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GreatGreen posted:As somebody who knows basically nothing about stocks... is it possible to short Gamestop now that the stocks are astronomically overvalued, the idea being they will almost certainly fall back hard because of what a poo poo company Gamestop is? It absolutely is, and in the abstract it's a great idea because there's no way Gamestop is actually worth 350-400 whatever it's going for now. But you risk being hit with the same type of short squeeze that got the hedge fund in trouble. Like, let's say we can guarantee the actual price is like 5 bucks and we know 100% won't stay above 300 dollars and buy in at that price. The question becomes how long does that drop actually take? And if the price jumps to 400 tomorrow before dropping, you better have 100 bucks per share to maintain your short, otherwise the brokerage will liquidate your shares and sell them at 400 to buyers and you owe 100 per share. But if you can maintain and the price drops back down to 50? You just made 250 per share. Especially when things are this volatile, the rule is "The market can stay irrational longer than you can stay solvent." It doesn't matter that you were right and the price drops down to five bucks, all the insanity that happens in between will bankrupt you. And while stocks can drop to zero they don't become negative so you "only" lose everything you put in. Stocks can go up infinitely so there's technically no ceiling to the amount of money you could lose when shorting. The price could go to 500, 800, 1000. threelemmings fucked around with this message at 06:09 on Jan 28, 2021 |
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Jan 28, 2021 06:03
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| # ¿ May 16, 2024 00:34 |
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