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Presumably the crash would occur after the GME price skyrockets and shorts (and then their brokers and clearing houses) go broke trying to close the short posit
by yreg 6y ago
Presumably the crash would occur after the GME price skyrockets and shorts (and then their brokers and clearing houses) go broke trying to close the short positions.
The insurance pays up if they buy your share.
Do you have another idea how it could end?
- SpicyLemonZest 6y agoIt could end by simply crashing without shorts going broke. There's not much reason to believe a larger short squeeze is forthcoming.
- yreg 6y agoWhy would that crash the entire stock market?
- SpicyLemonZest 6y agoThe theory I've seen is that there could be hidden systemic risks here. If GME tanks suddenly, there's some possibility that traders bailing out of their trades will take down Robinhood (who doesn't seem to be very healthy right now), and a major broker collapsing is never gonna be great for the market. I share your skepticism that it would actually happen this way, but it seems at least somewhat plausible.
- girvo 6y agoRobinhood are tiny on the brokerage stage. Important to retail, barely matter otherwise. That’s my understanding at least
- deleted 6y ago[deleted]
- SpicyLemonZest 6y agoThat seems consistent with what I've read recently. Good news.
- lwigo 6y agoIt's got nothing to do with Robinhood. If a hedge decides to cover the short so they don't have to admit defeat and go bankrupt, then the entire market goes down because they'll end up selling thousands of unrelated shares for their cover.
- SpicyLemonZest 6y agoYou've fallen victim to some common misinformation that's spreading. Multiple hedge funds have already been able to cover their shorts, and there's not much reason to believe this will change.
- lwigo 6y agoNot an endorsement but this was retweeted by Kai Ryssdal: https://twitter.com/TheStalwart/status/1355531873896824834 https://twitter.com/TheStalwart/status/1355531873896824834
- deleted 6y ago[deleted]