Gamestop share trading issue, can some explain whats happening

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Forums › Finance and wealth management › Gamestop share trading issue, can some explain whats happening

1101

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#281211 5-Feb-2021 12:54

Can anyone explain , in simple terms the resent US gamestop stock trading incident .

I dont understand why it matters who buys shares and for how much, and why share speculators(?) are worried
what is “short sell”

how does this 'punish hedge funds' ?
Cheers

gzt

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#2648126 5-Feb-2021 13:03

I expect hedge funds are laughing all the way to the bank after this activity.

In practice short selling means making a bet that the price of a share will drop.

jonathan18

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#2648129 5-Feb-2021 13:05

@1101 - assume you've not come across this thread on the same topic?

https://www.geekzone.co.nz/forums.asp?forumid=191&topicid=281106

NotATurkey

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#2648154 5-Feb-2021 13:29

Yeah, best to stick to the existing Geekzone thread.

There will also be tons of explanations online that are better than mine, but I'll have a go at explaining it assuming no market knowledge....

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Firstly, "Shorting" is when you borrow shares from somebody to sell to someone else.
Afterwards,
If the price goes down you can buy the shares back cheaply to pay back your loan and pocket the difference.
If the price goes up you make a loss as you have to buy them back at a higher price.

A single share can be "shorted" (aka borrowed then sold) multiple times. For example, if a person that was sold a previously "shorted" share shorts it themselves.

With GME 140% of the shares had been shorted.
Other people saw this and brought and held shares themselves. This pushed the price up making the hedge-funds lose money. The hedge-funds still had to buy shares to pay back their loans and since there was more demand than supply the price got pushed up even more.

After a while the brokers (people you order shares from) got told they had to have more money ready to cover shares being brought. They couldn't do this, so they stopped people from buying more.
This was one of the things that helped bring the price crashing back down again.

michaelmurfy

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#2648155 5-Feb-2021 13:32

Please stick with the existing thread - https://www.geekzone.co.nz/forums.asp?forumid=191&topicid=281106

Michael Murphy | https://murfy.nz
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