Soldato
Maybe short sellers shouldn't short more than the float of a stock then.
Trading the stockmarket (NO Referrals)
- Thread starter mcast123
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Soldato
Apart from shorting a company which is losing money won't crash the economy..
Big difference
Let's hope you don't have a comapny pension/S&SISA with funds then....
Soldato
I could see some pain for some investors that jumped into these shorted stocks. Buying them all the way up only for the company to cease trading and the stocks are frozen. I’m sure the institutional investors are getting ready to put short positions back on and make a killing on these.
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Folks. Sorry if this is a simplistic comment to make...
How is it that people who clumped together have managed to take the fight to multi billion dollar firms? How can average people have this biying power to drive the price up so much?
Also. Is this going to be a new trend going forward? If so it really raises the question about the volatility of this investment vehicle even further than it already is?
Again sorry for basic questions.
How is it that people who clumped together have managed to take the fight to multi billion dollar firms? How can average people have this biying power to drive the price up so much?
Also. Is this going to be a new trend going forward? If so it really raises the question about the volatility of this investment vehicle even further than it already is?
Again sorry for basic questions.
Soldato
Leverage is what gives it power, that as well as the huge amount of people jumping into it. Combine those two things and its a lot of force, they are like the CDO's which created the 08 crash.
Yes, i believe this will continue, its a trend, memestock investing.
Leveraging ? Achieve through spread betting? Is that how theyre achieving this?
I guess I'm stating the blindingly obvious but this really can screw with the livelihood of people who have been paying into their pensions/SIPS etc.
I'm no expert so I might be wrong. But from what I've seen happen... Basically the hedge fund either screwed up or took a massive risk and it was noticed, and taken advantage of, by hundreds/thousands (?) of small investors acting as one.
A hedge fund shorted Gamestop by more than 100% of the number of shares in the market (I've heard 120%, 124% and 140%). They do this by borrowing the shares and then selling them. They don't own them and have to pay a fee to do this. They never own them but they sold them. So at some point in the future they have to buy those shares back to return them. The longer they don#t then the more expensive it becomes for them. But they are betting that they will buy them back at a lower price than they bought them for and so will make a profit.
But this time it didn't work out like that. People on reddit noticed that more that 100% of the shares had been shorted (borrowed, sold and must be bought back again). They knew that the share price would actually rise because the hedge fund shorting them would have to buy them all back again and they had massively over sold them. So the people on reddit started buying them to make a profit. The price has now risen so much that it's becoming well known and more and more people have been buying them. At some point the price must fall again but no-one knows whether that will be tomorrow or another date in the future. A lot of people on reddit forum (r/wallstreetbets) are saying to hold the shares to avoid the price being pushed down by selling.
So on the one hand you've got one or more large hedge funds selling shares they don't own (which they must at some point buy back again) and on the other hand you've got thousands of individual investors rushing in to buy the shares knowing that the hedge fund must at some point buy them back at market value.
It's a risky strategy on both sides and I'm sure hedge funds won't just be waiting but actively using the volatility to make more money.
Soldato
Yea, options contracts with leverage. So someone put 5k into a options contract and its turned into 50k/100k/250k depending on the leverage. That combined with millions of people from r/wallstreetbets using them creates a behemoth.
Not particularly - I mean if they're invested in the stocks affected then they have the opportunity to sell at a profit or just leave them and they'll probably fall back down to the sort of price range they were in before fairly soon.
Perhaps some pension fund has allocated a small % to one of the hedge funds affected but that's an obvious risk.
If you're rich enough to invest in the affected hedge fund(s) directly then you're rich enough to take a hit if your fund blows up.
re: leverage - no not generally spreadbetting, it's mostly US retail traders and spreadbetting firms/bucket shops have been illegal in the US for about 100 years now.
Brokers offer leverage directly on US stocks, not massive amounts, say 4:1, you're borrowing money to buy stocks essentially, likewise if you short you borrow stocks and pay a fee to do that too.
The bigger impact perhaps (as mentioned above) is options, a call option is the right but not obligation to buy some stock at a given price (strike price) in the future - if a bunch of people buy options then the person selling them those options will tend to hedge using the underlying instrument... so this causes a bunch of market makers to buy the stock and send the price higher. Out of the money options are those where the strike price is higher than the current market price (so you're buying the right to buy at a higher price than you can currently buy now) these options are cheaper (and get cheaper as you move away from the current price) but if you've bought a bunch of these cheaply and the price moves up they become rather valuable and the person holding the other side of that trade needs to hedge more.... ergo buys more stock... and in doing so the price can go up further and so on... so when these "autists" have bought a **** ton of options at different strikes and the price goes up then the market makers need to buy more actual shares and the price goes up further... and better still the people with shorts see their positon go further and further against them and some of them need to close their position, which they do by.... erm buying more stock and sending the price even higher!
(edit typed UK when I meant US)
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Associate
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- 9 Aug 2020
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It's up 59 on the Dallas points quarter at the minute, burgen stock is up 6%
I invested 10k last year with burgen stock
I invested 10k last year with burgen stock
Soldato
Well they will be paying up to 30% now for borrowing the stock so whilst they could make a lot on shorting at $300 or whatever it is, they could also be running up huge borrowing fees.
Soldato
I get the reasoning behind the GME stock, why the fuss about NOK, BB, AMC etc?
Associate
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I'm learning about this, as this is something new to me.
My concern is that the hedge funds could play a dirty game (short ladder they call it?) and artificially bring the price down like we saw last Thursday. I'd imagine a lot of paper hands would sell seeing the price fall and the hedge funds can scoop in and buy up the shares. Couldn't they just do this several times so that the price never skyrockets, frustrating the retail investors?
Furthermore, it appears the short interest is still over 100%, but that could be people shorting at these $300-400 levels which would make sense?
Associate
Hi guys, what company, app or software are you using nowadays to trade shares? Also, can you buy/sell US shares hassle free or do you have to fill in some kind of form? Having badly missed my opportunity in the past with AMD shares I am thinking of giving it a go. Sorry if wrong thread.
I think people are trying to replicate the GME situation with these other stocks.
Soldato
it's ok for the rich to get richer, but as soon as someone on the street does the same is a disgusting attitude?