So let’s say Company X goes on an epic run in February, and by February 15th, it’s up to $50 a share. This contract is usually cheaper than the share price. I feel confident in Company X, so I buy options that let me buy 100 shares of Company X stock for $25 a share on March 1st. Currently, shares of Company X are trading at $10. Let’s say my fake investing firm wants to buy a call option on Company X. If you are feeling confident in a stock, you can buy a call option - which lets you buy a stock at a specific price on a specific date. In addition to letting you buy and sell stock, you can easily buy an option for stock, instead of the stock itself. Some people will notice that kind of thing and think, Hm, this stock is prime for a short squeeze! Basically, because so many people are short, it may be possible to trigger a chain reaction where you buy enough stock to send the price up, forcing some shorts to cover, sending the price up further, forcing more shorts to cover, and so on.įor retail investors, this process has gotten easier and cheaper because of apps such as Robinhood.
“Short interest is 71.2 million shares, while GameStop has only 69.7 million shares outstanding,” Matt Levine of Bloomberg points out. Right now, more people are betting against GameStop than betting it will succeed.
This means some shorts will be forced to “cover,” or buy the stock back at a high price, which sends the price even higher.įor retail investors, this process has gotten easier and cheaper There are several other bad things that can also happen, such as an increase in fees or the original investor wanting their stock back. The thing about short selling, though, is that you lose money if the stock goes up, and your losses are potentially infinite if the stock keeps going up. This can make you a lot of money, especially if the company goes bankrupt and you don’t have to return the stock! Typically, this is done by short selling - a practice where you borrow shares for a fee and sell them for (ideally) a high price, then buy them back at (ideally) a lower price to return them. If you think GameStop will fail and the stock will go down, or even that the company will go bankrupt, there’s a way to make money on that. The idea was to punish short-sellers, and for the little guys to pummel Wall Street. For a while, the idea that r/WallStreetBets would take over GameStop was a joke - but then it turned serious, Bloomberg reported. There is a Reddit forum for this, r/WallStreetBets, which describes itself as being “like 4chan found a Bloomberg Terminal.” A year ago, a user called delaneydi argued that GameStop was underpriced by the market. GameStop’s business has been suffering as a result.Ĭurrently, many people are at home and bored, and consequently, interest in day trading has shot through the roof.
These days, you can just buy video games over the internet instead of going to a soul-killing strip mall in Iowa City to buy a physical copy of the game. GameStop, founded a year before Blockbuster, is part of a dwindling cohort of IRL businesses that are being starved by online marketplaces. The idea was to punish short-sellers, and for the little guys to pummel Wall Street
0 kommentar(er)
