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Gamestop trading

Gamestop trading

Old Jan 31st 2021, 10:36 pm
  #46  
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Default Re: Gamestop trading

Originally Posted by Scamp View Post
Honestly, you're as likely to win playing roulette when picking individual stocks.

Yes true. It's just always the hindsight but at the time of course it is pure gambling really since the future is not yet known, could go down and become worthless too. Not the risk taker so I wouldn't risk money gambling since I cannot afford to lose it. I see stock market in a similiar way to gambling, I can't risk losing anything, so I don't put any into it.

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Old Feb 1st 2021, 12:47 am
  #47  
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Default Re: Gamestop trading

Originally Posted by dave_j View Post
I think it goes like this.
You, a predatory hedge fund, identify a target stock, we'll call it Gamestop, whose price you suspect will be sensitive to share sales because it's not doing well.
You purchase an option to buy shares of this stock at a set price at any time from now until when the option expires. This option will cost you only a small fraction of the actual cost of a share and there's the attraction, for a small initial outlay you stand to make large sums if you can engineer a significant fall in share prices.
You then sell shares you do not have in the understandable belief that the act of selling will, if enough shares are sold, cause the share price to fall. It's self fulfilling supply and demand. If shares flood into the market then the price will fall until it attracts buyers.
Once the share price has fallen sufficiently then you exercise your option to buy and pocket the margin between the difference in price less the cost of the option.
Thus if you have sufficient capital or can assemble enough like minded sellers and you can 'short' enough of the stock by selling enough shares then the price must fall and you clean up...
Unless, that is, you attract the attention of those unwilling to allow the price to fall and have the resources to engineer a price increase. This can be achieved where enough buyers can be assembled to buy at the same time. Note that where enough buyers can be assembled none need be wealthy, there is enormous strength in numbers, and it's the existence of the web that allows this to happen.
When the share price rises then... remember those shares you sold that you didn't own? Well when judgement day comes around, as it inevitably does, you will need to buy back those shares at the new higher level, you must settle your trades by settlement day. It's a beautiful consequence of the market that you've exploited for so long that your inevitable need to buy will serve to increase the price still further increasing your losses.
This is what happened to Gamestop where it was reportedly shorted to the extent where in excess of 100% of all shares then existing had been sold by people who didn't own them.
And the little people who bought? Well some will make large sums, many will lose some, but the myth of being able to make large amounts of cash will ensure that, like the gold rush of old, new 'miners' will keep coming with new money.
That's almost it, you just have the terminology wrong.

It's elementary to limit the risk too, by buying the option to purchase stock at a price only a bit above where it was. But that costs money and the hedge funds are greedy

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Old Feb 1st 2021, 2:10 am
  #48  
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Default Re: Gamestop trading

Originally Posted by anotherlimey View Post
That's almost it, you just have the terminology wrong.
It's elementary to limit the risk too, by buying the option to purchase stock at a price only a bit above where it was. But that costs money and the hedge funds are greedy
I guess if this goes on long enough we'll have the terminology hammered into us.

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