First of all thank you for taking the time to answer questions. My question is on GME and the time window I keep reading about. Why do the hedge funds need to cover in a certain time frame. I keep hearing things like a few days to a week. Why can't they just hold on until the RH traders get bored? What is the catalyst to force a cover of the short?
Contracts for option contracts ( derivatives are a security that derives its price from another security) expire on certain dates.
I have not looked to see the details of the ones I keep hearing about. But when they expire. It means someone is left holding the bag.
So you are forced to BUY 100 shares of the security at the price on the Option contract. Per contract.
You can. Recieve the shares. And the brokerage automatically takes the cash. Or puts you in Debt to pay it back HOLDING you OTHER SECURITIES hostage under "Margin" .
Or. You can double down and buy more options to cover your position and extend the shitty situation further into the future. Essentially buying more TIME VALUE .
This can go on for a very long time. It is a tug of war and both sides do not want to lose. Some already cut their losses.
So with options you can buy a contract and sell a contract at the same time.
There is many options strategies. Using puts , calls, shorts and longs
Watch a video on it. Its cool.
But I'm aware of 16 combinations of strategies using the 4 types. So they are locating the cheapest way to buy as much time as possible. Or face serious losses when they get "assigned" upon expiration at random because they are in the money for the holder of the other side of the contract .
So they can 1, get fucked. 2, choose to get fucked later. 3, government intervention (should never happen)
When you mix 2 options together you can lock in your position and not lose 1 dollar.
Straddle.
You can go Naked. That's one contract, where 1 side is exposed, no other side exists for hiding your bet (protection) . Because you have no underlying security , to give up when you lose,, the biggestbrisk is that your hopes the security goes down.. actually goes up to infinity, and you are super fucked and it can go to the moon.
The other would be your maximum loss is the security goes to Zero.
Similar to owning a stock
So this can go on for a long time if it needs to.
Remember if anyone is boring the loss would be interest.
Also with margin and the movement of the securities , you sometimes have to add money to make the broker happy, if you are using maximum leverage (margin)
Its super risky and happens fast
If you don't pay up. They physically Liquidate the positions they choose that are the most risky in your portfolio first without your concent.
Margin interest adds up fast, and faster if the security moves against you
First of all thank you for taking the time to answer questions. My question is on GME and the time window I keep reading about. Why do the hedge funds need to cover in a certain time frame. I keep hearing things like a few days to a week. Why can't they just hold on until the RH traders get bored? What is the catalyst to force a cover of the short?
Contracts for option contracts ( derivatives are a security that derives its price from another security) expire on certain dates.
I have not looked to see the details of the ones I keep hearing about. But when they expire. It means someone is left holding the bag.
So you are forced to BUY 100 shares of the security at the price on the Option contract. Per contract.
You can. Recieve the shares. And the brokerage automatically takes the cash. Or puts you in Debt to pay it back HOLDING you OTHER SECURITIES hostage under "Margin" .
Or. You can double down and buy more options to cover your position and extend the shitty situation further into the future. Essentially buying more TIME VALUE .
This can go on for a very long time. It is a tug of war and both sides do not want to lose. Some already cut their losses.
So with options you can buy a contract and sell a contract at the same time.
There is many options strategies. Using puts , calls, shorts and longs
Watch a video on it. Its cool.
But I'm aware of 16 combinations of strategies using the 4 types. So they are locating the cheapest way to buy as much time as possible. Or face serious losses when they get "assigned" upon expiration at random because they are in the money for the holder of the other side of the contract .
So they can 1, get fucked. 2, choose to get fucked later. 3, government intervention (should never happen)
When you mix 2 options together you can lock in your position and not lose 1 dollar.
Straddle.
You can go Naked. That's one contract, where 1 side is exposed, no other side exists for hiding your bet (protection) . Because you have no underlying security , to give up when you lose,, the biggestbrisk is that your hopes the security goes down.. actually goes up to infinity, and you are super fucked and it can go to the moon.
The other would be your maximum loss is the security goes to Zero.
Similar to owning a stock
So this can go on for a long time if it needs to.
Remember if anyone is boring the loss would be interest.
Also with margin and the movement of the securities , you sometimes have to add money to make the broker happy, if you are using maximum leverage (margin)
Its super risky and happens fast
If you don't pay up. They physically Liquidate the positions they choose that are the most risky in your portfolio first without your concent.
Margin interest adds up fast, and faster if the security moves against you
Thank you, that helps!