Reply to Gamestop

Forum Index » Money and Finances

Reply to "Gamestop"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous]Could some explain in simple terms what is happening here?  I've read several articles and at some point in each one I just end up lost.  I just invest in mutual funds, for the long term.  I'm not interested in trying to get in on this because I don't know enough to have a chance at making money.  I'm just curious what is going on.  I understand buying options is buying the right (but not the obligation) to buy stock at a certain price or on a certain date.  But from there I get lost.  Thank you to any kind soul willing to educate me a bit.[/quote]

Gamestop has been going up slowly over the past year.. A lot of people bought the stock and call options (right to buy) at very low prices hoping for a win at some point.  Along the way, some hedge funds started betting against the stock when it was &lt;$10 to about $20.  They do that by selling the stock without owning them (called shorting).  In order to do this, their brokerages will have to borrow those shares from another account (someone who owns it for the long term) and loan it to the short sellers.  The Short sellers pay interest.  How do they make money? By buying the stock at a lower price and &quot;returning&quot; it to the brokerage.

However, Gamestop announced recently that new members were being added to the board of directors (from a company called Chewy) and people found out that some hedge funds were shorting the stock.  The news started driving the stock up thanks to some traders on Reddit.  The short interest is also in excess of 100%.  Stock is now over $300!  The Short Sellers now have to pay $300 per share to buy it back and return it to the brokerage or continue paying interest.  If you shorted at $20, you take a $280 loss. As a result, there's huge buying pressure pushing the stock up.

Short sellers (Hedge funds and their enablers. i.e. mainstream financial media) are pissed and accusing the Reddit traders of market manipulation (which is what the hedge funds do all the time anyways..).. [/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics