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The Complete Moron’s Guide to GameStop’s Stock Roller Coaster
The Complete Moron’s Guide to GameStop’s Stock Roller Coaster:
Last week, an epic short squeeze had driven GameStop stock up to $40 a share, a roughly 1,500 percent increase from its low point nine months ago. Little did anyone know at the time that this would only be the beginning of the story.
As I write this, GameStop's stock price is hovering around $350, up another 775 percent or so since I wrote about this situation eight days ago. By the time you read this, that number may be horribly outdated, as the stock continues to bounce up and down with extreme volatility hour by hour (it dipped down as low as $61 and peaked as high as $159 on Friday).
The current stock price now gives the company a market cap of about $26 billion.
On the surface, that means the market currently thinks GameStop is worth more than twice as much now (during a potentially existential threat to brick and mortar game sales) as it was during the height of the Wii boom in late 2007, when console game downloads were barely a thing.
Also at: Business Insider.
Melvin Capital, Hedge Fund Targeted by Reddit Board, Closes out of GameStop Short Position
Melvin Capital, hedge fund targeted by Reddit board, closes out of GameStop short position:
Melvin Capital closed out its short position in GameStop on Tuesday afternoon after taking a huge loss, the hedge fund's manager told CNBC's Andrew Ross Sorkin.
GameStop, hedge funds' most-hated stock, was targeted by an army of retail investors who marshaled forces against short sellers in online chat rooms. In the Reddit forum "wallstreetbets" with more than 2 million subscribers, rookie investors encouraged each other to pile into GameStop's shares and call options, creating massive short squeezes in the stock.
CNBC could not confirm the amount of losses Melvin Capital took on the short position. Citadel and Point72 have infused close to $3 billion into Gabe Plotkin's hedge fund to shore up its finances. On Wednesday's "Squawk Box," Sorkin said Plotkin told him that speculation about a bankruptcy filing is false.
GameStop shares have soared more than 400% this week alone to $347.51 apiece, driving its January gains to 685%. The stock was worth just $6 four months ago.
Reddit's WallStreetBets is locked as AMC, GameStop stocks fall after-hours
For the past week, Reddit's WallStreetBets community has been the center of an epic war between large Wall Street investors and small scale social media betters. Now, it's been locked, and spooked investors appear to be dumping their shares.
Shares of GameStop and AMC dropped dramatically in after-hours trading shortly after Reddit's community was made only viewable through an invite.
See also: Reddit traders cause Wall Street havoc by buying GameStop
GameStop and Elon Musk send Reddit and Robinhood to the top of the App Store charts
'Dumb Money' Is on GameStop, and It's Beating Wall Street at Its Own Game (archive)
(Score: 4, Informative) by stretch611 on Thursday January 28 2021, @11:43AM (2 children)
Actually, there is another way to make money... with stock options. https://www.theoptionsguide.com/stock-option.aspx [theoptionsguide.com]
Basically options are a contract/agreement that allow me to buy or sell stock at a certain price up to a certain date.
A "call option" allows me the opportunity to buy a stock at a certain price by a certain date. e.g. I can buy a call option contract to buy 100 shares of gamestop at $100 by April 13th. (option contracts are always for multiples of 100 shares) If at any time between now and April 13th, the price goes above $100 I can exercise the option and buy those shares. (and usually immediately sell them as well at the current price) So if the price is $120 and I exercise my option at $100 I make $20/share or $2000 based on 1 option contract of 100 shares. If the price never goes above $100 (or if it does and I do not exercise the option hoping to wait for it to go up more) on April 13th the contract expires and I can no longer buy the stock for $100.
It costs money to buy an option contract. The longer the window of time before the contract expires costs more money. increased volatility also increases the cost of options. Also, obviously, options that are currently profitable cost more than options that are currently unprofitable. If you fail to exercise an option and it expires, you lose your entire investment.
Put options are similar, but reversed... A put option gives you a contract to sell shares at a specific price and you make money when the stock is worth less than the contracted sell price.
Buying options in general is cheaper than buying the stocks themselves... but there is a greater chance to lose all the money you put into them.
You can also make money selling option contracts. If you have the shares already in your account these are covered option... If you do not have the shares in your account you sell naked contracts. Naked contracts are quite risky and there is no limit to the amount of money you can lose with them. (e.g. if you sold someone options to buy 100 shares of gamestop at $100, and they exercised ot the day it was $400, you would have to pay $40,000 to buy shares only to get $10,000 from the person you sold the contract to.)
Options add more ways to make and lose money in the stock market... but if you barely know the basics of stocks, you are better off staying away from options.
Now with 5 covid vaccine shots/boosters altering my DNA :P
(Score: 0) by Anonymous Coward on Friday January 29 2021, @12:49AM
You can also bet on volatility. There is the straddle strategy. I don't do options but it seems relatively straight forward (you can google it. You need a minimum amount of volatility in either direction by a given time for you to make money).
(Score: 0) by Anonymous Coward on Friday January 29 2021, @12:54AM
What's even riskier than shorting is selling naked puts or naked calls. One thing you can do, and I've considered doing this, is selling covered calls.