SHORTING GAMESTOP! What are the options?

steve the addict wrote:

Gamestop is all downhill from here. Only suckers will buy from here on out. It has reached its peak. You missed the boat. All downhill now. Some sheep will get sucked in and lose now. That is the point of the (stock market) game. Some win. Some lose.

There is a whole economic treatise on “devil takes the hindmost “ which is coming into play on the Game Stop situation right about now.

its easy wrote:

Buy a put and sell a call on the same strike in th same month and you are short the stock.

and if you have any idea what that even means, you aren't reading running messageboards for your investment advice.

its easy wrote:

Buy a put and sell a call on the same strike in th same month and you are short the stock.

How much does it cost to short the stock? The puts seem ridiculously expensive but say I’m willing to lose $5000 but want to do a traditional short.

If I sell shared tomorrow what will it cost me in interest? How do you figure that out?

Most brokers I know currently are restricting shorting Gamestop. Different brokerage firms have different costs. To short GameStop right now you would have to probably pay locate fees (since you don't own the stock you are borrowing someone's shares to sell for you to buy back later and that costs money). When shorting you also use margin and would have to pay the margin interest rate for each night you are short the stock.

let's talk investing wrote:

At some point the reality that a company has to actually be making money and have a path to Future profits and sustainability is going to kick in. And this bubble due to shorting and hyping against shorting is going to crash

This has nothing to do with the company's profitability.

The price is is a psychological battle between two investor groups.

Those who understand the mechanics of this battle and make the right guesses about who will fold first and when, can make a profit. Others who don't understand it will make a loss.

You clearly belong to "others" in that game.

Synthetic put as someone else said.

You could also sell ITM call spreads that you expect to be OTM at expiration, or buy bear put spreads. This will cap your potential losses, and if you understand why GME is behaving the way it is, you will see why that is a good thing.

That said, if your only experience with stocks is buying some ETFs, don't jump in this. Everybody knows the stock is coming back down eventually. You have no informational advantage. Funds are actively positioning themselves for the drop, which includes taking your money.

Plenty of money floating around the market, much of it easier to grab than trying to time the fall of GME.

the question is whether the squeeze is actually in. if not - that is the price.

in order to hate on hedge funds, reddit needs to hold together. the interesting bit is the stock is still overshorted - its only reduced by single figure percent supposedly. can reddit hold its nerve?

monday will be entertaining.

Market can stay irrational longer than you remain solvent.

You’re right. It’s irrational to be up 20 times in one month. So, if it’s gone up 20 times already, how do you know that it’ll only go down from here? It can easily double again. When GME closed like around $190 on Thursday, were you confident that it would shoot up again to over $300? I didn’t know. Neither did a lot of people so they didn’t buy at $190 and people who wanted to get into GME got stuck buying at over $300.

Do what you want bc it your money but with shorting, if you do it wrong, you could lose more than what you have. I saw an article of someone who had about $30k in their account and shorted a stock that went completely the opposite direction and ended up owing ETrade $100k and started a gofundme fundraiser. He only managed to raise like $5k with many people making fun of him.

Now there's an idea: get $5k on gofundme merely for some ridicule

let's talk investing wrote:

My basic point is that I guarantee the stock is going down over the next year. And I'm just asking for what are some ways to make money assuming this is true

At some point the reality that a company has to actually be making money and have a path to Future profits and sustainability is going to kick in. And this bubble due to shorting and hyping against shorting is going to crash

From what I'm learning making money is speculating against fluctuations. Anyway I don't think this is the same as apple or Tessler because while those companies might be overhyped and overvalued they have longevity and growth potential. I don't see how a brick-and-mortar video game outlet has the legs the same way that Tesla does

I basically agree with the consensus -and you- that the stock is headed way lower. But here are the problems with betting on it:

1. It might go a lot higher first. If you short the stock and it goes to, say, $1000, even briefly, your broker may liquidate your account and leave you penniless. This happened to a lot of people who felt as you do when it went from $5 to $40 in a matter of months. Then it went to $400 in two days. Shorts lost countless billions in two days.

2. If you buy options, you have to be right about how far it will fall AND how quickly. You have to be experienced to know how to hedge your bets, and you have a fairly small margin of error. Right now, it costs $220 to buy $320 strike puts that expire in April. So you have to risk $220 with a max gain of $100 --- if it is bankrupt in three months.

3. There is a small but real chance that it grows into a high valuation and few/any put-buyers or shorts make money. No, it will never be Tesla or Apple, but those are companies worth nearly 2 trillion dollars combined. GameStop's market cap is 1% of that.

The new board does plan to shift to an online strategy, and they can raise cash for free now to help them do that by floating more stock. Imagine if they sold $20 billion in stock while investors have a seemingly unlimited irrational desire to buy. How much is GameStop worth when it has $20 billion in cash on its balance sheet?

The Dirty Duck wrote:

The new board does plan to shift to an online strategy, and they can raise cash for free now to help them do that by floating more stock. Imagine if they sold $20 billion in stock while investors have a seemingly unlimited irrational desire to buy. How much is GameStop worth when it has $20 billion in cash on its balance sheet?

They can't raise 20 billion. You are beyond delusional if you think reditors (or even the hedge funds that are helping them out) have that type of cash. I wouldnot be shocked if they try and do a smaller offering to suck up some of this free money (and for every employee to be selling as much as they legally can) but all of that might happen well after the collapse.

Seriously if you were RoaringKitty sitting on like a 40 million gain, are you going to stand your ground and hope to get to 100million or are you liquidating as quickly as possible? Think of how many buyers you need to to bring in to buy 40 million dollars of stock if each only has like 10k.

It is also important to remember that there were some pretty unique situations that allowed this to happen. It is rare that a stock gets shorted by this much.

And finally this is the part that most people struggle with. When you buy or sell a stock, you are not betting on if the company will do well or poorly. You are betting on if the stock will do better or worse than what everyone else thinks the stock will do. I might like apple as a company. But if I think sales are going up by 10% while the market thinks sales are going up 20%, I should be selling since if sales only go up 10%, the stock will fall.

I figured someone would focus on the 20 billion hypothetical rather than my main point, which is that a skyrocketing stock can breathe life into a dying company.

The number doesn't really matter in this case, but it is noteworthy that more than $20 billion in GME has traded each of the last few days, on average.

The Dirty Duck wrote:

I figured someone would focus on the 20 billion hypothetical rather than my main point, which is that a skyrocketing stock can breathe life into a dying company.

The number doesn't really matter in this case, but it is noteworthy that more than $20 billion in GME has traded each of the last few days, on average.

They would be smart to do a secondary offering to bring in some cash. But at the same time that could cause the inflated price to collapse faster. right now the only thing keeping the price inflated is the short/long battle and introducing more shares is not in the interest of the buyers...they only want to squeeze the shorts. So who wants to buy shares in an overpriced company that's diluting its shares and adding more supply to the market?

They actually announced a stock sale in their last quarterly report. But it was tiny relative to their current market cap.

to the OP: If you're not already set up for shorting, it's unlikely you'll be able to do it during the next week. First, you'll need to apply for a margin account with Ameritrade. That would often take a few days, and right now probably longer given the situation. Second, if you want to buy puts, you'd need to apply for a margin account + options. Third, a lot of brokers are restricting trades like shorting GME right now; I'm pretty sure Ameritrade is one of them. Fourth, even if you could make the trade, you have to understand how margin and shorting work -- if the stock goes up in price, you have to be able to cover (some of) that paper loss with money in your account. Fifth, this is just a really bad idea unless you know what you're doing, and if you're asking how to make this trade on here, you don't know what you're doing.

Finally, shorting is never "investing." It's trading.

Great post. I've been wondering why this isn't just a transfer of money from one hedge fund to several others and this starts to explain it.

The Dirty Duck wrote:

I figured someone would focus on the 20 billion hypothetical rather than my main point, which is that a skyrocketing stock can breathe life into a dying company.

The number doesn't really matter in this case, but it is noteworthy that more than $20 billion in GME has traded each of the last few days, on average.

Can you give a single example of where it made a difference in a company like Gamestop? It isn't like they need cash to bring the product to market or anything. Why do you think 20 billion in trading volume has anything to do with the ability to get people to invest 20 billion in your company. Other than being numbers, they aren't really related as most of the trading volume is going to be HFT guys playing trends and owning the stock for like 1s. Especially with crazy bid/ask spreads. And practically the problem is getting the offering issued before the stock collapses.

I do wonder if Ryan Cohen has an exit plan. Same thing with any other member of the company with large holdings. It is a weird feeling to have some absurd numbers on your brokerage statements but limited ways to convert it to spendable money because of lockouts and your actions causing the market to move.

Was the "options" part of the title intentional or do you know?

Appreciate a lot of the responses!

So is the answer to my question, the simple fact that a brokerage house has to authorize someone to short a stock?

When you short a stock you're basically borrowing it against a future sale. Now isn't this all based on a brokerage house wanting to mitigate risk?

So the simple answer is that you won't be authorized to short the stock anymore

Anyway the stock went up 20 times in one month and there was no corresponding value actually being created by the company's so it's obviously not worth anywhere near it's price

But it seems like some of the basics are that brokerage houses make money off transactions and they also want to mitigate their risk

So by creating the concept of shorting they're accomplishing both of those goals. But they can also determine whether they will let you short a stock

And if someone else says it seems like they will not currently even let someone especially a new person without an established account start shorting this stock

I think electric cars, Battery Technology, and solar power are three great sectors to get into. Anyone have any pics of companies in those sectors?

What about Lordstown Motors? Symbol ride? GM just invested a lot, anyone familiar with their management team and Prospects?