Short interest is a measure of the aggregate short positions on a stock. Check an online brokerage or other financial service for the short interest on several stocks of your choice. Can you guess which stocks have high short interest and which have low? Is it theoretically possible for short interest to exceed 100% of shares outstanding?
Answer to relevant QuestionsSuppose that you go to a bank and borrow $100. You promise to repay the loan in 90 days for $102. Explain this transaction using the terminology of short-sales. ABC stock has a bid price of $40.95 and an ask price of $41.05. Assume there is a $20 brokerage commission. a. What amount will you pay to buy 100 shares? b. What amount will you receive for selling 100 shares? c. Suppose ...Suppose XYZ stock has a price of $50 and pays no dividends. The effective annual interest rate is 10%. Draw payoff and profit diagrams for a long position in the stock. Verify that profit is 0 at a price in 1 year of $55. Using the same information as the previous question, draw payoff and profit diagrams for a short position in the stock. Verify that profit is 0 at a price in 1 year of $55. Construct payoff and profit diagrams for the purchase of a 1050-strike S&R call and sale of a 950-strike S&R call. Verify that you obtain exactly the same profit diagram for the purchase of a 1050-strike S&R put and sale of ...
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