The parent company of Truth Social is a popular target for short-sellers, even after they lost $100 million last month betting on a decline in the stock that didn’t come.
It’s not that complicated. Don’t make finance seem unapproachable.
The explanation isn’t great but it sounds like they are basically just buying a warrant (call option issued by the company) at a low price and selling the shares short at a higher price. That would create a riskless profit if you wait for the merger to be approved.
If the stock goes way up, you make money on the warrant and pay some back on the short. If the stock drops, you make money on the short and lose some on the warrant.
Usually this strategy doesn’t work but trading in this stock is not rational. It’s like they’re borrowing apples to sell them at $3 now and paying it back with a guaranteed $2 apple later.
It’s not that complicated. Don’t make finance seem unapproachable.
The explanation isn’t great but it sounds like they are basically just buying a warrant (call option issued by the company) at a low price and selling the shares short at a higher price. That would create a riskless profit if you wait for the merger to be approved.
If the stock goes way up, you make money on the warrant and pay some back on the short. If the stock drops, you make money on the short and lose some on the warrant.
Usually this strategy doesn’t work but trading in this stock is not rational. It’s like they’re borrowing apples to sell them at $3 now and paying it back with a guaranteed $2 apple later.