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Waltzing Along posted:One thing I am a bit confused about is why the stock got so high. I mean, doesn't someone have to buy it for the price to go up? Who is doing the buying when it is already super high? When you short a stock, you say "hey, this stock is worth $100 now, but I think that tomorrow it will be worth $90. You have 100 of these shares. I want to borrow them from you and sell them today. Then tomorrow, I'll buy them back for $1000 worth of profit. Then I will give you back the shares and some money, and I will keep the rest of the money." Lots of very rich people shorted lots of GME stock. In fact, they shorted more GME stock than actually existed, which is something that can happen when a short seller gets shares from another short seller who got them from someone else. So the people buying it are the short sellers who promised to buy it back after selling it, with the hopes of buying it for less than they sold it for. However, they're on the hook to buy it back regardless of what actually happens to the price. If the price goes up, the short seller takes a bath because they have to buy the shares back at the higher price to make good on their promise to the person they got the stock from originally. That's where the demand is coming from. The short sellers don't actually want GME stock that costs more than they sold it for previously, but they're already on the hook for it. EDIT: A funny consequence of the way this works is that the short sellers' losses aren't capped. When you buy a stock regularly, you make money when the value goes up and lose money when it goes down. Logically, the lowest the stock's value can go is $0, so the worst thing that can happen is you lose all the money that you invested. On the other hand, when you short a stock, you make money when the value goes down and lose money when the value goes up. That means you can lose a LOT more than what you put in if, you know, hypothetically, you shorted a stock at $15 and it rocketed up to $400. Ariong fucked around with this message at 21:26 on Jan 28, 2021 |
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Jan 28, 2021 21:21
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Acerbatus posted:They're kinda forced to, if my understanding is correct. All of that hinges on the notion that investing in Gamestop shares is a foolish meme investment. It’s not. There are also serious investment people in suits and ties who are invested in Gamestop, and who recommended that the people who follow them make the same investment.
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Jan 29, 2021 00:17
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Jan 29, 2021 23:21
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