Options, Value, Short Squeeze, and Gamestop?
Last week in ISM I continued to learn about the stock market through my mentor and secondary research. The stock market had an extremely volatile week last week, and it served as a perfect frame for learning about the stock market.
The most important aspect of my week was my mentor visit. During my mentor visit Mr. Daniel and I discussed the recent happenings in the stock market with Gamestop. Mr. Daniel taught me the concept of short squeezes and how the scenario with Gamestop was an extreme cause of a short squeeze. I found the idea of short squeezes fascinating as it directly relates to behavioral economics and I was able to add the short squeeze to my ever expanding knowledge of behavioral economics.
Mr. Daniel and I then discussed value in the stock market and what it means for a stock to be worth a certain amount. As Mr. Daniel put it, a stock is worth what someone is willing to pay you for it. This concept applies more broadly to the idea of value itself, where value is what other people are willing to sacrifice for a certain item/goal. This discussion of value helped me understand how investors decide if a stock is over or undervalued and helped me understand the stock picking process.
The final thing my mentor and I discussed was options. Mr. Daniel explained to me what options are and how they are played, and I began researching options and how they are used to gain high reward while taking on more risk. Overall, last week was an incredible week for learning and I am looking forward to continuing my research with the help of my mentor.