Yes absolutely, that is a detailed summary of what I meant by...

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Mturns

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14/12/23

10:16

Post #: 71442660
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Originally posted by Stephan90: ↑

I am sure that a lot of traders who have sold futures contracts, and there have promised physical delivery in the future, intend to close their positions by buying the same amount of contracts before the expiration date. The problem is that if too many traders want to do this then increased demand for these contracts leads to price increases for these contracts. So traders would incur big losses if the prices increase too much. This is what I would call a short sqeeze. It is the same phenomenon that happens when short sellers push up a stock price drastically because they need to cover their positions and the higher the stock price goes the more short sellers need to cover. This can make share prices go almost vertical in extreme cases. Selling futures contracts without the intent or means to physically deliver the underlying asset is like short selling stocks. Eventually the sellers need to cover their short positions. In the case of futures contracts this is due to the expiration date approaching and in the case of short selling it is the lending fees that the short sellers pays to the lender of the shares.

Short squeeze - Wikipedia

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Yes absolutely, that is a detailed summary of what I meant by “interesting”

If it does all play out in this way then an increase in demand to the spot market of that magnitude is simply going to cause prices to skyrocket. We will see how it plays out in the next few months.

AKE Price at posting: $9.98 Sentiment: Hold Disclosure: Held
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0 Great analysis

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