You borrow stock worth of $100 with the agreement to return them on a specific date
You then sell that stock for $200 hoping to make a $100 profit
However, at the agreed date the stock is suddenly worth $500, and you need to return them as agreed on that specific date
Now you are not making a $100 profit, but you actually have to find the other $400 extra to buy and return the stock as previously agreed
Now imagine lots of banks, traders and investment funds doing the same. You end up with massive domino effect and a market crash. Now to make it even worse, they oversold the stock; they borrowed 10 pieces but actually sold 100 pieces assuming they could make up the difference with the profit.
wsb probably had a small role in starting this, but the system has been this way for a while and this has happened many times before, so it would be very hard to pin this down on wsb completely
Appreciate the explanation but now I’m even more confused. Which side are you describing, and are you describing long calls or long puts? I’ve traded option but never straight up shorted anything, but my understanding is that shorting has no expiration date as long as you’re within margin limits and if this is a “coordinated attack” to drive up the price to flush out the investment firms who are heavily short, resulting in margin calls. I may be missing something?
Best breakdown on the wallstreet “don’t pass“ line I’ve seen. I personally advise gambling on straight dice only. (No cards!!! Legerdemain can’t be beaten.)
You can live okay just playing craps well. Don’t drink! Takes discipline. That “win limit” thing takes superhuman willpower. Same with investing. “Pigs go to slaughter” is a cliche for a reason.
Trying to profit off of gambling is always stupid. The only strategy that works long-term is cheating. If you're not cheating, you'll always lose in the long term. Better to try it once, win and then quit, or lose and then quit.
You borrow stock worth of $100 with the agreement to return them on a specific date
You then sell that stock for $200 hoping to make a $100 profit
However, at the agreed date the stock is suddenly worth $500, and you need to return them as agreed on that specific date
Now you are not making a $100 profit, but you actually have to find the other $400 extra to buy and return the stock as previously agreed
Now imagine lots of banks, traders and investment funds doing the same. You end up with massive domino effect and a market crash. Now to make it even worse, they oversold the stock; they borrowed 10 pieces but actually sold 100 pieces assuming they could make up the difference with the profit.
Hope I made this a bit more understandable.
Thank you so much for that explanation. It helped so much.
So the guys on the subreddit just all agreed to buy gamestop stock and had this major of an effect on the price?
That's insane.
wsb probably had a small role in starting this, but the system has been this way for a while and this has happened many times before, so it would be very hard to pin this down on wsb completely
Appreciate the explanation but now I’m even more confused. Which side are you describing, and are you describing long calls or long puts? I’ve traded option but never straight up shorted anything, but my understanding is that shorting has no expiration date as long as you’re within margin limits and if this is a “coordinated attack” to drive up the price to flush out the investment firms who are heavily short, resulting in margin calls. I may be missing something?
I'm kinda lost on it too, this article does some to explain what's going on:
https://www.zerohedge.com/markets/next-big-hedge-fund-blow-and-what-happens-next-0
And this is a broader overview: https://www.breitbart.com/tech/2021/01/26/bloomberg-online-investing-forums-are-driving-stocks-like-gamestop-to-the-moon/
Who is doing this?
Melvin Capital with help from Citrone
Best breakdown on the wallstreet “don’t pass“ line I’ve seen. I personally advise gambling on straight dice only. (No cards!!! Legerdemain can’t be beaten.) You can live okay just playing craps well. Don’t drink! Takes discipline. That “win limit” thing takes superhuman willpower. Same with investing. “Pigs go to slaughter” is a cliche for a reason.
Trying to profit off of gambling is always stupid. The only strategy that works long-term is cheating. If you're not cheating, you'll always lose in the long term. Better to try it once, win and then quit, or lose and then quit.