There’s a lot going on in the stock market this week and both and Reddit in general are inundated with questions about it. This is an opportunity to ask for explanations for concepts related to the stock market. All other questions related to the stock market will be removed and users directed here.
How does buying and selling stocks work?
What is short selling?
What is a short squeeze?
What is stock manipulation?
[What is a hedge fund?](https://www.reddit.com/r/explainlikeimfive/comments/l6ptb7/eli5_what_is_a_hedgefund/)
What other questions about the stock market do you have?
In this thread, top-level comments (direct replies to this topic) are allowed to be questions related to these topics as well as explanations. Remember to follow all other rules, and discussions unrelated to these topics will be removed.
**Please refrain as much as possible from speculating on recent and current events.** By all means, talk about what has happened, but this is not the place to talk about what will happen next, speculate about whether stocks will rise or fall, whether someone broke any particular law, and what the legal ramifications will be. Explanations should be restricted to an objective look at the mechanics behind the stock market.
EDIT: It should go without saying (but we’ll say it anyway) that any trading you do in stocks is at your own risk. **is not the appropriate place to ask for or provide advice on stock buy, selling, or trading.**
In: Economics
How did anyone know that over 100% of GME was shorted in the first place? Is this just public information?
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What is keeping a hedge fund that shorted GME from just waiting until this bubble pops? What is how does this short squeeze force the hedge funds to pay billions today if soon this will all be over?
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Is it legal for Robinhood to block trading of Gamestop stock?
Okay let me get this straight
I’m Wall Street and I
– borrowed a pillow, have to give it back on the 29
– sold the pillow for $100 thinking I can buy it back for $50 before the 29
– reddit bought the pillow I borrowed and now I can only buy it back at $3000
– tomorrow is the 29 and I don’t have $3000
– I’m screwed?
Does anyone know the first post that called for buying GameStop? Just curious for some historical perspective on how this all started.
Message I wrote for a friend explaining the situation:
on reddit, about 2 million people saw an exploit they could use in the stock market, the exploit was this:
as a hedge fund, (businesses with billions of dollars), their job is to short the market, (see if a stock is going to drop, then if they think it will, they bet on it and if it drops they make a ton of money, but if it goes up, they have to pay the dividends.) For example, if Tesla is at $500 per share (stock), they could bet it’s gonna drop to $400. If it does they make money, if not, let’s say it goes up to $600, and they bought 10 shares, they have to pay ~5,000 ish dollars, because they bought ten shares and it went up. Their job is to do the opposite of investors, so they try to bet the market will go down instead of up.
Anyways, people on r/wallstreetbets saw that hedge funds were betting that GME (gamestop) would short, (go down). So, they decided to get all 2 million people on that subreddit to join them in buying GME stocks. The idea is, if you buy a stock, the price goes up super slightly, and if millions of ppl buy a bunch of stocks, the price per stock will skyrocket.
So, WSB (r/wallstreetbets) did exactly this. GME was valued at $27 per share, and hedge funds began to bet that GME would short, so, WSB bough a TON of GME stocks, and forced the stock to skyrocket. GME hit $500 per share last night, meaning that multiple hedge funds had to pay BILLIONS of dollars.
All of this happening, and people are becoming millionaires everywhere. If you bough ONE share of GME at $27, and sold at the peak, ($500), you would’ve made ~$441 profit, but people bough hundreds of thousands of shares, so they made millions.
This means hedge funds went bankrupt. The rich people lost all their money, and the poor became rich. For the retards on snapchat, this is where the story ends, but there’s a lot more to it.
Super powerful people saw this, and didn’t like they were losing money, so, they got in bed with brokerages, and made them get rid of the “buy” option for GME and a couple other stocks. Meaning that they took away everyone’s power of their own money, just because they lost some of theirs. GME crashed today, but there was no volume behind it, meaning that nobody sold, so there is no reason it should’ve crashed. This means that somebody powerful manipulated the market and made it crash, which is EXTREMELY illegal.
So, WSB are the actual good guys here, and the government, along with many billionaires are in deep shit for removing the people’s freedom of finance and manipulation of the market, which basically means they toyed with peoples money.
Edit: I just want to clarify, I am in NO WAY an expert. Some of this may be inaccurate, this is just my take, and how I explained it to someone who didn’t even know what a stock was. Take it with a grain of salt.
Does the massive increase in stock price benefit GameStop, the actual company, in any way? Like they’ve obviously been struggling for a while, does this fiasco actually help them stay afloat, or is the health of a company completely disparate the price of its stock?
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