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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 spilt 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 spilt 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 | |||
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 now know this not to be quite so obviously 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 you have a billion dollars in cash margin and you put on a $5,000,000 short on GameStop at different prices. We have also estimated the point at which a billion dollar fund (fully into cash!) would run out of cash to post margin (this is the implied bust price): | 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 you have a billion dollars in cash margin and you put on a $5,000,000 short on GameStop at different prices. We have also estimated the point at which a billion dollar fund (fully into cash!) would run out of cash to post margin (this is the implied bust price): | ||