Kind: captions
Language: en
i'm not a trader but i follow a
subreddit on reddit called
wall street bets i hear that gamestop is
going to rise so i have a little saved
up i decide hey
i'm going to buy a stock call option
that's like buying 100 shares of a stock
on layaway you just need a fraction of
the amount of money it would take to
actually buy
100 shares the trading day is just
starting
i'm betting that the stock is going to
rise but suddenly
the website crashes the phone lines are
down
i can't get in touch with anyone and my
trades are not going through
so i forget about it i go along my day
make some coffee and then
i look back at the site somehow my
account is down
nine thousand dollars that's more than i
even had in it
investing in options is wildly dangerous
you can lose
an extremely large amount of money or be
down and position an extremely large
amount of money in a very short amount
of time
everyone loves the story of a little guy
taking on
the man which is why game stock story to
a peak stock value of 480 plus dollars
was
front page news for days it'll be
featured in forthcoming films and
even congress is taking a closer look at
the action but what's overlooked is the
tremendous amount of risk
retail investors small people like you
and i take on when entering into a
market with so much
volatility it's a story of math but it's
also one of merging technologies
before we talk about what's happened
let's go over to gamestop and see how
they're doing
game stop let's go
[Music]
so this is my local game stop and
apparently they closed just last month
and that isn't a one-off because in the
last two years they've closed more than
700 shops with more closures to come
gamestop's brick and mortar retail
business is in the dumpster
this company's once high-flying stock
was trading below
10 bucks a share for all of last year in
just a few weeks it had suddenly
doubled tripled went up 10 times in
price and it was still
going how was this possible ever since
the pandemic downturn in early 2020 the
stock market has done quite well
and millions of everyday traders new
traders have decided to take a turn of
rolling the dice
at the market and then a group of
redditors saw that there was enormous
interest in short selling certain stocks
by wall street hedge fund firms that
have
a lot of money shorting is a bet that a
stock will go
down these hedge funds were targeting
businesses in trouble
this includes stocks like amc theaters
bed bath and beyond and of course
gamestop that caused redditors to decide
to target the hedge funds
and it's still happening today wall
street bets is a community that's been
around for a little while and it's
always been
kind of an irreverent nihilistic
investment community where
people went for big gains and big losses
and strong positions
and hilarious memes and you would buy
stock if you thought a meme was super
great just because
i mean what did you have to lose this is
madison darbyshire she covers retail
investing trends for the financial times
reddit users are not a monolith but many
of them got together to coordinate
large purchases of the stock and hold
them this led to many who had short
positions who were betting that the
stocks would go down
to have to buy more to cover their bets
which forced more short sellers to get
out of their losing positions
by buying more it's hard to overstate
how high the interest of these stocks
got on the week of january 25th
the wall street bet subreddit grew by
millions of subscribers
my barber had stock options even my
therapist said that she bought gamestop
sebastian castillo is one of the people
who recently began trading again
hey everybody he plays the options on
the robin hood app for much
riskier form of trading the bet i made
for 600
is now worth seventy dollars an option
is a contract
that gives you the right to buy or sell
100 shares at the price you choose
that's called the strike price
for example if you buy a call option of
gamestop
at 100 it gives you the right to buy 100
shares at any time
between the moment you buy it and the
expiration date so the math works like
this
let's say the stock goes up to 105
you could exercise your option and the
person who sold it to you
would be forced to give you 100 shares
at 100
each so you've basically netted 500
in profit of course minus the price you
paid for the option
but the price goes down and ends below
your strike price of 100
let's say it goes to ninety five dollars
it's worthless you would never
exercise your option because you would
never pay a hundred dollars for
something valued at ninety five dollars
so you've lost all the money you paid
for the option in the first place
with options it's almost like stocks as
checkers and options is chess
so to recap if you're buying a call
betting that the stock price will go up
you can make money if the stock price
goes up beyond a certain amount
if it goes down you lose everything you
pay for the option and a funny side note
sebastian is actually a gamer and a
leader of a
nerdy game group i kind of have mixed
reviews about this place but i guess if
he needed to pick something up
same day in a hurry it would do so he
knew gamestop was worth
much less but that didn't stop him from
investing this is gamestop stock
it's trading at 330 dollars when i check
the wall street bets forum
and people are talking about buying in
and
holding it to go to the moon if that's
not the moon i don't know what is
330 dollars a share that's more than 33
times what i had been trading a month
earlier according to polling as many as
a quarter of americans bought these meme
stocks in january stocks that were being
heavily promoted on forums where app
trading was popular
during the game stock pandemonium there
are times when the live ticker kind of
froze
and uh even the trade button to buy or
sell it was unavailable
and that's when i knew things were
really getting out of control
when they couldn't even handle basic
transactions so many new investors had
entered the market at this time that
brokers just had trouble keeping up with
all the orders and that's what happened
to me at the beginning of this video
i put in a market order when the cost
was low but because the platform froze
the trade didn't go through immediately
it was filled much
later when the price had more than
tripled so
i was thinking i was buying one thing
when i was on the hook for more than ten
thousand dollars
so it seems a few things were going on
here first robin hood and others decided
to halt trading on the most popular
stocks in america
the sites just couldn't handle the load
of all of these users
which is known as um operational
resiliency is what they call the
abilities of the platforms to function
under times of extreme stress and all of
the investment platforms this year
have really struggled to maintain their
functionality all these brokerage
platforms have essentially been built
since the financial crisis 10 years ago
you couldn't buy stocks and shares on
your phone
it was like staring at a screen full of
numbers looked like a giant excel
spreadsheet it could be very
intimidating
the accessibility has really just
exploded it's become so much more easy
to understand
so much more easy to research new stocks
all these platforms have had tremendous
user growth in the last year so they
really
are struggling to adjust to the new
level of investment participation and
some brokers just simply didn't have
enough cash on hand to handle the amount
of trades that were happening on mass
robin hood had to go and raise a billion
dollars from investors
to wrap things up the risks are quite
high for your average investor
entering into the market for one stocks
are highly volatile
and these meme stocks who knows what
could happen to them these apps like
robin hood and weeble aren't always the
most reliable place to invest your money
long term
as for my personal story i waited a few
of the most stressful
hours of my life and eventually the game
stop
price did rise so i was able to break
even
but it wasn't a wise investment i came
away with a feeling like
the whole system was not meant to
protect users like me
because i had no control over the
situation by the time information
becomes widespread
everybody knows about it and you're not
going to get ahead of
the herd or the institutions that have
access to this information earlier
and are able to execute trades faster so
one of the things that surprised me the
most was how many people bought
shares and gamestop when it was above
only to be left holding the bag when the
price came back down to earth