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onoesworkacct | 4 months ago
Suppose we have a stock and a bunch of investors. All of the investors have some set of information implying a value v. Except, one investor is smarter and finds an edge (rise of AI or whatever) which implies a value of 2v.
That investor will buy the stock any price up to 2v. The rest of the investors will be happy to sell at any price above v. Given unlimited money the price should stabilise at 2v very quickly.
However there are lots of real-world caveats like, not everyone has an infinite money glitch.. and there are probably second-order and third-order effects like some hedge fund notices the pattern and does XYZ which influences price... options make price a function of expectation of price, then the price of options is driven by the expected price of the same options near execution date... idk
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