The Number To Beat

The accumulated short position in GBN.V stock is said to be 1,164.7550%, according to Bloomberg.

There is a way of looking at this number as if it were a leveraged position.

Since derivatives came into vogue in Canada with further deregulation of the banking sector in 2005 and the abolition of the no-down-tick rule in 2011, this makes equity swaps easily available to commercial traders.

GBN.V as a stock is under pressure in particular, mostly due to its strong inverse correlation with the long-dated U.S. treasury bond price, indicating that there is a large exposure to delta hedging strategies. In short, a sizeable equity swap is in place involving GBN.V shares

But these positions do not require any capital outlay to arrange necessarily, they are merely the I.O.U.s generated by the system. Equity swaps are at best leveraged positions with no underlying asset.

If you leverage up 11.64755X against the share value of the net and outstanding shares in any company, then the share price need only move ~8.5 cents before the position has gone broke in the case of GBN.V.

So GBN.V as a company has to come up with news that will move the stock and entice buyers to enter the market, but only by 8.5 cents.

Does this seem terrible to you?

-F6