiplicitive power of re-shorting shorted shares negates segregation rules.
      - SEC Price Improvement rules all favor lower bids.

      Key thing about shorting over puts is simple.
      - When you short, you get money.
      - When you do puts, it costs you money.

      Puts expire versus a short position can be forever.

      The two most powerful ways to deter shorts are:
      - Remind them every 13 weeks with a quarterly dividend.
      - Buy back and retire shares. Key point is retire, many buypacks are used as currency as treasury shares.

      Assume you have a sizable account and you shorted 1,000 shares of SODA @ $40.
      All you have is a liabilty against your account equity, which at the moment costing you nothing to maintain.

      Sentiment: Strong Buy

 
SODA
37.69-0.59(-1.54%)Apr 15 4:00 PMEDT

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