Posted on 02/01/2021 4:35:56 AM PST by NewJerseyJoe
Or a link that explains it. Thank you
Even after watching Trading Places for 30+ years, I still don't understand exactly what they were doing at the stock exchange. 🙁
Buy low. Sell high.
All the reddit boys and girls are really, really excited, after just having gotten a dollar bill under their My Pillow from the Tooth Fairy. Now they are wishing for a new silver pony. But sadly, they are going to find out that the Tooth Fairy only does dollar bills, and only once a year on their birthday.
I’m generally not a Ben Shapiro fan, but he lays it out pretty succinctly here:
https://www.youtube.com/watch?v=xszj1flDxl0
When you sell short you borrow stocks from a broker for a fee. You have to return those stocks within a month. You take those stocks that you BORROWED AND SELL THEM ON THE MARKET.
Let’s say they sell for $100 per share. You are BETTING THAT IN THAT MONTH they will drop to $50 per share. YOU BUY THEM BACK AT $50 per share and keep the $50 profit, RETURN THE STOCKS TO THE BROKER MINUS A FEE... You made $40 (just an estimate) per share.
The problem for the highly leveraged short sellers is that they MUST RETURN THE STOCK SO THEY HAVE TO BUY THE STOCK BACK AT THE END OF THE MONTH SO IF THE STOCK GOES UP... they are screwed.
Force the price of stock or commodity that is heavily sold “short” up in price.......
This price increase forces those who hold the “short” positions to buy the stock back as it rises to cover their short calls.....
The people who drove the stock price up, get a huge profit from the traditional “buy stock low and sell when it’s high”.....
The people with the short position lose...... and badly...
Silver is up this morning but only about 8.5%
Well.... You just couldn’t be more wrong. Sorry. These guys have made bank and they will make bank today in silver also.
Well.... You just couldn’t be more wrong. Sorry. These guys have made bank and they will make bank today in silver also.
Here’s a cookie now go play outside.
Normally, the way it works is that hedge fund managers make billions of dollars by gaming the system.
But this time, some very smart trolls in mom‘s basement gamed the system and hedge fund managers lost billions. You might see they GameStopped the system.
I liken it to good old-fashioned daytrading.
I’m confused about it too.
Leveraged short selling could disappear. The hobbits have hacked the system.
Lol
My, aren’t we being clever so early in the morning. I like it. I was going to reply to the OP....
“I could explain it to you but I don’t have enough crayons.”
Shorters basically borrow stocks from a broker for a fee promising to buy the stock and return it to the broker in a month or so.
Say hedge funder shorts gamestop at $10. He borrows the stock at $10 from the broker and promises to give it back at price in a month. He then sells it for $10 to someone else and pockets the money. In one month, he’s hoping that the sell will kill the stocks upward inertia so it will be $7 in a month. At that time he buys the stock to return it to the broker for $7, pays a .50 rental fee to the broker, and pockets 2.50 in profit.
Of course, he does this X 10,000,000 as a hedge funder, so if he pulls it off, he makes 2,500,000 in one trade and doesn’t even have to hold the stock.
NOW, the problem is in that final part. What if someone suddenly buys a s$-&load of stock, driving up the price after the month? Now the stock is $200 instead of $7 and he still has to return the stock to the broker. But now he OWES $200 per stock...for a loss of $190 X 10,000,000. He owes 1,900,000,000.
This is what happened, and wall street bets is actively searching for an stock being heavily shorted to run the price up to put the hurt on hedge fund shorts
Let me ask my wife’s boyfriend.
The problem is the brokerage house only pretends to have the stock in inventory to “loan” the short seller. It is fraud all the way around.
While others are about explaining GameStop and the silver market, maybe they could also explain cryptocurrency. I must admit I don’t fully understand it, but that doesn’t stop me from investing and making Mucho Dinero from it.
It’s like this. One group of predators thought they had spotted some easy prey. So at the right moment they stood up and shouted “YOU’RE DEAD!”. But another group of predators that the first group didn’t know about stood up and shouted “NO! YOU’RE DEAD!”, and then proceeded to beat the living snot out of the first group. Now the first group is running around wailing “No fair! It’s supposed to be out free market.” Meanwhile, the prey got away.
Several good explanations before I got to this. One footnote....people who do shorts, are high-risk gamblers and wouldn’t hesitate to risk their life savings on what they perceive as a great ‘bet’.
Go back to summer/fall of 1929 and Wall Street collapse approaching, with shorts going left and right. This short business is probably 50-percent of the trigger for the Wall Street collapse. Few historians talk about this era and the whole speculation deal of the 1920s.
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