Last week, the only thing that was on the news was GameStop, AMC, and Bed, Bath, and Beyond. It was like a wormhole of stock numbers and things that, until recently, I had no clue about. But I’m going to try to break it down for you.
To understand the world of stocks we need to understand the basic idea of them which is to earn money. Stocks in it of themselves are a gamble. You win some, you lose some. But overall, it is an investment, and it is all about timing. You would wait until the right moment, typically when the stock prices are on the lower side and you would keep an eye on what is trending in the stock market world. Eventually, you would see that a business that you support is growing, but before they get to be too expensive, you would pour some of your own finances into businesses by buying stocks. You watch them grow even more and you sell them back when you think they have grown as much as they can. That is how you would make money off of stocks.
Now, what the small community on Reddit is doing with GameStop and other smaller stocks is a riskier gamble than simply buying a stock. They are doing what is called “short selling.” What is short selling you might ask? Well, short selling is a common, but extremely controversial way of trading in financial markets. In simpler terms, it’s a legal way of cheating through the system to make money faster than everyone else.
A short seller would borrow shares from a broker (someone who buys and sells securities on a stock exchange on behalf of clients), then sell those shares on the market with a hope that the share prices decrease. This is very crucial. The prices MUST decrease or it’s game over. If they do fall, short sellers would buy back the shares and return them to the broker which would lead to a profit. However, if they see that the share prices rise, they lose more money than they could have made. So, again…it’s about timing.
What is happening with GameStop and other companies is quite fascinating to watch. WallStreetBets, the group that is conducting this recent rise in stocks, is doing exactly what all short sellers do, but they have more control over it. Some would say it is idiotic and cruel to do this to a business, while others would say that it is amazing—they are sticking it to the man. And of course, there are two sides to every story. This movement could be a stand against the system, taking the money out of the hands of the rich and into the hands of the little guys. Or this could be just a way to get more money in the pockets of those who played the game. Either way you want to see it, it’s quite marvelous to watch.
What are your thoughts on the recent stock market drama? Let us know down in the comments.
This article originally published on GREY Journal.