Can You Pay a Credit Card with a Credit Card?

Your credit card payment is fast approaching, and you’re freaking out. The problem isn’t paying the total balance—it’s that you can’t even afford the minimum required payment. Can you pay a credit card with another credit card? Yes and no.

Most credit card rules won’t allow it—at least not directly. It’s simply too expensive for credit card companies to process these transactions.

There are a couple of indirect ways you can pay a credit card with a credit card: cash advances and balance transfers. Even better, there are longer-term solutions that don’t involve a second credit card.

Avoiding the Issue in the First Place

The best way to avoid a situation in which you are considering using one credit card to pay another is by paying your entire credit card statement balance every month.

Making credit card payments in full and on time will allow you to avoid paying interest.

Paying the statement balance in full each billing cycle also reduces the chance of accumulating debt that is hard to pay off.

At the very least it is important to make minimum payments to avoid negative effects on your credit score.

Recommended: Why is Credit Card Debt So Hard to Pay Off?

Paying a Credit Card With Another Credit Card

Taking a Cash Advance

You can’t pay one credit card with another directly, but you might be able to pay a credit card with a cash advance from another card.

Let’s say you have two credit cards: Card A and Card B. You can’t afford to make your minimum payment on Card A, so you’re looking to Card B for a little help. You have the option to take a cash advance from Card B.

You could use Card B to withdraw cash from your checking or savings account at an ATM. Then you’d deposit that money into your checking account and make an online payment from your bank account or with a debit card.

Pros of a Cash Advance

Taking out a cash advance may be the right option if your situation meets three criteria: You’re trying to pay a small amount on Card A, you already have a second credit card to use for this transaction, and Card B has a lower interest rate than Card A.

Most credit card companies limit how much cash you can withdraw with your credit card per month. If your withdrawal limit from Card B is $5,000, though, and you want to make a payment of $500 on Card A, things shouldn’t get too sticky.

Cons of a Cash Advance

Your credit card company might not allow you to withdraw enough money per month to pay off your other credit card. Your cash advance limit isn’t necessarily the same as your monthly spending limit. Before you take a cash advance, you may want to contact the company that issued your second card to inquire. Or check a statement.

Also, interest usually starts accruing on the amount you withdraw from the moment you take the cash advance. The annual percentage rate (APR) for a cash advance will typically be higher than the purchasing APR on the card. As a result, it’s possible to go even further into debt.

What’s more, you’ll likely pay a fee to take a cash advance. The amount will depend on the credit card company, but you can usually expect to pay the greater of $5 to $10 or 3% to 5% of the amount you withdraw.

Completing a Balance Transfer

If you don’t have another credit card, or your cash advance allowance is too low, you might consider a balance transfer, which would allow you to transfer the balance on Card A to Card B.

Ideally Card B would have a lower interest rate or none at all. You could potentially pay off the total balance more quickly because more of the money you used to pay in interest is going to pay off the principal, or you’re not accruing interest at all.

You may complete a balance transfer only by using a designated balance transfer credit card.

Pros of a Balance Transfer

Certain credit card companies offer balance transfer credit cards with no interest for the first six months or more. When you shop around for a new card, you’ll typically hear the grace period referred to as an “introductory balance transfer APR period” or “promotional period.”

During this period, you can work on paying off your debt without paying any interest.

Cons of a Balance Transfer

While balance transfers may be a godsend for paying off your balance in a set amount of time, what if you can’t nibble away at the total balance quickly?

Once the introductory balance transfer APR period ends, the interest rate will shoot up, and the balance transfer card won’t seem so magical anymore.

If you miss a payment, most companies will suspend the introductory APR period on Card B, and you’ll have to pay what’s known as a default rate, which could end up being even higher than the rate on Card A. Even if you consider yourself responsible enough to make all your payments on time, a financial emergency could throw you off track.

There are also generally fees associated with balance transfers, though they’re often lower than cash advance fees.

It’s worth mentioning that you can’t use balance transfers or cash advances to get credit card points or miles.

What If I Can’t Pay My Minimum?

If for whatever reason a cash advance or balance transfer isn’t available to you, you may still have trouble making your minimum payments. If this is the case, stay calm and assess your situation.

You may want to gather your credit card statements and put your debts in order, either from largest to smallest or from highest interest rate to lowest. This step can help you understand how much debt you’re in and how to prioritize your bills.

You may decide to tackle the largest debts first, or even your smallest to gain momentum. Or you may decide to save money on interest by focusing on credit cards with the highest interest rate first.

You may consider talking to your creditors to see if they can help. A credit hardship program could give you more time to pay off your balance or adjust your terms.

What About a Personal Loan?

Taking out a personal loan is an option for paying off a large credit card bill. A personal loan may come with a lower interest rate than a credit card, and may be more manageable in the long run.

Pros of a Personal Loan

Most credit cards come with variable interest rates, meaning the rate can change over time with shifts in the economy. An unsecured personal loan usually has a fixed rate. (Unsecured means the loan isn’t secured by collateral, like your home or car.)

If you have a good credit score, your rate for a personal loan could potentially be lower than your credit card rate.

If that is the case, you could take out a credit card consolidation loan, then make payments on the loan at the lower interest rate. You’d likely end up paying less in interest over time and might be able to pay back the loan more quickly than you’d be able to pay off the credit card.

Taking out a personal loan also could help your credit utilization ratio, the amount of available revolving credit you’re using. Credit utilization affects your credit score.

Your credit score also is favorably affected when you’re able to consistently pay bills on time.

Cons of a Personal Loan

Taking out a personal loan to pay off a credit card isn’t for everyone. Maybe you’ve realized you have trouble controlling your spending, and that’s why you have credit card debt to begin with. Having a personal loan to fall back on could tempt you to spend even more with your credit card.

Also, a lower interest rate isn’t guaranteed. If you discover that your loan rate could be higher than your card’s rate after inquiring with a lender, taking out a loan may not be the best choice.

No matter how low your personal loan interest rate is, it will still be higher than the rate during an introductory APR period for a balance transfer.

The Takeaway

Can you pay a credit card with another credit card? Indirectly, yes, with a balance transfer or cash advance. While those moves can work in a pinch, each has potential drawbacks.

Taking out a fixed-rate personal loan with a clearly defined payment schedule may be the better long-term option. SoFi offers personal loans with no fees required.

Looking to get on top of your debt? Check your rate on a SoFi Personal Loan.


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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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What is Volatility Skew and How Can You Trade It?

What Is Volatility Skew and How Can You Trade It?

What is Volatility Skew?

Volatility skew, also known as Option Skew, is an options trading concept that refers to the difference in volatility between at-the-money options, in-the-money options, and out-of-the-money options. These terms in options trading refer to the relationship between the market price and the strike price of the contract.

Options contracts for the same underlying asset with the same expiration date but different strike prices have a range of implied volatility. In other words, it’s a graph plot of implied volatility points representing different strike prices or expiration dates for options contracts.

Each asset type looks different on a graph but they tend to resemble a smile or a smirk, the volatility skewness is the slope of the implied volatility on that graph. A balanced curve is called a “volatility smile,” and if it is unbalanced to one side it is called a “volatility smirk.”

What is Implied Volatility (IV)?

Implied volatility, denoted by the sigma symbol (σ), is an estimate of the volatility that a particular underlying asset will have between the current moment and the time when the options contract for the asset expires. It’s basically the uncertainty that investors have about an underlying stock and how likely traders think the stock will reach a particular price on a particular date. The volatility of an underlying asset changes constantly. The more the price of the asset changes, the more volatility it has. But implied volatility doesn’t necessarily follow the same pattern because it depends on how investors view the asset and whether they predict it will have volatility. Implied volatility is usually shown using standard deviations and percentages over a particular period of time.

Option pricing assumes that options for the same asset that have the same expiration have the same implied volatility, even if they have different strike prices. But investors are actually willing to overpay for downside-striked stock options because they think there is more volatility to the downside than the upside.

Different types of options contracts have different levels of volatility, and it’s important for traders to understand this when determining their options trading strategy.

What Does Volatility Skew Mean for Investors?

Volatility depends on supply and demand as well as investor sentiment about the options. The volatility skew helps investors understand the market and decide whether to buy or sell particular contracts. It’s an important indicator for investors who trade options.

Stocks that are decreasing in price tend to have more volatility. If there is implied volatility of an underlying entity, the price of an option increases, resulting in a downside equity skew.

If a skew has higher implied volatility, this means prices will be higher. So investors can look at volatility skews to find low- and high-priced contracts to decide whether to buy or sell.

There are two types of volatility skew. Vertical skew shows the volatility skew of different strike prices of options contracts that have the same expiration date. This is more commonly used by individual traders. Horizontal skew shows the volatility skew of expiration dates of options contracts that have the same strike price.

How Do You Measure Volatility Skew?

Investors measure volatility skew by plotting graph points of different implied volatility of strike prices or expiration dates. For example, a trader could look at a list of bid/ask prices for options contracts for a particular asset that expire on the same date. They take the midpoint implied volatility points from the bid/ask prices and chart them out.

The tilt of the skew changes over time as market sentiment changes. Observing these changes can give investors additional insights into the direction the market is heading, which they can use in skew trading. For instance, if the stock price increases in value significantly, traders might think it is overbought and therefore that it will decrease in value in the future. This will change the skew so its curve increases, showing more pressure for on-the-money or downside put options.

There are five factors that influence the price of options:

• Underlying stock or asset market price

• Strike price

• Time to expiry

• Interest rate

• Implied volatility

Investors can calculate the volatility at different strike prices and graph those out to see the volatility skew.

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How Do You Trade With Volatility Skew?

As mentioned above, the two types of volatility skew are horizontal and vertical. These can both be used in trading.

Horizontal Skew

There are many factors that drive changes in horizontal skew, such as product announcements, earnings reports, and global events. For instance, if traders are uncertain about the short-term future of a stock because of an upcoming earnings report, the implied volatility may increase and the horizontal skew could flatten.

Traders look for opportunities by using calendar spreads to look at the differences between option expiration implied volatility. Where there is implied volatility in a horizontal skew, there may be inefficient pricing that traders can take advantage of.

If the implied volatility is higher than expected in the front month, the option contract will be relatively more expensive, which is referred to as positive horizontal skew.

On the other hand, if the implied volatility of the back month is higher than expected this is known as negative horizontal skew or “reverse calendar spread.” In this situation traders would sell the back month and buy the front month because they can profit when the price of the underlying asset increases before the back month contract expires.

For example, a trader might look at the market for a stock and find that there is a horizontal skew in the option calls, meaning traders are putting in buy and sell orders with the prediction that it’s more likely the stock will increase a lot in the long term than in the short term.

If the trader doesn’t think the current market predictions are correct, they can use a reverse calendar call spread, similar to shorting a stock and predicting it will go down. If the price of the stock plummets, both the long- and short-term contracts will decrease in value and the trader can buy them back at a lower price than they sold them for.

In this case the trader can also profit if the implied volatility of the options decreases. They chose to sell when the implied volatility was high during the front month, so if the implied volatility decreases they can buy back at a lower price.

Although this has the potential to be a profitable way to trade, it is also risky because it’s a short call that requires a lot of margin. Stock exchanges require traders to have significant funds in their account if they want to do this type of trade.

Recommended: Investment Risks and Ways to Manage

Vertical Skew

Many investors prefer trading with vertical skew because it is simpler than horizontal skew and requires less margin and, therefore, less risk. Also referred to as volatility skew and option skew, vertical skew looks at the differences between the implied volatility of different stock strike prices that have the same expiration date. Using vertical skew, traders can find opportunities to trade debit spreads and credit spreads, finding the best strike prices to buy or sell.

For example, a trader might find a stock they believe will increase in value before its option contract expires. So they want to find a bull put spread to buy to get profits when the price increases. They will have many strikes to choose from, so they can use vertical skew to identify which are the best trades, meaning those that are low or high priced. The trader can identify one with a good price to buy, wait until it increases and sell it for a profit.

The Takeaway

Options trading is popular with many investors, and volatility skew is one way for options traders to evaluate the price of options contracts. Traders might look at either horizontal or vertical skew to make a decision about whether an options contract purchase makes sense for their investing strategy.

For investors who are looking for a more straightforward way to build a portfolio, an easy way to get started is by opening an account on the SoFi Invest® brokerage platform. The investing platform lets you research, track, buy and sell stocks right from your phone. You can easily see all your financial information in one simple dashboard. If you need help getting started, the SoFi team is available to answer your questions at any time.

Photo credit: iStock/Just_Super


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
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Understanding Market Breadth

What Is Market Breadth?

Market breadth indicators are mathematical formulas that show how many stocks in a particular market or stock index are increasing in price compared to how many are declining in price. It’s useful for understanding the current and predicted movements of stock indices and analyzing stocks and understanding how broad-based a rally or pullback might be.

Determining the breadth of the market requires using a set of technical indicators to assess the price and movement of the index. Stock indices are groups of stocks and securities, grouped based on an industry, region, company size, or other factors.

What Is Breadth Ratio?

If the majority of stocks in an index are increasing in value, this is called positive market breadth, and the index is said to be in confirmation in this circumstance. This is a bullish indicator that shows that the overall market is in a rising trend and is likely to continue going up in value.

The opposite also holds true. If the majority of stocks are decreasing in value, this is referred to as negative market breadth. This indicates that there is a bearish sentiment and the index may decrease in value.

If the index is rising in value but the market breadth indicators show a negative market breadth, the index is said to be in divergence. And vice versa.

Since market breadth can show the direction of the overall market, traders use it to assess the health of the index as well as the broader market. However, market breadth indicators aren’t always completely accurate, and they can’t be used as predictions of market changes or price reversals.

Sometimes market breadth indicators signal a market movement too early for investors to make use of it. Market breadth is one of the inputs used to generate CNN’s Fear and Greed Index.

How is Market Breadth Used by Investors?

One way institutional and retail investors use market breadth is to reveal underlying market conditions that may not be immediately apparent from looking at the current price movement of an index on a chart. If a few shares in an index have large price movements up or down, this can affect the average and shift the entire index, even if the majority of stocks in the index are going in the opposite direction. The direction of an index is not always an accurate representation of the performance of individual securities that are in the index.

Market breadth can act as a warning to traders to show them potential future price movements of an index, or can show how many stocks are actually moving following a specific market event or trend. Given its limitations, most traders use market breadth in conjunction with other tools and indicators that provide a comprehensive picture of market conditions and the health of the index.

Types of Market Breadth Indicators

Market breadth indicators are mathematical formulas used to measure how many stocks are rising and falling within an index, as well as their trading volume. Investors use them to discover market sentiment, predict whether an index is likely to rise or fall in the future, and to assess the strength of an upward or downward price trend.

Traders use these indicators along with other types of technical analysis tools such as looking at chart patterns. The difference between breadth indicators and other technical indicators is that technical indicators more broadly signal support and resistance, look for profitable trade signals, and assess trading volume and asset prices. Breadth indicators look specifically at the movements and volume of a stock index.

Recommended: What Is Technical Analysis? A Beginner’s Guide

There are several market breadth indicators used to assess an index. Each indicator shows different information. Together they can confirm stock index price trends, show a picture of index health, and help predict future stock price movements such as reversals. Some market breadth indicators add or subtract each new day’s value from the previous day, making them cumulative calculations, whereas others use each period of time as a separate data point.

Some assess an entire index while others assess individual stocks within an index. Different breadth indicators may be used for different purposes depending on what a trader wants to find out and how in depth they want to go into technical analysis of stocks and indices.

Popular indicators include:

Volume of Trade

One technical indicator often used with market breadth is volume of trade. Volume of trade is the number of shares of a particular stock within an index traded within a particular period of time. Generally, traders look at a period of 52 weeks, or one year. It’s important to look at trading volume of individual stocks because if a stock has a high volume of trade then its price movements have a large impact on the overall index.

Advance/Decline Line

Another popular breadth indicator is the Advance/Decline Line, which adds or subtracts net advances of a new period from those of a previous period. Net advances are the number of increasing or decreasing stocks. This gives a cumulative picture of the direction of the index, showing the investor sentiment for all stocks included in the index.

On Balance Volume (OBV)

To find this indicator, traders add or subtract trading volume based on an index closing price.

McClellan Summation Index

This market breadth indicator creates a running total based on the McClellan Oscillator, with the index going up when the oscillator is positive and down when it is negative.

Arms Index (TRIN)

Investors calculate this indicator by dividing the ratio between increasing and declining stocks by the ratio of increasing to decreasing trade volume.

Chaikin Oscillator

The oscillator shifts with volume and price movements.

Up/Down Volume Ratio

To find this ratio, traders divide rising stock volume by decreasing stock volume.

Up/Down Volume Spread

Traders calculate this indicator by subtracting down volume from up volume.

Tick Index

This indicator looks at how many stocks are trading on an uptick versus how many are trading on a downtick.

New Highs-Lows Index

This indicator looks at a one-year period and compares the number of stocks with a 52-week high to the number with a 52-week low. If more than 50% of stocks have a high or a low, this can be an indication that the index is moving in a bullish or bearish direction.

Limitations and Downsides of Market Breadth

Although market breadth indicators are a valuable tool for traders, they do have some limitations. They can help investors decide what trades to make, but they do not serve as accurate predictions of the future. They don’t always show upcoming reversals or price confirmations, and are just one tool in analyzing a stock.

Every trading situation is different, so the same indicators can’t be equally useful in all situations. Also, some indicators might show a large or small movement that isn’t reflected in the index price. For instance, if the trading volume changes a lot during a trading day but the price doesn’t change very much, a volume indicator will show a large shift that isn’t an accurate representation of movements in the market.

The Takeaway

Market breadth is a useful technical analysis tool for helping traders understand index markets. It can give them a sense of whether recent market movements reflect broad-based trends or whether large movements by a few stocks are skewing the overall numbers.

If you’re interested in starting to trade and build a portfolio, SoFi Invest® brokerage platform is a great trading app to use. The investment platform lets you research, track, buy and sell stocks with just a few clicks on your phone. You can connect all your banking and investment accounts to easily see your financial information in one simple dashboard.

The platform offers both active and automated investing. With active investing, you can pick and choose each stock or asset you want to buy. Using automated investing, you can choose from groups of pre-selected stocks and assets. If you need help getting started, SoFi has a team of professional financial advisors available to answer your questions.

Photo credit: iStock/FreshSplash


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

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What Is the MOASS and When Will It Happen?

What Is the MOASS?

This story was updated on Oct. 6 to correct some inaccuracies.

Before 2021 many investors didn’t know about the Mother of All Short Squeezes, also known as MOASS. But the GameStop stock saga early in the year changed that. That scenario saw a rag-tag band of day traders take on the hedge fund giants, with a short-sale “squeeze” that greatly impacted some of those giants.

The episode shined a much-needed light on investors, short-sales, trading squeeze strategies, and digital trading on a massive scale, all of which fell under the MOASS umbrella in 2021.

Short Squeeze Basics

A short squeeze is an orchestrated effort to drive up shares of a stock that’s being heavily shorted. MOASS, Mother of All Short Squeezes, is a trading strategy in which a high volume of buyers drive up shares of stocks that were being “shorted” by other investors.

A short squeeze trading strategy needs two components to work – a short seller or, more preferably, several short sellers on one side and a group of disciplined contrarian investors who unroll a short squeeze and buy shares of the stock being shorted.

How the MOASS Works

In a short squeeze, short sellers aim to drive a stock’s price downward and profit as the stock declines in value. Short sellers are usually organized institutional investors with enough assets to move a stock in a preferred direction, and they sometimes use dark pools to make their bets.

They do so by borrowing and selling shares of a stock that they believe will decline in value. Then, when the stock price falls, a short seller buys the stock at the reduced price, returns the shares, and pockets the profit.

If the short seller makes the right call, meaning the price does fall, they earn the difference between the price when they entered the short position and the lower stock price at which they bought to cover. If the short seller makes the wrong call, and the price goes up, the investor must buy the stock at a price higher than when they entered the short position, thereby losing money – and negating any potential for a profit.

As short sellers wind up leaving their short positions when they execute a buy order on the stock, those short-squeeze buy positions get noticed by other investors, who also jump in to purchase the stock. That, in turn, drives the stock’s price even higher, since there are fewer shares of the stocks available to purchase.

Recommended: Understanding Low Float Stocks

Short-sellers, highly alarmed by the rising share price, also issue buy orders on the stock to exit the short sale strategy and reduce their investment risk, which completes the cycle and puts the short squeeze in full effect. This can result in the short sales losing money and the MOASS trader making a profit on the rising stock price.

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GameStop: The Prime Example of MOASS

A good example of MOASS in action is the GameStop saga in early 2021. At the time, several hedge fund firms had “shorted” GameStop stock, which essentially meant betting the share price of the stock would decline. That didn’t happen with GameStop shares.

Instead, a group of day traders hanging out on a Reddit investing platform called Wallstreetbets banded together and started buying up shares of GameStop stock. The gambit worked, with GameStop shares skyrocketing from $19 per share to around $350 per share. The retail investors had successfully “squeezed” the short sellers, causing several hedge funds to lose hundreds of millions of dollars on their short positions on GameStop.

If the short squeeze works, the share price will continue to rise and the short investors, many of whom have fixed deadlines built into their short sales positions, will have to sell their shares and cut their losses, thereby driving the stock price even higher. That rewards the short squeeze investor, who profits from the rising share price, especially as other buyers enter the fray and drive the share price up even higher.

Recommended: Pros and Cons of Momentum Trading

Once victory was declared with the GameStop short squeeze, the Reddit traders turned their attention to other stocks where short selling activity was particularly high. That group included AMC Entertainment Holdings (AMC), Koss Corporation (KOSS), and Blackberry Ltd. (BB), which all saw share volumes rise after the MOASS traders entered the fray.

Thus, a series of short squeezes that target more and more short sellers is really what MOASS is all about – squeezing enough short-sellers to achieve critical mass in the trading markets, and making huge profits in the process.

MOASS Trading Tips

Investors who want to participate in the next short squeeze effort should be careful. So-called “meme” stock trading can be fraught with risk, especially if you’re left holding the bag after other short-squeezers sell out of their positions before you do.

Take these risk considerations with you before participating in a mass short squeeze play.

Buy Minimally to Limit Losses

While the adrenaline level can be high when participating in a short squeeze trading event, tamp down emotions by limiting the amount of money you invest in a GameStop-type situation. It may be relatively boring to do so, but your money is likely better in a well-researched fund that has a good management team and a history of solid portfolio performance results.

As the old gambling adage says, never risk money you can’t afford to lose. That goes double when chasing the thrill of a MOASS scenario.

Expect to Lose Money

Chances are good that you’ll lose money at some point with a short squeeze play.

Nothing is guaranteed in the stock market and that’s especially the case as short-sellers have learned their lesson after the GameStop fiasco, and grow more cautious about their investing habits. MOASS trading patterns can be something of a roller coaster ride for investors, and the odds that your ride will dip along the way are high. That can translate into days or even weeks of your short-squeeze buying strategy where your investment returns are written in red ink.

MOASS Tip: Have a Plan to Sell Quickly

Short squeeze investing isn’t exactly an orderly process and you need to put your interest first ahead of other MOASS investors. Why? Because volatility can be high and prices can swing at a moment’s notice when trading MOASS-themed stocks. Additionally, nobody really has any idea how high a price can go with a short squeeze in play, and nobody really knows if a stock will rise higher at all.

That’s why it’s a good idea to have a fixed “sell price” in mind when engaging in a short squeeze situation – a stop loss order to automatically sell the stock at a specific price can be a good idea in this scenario.

If you buy a targeted MOASS stock at $50 and it goes to $70, there’s no way of knowing if the stock will go any higher – it might and it might not. Worse, the price could slide back to $30 when buyers lose interest in the stock.

Having a good investment exit strategy in a short squeeze scenario, can help minimize investment losses and capitalize on a stock increase when and if it happens.

The Takeaway

Short squeeze trading strategies can bring a great deal of portfolio-shaking volatility to the investment table, and there are plenty of heavily shorted stocks that could be the next MOASS, but it’s impossible to know which one could trigger a squeeze. That means MOASS may not be the best strategy for long-term investors or those with an aversion to risk. A short squeeze takes a significant amount of discipline, patience, and attention on the part of the investors, with continual risk in play until the squeeze is played out.

If you’re ready to try your hand at investing, one way to get started is by opening an online stock trading account on the SoFi Invest® investment app. You can use it to buy stocks and exchange-traded funds right from the SoFi app.

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SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

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How to Start a Cryptocurrency: Can Anyone Create a New Coin?

How to Start a Cryptocurrency: Can Anyone Create a New Coin?

Despite ongoing crypto volatility, there’s nothing to stop people from launching new crypto projects. In fact, anyone could start a cryptocurrency, but not everyone has the knowledge or resources necessary to take on the task.

Even after someone manages to create a new type of crypto, one that offers new features or aims to solve existing problems, there is still work to do in terms of promotion, listing on exchanges, never mind ongoing maintenance and upgrades.

Understanding Coins vs Tokens

Before getting started, however, it’s important to know the difference between a token and a coin. Both fall under the blanket term of “cryptocurrency,” but while a coin like Bitcoin or Litecoin exists on its own blockchain, a token like Basic Attention Token, functions within an established blockchain technology infrastructure like Ethereum. Tokens also do not have uses or value outside of a specific community or organization.

Cryptocurrencies function like fiat currencies, without the centralized bank. Users typically hope to use their coins to store, build, or transfer wealth.

Meanwhile, tokens usually represent some kind of contract or have specific utility value for a blockchain application. Basic Attention Token for example, rewards content creators through the Brave browser. Tokens can also serve as a contract for or digital version of something, such as event tickets or loyalty points.

Non-fungible tokens (NFTs) represent a unique piece of digital property, like artwork. And DeFi tokens serve many different purposes in that space.

Recommended: What is Cryptocurrency? A Guide to Understanding Crypto

Ways to Create a Cryptocurrency

There are three primary ways to create a cryptocurrency, none of which is fast or easy. Here’s how each of them works:

Create a New Blockchain

Creating a new blockchain from scratch takes substantial coding skills and is, by far, the most difficult way to create a cryptocurrency. There are online courses that help walk you through the process, but they assume a certain level of knowledge. Even with the necessary skills, you might not walk away from these tutorials with everything you need to create a new blockchain.

Fork an Existing Blockchain

Forking an existing blockchain might be a lot quicker and less complicated than creating one from scratch. This would involve taking the open source code found on GitHub, altering it, then launching a new chain with a different name and a new type of crypto. The developers of Litecoin, for example, created it by forking from Bitcoin.

Developers have since forked several coins from Litecoin, including Garlicoin and Litecoin Cash. This process still requires the creator to understand how to modify the existing code.

Use an Existing Platform

The third and easiest option for those unfamiliar with coding is making a new cryptocurrency or token on an existing platform like Ethereum. Many new projects create tokens on the Ethereum network using the ERC-20 standard, for example.

If you’re not familiar with writing code, you might consider a creation service that does the technical work and then hands you a finished product.

Up to $100 in bitcoin2 – just for you.

With 30 coins available, our app offers a secure way to trade crypto 24/7.

 

 

How to Make a Cryptocurrency: 7 Steps

After considering everything above, you can start taking the steps to build the cryptocurrency. Some of these steps will be less relevant when paying a third-party to create the new coin. Even then, anyone undertaking the task should be familiar with these aspects of how to create a cryptocurrency.

1. Decide on a Consensus Mechanism

A consensus mechanism is the protocol that determines whether or not the network will consider a particular transaction. All the nodes have to confirm a transaction for it to go through. This is also known as “achieving consensus.” You will need a mechanism to determine how the nodes will go about doing this.

The first consensus mechanism was Bitcoin’s proof-of-work. Proof-of-Stake is another popular consensus mechanism.  There are many others as well.

2. Choose a Blockchain

This goes back to the three methods mentioned earlier. A coin or token needs a place to live, and deciding in which blockchain environment the coin will exist is a crucial step. The choice will depend on your level of technical skill, your comfort level, and your project goals.

3. Create the Nodes

Nodes are the backbone of any distributed ledger technology (DLT), including blockchains. As a cryptocurrency creator, you must determine how your nodes will function. Do they want the blockchain to be permissioned or permission less? What would the hardware details look like? How will hosting work?

4. Build the Blockchain Architecture

Before launching the coin, developers should be 100% certain about all the functionality of the blockchain and the design of its nodes. Once the mainnet has launched, there’s no going back, and many things cannot be changed. That’s why it’s common practice to test things out on a testnet beforehand. This could include simple things like the cryptocurrency’s address format as well as more complex things like integrating the inter-blockchain communication (IBC) protocol to allow the blockchain to communicate with other blockchains.

5. Integrate APIs

Not all platforms provide application programming interfaces (APIs). Making sure that a newly created cryptocurrency has APIs could help make it stand out and increase adoption. There are also some third-party blockchain API providers who can help with this step.

6. Design the Interface

There’s little point in creating a cryptocurrency if people find it too difficult to use. The web servers and file transfer protocol (FTP) servers should be up-to-date and the programming on both the front and backends should be done with future developer updates in mind.

7. Make the Cryptocurrency Legal

Failing to consider this last step led to trouble for many who initiated or promoted ICOs back in 2017 and 2018. At that time, cryptocurrency was in a kind of legal grey area, and they may not have realized that creating or promoting new coins could result in fines or criminal charges depending on the circumstances.

Before launching a new coin, it a good idea to research the laws and regulations surrounding securities offerings and related topics. Given the complexity of the issues and their regular updates, you might consider hiring a lawyer with expertise in the area to help guide you through this step.

The Takeaway

This is only the beginning of what someone needs to know about how to create a cryptocurrency. In addition to the technical aspects, creators of a new coin or token will have to figure out how their cryptocurrency can provide value to others, how to persuade them to buy in, and how the network will be maintained. Doing so often involves many costs like hiring a development team, a marketing team, and other people who will help keep things going and perform needed upgrades.

Creating a cryptocurrency can take a lot of time and money, and there’s a high risk that it will not succeed. There are more than 5,000 different types of cryptocurrencies listed on public exchanges according to data from Coinmarketcap, and thousands more that have failed over the years.

Simply participating in cryptocurrency trading might be a better route for those who don’t have the time, money, or interest in creating their own. A great way to do that is by opening an investment account on the SoFi Invest brokerage platform, which makes it easy to trade crypto, stocks, and exchange-traded funds.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/23; terms apply.)

Photo credit: iStock/MF3d


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

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2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.
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$100 $499.99 $15
$500 $4,999.99 $50
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