1. Your Questions About Nasdaq Short Interest
Lizzie asks…
Short interest Ratio (Days to cover). Can someone interpret this??
I know the definition which is: Calculated as the aggregate short interest for the month divided
by the average daily share volume traded between short interest settlement dates. If days to
cover is between 0 and 1, it is rounded up to 1 on Nasdaq.com.
I understand the definition, but can someone interpret the numbers. I mean what does a big
Short interest Ratio (let's say above 5) indicate? and what does a small number indicate as
well?
Thanks in advance.
Steve Winston answers:
If the short interest ratio is 5, it would mean that it would take the shorts sellers 5 days to cover
their short positions. The higher the ratio means that the longer it takes the bears (shorts) to buy
back (cover) the borrowed shares if positive news about the company lifts the price.
A smaller number would indicate less time for a short seller to cover his or her position. In most
cases a short interest ratio of 8 or above would prove to be a very hard to cover stock.
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2. William asks…
What are the restrictions of shorting stocks on nasdaq,
nyse,amex?
Why can't you short stocks under $5?, does shorting mean that you have to borrow money
from your broker and pay interest on that money until you cover that short?
Steve Winston answers:
Each brokerage company has rules for shorting. Typically, stocks under $5 are considered too
risky by the broker to short.
When you short, you sell the stock first. And your broker will put the short sale of the proceeds
into your "short" account, where it remains until you buy the stock back, hopefully at a higher
price than what you shorted it for. You'll pocket the difference, less fees into your margin
account. Also, you do not get any dividends from the stock, if any were issued during the time
you are short. You pay the dividends to the owner of the stock.
You do not pay interest on the proceeds from the short sale, nor do you accrue interest from the
proceeds in your short account.
///
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3. Mary asks…
What are the names and symbols of some "stocks" that mirror the
major indexes as they drop (go short)?
I want to know what "stocks" take advantage of a drop in the various stock indexes. In the
opposite way that "SPYDERS" (SPY) mirrors the S&P going higher and 'QQQ' mirrors the
Nasdaq index.
What are the symbols for the S&P 500, Dow Jones Industrials and Nasdaq index that mirrors
those indexes when they are dropping in price? I am not looking for "defensive" stocks, but
those that actually go "short" the major stock indexes. I am also not interested in any mutual
funds that negatively mirror stock indexes.
Thanks for your help.
.
.
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4. Steve Winston answers:
SDS is the ProShares S&P 500 short ETF
QID is the one for the Nasdaq.
Google 'Proshares' and you'll find the rest of them. They have them for most major indices.
Paul asks…
Finance help needed-interest rate, money markets, annuities?
Money markets are markets for
Foreign currencies.
Consumer automobile loans.
Corporate stocks.
Long-term bonds.
Short-term debt securities such a Treasury bills.
2. Which of the following statements is CORRECT?
The most important difference between spot markets versus futures markets is the maturity of
the instruments that are traded. Spot market transactions involve securities that have maturities
of less than one year whereas futures markets transactions involve securities with maturities
greater than one year.
Capital market transactions involve only preferred stock or common stock.
If General Electric were to issue new stock this year, it would be considered a secondary market
transaction since the company already has stock outstanding.
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5. Both Nasdaq dealers and “specialists” on the NYSE hold inventories of stocks.
Money market transactions do not involve securities denominated in currencies other than the
U.S. dollar.
3. If the stock market is semistrong-form efficient, which of the following statements would be
CORRECT?
The required returns on all stocks are the same, and the required returns on stocks are higher
than the required returns on bonds.
The required returns on stocks equal the required returns on bonds.
A trading strategy in which you buy stocks that have recently fallen in price is likely to provide
you with a return that exceeds the return on the overall stock market.
If you have insider information about a particular stock, you cannot expect to earn an above
average return on this information because it is already incorporated into the current stock price.
Even if a market is semistrong-form efficient, an investor could still earn a better return than the
market return if he or she had inside information.
4.
Suppose 1-year T-bills currently yield 5.00% and the future inflation rate is expected to be
constant at 3.10% per year. What is the real risk-free rate of return, r*? Disregard cross-product
terms, i.e., if averaging is required, use the arithmetic average.
1.90%
2.00%
2.10%
2.20%
2.30%
5.
Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.25%, and a
maturity premium of 0.10% per year to maturity applies, i.e., MRP = 0.10%(t), where t is the
years to maturity. What rate of return would you expect on a 5-year Treasury security, assuming
the pure expectations theory is NOT valid? Disregard cross-product terms, i.e., if averaging is
required, use the arithmetic average.
5.95%
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6. 6.05%
6.15%
6.25%
6.35%
6.
Which of the following would be most likely to lead to a higher level of interest rates in the
economy?
Households start saving a larger percentage of their income.
Corporations step up their expansion plans and thus increase their demand for capital.
The level of inflation begins to decline.
The economy moves from a boom to a recession.
The Federal Reserve decides to try to stimulate the economy.
7.
Assume that interest rates on 20-year Treasury and corporate bonds are as follows:
T-bond = 7.72% A = 9.64%
AAA = 8.72% BBB = 10.18%
The differences in rates among these issues were caused primarily by
Tax effects.
Default risk differences.
Maturity risk differences.
Inflation differences.
Real risk-free rate differences
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7. Steve Winston answers:
THIS QUESTION IS WAAAAYYY TO LONG FOR A PERSON TO ANSWER, PLEASE
SHORTEN IT UP A BIT, AND IM SURE YOU WILL GET YOUR ANSWER...
Mark asks…
Why AIG stock price didn't soar during (6/20/09 to 7/15/09)?
Why the short interest of AIG decreased to 21,920,787(settlement date:7/15/2009, Avg Daily
Share Volume: 44,486,725, Days to cover: 1)) from 262,011,225 (settlement date:6/30/2009,
Avg Daily share Volume:76,476,628, Days to cover:3.423), there was no significant rise in stock
price during that period? Thank you!
See
http://www.nasdaq
.com/aspxcontent/shortinterests.aspx?symbol=C&symbol=BAC&symbol=GS&symbol=AIG&sele
cted=AIG
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8. Steve Winston answers:
Intrinsic values of AIG were not higher. Remember, it is still all speculative, no matter what the
experts try to say. The markets took a little dip during that time under monetary constraints also.
Laura asks…
Question about price movement of AIG?
Why the short interest of AIG decreased to 21,920,787(settlement date:7/15/2009, Avg Daily
Share Volume: 44,486,725, Days to cover: 1)) from 262,011,225 (settlement date:6/30/2009,
Avg Daily share Volume:76,476,628, Days to cover:3.423), there was no significant rise in stock
price during that period? Thank you!
See Table:
http://www.nasdaq
.com/aspxcontent/shortinterests.aspx?symbol=C&symbol=BAC&symbol=GS&symbol=AIG&sele
cted=AIG
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9. Steve Winston answers:
AIG did a reverse split on July 1, 2009. For every 20 old shares of AIG you got 1 new share. So
divide the June 30 numbers by 20 to get a proper comparison.
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