Stock Market Warning: Margin Debt Hits Record-High $401 Billion

Quote from Nighthawk:

Stock Market Warning: Margin Debt Hits Record-High $401 Billion

Read more:

http://www.benzinga.com/markets/13/...bt-hits-record-high-401-billion#ixzz2k5Rj0YiC

I hope, you guys are hedging with deep OTM stock index puts. I am not calling a crash but a major correction

Taking a look at $VIX Skew, it looks very likely as large institutionals hedging activities are increasing lately:


http://www.cboe.com/micro/skew/introduction.aspx

Fasten your seat belts!

:D :p :eek:
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What makes you think that margin debt is on the long side? It could be short or neutral.
 
Quote from Nighthawk:

Short? No way:

http://www.nyse.com/press/1382612434379.html

:cool:
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Dude, your short interest link showed the current numbers at the lows the last two years. Do you know how to read these reports? And a little fyi, most margin that is utilized IS actually on the short side. Remember, you HAVE to use margin to short, can't be done in a cash account. Long positions CAN be in cash. So all things being equal, the marginal trade is more then likely to be a short one then a long one through the process of induction.
 
Quote from Maverick74:

Dude, your short interest link showed the current numbers at the lows the last two years. Do you know how to read these reports? And a little fyi, most margin that is utilized IS actually on the short side. Remember, you HAVE to use margin to short, can't be done in a cash account. Long positions CAN be in cash. So all things being equal, the marginal trade is more then likely to be a short one then a long one through the process of induction.
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Your logic is faulty.

The total number of long positions is >>> total number of short positions.

For example, AAPL, has <2% of its float short, so there is 50x long positions than short positions in AAPL. Same is true with most other stocks.
 
Quote from elite74:

Your logic is faulty.

The total number of long positions is >>> total number of short positions.

For example, AAPL, has <2% of its float short, so there is 50x long positions than short positions in AAPL. Same is true with most other stocks.
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Yes, but you have to isolate the margin that is relevant. Someone who has been holding AAPL for 10 years vs someone holding it for 10 minutes. If you reduce the population size to only those who are acting and reacting in the very short term, it's going to lean to the short side all other things being equal.

For example, if there were only 10 shareholders in the entire world trading or investing in AAPL:

As you correctly stated, most people are long, so you might have say 6 long term holders. That leaves 4 that are short term. Let's break down the probabilities of ONLY those short term. One could be long via cash, long via margin or short via margin (can't be short cash). let's say the remaining 4 are short term oriented and spend an equal amount of time long and short. That leaves 2 longs and two shorts. The shorts both have to be margined. The longs can be split between one margin and one cash. That leaves us with 3 of the 4 using margin. Of the 3 margined traders, 2 are from the short side, one from the long side. That means about 66% of the margin is being represented by the shorts. Now you can manipulate these numbers back and forth, but using a 50/50 model which is fair, the skew is always to the short side. That does not mean they ARE short, it simply means your theory has to overcome the bias that the marginal spec is skewed to the short side.
 
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