[foolmeonce]

No one actually wants the underlying stock, so it is really just a bet on the value at the moment they theoretically need to hand over the stock between the parties in the contract.

I think the parties would just be exchanging money in lieu of stock and whoever bought the actual stock will have Gamestop stock, so after the utility for screwing the naked shorts goes away, people who bought in the rush will probably lose just like any other pyramid scheme.

[chii]

> I think the parties would just be exchanging money in lieu of stock

but stocks are marked to market - the lender of the stock will ask back the market value, which if it was being pumped, is going to be high. If the shorts are settled by cash, it's not only not going to make a difference to the bottom line of those shorting, it will also not change the price of the stock.

[foolmeonce]

The people shorting are screwed, but the profits will go to the people who bought the options, who will essentially be selling the contract back and trying not to own the stock. The stock should go into free fall, and the people who bought the stock are also going to be victims unless they sell to an alternate victim before the call date.

It should all be convoluted by policy, settle dates, brokers selling and later replacing stock in margin accounts, etc. But basically anyone involved in buying GameStop stock itself is playing in the options market with insufficient evidence of understanding, and brokers are supposed to interfere with that.

[bluGill]

The people shorting - if they can hold out against a margin call - win in the long run. Gamestop isn't worth these prices, and so they can cover in 6 months when interest goes away and the price drops to $2. Even if gamestop is a long term win, it won't be worth more than $10 next year.