teamgreen02 Posted January 28, 2021 Share Posted January 28, 2021 GME opened at $265 this morning. Peaked at $468 and now is back down to about $264. Similar happening with the movie theatre chain AMC. https://www.theguardian.com/business/2021/jan/28/gamestop-how-reddits-amateurs-tripped-wall-streets-short-sellers Quote The co-ordinated effort by users of the online forum Reddit to drive up the share price of GameStop and other companies is designed to turn the screw on short-sellers. To the layman, the dynamics at play here can seem dizzyingly labyrinthine. But a good place to start is by understanding what short-selling is – and how the Wall Street wizards who do it could end up being wrong-footed by a group of amateur traders. What is short-selling? It’s a way of making money by betting that a company’s share price will fall. Let’s say StuffCo (a made-up company) has a share price of £10. If I believe the share price is going to rise, I’ll simply buy shares at £10. If the price rises to £15, I can then sell my stock for a profit of £5 per share. Shorting is a little more complicated. If I expect the share price to fall (because I think it is a rubbish business: badly run, for instance, or selling outdated products), I can borrow a share in StuffCo from someone who has it, in return for a small fee. If I sell it straight away, that puts £10 in my pocket. I no longer have the share I borrowed but I will have to give it back at an agreed time. So I wait for the StuffCo share price to fall to £5, then buy it and return one share to the person I borrowed from in the first place. They get their share back and I’ve still got the £10 I sold it for, minus the £5 I had to pay to replace it. I have pocketed £5 by correctly anticipating the fall in the share price. What can go wrong? If my prediction is incorrect and StuffCo’s shares go through the roof, I’m in big trouble. I’ve sold the share I borrowed at £10 but if the value increases to £100, I’ll have to spend £100 in order to give a share back to the person I borrowed from. I’d lose £90. Theoretically my losses are unlimited – because there is no defined ceiling on how far a share can rise. What has happened with GameStop? In this case, Reddit users in a group called WallStreetBets noticed that hedge funds, including one called Melvin Capital, had taken a large short position in GameStop. They decided to punish the Wall Street big boys and launched a co-ordinated buying spree. That began forcing the price up – it is now up more than 1800% – increasing the losses for the short-sellers who had bet against it. They had suffered losses of $1bn already, according to reports on Thursday. The hedge funds found themselves trapped in what is called a “short squeeze”, a kind of feedback loop that drives the price ever upwards. The hedge funds have to start buying the shares, in order to “cover” their position and limit their potential losses. But that buying forces the share price up even more – making their position even worse. Effectively they have been forced to bet on shares rising in order to offset their previous bet on them falling. How can Reddit users afford the buying spree? They aren’t only buying shares, they’re also using call options. These are the right to buy shares at a certain price and they effectively function as a leveraged bet, a purchase that only requires you to pay a fraction of the share price. This is the fuel that stokes the short-squeeze fire. Do short-sellers deserve it? Hedge funds aren’t exactly the world’s favourite people, given that they make vast quantities of money, often with ruthless disregard for the businesses that become little more than chips in a financial casino game. During the financial crisis, shorting became a byword for vulture capitalism. Hedge funds were accused of deliberately driving companies into the ground by taking out billion-dollar short positions, artificially pushing down share prices to the point that they collapsed, when they might otherwise have survived. Several national financial regulators across the world imposed temporary bans on short-selling certain vulnerable stocks – such as banks or insurers during the post-2008 financial crisis – or even blanket bans on the practice. Is the criticism fair? There is evidence that shorting can accelerate the downward movement of share prices, as big bets on corporate failure become a self-fulfilling prophecy. The counter-argument is that you cannot successfully short a healthy company, as your bet will simply turn out to be wrong. Furthermore, short-sellers can act as an early warning system highlighting bad businesses. They have often proved to be the first people to notice that a company is in trouble, sometimes even before the company’s directors do. Investors took out large short positions in the government outsourcer Carillion before its high-profile collapse. In the recent Wirecard scandal, short-sellers realised the German company was built on sand, even while Germany’s financial regulator continued to bury its head in the sand. 1 Quote Link to comment Share on other sites More sharing options...
f7ben Posted January 28, 2021 Share Posted January 28, 2021 Tell me more about how the market isn’t a casino Quote Link to comment Share on other sites More sharing options...
jtssrx Posted January 28, 2021 Share Posted January 28, 2021 59 minutes ago, f7ben said: Tell me more about how the market isn’t a casino Did you see they are going after the Reddit people? Yes that’s right go after the peasants and ignore the people who make billions off of manipulating the market 1 Quote Link to comment Share on other sites More sharing options...
Mainecat Posted January 28, 2021 Share Posted January 28, 2021 57 minutes ago, f7ben said: Tell me more about how the market isn’t a casino I told you it was. No guarantee....just pull the handle. I hope every investor sees how this pyramid scheme worked. Large numbers of small investors drove the price. Now imagine big corps...just a few buying large shares.....what’s that do? Are the stocks really worth their inflated prices? Fuck no. Quote Link to comment Share on other sites More sharing options...
f7ben Posted January 28, 2021 Share Posted January 28, 2021 10 minutes ago, Mainecat said: I told you it was. No guarantee....just pull the handle. I hope every investor sees how this pyramid scheme worked. Large numbers of small investors drove the price. Now imagine big corps...just a few buying large shares.....what’s that do? Are the stocks really worth their inflated prices? Fuck no. It’s not corps....it’s investment banks who are just proxies for the fed Quote Link to comment Share on other sites More sharing options...
JEFF Posted January 28, 2021 Share Posted January 28, 2021 11 minutes ago, Mainecat said: I told you it was. No guarantee....just pull the handle. I hope every investor sees how this pyramid scheme worked. Large numbers of small investors drove the price. Now imagine big corps...just a few buying large shares.....what’s that do? Are the stocks really worth their inflated prices? Fuck no. You understand why they are doing it right? It's a rhetorical question. No you don't. Quote Link to comment Share on other sites More sharing options...
Mainecat Posted January 28, 2021 Share Posted January 28, 2021 4 minutes ago, f7ben said: It’s not corps....it’s investment banks who are just proxies for the fed Yup. Where do you think the huge corporate tax cuts went? Yup buying back their own stocks. Quote Link to comment Share on other sites More sharing options...
f7ben Posted January 28, 2021 Share Posted January 28, 2021 Just now, Mainecat said: Yup. Where do you think the huge corporate tax cuts went? Yup buying back their own stocks. Yes Quote Link to comment Share on other sites More sharing options...
Mainecat Posted January 28, 2021 Share Posted January 28, 2021 Just now, JEFF said: You understand why they are doing it right? It's a rhetorical question. No you don't. Holy fuck your stupid. Quote Link to comment Share on other sites More sharing options...
Mainecat Posted January 28, 2021 Share Posted January 28, 2021 4 minutes ago, f7ben said: Yes https://www.reuters.com/article/us-health-coronavirus-trump-buybacks/trump-slams-companies-for-using-u-s-tax-credit-to-buy-back-stocks-idUSKBN2173HY Quote Link to comment Share on other sites More sharing options...
JEFF Posted January 28, 2021 Share Posted January 28, 2021 9 minutes ago, Mainecat said: Holy fuck your stupid. Ok, explain what's going on with GME right now... Quote Link to comment Share on other sites More sharing options...
Rod Posted January 28, 2021 Share Posted January 28, 2021 2 hours ago, f7ben said: Tell me more about how the market isn’t a casino Of course it is. Quote Link to comment Share on other sites More sharing options...
F3600 Posted January 28, 2021 Share Posted January 28, 2021 I don't mind the Reddit investors using the information, tools, and trades available to them to move the stock in their favor. What I do mind is the Investment firms crying foul when their own techniques are used against them AND the media an regulators carrying their water for them on tv. 6 2 Quote Link to comment Share on other sites More sharing options...
Angry ginger Posted January 28, 2021 Share Posted January 28, 2021 1 minute ago, F3600 said: I don't mind the Reddit investors using the information, tools, and trades available to them to move the stock in their favor. What I do mind is the Investment firms crying foul when their own techniques are used against them AND the media an regulators carrying their water for them on tv. spot on Quote Link to comment Share on other sites More sharing options...
Angry ginger Posted January 28, 2021 Share Posted January 28, 2021 Guys like Dave Portnoy and the retail bros have really shined a light on the business being stacked in favor of the suits at the expense of every day investors. 1 Quote Link to comment Share on other sites More sharing options...
Rod Posted January 28, 2021 Share Posted January 28, 2021 Supposedly lots of these small buyers are locked out of trading now, but the stock is open and they can’t participate as the stock drops criminal Quote Link to comment Share on other sites More sharing options...
Angry ginger Posted January 28, 2021 Share Posted January 28, 2021 Just now, ACE said: Supposedly lots of these small buyers are locked out of trading now, but the stock is open and they can’t participate as the stock drops criminal Robinhoods a POS company as is TD and Schwab for backing up the suits, that said its my understanding they can unwind positions just not open new ones. Quote Link to comment Share on other sites More sharing options...
f7ben Posted January 28, 2021 Share Posted January 28, 2021 2 minutes ago, ACE said: Supposedly lots of these small buyers are locked out of trading now, but the stock is open and they can’t participate as the stock drops criminal They’ve been doing this shit all summer and fall. On the most volatile days they experienced platform malfunctions and people couldn’t open or close positions Quote Link to comment Share on other sites More sharing options...
Rod Posted January 28, 2021 Share Posted January 28, 2021 1 minute ago, Angry ginger said: Robinhoods a POS company as is TD and Schwab for backing up the suits, that said its my understanding they can unwind positions just not open new ones. Behn probably bought in at the top 1 Quote Link to comment Share on other sites More sharing options...
Rod Posted January 28, 2021 Share Posted January 28, 2021 Class action suit filed against robin hood Quote Link to comment Share on other sites More sharing options...
f7ben Posted January 28, 2021 Share Posted January 28, 2021 4 minutes ago, ACE said: Behn probably bought in at the top I have zero money invested Quote Link to comment Share on other sites More sharing options...
Frostynuts Posted January 28, 2021 Share Posted January 28, 2021 1 minute ago, ACE said: Class action suit filed against robin hood Good luck with that. Of course, the lawyers will love the win win for them. Quote Link to comment Share on other sites More sharing options...
teamgreen02 Posted January 28, 2021 Author Share Posted January 28, 2021 12 minutes ago, ACE said: Supposedly lots of these small buyers are locked out of trading now, but the stock is open and they can’t participate as the stock drops criminal Yup, they can sell on Robinhood but not buy. Other companies were stopping trading to. Where's @DriftBusta on this? Hopefully he's already cashed in and on his way to Aruba. Quote Link to comment Share on other sites More sharing options...
jtssrx Posted January 28, 2021 Share Posted January 28, 2021 2 hours ago, JEFF said: Ok, explain what's going on with GME right now... You notice he never replied. Quote Link to comment Share on other sites More sharing options...
JEFF Posted January 28, 2021 Share Posted January 28, 2021 4 minutes ago, jtssrx said: You notice he never replied. He can't. Quote Link to comment Share on other sites More sharing options...
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