Short selling means you sell stocks you don't have, with the promise of buying them later, with a hard deadline.
If the stock goes down, you will end up buying them later, cheaper, than you "sold" them right now.
But if the share price rise, you HAVE to buy them at a higher price.
Because GameStop was expected it to go bankrupt (and share price go to zero, essentially), some investing companies have shorted a lot of their stock. (Sold stock they didn't have, expecting to buy them later at 0$, and keeping the difference.)
But now a shitload of people (or something) bought actual stock at 8ish$, making the stock go UP a shitload to 300+$
This means the people who sold a shitload (shorted) at 8$, will be stuck, this friday, buying it at 300$+. Since they probably sold thousands of share, they'll have to pay thousands times 300$ to buy them back, and they HAVE to.
So, they're going bankrupt themselves.
Well, I mean, IF the market is shrinking, and IF the market is responding only to actual market change, and IF some people want to buy carrots, and you don't have carrots, and you go "I'll get you carrots tomorrow, they're 20$, as you can see by the current price" and the next day you go buy them, and the price dropped to 10$, and you get to keep the difference ... then yeah, it can work.
IF you are certain the market is going down.
If you're actually betting in a market where the value can be manipulated, and you lose, and then complain that the people doing the manipulations aren't your people, so it's unfair ... well, then, they can go suck a fuck, they knew what they were getting into, they're professionals, no? ;-)
Besides, don't they have insurance for these kinds of thing? If they wanted to do something risky, without insurance, well, that's on them.
Landis had a hell of a run, from Animal House to Beverly Hills cop. Then he fell off the cliff with Blues Brothers 2000, and just never got back to that level.
Autists don't care if the company lives or dies (it's dying, the internet killed them), they're just saying they can stay retarded longer than the hedge funds can stay in the game. Literal quote from them.
Basically, you "borrow" a stock and sell it at the current price, with a promise to return the share later.
Let's say you borrow a single share, and sell it for 8 dollars. You now have 8 dollars, but also a debt of 1 share. Later, if the stock falls to 5 dollars, you buy a share and return it to the person you borrowed it from (usually your broker). You sold your borrowed share for 8 dollars, but had to buy one for 5, so you profited 3 dollars. However, let's say the stock goes up to 10 instead. When the person that loaned you stock wants it back (usually to sell it themselves) you'll have to buy a share for 10 to give back to them, resulting in a loss of 2 dollars. It's a way to make money when a stock goes down, however, it's very risky as your potential loss is unlimited (because the higher the stock goes, the more money you lose).
In the gamestop case, the hedge fund shorted it at 8 dollars, but it's currently sitting over 300. So, if the lender that gave them the shares was to act on the loan (which apparently will happen this Friday), then the hedge fund will take a loss of 292 dollars per share.
I am not a financial guy so I don't understand any of the complexities, but from my understanding it is like betting against a company you think will fail. Somehow when the companies stock prices fall these hedge funds make money. But when the prices go up especially so drastically in this case going up like 50x in price they lose billions of dollars. That is literally all I know about them, so if you want to know how they actually work you will have to research it yourself.
Merrill capital hedge fund short-selled GameStop stock (GME) by borrowing shares and selling them as they thought the price would drop below market when they had to buy the shares earning a profit. They are getting burned because these retail investors collectively drove the price of GME shares way above market price. This GME price is artifical. The reason this is such high risk investing is because short selling can result in losing far more than a 100% of investment because you have to buy the shares you borrowed
Hedge funds sold stock they didn't own at the current market price with the promise to buy it later thinking the price would be lower. They promised to sell more stock than actually exists for gamestop, small time investors noticed and started to buy up the stock at current market prices. Because the hedgefund is obligated to buy all of the stock at whatever price the stock has become essentially priceless.
This is not the “eli5” version. Ya gotta dumb it down further for us lol
Short selling means you sell stocks you don't have, with the promise of buying them later, with a hard deadline.
If the stock goes down, you will end up buying them later, cheaper, than you "sold" them right now.
But if the share price rise, you HAVE to buy them at a higher price.
Because GameStop was expected it to go bankrupt (and share price go to zero, essentially), some investing companies have shorted a lot of their stock. (Sold stock they didn't have, expecting to buy them later at 0$, and keeping the difference.)
But now a shitload of people (or something) bought actual stock at 8ish$, making the stock go UP a shitload to 300+$
This means the people who sold a shitload (shorted) at 8$, will be stuck, this friday, buying it at 300$+. Since they probably sold thousands of share, they'll have to pay thousands times 300$ to buy them back, and they HAVE to.
So, they're going bankrupt themselves.
Ah, thank you. I’m smart now
You explained this very well. Now most people should understand what is going on.
Imagine being in the room when the genius who came up with that burst in.
"I have an AWESOME idea!!! You can sell stocks...get ready for it...that you don't even own!!!"
BRILLIANT!!!!!
Well, I mean, IF the market is shrinking, and IF the market is responding only to actual market change, and IF some people want to buy carrots, and you don't have carrots, and you go "I'll get you carrots tomorrow, they're 20$, as you can see by the current price" and the next day you go buy them, and the price dropped to 10$, and you get to keep the difference ... then yeah, it can work.
IF you are certain the market is going down.
If you're actually betting in a market where the value can be manipulated, and you lose, and then complain that the people doing the manipulations aren't your people, so it's unfair ... well, then, they can go suck a fuck, they knew what they were getting into, they're professionals, no? ;-)
Besides, don't they have insurance for these kinds of thing? If they wanted to do something risky, without insurance, well, that's on them.
This made me laugh, but now I want to cry because someone actually did this in real life.
Watch "Trading Places" with Eddie Murphy. This is exactly what they did to the Dukes.
Fuck me. I just watched this at new years ( a tradition) and for the first time i understand what happened at the end....
Thanks for tying a bow on that for me.
I didn't understand it for years, either, but once I started educating myself on how markets work, especially commodities, it made sense.
Great movie. They don’t make them like that anymore. 😞
Landis had a hell of a run, from Animal House to Beverly Hills cop. Then he fell off the cliff with Blues Brothers 2000, and just never got back to that level.
Basically Trading Places? Eddie Murphy movie?
What do you not understand? Shorting?
Hedge funds bet on the company dying, autists bet on it staying alive and kept ot alive.
Autists make money, hedge funds lose money.
Autists don't care if the company lives or dies (it's dying, the internet killed them), they're just saying they can stay retarded longer than the hedge funds can stay in the game. Literal quote from them.
wallstreetbets?
Yes. I understand /biz on 4chan is involved, too.
“We can remain retarded longer than they can remain solvent!” - WSB
Thanks fren
Well, it’s also like watching the media prop up Biden, only I hope the autists get out before they lose everything. The media wasn’t so fortunate.
Then hedge funds send in their goons to regulate, erm i mean protect, the little guy from doing this again.
A bunch of autistic redditors are buying Gamestop stock at way inflated prices and it is messing with these hedge fund's shorts.
Is this like The Big Short in reverse?
Yes. Holding a stock has risks but no time limit.
Shorting is on a fuse. You can fuck the shorting contracts to death by stalling a stock from falling.
So essentially, Reddit Autists are kamikazeing their own money in order to screw over hedge funders.
What is a short?
Basically, you "borrow" a stock and sell it at the current price, with a promise to return the share later. Let's say you borrow a single share, and sell it for 8 dollars. You now have 8 dollars, but also a debt of 1 share. Later, if the stock falls to 5 dollars, you buy a share and return it to the person you borrowed it from (usually your broker). You sold your borrowed share for 8 dollars, but had to buy one for 5, so you profited 3 dollars. However, let's say the stock goes up to 10 instead. When the person that loaned you stock wants it back (usually to sell it themselves) you'll have to buy a share for 10 to give back to them, resulting in a loss of 2 dollars. It's a way to make money when a stock goes down, however, it's very risky as your potential loss is unlimited (because the higher the stock goes, the more money you lose). In the gamestop case, the hedge fund shorted it at 8 dollars, but it's currently sitting over 300. So, if the lender that gave them the shares was to act on the loan (which apparently will happen this Friday), then the hedge fund will take a loss of 292 dollars per share.
This is an awesome post for someone like me who is a complete 💩🧠 normie newb on the subject. Thanks for sharing.
So what does the person loaning their stock out to these hedge funds recieve in all this?
I am not a financial guy so I don't understand any of the complexities, but from my understanding it is like betting against a company you think will fail. Somehow when the companies stock prices fall these hedge funds make money. But when the prices go up especially so drastically in this case going up like 50x in price they lose billions of dollars. That is literally all I know about them, so if you want to know how they actually work you will have to research it yourself.
Merrill capital hedge fund short-selled GameStop stock (GME) by borrowing shares and selling them as they thought the price would drop below market when they had to buy the shares earning a profit. They are getting burned because these retail investors collectively drove the price of GME shares way above market price. This GME price is artifical. The reason this is such high risk investing is because short selling can result in losing far more than a 100% of investment because you have to buy the shares you borrowed
Hedge funds sold stock they didn't own at the current market price with the promise to buy it later thinking the price would be lower. They promised to sell more stock than actually exists for gamestop, small time investors noticed and started to buy up the stock at current market prices. Because the hedgefund is obligated to buy all of the stock at whatever price the stock has become essentially priceless.