GameStop- Stock price

Seaside_Hawk

Seaside_Hawk

Well-known member
Anyone been following this story. A number of hedge funds are short selling the stock 130% crashing the price down to $4.
Some guys on a reddit forum found out and started spamming people to buy the stocks, then some big investors got involved including elon musk.

The stock this morning is worth $347

A couple of hedge funds will go bankrupt over this already losing billions.
 
Quite right too. Several brokers have suspended trading on this and AMC which has seen similar input.

When they manipulate prices it's called the financial market, when everyday plebs do it suddenly it's not allowed.

First of many instances of this, it just highlights how disadvantaged the retail investor is in these manipulated markets.
 
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Silver will be the next big short squeeze - many very very big players are enormously short on silver so we may well see a repeat but on a much larger scale.
 
And 12 months ago the shares were valued at just over $3. So what’s happened in the last 12 months to justify such an increase?

Absolutely nothing as far as I can tell. Still just a tired old company. Case of take your profit and run I’d think.
 
Trading halted on a whole host of stocks now on most platforms, including Robinhood which has obliterated its entire brand in one day.

It is, of course, owned by Citadel, one of the parties responsible for gobbling up positions in Melvin Capital due to the very short squeeze which they are now helping to put a stop to...
 
Unfortunately hedge funds can contain ordinary peoples’ investments as well as the uber-speculators. I hope not in this case. Also, I hope the little investors cash in before the bubble bursts. Or have cashed in by making the hedge fund close its short positions.
 
Bloodtangerine said:
I understand the logistics BUT I don’t understand the motivation of putting a hedge fund out if business....and more pertinently what the investors who buy and thus drive the price up get out of the deal?.....they could lose a lot of money
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Because they don't buy the stock at the current price, they buy it after they sell to mug punters, speculating it's less than they sold them for.

Wolf of Wall Street innit.
 
Lytham_fy8 said:
Because they don't buy the stock at the current price, they buy it after they sell to mug punters, speculating it's less than they sold them for.

Wolf of Wall Street innit.
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Sorry mate, don’t understand your reply, it’s too short (no pun) and says “they” twice which can always be confusing as I may think “they” are a different group to the “they” that you are referring to ......I am being genuine bye not having a joke
 
Actually, short selling involves borrowing a large number of shares from a large institution for a fee, then selling them in a huge tranche to drive down the price before buying them back within the agreed loan window (often less than two weeks) to return to the institution.

In this case, the plebs acted in cahoots, with many, many of them each buying small holdings to reverse the hedge fund’s share dumping and drive up the price in this time window. The hedge fund had to buy back the shares at a high price to close out their accelerating liability. Even so, they lost billions. The shares will fall back to their original price when demand drops; that demand being caused by the hedge fund’s huge forced purchase. And that forced purchase had to be from the small investors.

It’s t’interweb, with open info preventing the hedge fund hiding what they were hoping for and rapid communications mobilising the power of huge numbers of gaming geeks innit? A bit like the Tik-Tok kids wrecking The Donald’s rally by snapping up the tickets without ever intending to go.
 
Bloodtangerine said:
Sorry mate, don’t understand your reply, it’s too short (no pun) and says “they” twice which can always be confusing as I may think “they” are a different group to the “they” that you are referring to ......I am being genuine bye not having a joke
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Nah, they is the same they, unless you mean the redditors? They were buying en masses to push the price up, costs them little, costs the shorters loads.

Anyway, a bricks and mortar games shop hasn't got a chance these days. Everyone downloads.
 
I’m not sure I buy into this narrative of amateur investors v hedge funds. Sounds a bit too romantic; robbing from the rich etc; redistribution of wealth from Wall Street to clever tech savvy kids; and all that gubbins.

Certainly there are a lot of amateur investors along for the ride but I’d bet behind it there are some very rich disrupters finding a new way to make money from volatile markets and coordinating via encrypted systems. By encouraging retail investors they are bringing in additional financial muscle but more importantly are hiding their activities behind a wall of social media etc making the regulators job of preventing market manipulation almost impossible.

Don’t get me wrong. I’m not defending hedge funds or Wall Street in the slightest. Just hazarding a guess at what’s really going on.
 
Lytham_fy8 said:
Nah, they is the same they, unless you mean the redditors? They were buying en masses to push the price up, costs them little, costs the shorters loads.

Anyway, a bricks and mortar games shop hasn't got a chance these days. Everyone downloads.
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I do not understand how it costs them little to drive the price up. I am good at maths btw and worked for a bank for 27 years so I’m not acting daft...I am clearly missing the point ....currently watching 10pm news to suss it ...I will also research properly tomorrow 👍
 
Bloodtangerine said:
I do not understand how it costs them little to drive the price up. I am good at maths btw and worked for a bank for 27 years so I’m not acting daft...I am clearly missing the point ....currently watching 10pm news to suss it ...I will also research properly tomorrow 👍
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It's the amount bought, the price goes up and the shorters are duty bound to buy them regardless of actual worth.
 
Bloodtangerine said:
I do not understand how it costs them little to drive the price up. I am good at maths btw and worked for a bank for 27 years so I’m not acting daft...I am clearly missing the point ....currently watching 10pm news to suss it ...I will also research properly tomorrow 👍
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It’s to do with the price you pay for the the options. They are cheaper than the price of the shares.

You can have put or call option.

If you have a put option you have a right to sell the shares at a fixed price within a specified period. So if the shares are only worth £10 but your option allows you to sell shares at £50 you can make a £40 profit. So typically you’d want a put option if you thought the price was going to fall.

if you have a call option you have a right to buy shares at a fixed price within a specified period. So if the shares are worth £50 but your option allows you to buy them for £10 you can buy them, immediately sell them and pocket £40. You’d usually want a call option if you thought the share value was going to increase.

A few things to understand about options.

You’re buying the option and not the shares.

Options are cheaper than the shares. Imagine they only cost £1 per share but bring with them the ability to make the profit per share in the examples above.

The options themselves therefore acquire a value and can be bought and sold.

So you can acquire an option cheaply, with no intention of ever exercising it or having the wherewithal to do so, and potentially make huge profits. And it’s that potential that drives the underlying value of the shares.

None of which has anything to do with the fundamental value of the actual business.
 
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The big boys generally SELL the options - although retail investors like me do as well.

Selling an option can be a much safer way to make money as it can be made far less risky, particularly if you sell options on indexes rather than shares.

For example you can set up a credit spread on any US index and calculate the likelihood of the trade winning.

The credit spread is either or both the highest and/or lowest point you think the index will get too over the period of the trade (each credit spread is a different trade). Providing the market does not hit either line you win twice.

Think of it like this, the FTSE as I write is currently at 6426, if I think the FTSE will bounce around over the next few weeks at no lower than 6300 and no higher than 6600 I place two bets - one that FTSE will not go above 6600 and one that it will not go below 6300 - and providing the index stays in that corridor over the few weeks I win twice.

The bigger the gap the more chance I have of winning and you can mathematically predict the chance of it staying in that corridor. If you set the gap to big nobody will take you up though.

The extra beauty of this is most trading platforms allow you to use the SAME capital to place both trades, as in reality it can only hit one of the lines, although mathematically possible. If it did happen though you would owe the money for the second trade.

You can get around 70% (seventy) annual return on your at risk capital by doing this.

As you make money when you SELL the option, as long as the lines are not hit or crossed, your profit is the premium you originally charged for selling the option.

The software sets the premium which is driven by the market and what other traders are prepared to pay to tie you in if something happens.

Think of it like insurance, someone is paying you a premium to take the risk in case something else happens.

You become the bookie rather than the punter - and we all know who wins in the end 👍

PS if you want to know how to calculate everything, PM me and I will put you in touch with the people who educated me. The detail of it working is highly confidential and covered by IP which I will not break.
 
If regular people are the apes and the hedge fund people are the snakes.

Let's say 5 banana's currently cost $10. One ape on the market has 5 banana's. A snake asks to borrow 5 banana's for a bit and instead sells the 5 banana's thinking price will go down soon (shorting). He thinks he can buy them later for less and give them back to ape, so he make's profit on the difference.

Group of apes notice what stupid snakes are doing and decide to buy all banana's on the market until snakes have no other choice than to buy from the group of apes in order to return what they borrowed. If group of apes stay strong then price will go UP.
 
To re-iterate what some have already said, the hedge funds don't actually buy the shares, they borrow them in the hope to sell them on the market and then buy back at a lower price a few days later and pocket the difference. The mistake as I see it is that the hedge funds have become greedy and over exposed themselves on single stocks that they believed were sure to do badly during the pandemic - AMC is one which is a cinema chain. The percentage of total shares that had been short issued by hedge funds was massive, in some cases well over 50% of the total outstanding shares. Basically, a large group of reddit users spotted this and decided to buy millions of these shares. Eventually the hedge fund has to buy them back - because they were only borrowed from the broker. But the reddit users have collectively said no, you can buy them from us but only for £x per share. Result - share price soars because demand is far greater than supply, and the hedge fund loses billions and reddit users make a ton.

I suspect hedge funds all over the world are hurriedly changing their behaviour as we speak, as there is nothing illegal about what reddit users have done.
 
BFC_53 said:
To re-iterate what some have already said, the hedge funds don't actually buy the shares, they borrow them in the hope to sell them on the market and then buy back at a lower price a few days later and pocket the difference. The mistake as I see it is that the hedge funds have become greedy and over exposed themselves on single stocks that they believed were sure to do badly during the pandemic - AMC is one which is a cinema chain. The percentage of total shares that had been short issued by hedge funds was massive, in some cases well over 50% of the total outstanding shares. Basically, a large group of reddit users spotted this and decided to buy millions of these shares. Eventually the hedge fund has to buy them back - because they were only borrowed from the broker. But the reddit users have collectively said no, you can buy them from us but only for £x per share. Result - share price soars because demand is far greater than supply, and the hedge fund loses billions and reddit users make a ton.

I suspect hedge funds all over the world are hurriedly changing their behaviour as we speak, as there is nothing illegal about what reddit users have done.
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I think that’s right. A pure put option is just a right to sell shares - not an obligation. Thus exposure is limited to loss of the price you have paid for the option.

With these “let’s borrow and sell some shares and buy them back later” type derivatives then the risk for the option holder is much greater.
 
Mexboroseasider said:
I think that’s right. A pure put option is just a right to sell shares - not an obligation. Thus exposure is limited to loss of the price you have paid for the option.

With these “let’s borrow and sell some shares and buy them back later” type derivatives then the risk for the option holder is much greater.
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If you BUY a Call or a Put you have the right to buy or sell if the strike price is reached.

If you SELL a Call or a Put you are obligated to buy or sell if the strike price is reached i.e. you have no choice and the platform does the transaction if the person you sold it to uses their right to buy or sell.
 
seasideone said:
If you BUY a Call or a Put you have the right to buy or sell if the strike price is reached.

If you SELL a Call or a Put you are obligated to buy or sell if the strike price is reached i.e. you have no choice and the platform does the transaction if the person you sold it to uses their right to buy or sell.
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I see what you mean. I was only talking about the BUYER of the call or put option. They aren’t obligated to exercise the option but if they don’t they obviously lose the premium they paid for it. In effect you’ve capped your risk.

If you sell an option then you are required to buy or sell if the option is exercised by the buyer/holder of the option. Do retail investors get involved in that? Very risky indeed I’d have thought.
 
Mexboroseasider said:
I see what you mean. I was only talking about the BUYER of the call or put option. They aren’t obligated to exercise the option but if they don’t they obviously lose the premium they paid for it. In effect you’ve capped your risk.

If you sell an option then you are required to buy or sell if the option is exercised by the buyer/holder of the option. Do retail investors get involved in that? Very risky indeed I’d have thought.
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I sell options all the time and make very very good money out of it - as stated earlier in this thread.

When you sell options you become the bookie - and you see very few poor bookies 👍
 
Mexboroseasider said:
So I assume you control your risk via the strike price?
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Yes, the trade (strike price) should be as far away from the money as possible as you can get - while still making a decent premium AND managing the risk of the trade going wrong.

It’s just simple Maths and probability.
 
Archibald Knox said:
Actually, short selling involves borrowing a large number of shares from a large institution for a fee, then selling them in a huge tranche to drive down the price before buying them back within the agreed loan window (often less than two weeks) to return to the institution.

In this case, the plebs acted in cahoots, with many, many of them each buying small holdings to reverse the hedge fund’s share dumping and drive up the price in this time window. The hedge fund had to buy back the shares at a high price to close out their accelerating liability. Even so, they lost billions. The shares will fall back to their original price when demand drops; that demand being caused by the hedge fund’s huge forced purchase. And that forced purchase had to be from the small investors.

It’s t’interweb, with open info preventing the hedge fund hiding what they were hoping for and rapid communications mobilising the power of huge numbers of gaming geeks innit? A bit like the Tik-Tok kids wrecking The Donald’s rally by snapping up the tickets without ever intending to go.
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There is an added complication. GameStop only has 70 million issued shares. The hedge fund that started the shorting borrowed shares heavily and sold heavily, ca 30 million I believe. When they found the share price did not fall as they expected, they piled in again with another big short trade in the hopes of breaking the company. In the end, with other sales and triggered options, there were 71 million selling trades that had to be balanced by people buying. That is, more than the number of issued shares existing.

The problem was that about 20 million shares are held by directors etc, who are restricted from trading by insider trading rules. Another large batch is held by institutions who tend to hold for the long term. Which meant there were only about 20 million out of the total 70 million available as volatile and trading.

So the hedge fund shorters were chasing scarce commodities, which became even scarcer with the geeks piling in and buying up call options, which effectively gives the latter “rights to buy” in preference to the hedge fund’s desperate need to return the shares they had borrowed. Demand hugely outstripped supply and the price of shares and call options rose stratospherically. Far beyond any reality based upon GameStop’s financial performance or even future prospects. Basically, you could ask the price you wanted if you held shares or had options to do so.

What surprised me was that the hedge fund was so slow to understand and respond to what unfolded. These guys watch markets by the minute and second and yet were swamped before they could react. I suspect the geeks might have organised themselves to make a coordinated and tightly-timed assault on the market.

I think it shows how broken capitalism is under current stock exchange rules. It may be that shorting a stock will have to be made illegal. The hedge fund managers have just thrown away all the billions that investors had placed with them, in two throws of the dice. The big mistake was to double up after the first short failed to have the desired effect. For them, it was a “Black Swan” event.
 
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It's the crash of 2008, albeit on a smaller scale. The market is being rigged for the big hedge funds, at the expense of the individual (substitute hedge funds for banks)

The regulators on both sides of the Atlantic are taking an interest, the Stock markets in London and NY cannot afford to put investors off.
 
WaltonLeDaleTangerine said:
Did anyone get on this early?

Its taken a bit of a dip with RH forcing through sales.
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I suspect nobody on here got in at the take off stage.
Wouldn’t touch it with a barge pole now. Crazy wild swings all day.
There will be loads joining that forum and speculating on the next one - short sell target.
There’s been a few names thrown around.
If you’ve got all day and a spare load of cash, you could try and jump on the next one - and I guarantee there will be a next one - unless Wall Street find a way of shutting it down.

People could literally lose their houses betting on this, if not careful. I hope SS has his hedge funds in order.
 
Yes let’s hope this doesn’t FU Simon Sadler’s business model or we might all be crying into our tangerine tea mugs.

As I understand it as well, if silver is the next target I think that might leave JP Morgan bank on the hook? I hope we aren’t going to revisit a 2007/8 scenario?
I doubt we can withstand another shock to the system on top of that and Covid?
 
Scariest thing is they apparently shorted again yesterday after getting RH to suspend.

Frustratingly FreeTrade who I use had their FX and their bank restrict trade to US so my orders got cancelled today.

Which platforms would any of you recommend?
 
Nothing wrong with the odd short.
I have been waiting for the right opportunity to short Tesla stock.
They are overpriced for the small slice of car and battery manufacturing
They have been manipulated by the likes of Robin Hood group.
Even bored students have made a killing recently.
I shorted them at $860 and now on downward slope. I Hope!
 
I’m jumping off William Hill first thing. Done very well out of them since April. This suggested sports gambling advertising ban will likely impact price.
 
Ever since I first saw this thread it has fascinated me. I understand the basics, you buy a share at £ and over time the price goes up and down depending on how you feel and when you sell it decides if you make or lose £.
However this hedge fund thing and options really boggles me head. Am I right in thinking that hedge funders will pay a price to borrow some shares over a period of time to then be returned. Sell the shares for obviously at least double what they paid to borrow them (as I see it you need to sell x2 the price to make anything). Then buy them back at less than half you sold them for (again as I see it to make any money). Having borrowed, sold,now bought back, return shares to lender and pocket the money made?????.
However that being my understanding of it surely cannot be correct for blatantly obvious reasons, firstly being a big share holder you'll understand about hedge funds and know that if you agree to lend them your shares when they are returned will be worth far less than when you lent them out. Secondly how can you sell something you don't legally own?, if I borrow or lease a car I can't sell it to someone else.!. Thirdly why would you buy something for £5 then sell it for £2 a few days later?, (unless it was fucked and not fit for purpose in the 1st place) then surely you'd have some recompense!!!.
Just can't get me head around it all, sorry for such a long winded post, but as said "find the subject fascinating".
 
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