Lesson in a Short Squeeze

A lesson in owning stocks, or most importantly a short in a stock, is being played out as I write here.  Sears Holdings which many traders believe have no future but a stock value that has one way to go and that is down is being short squeezed today.  Here is how it is playing out from what I can tell.  Sears reported weak earnings a few weeks ago and has been selling down lately.  Traders thinking selling the stock short, meaning they borrow shares to sell now with the intent to buy it back later at a lower price thus making a profits, have been doing just that.  Enter Eddie Lampert who runs a hedge fund with lots of Sears Holdings shares.  His hedge fund has liquidated numerous positions of late taking profits and looks to be deploying those assets into Sears shares pushing the price up.  That pressure is intense since he has lots of cash to deploy.  For the short sellers they now are getting caught in the squeeze of a stock they sold to go down now going up quickly.  Sears selling in the $38 range shortly is today selling over $56 and the shorts are getting killed.  They in turn to cut their losses are now buying back shares to cut their losses and that action as well is pushing prices higher. The lesson is be darn careful when you are a trader and playing the dangerous short selling game.  

We currently own 2400 puts in SHLD at $37.00.  Yes, we are most happy with the short squeeze here.