There's something fascinating happening in the markets that most people completely miss when they look at short-selling. Everyone talks about the biggest short positions by dollar value—and sure, Tesla sits at around 13.5 billion in short interest. But here's what really matters: that's not actually telling you which stocks the market thinks will completely collapse.

I started digging into this after noticing how differently people measure short interest. The dollar value is basically meaningless. What you need to look at is the percentage of shares actually shorted relative to what's outstanding. That's where things get wild.

Tesla's got about 10% of its shares sold short. Sounds significant until you realize there's only one stock where the market has basically decided everything is worthless: GameStop. We're talking over 100% of shares shorted. All of them. And then some.

How is that even possible? Here's where it gets interesting. When you short a stock, you borrow shares and sell them. The quirk nobody talks about: those same shares can be lent out multiple times. One short-seller borrows from a broker, sells to another broker, and boom—that second broker lends them again to another short-seller. Same shares, counted twice as "shorted." GameStop hit 100.6% short interest because of this cascading lending.

It's rare, but it's happened before. Back in 2000 during the dot-com bubble, Palm reached 147.6% short interest when it spun off from 3Com. Investors saw a pricing disconnect and just kept shorting. The market was absolutely convinced Palm would fail.

Now, Peloton is sitting as the second most-shorted stock with about 93% of its float sold short. But here's the difference—Peloton's got a massive gap between its float and total shares outstanding because it's a recent IPO and insiders still control most of the stock. That's different from GameStop, where the float is pretty close to shares outstanding.

The real question everyone's asking: is GameStop facing a short squeeze of the century, or is this just a slow march toward obsolescence? The company hasn't exactly inspired confidence with its strategy around physical gaming hardware in an increasingly digital market. If they could somehow shock the market with solid earnings, we'd see one of the most incredible squeezes ever. But realistically, most people watching this expect GameStop to follow the same path as Blockbuster and RadioShack.

What's wild is how the market psychology plays out when you have a most shorted stock situation like this. Every short-seller is essentially betting on zero—that the company disappears entirely. That kind of conviction is rare, and it makes you wonder what they're seeing that long-term investors are missing. Or maybe they're right, and the bulls are just hoping for a miracle. Either way, it's one of the most extreme bets you can find in the market right now.