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The GameStop situation, what happened, why, and does it affect me?

While not many people were directly affected by this situation it did become clear that there is a big issue.

If you invest in stocks, you should understand what happened and why this can affect you. How can you protect yourself from this situation?

Was there a winner and was there a loser?

It is definitely a great David versus Goliath story. David is represented by the Redditors, the little guys, and Goliath is represented by the Hedge funds. 

To understand what happened, you should understand the difference between a long position and a short position. In simple terms, a long position is the regular situation where you buy stocks, hold them for some time, and then sell them. A short position reverses the order of buy and sell. They sell first and then buy later. 

I look at it as they are buying negative shares. Sounds weird, I agree.

When you buy something, you pay money for it. If I buy 100 shares at $50 a share I will need to pay $5,000. Imagine if I buy negative 100 shares (-100) then rather than paying $5,000, I will receive $5,000. Rather than owning 1,000 shares, I will owe 1,000 shares. Strange, yes.

The reason for holding a short position is that you believe the prices will drop. If the prices drop by $5 and I hold 100 shares, I lose $500 but if I hold – 100 shares, I gain $500. 

Find out more, how this works and what causes a short squeeze.

In brief, the Redditors caused the prices to increase by buying more of GameStop, this caused prices to rise for several days. This caused the short sellers to lose money and require them to exit their short positions, this, in turn, raised the price that much faster.

In the end, the short-sellers got beat by the Redditors. At least for the first round. What does this mean for the heavily shorted stock? All could be susceptible to a similar situation. 

In this book, you will learn:

  • How should your strategies be affected by this?
  • What is legal price manipulation?
  • When does it border on being illegal or unfair?
  • How to take advantage of this situation going forward.
  • What do you do if the prices drop instead of rising?

If you want to know how to adjust your strategies to benefit from this situation or ensure your strategies are not negatively affected, then get this book today.

Ready to learn how to protect your investment? Click “Buy Now”!

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