Yesterday i knew absolutely nothing about any of this shit, now I'm aimlessly looking for stuff on youtube to explain as much as possible, not necesarily in order to take part in it, although I'm definitively considering

  • PhaseFour [he/him]
    ·
    4 years ago

    Do you want to know about investing in general, or the specific tactic that we are using right now? The latter is easier to explain.

    • asABOVEsoBELOW [none/use name]
      ·
      4 years ago

      Primarily the latter. I understand what a short is, why people shorting can lose money, but that's about it.

      I also want to know more about investing in general, but it can wait, especially if this comunity sticks around after the dust settles

      • PhaseFour [he/him]
        ·
        4 years ago

        Okay, so what we are doing right now is called a "short squeeze." But to understand the squeeze, you need to understand the short option first.

        There are more options for trading on the stock market than just buying & selling. One of these options is called a short. A short is when you sell a stock, and enter into a contract to buy the stock back at a given date. This option is a good idea when you expect the value of a stock to go down.

        Here's an example:

        Let's say I enter into a short option on Blackberry today. I sell the stock at the market price of $25. I also enter into a contract to buy that stock back at the market price when the contract expires.

        Let's say that market price is at $20 when the contract expires. I have to buy back that stock for $20. I sold for $25 and bought it back for $20. That made me $5 in profit. That profit was made because the value of the stock went down.

        And if that stock goes up in price, I would lose money. If Blackberry was worth $30 when the contract expires, I would lose $5.

        The interesting thing about shorts is that there's no limit on the money one can lose on the option. If I just buy a stock, and the stock goes to $0, I only lose the money I spent on the stock. However, if enter into a short option at $25, and the stock goes up to $100,000 by the time the contract expires, I'm on the hook for the $100,000. That's where the short squeeze comes in.

        I'll explain the specifics of the GameStop short squeeze in a bit, I gotta go do dishes. Also, it seems comrades have dropped links with explanations. But feel free to ask me any questions while I'm gone!

        • asABOVEsoBELOW [none/use name]
          ·
          4 years ago

          in the case of gme, they haven't bought the stocks they need to buy yet, right ? And this is what is going to happen friday, which is going to drive the stock even further, is that corrrect?

          e: very good explanation btw, i think it's perfectly clear for me now

          • PhaseFour [he/him]
            ·
            4 years ago

            I'm glad the explanation helped.

            The GameStop situation is nuts. There are 1.4x more short options on GameStop than there are stocks. Conventional wisdom means these short sellers have to buy up every stock on the market, and then some. I literally have no idea how that happened, or how that will be resolved.

            But that means there will be a huge demand for GameStop stocks when those contracts expire, and that's why we are driving up the price.

            But the bourgeoisie are playing rough. I have no idea what they are capable of doing. So, if you choose to invest, only invest what you are willing to lose. This is a gamble.

      • CanYouFeelItMrKrabs [any, he/him]
        ·
        4 years ago

        simple version

        https://www.reddit.com/r/wallstreetbets/comments/l54jy8/short_squeeze_explained_for_dummies_us/

        normal version

        https://www.investopedia.com/terms/s/shortinterest.asp#:~:text=Stocks%20with%20an%20extreme%20level%20of%20short%20interest%2C,Stock%20exchanges%20measure%20and%20report%20on%20short%20interest