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Stock-Age: Stocks, Options and Dividends oh my!
- Thread starter koam
- Start date
bigedole
Member
Why would shorting now be a bad idea? What's the typical length of a short contract? Like how far into the future do you have to wait before you need to buy the shares? If it's insanely high right now, shorting seems like a not so bad idea?
Buggy Loop
Gold Member
I’m not digging too deep in the put/short strategy, but since the float is so small, they are paying premium prices because it’s beyond 100% interest to short. Looking at put options right now, the ask price is insanely high even weeks from now with huge volatility. Being the highest shorted stock should already be a huge fucking red flag, there’s likely illegal naked shorts on top of that.
If hedge funds start to call it quits because they are bleeding, how will small short traders will have the force to hold out for long?
Anyway, I’m a bit new to all this, so maybe I just don’t understand or see the whole picture. But having a big spotlight on the high short interest on GME cannot be that good for short positions. They’re backed in a corner with not enough float to cover, not enough shares to go around.
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mckmas8808
Mckmaster uses MasterCard to buy Slave drives
How does someone make money if the "bet" that a stock a month from now will be $20 a share, instead of $80 a share? What's the upside for a short seller?
StreetsofBeige
Gold Member
Going "long" is the traditional way. Buy a stock for $100, hope it goes to $130. Make $30/share.
"Shorting" is the reverse. As weird as it sounds, you can sell first at $100, but at some point you have to buy it back. So you hope it drops to $80, and you make $20/share.
If you go long, the most you can lose is 100% of what you put in. The stock goes to $0.
Shorting can theoretically have infinite losses, because a stock can keep going up. Let's say you shorted 100 shares Amazon in 2002 at $20. That's $2000. It's now $3,000/share. You have to cover (rebuy it), you have to pony up $300,000.
Of course this is a dumb example. No bank or broker would allow a giant short position in the hole for 18 years. You'd get margin called at some point. But you get the idea.
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mckmas8808
Mckmaster uses MasterCard to buy Slave drives
GOOD GOD! Okay, so that's why Shorts have to buy stocks the traditional way (when the stock price goes up super fast) in order to cover their loses. Okay that makes sense. My next question is, who does the short borrow the money or stock from to sell it for $100 (in your example) in the first place? How do they get the ability to sell a stock that they don't "own" per say?
Dynasty8
Member
I just started investing a couple weeks ago. My money has been tied up into a savings account earning basically nothing. Any advise?
Please note that I am new to this. Thinking of investing somewhere around $90-$100k. Would it be smart to put most of that into the S&P500 and play around with $10-$20k?
Please note that I am new to this. Thinking of investing somewhere around $90-$100k. Would it be smart to put most of that into the S&P500 and play around with $10-$20k?
StreetsofBeige
Gold Member
The shorter is borrowing from the broker.
Ya, shorting can be wild. So that's why there's the term short squeeze. Shorters see the price rising fast and panic and have to buy back (cover).
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mckmas8808
Mckmaster uses MasterCard to buy Slave drives
Oh so that's why that one company late last week lost like $2.5 Billion. And now the Hedge Fund company is "infusing" capital back into their business.... How can some people think WSB are manipulating the market, when it looks like Hedge Fund Companies have ben getting a way with certain levels of manipulation for years?
I ask these questions because this story is making me want to be part of "the crowd". The crowd that's becoming a retail investor.
mckmas8808
Mckmaster uses MasterCard to buy Slave drives
So what does this say to you guys in Stock-Age? Does this mean he now "HAS" to buy GME stock at $115 in February, even if the stock is $55 a share that day? Or is he only forced to buy it "IF" the stock hits $115 a share sometime in February?
This guy was talking to the Founder of Reddit yesterday and now posted this today. He's the Owner of the Golden State Warriors and Chairman of Virgin Galactic.
This guy was talking to the Founder of Reddit yesterday and now posted this today. He's the Owner of the Golden State Warriors and Chairman of Virgin Galactic.
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Buggy Loop
Gold Member
It’s even worse than that, he does not even go into profit until stock price goes above 115$.
This is a very rich person’s gamble with friends and this is lunch money for him, in no way try to follow that. If his gamble pays off though, it’ll be a really fun story.
haxan7
Banned
it looks like the people that pumped GME have some strategy going to get it above $115 by Friday going by WSB, unless I'm understanding it wrong
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StreetsofBeige
Gold Member
Those are different. Call and Put options involve strike prices to be in the money. If the stock is on the losing end, they are worth $0 when the deadline hits.
mckmas8808
Mckmaster uses MasterCard to buy Slave drives
Wow! So what's the logistics of his call? So it looks like he bought 50,000 shares? Did he buy those shares for today's $85 a share? Or does the purchase only happen "once" it hits $115?
StreetsofBeige
Gold Member
Call and Put options are not bought at the current stock price, which GME is at $95 as I type. These kinds of risky investments have their own special price charts, where you buy contracts. Not shares.
Buggy Loop
Gold Member
Looking at call options now at 115$ In February (I don’t know which date he picked), it’s at roughly 25$ per option.
1 option is 100 shares
(25$ x 100)*50000= 125M$ ?
Roughly.
mad lad
Of it ever goes up, he’ll be filthy rich also with that bet. Options are the true YOLO.
edit: is it 50 or 50000? What kind of broker writes 50.000 for 50 contracts.
Anyway, if 50, 125k. Peanuts for him
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Buggy Loop
Gold Member
Holy shit, halt on 114$
Taxexemption
Member
This is different than shorting. He's buying a contract. For every contract he owns he can buy 100 shares at $115 at any time between now and the expiration date of the contract. He doesn't have to buy though, so his risk is limited to the amount he paid for the contracts. This is much less risky than shorting. The contract will increase in value as the price nears $115, and will start to increase much more if it goes over $115 a share. If the contract expires and at that time the stock is trading at under $115 a share he will lose the money he put in, and the option will expire worthless.
All of these contracts can be done with collateral, which has risk, but the risk is limited. It's stuff like these naked shorts where there is no collateral involved that are extremely risky, and in my opinion probably should not be legal (I have a bunch of unpopular economic opinions though so don't take me too seriously).
mckmas8808
Mckmaster uses MasterCard to buy Slave drives
Whoa! The premium is $25 per option? Crazy. So with this mad man.......lets say the price of GME hits $150 a share "BEFORE" February. Lets say it that this Friday........does that mean the Owner of the Golden State Warriors can opt to sell (or do a PUT) on those call option contracts early and net the difference if the stock runs up to $150 a share early?
mckmas8808
Mckmaster uses MasterCard to buy Slave drives
Thanks for the info. So lets say the stock hits $120 by the expiry date in February. Being that he has a call for 50,000 contracts (which is 100 shares per contract), that means he has to pay $125 Million total like
Buggy Loop
said right? But wouldn't that also mean that he would then own 5,000,000 shares of GME stock at $120 a share? Would that mean his shares would then be worth $600 Million? That'll net him $450 million! No way I have any of this right...........right?
Buggy Loop
Gold Member
I think it's 50 call options actually, i made the mistake (who the fuck writes 50.000)
I'm still learning about options myself honestly, did my first option call last week and i'm still not sure what are all my possibilities to manage it as of now. I let expire in the money, i exercise them, i sell them? Still looking into it.
1 call option on BB @ 17.5, paid 0.8$, 80$ total for the 100 shares. Now it has been oscillating at roughly 5.5~6.35$, which would be close to a 700% gain. Only 1 call to test the waters.
Worst thing that happens? I lose 80$. But it does not look like it's heading towards that.
Call options are fascinating. Relatively low risk (you can lose the premium if it expires out of the money), but crazy possible gains.
But, i don't recall which options are "don't touch" level, with barely any gains to make and unlimited loss potentials. I think it's selling calls, and buy puts? Peoples who do these options are fucking insane in my mind.
I'm still learning about options myself honestly, did my first option call last week and i'm still not sure what are all my possibilities to manage it as of now. I let expire in the money, i exercise them, i sell them? Still looking into it.
1 call option on BB @ 17.5, paid 0.8$, 80$ total for the 100 shares. Now it has been oscillating at roughly 5.5~6.35$, which would be close to a 700% gain. Only 1 call to test the waters.
Worst thing that happens? I lose 80$. But it does not look like it's heading towards that.
Call options are fascinating. Relatively low risk (you can lose the premium if it expires out of the money), but crazy possible gains.
But, i don't recall which options are "don't touch" level, with barely any gains to make and unlimited loss potentials. I think it's selling calls, and buy puts? Peoples who do these options are fucking insane in my mind.
Taxexemption
Member
Thanks for the info. So lets say the stock hits $120 by the expiry date in February. Being that he has a call for 50,000 contracts (which is 100 shares per contract), that means he has to pay $125 Million total like
No way I have any of this right...........right?
A couple of things. He doesn't have to buy the shares, he can just re-sell the contracts. If there is still time left on the contracts and people think it will keep going up, he may make more money selling the contracts than he would by exercising the contracts which would cause him to buy the shares at that price, and then selling the shares. However, the tendency is for the price of the option, if it's in the money (over 115 in this case) to mirror the price of the stock so that you make about the same amount of money either way. At that point whether you exercise the contract is just a question of whether or not you actually want to own the stock or just profit off of the movement in stock price.
As for your calculation maybe I'm doing it wrong but I think the net is more like 25 million minus the cost of the options. Basically the profit should be the difference between 120 and 115 or 5 dollars a share, times the number of shares. I'm getting a number closer to 25 million, still a lot of money.
Non-Americans tend to use . instead of , to separate thousands in numbers. Use of . to indicate a decimal point is as far as I know, an almost completely American phenomenon. I'm actually quite fortunate to have learned this in a foreign language class, as even in my accounting training I don't think this kind of information almost ever came up.
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Honey Bunny
Member
Starting to wonder if mckmas is one of those reddit users trying to drive the price up now.
Buggy Loop
Gold Member
Holy shit at GME’s curve currently, hovering at around 120$ but less and less dips overall, the curve since this morning is 
Taxexemption
Member
Selling calls is smart, unless you are selling them naked (no collateral). I have 100 shares of Ford, I sold a call at 10. I paid an average price of 6.84 for the shares. I want to sell the stock at 10. For selling that call I got a payment of 25 dollars. This was back when it was selling for a much lower price. If it's over 10 when it expires, most likely it will be exercised and all 100 of my shares will be sold at 10, which is what I wanted. If it's under 10 but still close to it, the call will expire worthless and I get to sell it again. Ideally the price of the stock would be around 9.50 when the contract expires as I could sell that call again with a new expiration date for probably over 100 dollars. Basically what I'm saying is some of the mechanics change if you actually own the stock and aren't just speculating speculating price movement.
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mckmas8808
Mckmaster uses MasterCard to buy Slave drives
Trust me.....I'm not. I'm trying to learn the game with the prospects of being a retail investors in a year or so. My sister in law does it and made $1,000 yesterday on GME stock alone.
SpartanN92
Banned
There are constant interest payments on those as well correct?
StreetsofBeige
Gold Member
Yes.
ManofOne
Plus Member
SpartanN92
Banned
I think you responded to the wrong person. I was asking about interest.Here, I drew it for you.
Is that a daily, weekly, yearly interest on borrowed shares?
HoodWinked
Member
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Taxexemption
Member
Pretty sure that's 50,000 contracts. In most places outside the US they use . to separate thousands and , for the decimal.
Number formatting in Europe vs. the U.S. – Language Editing
Read this post to understand how number formatting in Europe differs from that in the U.S. in terms of the decimal point vs. decimal comma and the thousands separator.
www.languageediting.com
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mckmas8808
Mckmaster uses MasterCard to buy Slave drives
YO! We just talked about this hours ago and he's ITM already. Is there a way to find out what his "today's" earnings are if it closes at $150?
HoodWinked
Member
ya
$150 x 50 x 100 - $115 x 50 x 100 = $175,000 - minus what he paid for the contracts
however. if its not 50 contracts but actually 50.000 = 50,000 then he makes way more
$150 x 50,000 x 100 - $115 x 50,000 x 100 = $175,000,000 - minus what he paid for the contracts
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StreetsofBeige
Gold Member
Wow. I thought the short ride might be over. It wasnt up that much for half the day.
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CrankyJay™
Member
I sort of feel bad for whomever I told to sell. What I should have said was sell small portions for each new level it rises to secure profit. But I couldn’t have imagined this shenanigans. Wow.
StreetsofBeige
Gold Member
Elon pumping it. So far +$10 after hours.
He probably wants GS to skyrocket to kill all the institutions shorting it. That's for all the analysts over the years telling him Tesla was junk and going bankrupt.
He probably wants GS to skyrocket to kill all the institutions shorting it. That's for all the analysts over the years telling him Tesla was junk and going bankrupt.
CrankyJay™
Member
$182 post market. Who in the hell is buying up here? lol
ManofOne
Plus Member
- Microsoft (NASDAQ:MSFT): FQ2 GAAP EPS of $2.03 beats by $0.39.
- Revenue of $43.08B (+16.7% Y/Y) beats by $2.85B. “Accelerating demand for our differentiated offerings drove commercial cloud revenue to $16.7 billion, up 34% year over year,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “We continue to benefit from our investments in strategic, high-growth areas.”
Imagine a company like MSFT hitting DOUBLE DIGIT GROWTH
CrankyJay™
Member
Pissed I didn’t grab the DKNG stock at $14 last year when I could.
ManofOne
Plus Member
DKNG could fall back to low 30's when I bought it. I have it at an average price of $31.87. It worth around $55 imo but with the gambling laws being allowed in NY, VIRGINA etc.
It could easily hit $70 ore more by end of year.