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GameStop: Difference between revisions
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In which the experts in the market got properly schooled by a bunch of daytraders. Acres have been spilled on this elsewhere, but the JC’s own hot takes are these: | In which the experts in the market got properly schooled by a bunch of daytraders. Acres have been spilled on this elsewhere, but the JC’s own hot takes are these: | ||
* | *Firstly, everyone knows [[shorting]] gives you unlimited upside risk. But there is still this basic supposition that, okay, it’s ''theoretically'' unlimited, but ''practically''? — c’m''on''. There are rational bounds to which no stock can go. Well, we know that not to be the case. | ||
*Secondly, shorting a stock that is at the bottom of its range is a way more risky proposition than shorting a stock that is at the top. GameStop closed at $3.96 on 17 July last year. Imagine shorting a million shares then. Cost? $3,960,000. Maximum return? $3,960,000. Maximum loss, at peak Jan 28? 469,420,000. That’s the thick end of ''half a billion dollars.'' Now, consider the same investment | *Secondly, shorting a stock that is at the bottom of its range is a way more risky proposition than shorting a stock that is at the top. GameStop closed at $3.96 on 17 July last year. Imagine shorting a million shares then. Cost? $3,960,000. Maximum return? $3,960,000. Maximum loss, at peak Jan 28? 469,420,000. That’s the thick end of ''half a billion dollars.'' Now, consider the same investment at 36 | ||
*Practical limit to how far you can ride it: as far as you have cash on hand. The moment you have to raise new capital, you dilute your existing investors into oblivion | *Practical limit to how far you can ride it: as far as you have cash on hand. The moment you have to raise new capital, you dilute your existing investors into oblivion | ||