Anyone participating in the GameStop short squeeze?

-.-. --.- -.-. --.- -.-. --.- -.-. --.-
It only stands to reason that where there's sacrifice, there's someone collecting the sacrificial offerings. Where there's service, there is someone being served. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.

Ayn Rand

"He gains votes ever and anew by taking money from everybody and giving it to a few, while explaining that every penny was extracted from the few to be giving to the many."

Ogden Nash from his poem - The Politician

January 27, 2021, 08:16 PM

LS1 GTO

quote:
Originally posted by Lord Vaalic:
So... For the uneducated among us...

Who is actually paying you when the stock goes down? If it was $10 and you short it and it goes to $1, how do you get your $9? You still only have stock worth $1

You sell the stock for $1.00, buy it tomorrow at $0.90 and deliver it on. Friday.

Aeteocles can explain it in better detail but essentially it's the opposite of buy low, sell high, which is sell high, buy low.

In your example, you sell the $10 share for $9 then tomorrow buy it for $1. You just made $8.

January 27, 2021, 08:47 PM

car541

Shorting works like this:

You go out and set up a contract to sell shares at a fixed future price which is generally pretty close to the present price (the efficient market theorem and all).

You then fulfill the contract at the future date (call closing the position).

If the stock goes down, you win, because you can buy it for less then the fixed sale price at the commitment date

January 27, 2021, 09:05 PM

Aeteocles

quote:
Originally posted by Lord Vaalic:
So... For the uneducated among us...

Who is actually paying you when the stock goes down? If it was $10 and you short it and it goes to $1, how do you get your $9? You still only have stock worth $1

Edit: I'm describing a physical short, which is the basic way it's taught in high school econ. The post above me describes buying a put option, which is also another valid short strategy.

So, imagine 4 people. Shareholder, Broker, Short Seller, and Retail Trader.

There is an Acme Corp that is publicly traded. They make airbags. Their airbags, in recent news, have been causing injuries. Short Seller believes the share price will tank. He decides to create a "short position."

Short Seller goes to Broker and requests 1 share of Acme to hold short. Broker takes from Shareholder's account 1 share of Acme and loans it to Short Seller, and at the same time puts $1 into the Shareholder's account as interest for loaning out the share. Broker takes $2 from the Short Seller ($1 interest for the Shareholder, $1 fee for Broker's services). Short Seller agrees to return the share in 30 days.

Short Seller sells the Acme share on the open market to a Retail Trader (random person on Robinhood or Schwab). He sells it for $10. Short Seller now has $10 in his pocket, but no shares. His current profit is negative $2, because he paid fees and interest up front and owes the broker 1 share currently worth $10.

Two weeks later, Acme shares tumble to $5 on news of a class action lawsuit. Short Seller thinks the time is right to close his short position. Short Seller goes out onto the open market and buys a share for $5 from a Retail Trader. Retail Trader sells for the $5 because he wants to cut his losses. Short Seller now has 1 share and $5 remaining dollars.

Short Seller returns the share to the Brokerage, who then places it back into the Shareholder's account.

Brokerage has made $1 in fees as profit.

Shareholder now has 1 share, plus $1 in interest for loaning the share.

The Short Seller now has $5, and minus the $1 in fees and $1 in interest paid, has made a $3 profit on his short position.

The Retail Trader is down $5, having bought the share at $10 and sold it to the Short Seller for $5.

This message has been edited. Last edited by: Aeteocles,

January 27, 2021, 09:14 PM

Oat_Action_Man

quote:
Originally posted by bigeinkcmo:
I hope you guys feel better knowing it's all Trump's fault! LoL

What's particularly hilarious about that little tirade is that, just for example, my student who decided to blow her whole savings on this gamble is a virulent, rabid Trump hater. She even describes herself as a "raging liberal".

This has, apparently, nothing to do with Trump and everything to do with a viral internet strategy...which, perhaps ironically, is the epitome of populism.

January 27, 2021, 10:14 PM

1967Goat

quote:
Originally posted by Lord Vaalic:
So... For the uneducated among us...

Who is actually paying you when the stock goes down? If it was $10 and you short it and it goes to $1, how do you get your $9? You still only have stock worth $1

He who sells what isn't his-in, must buy it back or go to prison.

January 27, 2021, 10:49 PM

Lord Vaalic

Aeteocles,

Thank You, I was lost on how they actually made the money. I get it now, thanks for the explanation

January 27, 2021, 11:01 PM

jigray3

So what exactly is the potential illegal activity? Collusion? This would not be a classic definition. Market manipulation? That's a tough row to hoe. You'd have to prove fraud - deliberate untrue statements or omissions of fact to inflate the value of the stock.

It will not end well for those at the well too long. Pigs get fat, hogs get slaughtered.

January 27, 2021, 11:08 PM

parabellum

quote:
Originally posted by jigray3:
So what exactly is the potential illegal activity?

The attempted murder of the English language, at least in this thread, anyway.

January 27, 2021, 11:27 PM

heathtx

I have some GME, have watched it shoot up. I bought some $300 puts to protect my profit. The guy who sold the put MUST buy each share at $300 anytime (if it closes below $300) between now and Feb 19. So I don’t really care what it does, I locked in a good profit today.

The higher GME goes, the less that option costs, so if GME continues to climb I can ratchet up the strike price of the put...

January 28, 2021, 02:11 AM

Paten

I'll just keep my gambling on the Blackjack table. So far I'm up this week.

January 28, 2021, 06:25 AM

Aeteocles

GME into the 500's.

This is going to break the market. Regulators have no idea what to do.

Stocks are going to be on sale tomorrow probably.

January 28, 2021, 06:52 AM

Aeteocles

quote:
Originally posted by Paten:
I'll just keep my gambling on the Blackjack table. So far I'm up this week.

Up playing blackjack?

January 28, 2021, 07:07 AM

dewhorse

So a group of internet plebs (no disrespect intended) figured out a way to game the market.....kind like a major hedge fund coming out publicly saying they are shorting a stock?

hmmmmm

January 28, 2021, 08:14 AM

Lt CHEG

quote:
Originally posted by RAMIUS:
Tomorrow should be wild. Watching the army of investors growing on twitter is very cool. This guy seems to be leading the charge.

https://twitter.com/WSBChairman?s=20

I can’t believe that I actually agree with AOC on something.

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”