Stocks and Trading Thread - Channeling your inner Mono

[Threviel]

Yes, not that retard. What does OTM stand for?

[Threviel]

I do know what an option is, I'm an engineer, maths is not that hard. But I do not know the english economical lingo with all its acronyms.

[Habbaku]

"Out of The Money", IE options with a strike price (the price at which you are buying the right to purchase the stock) at a level above (or below in the case of puts) current price levels.

A fast and loose example is buying call options on a stock with a strike price at $10 while the stock's current price is, say, $2. That would be extra-deep OTM. It's highly unlikely to work, but is also typically very cheap, so if you ever actually exercise the option, you will make out like a bandit.

[Admiral Yi]

"Make out like a bandit" means you will make a lot of money.

[Threviel]

Aha, I was hoping for love under a star studded night sky with my ill-gotten gains shining in a corner of my den. 

Or seriously: Crikey, that shit sounds dangerous.

[Admiral Yi]

YOLO!

[Threviel]

It seems wallstreetbets strategy with AMC is to buy and hold. Shorters continuously shorting it and failing will presumably drive up the price. And it seems to be working so far.

This thing is going to pop like a balloon once it pops and AMC is going to end up being owned by some very poor redditors.

What is the flaw in my reasoning?

[Josquius]

The theory is when the short squeeze finally hits it shoots up to infinity ala volkswagon and there's enough demand from the shorters that it will stay at the top for long enough to get out.
How realistic this is.... I think a lot of the WSB are egging each other on to be diamond hands and never to sell with the full intent of selling themselves when they think it has peaked.

[Tamas]

I think a lot of the WSB are egging each other on to be diamond hands and never to sell with the full intent of selling themselves when they think it has peaked.

Indeed.

Best case scenario for the "hodlers" to AMC become like GME with violent and unexpected moves in both directions. But unlike Gamestop, AMC seems perfectly willing to use this to save themselves from financial ruin, and as I understand have been releasing new stock since the GME days and the last time only very recently. I can't see it not tanking eventually.

[Admiral Yi]

It seems wallstreetbets strategy with AMC is to buy and hold. Shorters continuously shorting it and failing will presumably drive up the price. And it seems to be working so far.

This thing is going to pop like a balloon once it pops and AMC is going to end up being owned by some very poor redditors.

What is the flaw in my reasoning?

There is no flaw in your reasoning.  You don't want to be the one holding the stock when the music ends.  You don't want to be the last guy at the party.

Well, your description of short sellers is a little off.  Short selling is not per se a strategy intended to lower the price.  It's a bet, much like an option, that the price will go lower on its own, typically because of weak fundamentals (i.e. earnings). 

[Threviel]

It seems wallstreetbets strategy with AMC is to buy and hold. Shorters continuously shorting it and failing will presumably drive up the price. And it seems to be working so far.

This thing is going to pop like a balloon once it pops and AMC is going to end up being owned by some very poor redditors.

What is the flaw in my reasoning?

There is no flaw in your reasoning.  You don't want to be the one holding the stock when the music ends.  You don't want to be the last guy at the party.

Well, your description of short sellers is a little off.  Short selling is not per se a strategy intended to lower the price.  It's a bet, much like an option, that the price will go lower on its own, typically because of weak fundamentals (i.e. earnings).

Short selling is, IIUC, lending stocks, selling them, wait for them to drop, buy back at lower price, return stocks, profit!
By failing I mean it not dropping and that they therefore have to buy them back at a loss thereby driving the value upwards if everone else is just holding. I do not mean short squeeze here.

[Admiral Yi]

Short selling is, IIUC, lending stocks, selling them, wait for them to drop, buy back at lower price, return stocks, profit!
By failing I mean it not dropping and that they therefore have to buy them back at a loss thereby driving the value upwards if everone else is just holding. I do not mean short squeeze here.

OK.  It's true short sellers fail when the price goes up.

But I don't get the last sentence.  The price going up is the definition of a short squeeze.

[Threviel]

As I understood the short squeeze on GME there was not enough stocks around to buy for the shorters, driving up the prices astronomically, they were squeezed. It was not a normal day-to-day event, it was something extraordinary.

[Admiral Yi]

As I understood the short squeeze on GME there was not enough stocks around to buy for the shorters, driving up the prices astronomically, they were squeezed. It was not a normal day-to-day event, it was something extraordinary.

GME was different in that 120% of the float had been shorted, but any time the price rises on a short seller that constitutes a short squeeze.

[Threviel]

Roger.