Reddit /r/lifeprotips Sell Your Videos Instead of Uploading It

I rarely comment on current events, simply the GameStop Reddit grouping supporters versus hedge fund stock price wars story is only too juicy to not accept a bite, share my thoughts, and offer a few warnings for readers to heed. I'll do my best to give a fair summary the GameStop story here, but this story is changing by the infinitesimal. Allow'due south starting time start with a summary of "curt selling" as that is essential to agreement what is going on in this story.

What is Curt Selling?

"Short selling" is when an investor (speculative "trader" might be more appropriate hither) borrows shares of a stock from another investor for a pocket-size fee, unremarkably selling the stock immediately for whatever the current price is at that moment, so afterward ownership the stock back and returning the borrowed funds to the lender. The difference betwixt the purchase and sell prices is turn a profit if bought at a lower price (or, loss if bought at a higher toll). The bet being made by the trader is that the stock is overvalued, will turn down, and a profit volition exist made when shares are bought at a lower price.

For example, a stock sold at $20 per share and subsequently bought at $10 per share, would effect in a $10 per share profit. On the flip side, if the stock was sold at $20 per share and later bought at $40 per share, it would outcome in a $xx per share loss.

Whereas almost investors "invest" in stocks by purchasing and holding the assets, with the hope of the price going upward over time, Wall Street hedge funds ordinarily observe downtrodden businesses, then "short sell" their stocks to drive the cost down and brand a profit. In many cases, the hedge fund or large brusk seller is itself driving the price lower by short selling a large number of shares simply by the volume in which they are doing so, often paired with attacking the company in other ways. Information technology'south legal, and some would even argue that it's necessary for off-white stock market valuations, merely the downward toll manipulation can be self-fulfilling and ethically suspect when initiated by a big short seller, at best.

At that place'due south risk in this trading strategy, however. In aggregate, stocks historically become upwardly, not down, over time. And a stock going upwardly in value for a brusk seller can issue in massive losses for that brusque seller. Information technology's even bankrupted a few hedge funds that couldn't cover their losses.

Frank Costanza: too burned, when he stopped short

GameStop Reddit Investors Versus the Hedge Funds: A Summary

Stock prices naturally going upwardly over time is a short-sellers worst fear. Stock prices going up due to artificial price manipulation is their worst nightmare. That's where the investors in the ~4.ix million member Reddit r/wallstreetbets group enter this story.

As the story goes, the members of this Reddit group decided to take on the hedge fund brusk sellers of a few downtrodden, but dearest brands. GameStop (Ticker: GME) has received almost of the press, but other brands that they take rallied behind include AMC Theaters (AMC), BlackBerry (BB), Bed Bath & Across (BBBY), Tootsie Roll (TR), Koss (KOSS), Trivago (TRVG), Nokia (NOK), and Express (EXPR).

Everyday retail investors in the Reddit group have essentially poured money into stock purchases and options (often through the Robinhood App) to overwhelm the hedge fund short sellers, with large cost spikes creating a "brusk squeeze" on the short sellers, who were forced to cover their short positions for substantial losses (normally done by selling other stocks they had profitable positions in, or borrowing funds), which drove the prices up fifty-fifty further.

Equally a result of the price manipulation (and yes, it is an artificial cost manipulation), shares of these stocks have skyrocketed. GameStop's marketplace value increased to over $24 billion from $2 billion in only days! GameStop shares rose over ane,700% since December. Other stocks have seen similar hyped-up, manipulated gains as well. And Melvin Capital, the hedge fund that had the massive short position against GameStop closed out its position in the stock, losing billions.

If the story ends there, it'southward a fun, heart-warming, David versus evil Wall Street hedge fund Goliath story. Of class, it doesn't.

GameStop and other stocks have bounced up and down wildly, and Robinhood and Interactive Brokers, at to the lowest degree temporarily, shut downwards the ability to buy (but not sell) GameStop, AMC, and a number of similarly traded stocks on their apps. This movement resulted in the threat of a class activeness lawsuit from wallstreetbets investors (and subsequent small walk-back from Robinhood). And more than than a few prominent politicians on both sides of the aisle have weighed in…

Fully agree. 👇 https://t.co/rW38zfLYGh

— Ted Cruz (@tedcruz) January 28, 2021

I am happy to work with Republicans on this upshot where there's common basis, merely you lot almost had me murdered 3 weeks ago so yous can sit this one out.

Happy to work west/ most whatsoever other GOP that aren't trying to get me killed.

In the meantime if y'all want to aid, you lot tin can resign. https://t.co/4mVREbaqqm

— Alexandria Ocasio-Cortez (@AOC) January 28, 2021

Where does this story go next? I will tell you.

My Thoughts on the Reddit Wall Street Bets GameStop Story (with a Warning to Readers)

I'm not shedding whatever tears for hedge fund managers or their investors, just I am against manipulative toll speculation whether it comes from the powerful hedge fund titans of Wall Street artificially driving a stock's cost downwards or a group of rebels on Reddit artificially driving a stock's price to absurd levels. It's ii different groups playing the same toll manipulation game. And while it's kind of fun to see hedge fund managers get squeezed, in that location are going to be thousands, maybe millions of small retail investors who get caught up in the hype and lose a lot of money on this type of artificial sugar-high trading.

This really isn't all that different than "pump-and-dump" schemes that are illegal and come with heavy fines. Pump-and-dump is when a shady actor buys a big position in a tiny stock, hypes the stock to a large number of people (commonly with misleading data and claims), then sells the stock for a massive turn a profit equally the price artificially increases, while those who piled in to the stock late get burned as reality sets in and the stock declines to previous valuations.

Make no error, while the players are unlike, the same result will happen hither with GameStop and with just nearly every other stock that is hyped on r/wallstreetbets (or anywhere else). The few who are first to arrive will make a lot of coin (if they sell at the exact right moment), and everyone else who entered tardily will lose a lot of money. In fact, many of the stocks highlighted on r/wallstreetbets have already between 50 and 100% of their recent gains in just the concluding few days.

Bottom line: don't participate in this or any speculative stock trading. Sure, you could make a lot of money if you lot fourth dimension it just perfectly, but the odds are fifty-fifty more probable that you will lose a ton of money every bit the stock comes back down to earth. It's glorified gambling, and the house odds are against you lot. The fact that the gambling happens through a trading app instead of a dealer at a casino table doesn't make it any more legitimate or likely to event in winnings. Passive investing over long periods of time is still the merely consistent winner for most retail investors. My hope is that this story highlights the need for Wall Street reform that prevents both small groups of large players and large groups of minor players artificially driving stock prices up or down.

wilsonjuspencesses.blogspot.com

Source: https://20somethingfinance.com/short-selling-gamestop-reddit-wallstreetbets/

Share this post