[HN Gopher] Robinhood, Trading 212 and others go down amid AMC a...
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Robinhood, Trading 212 and others go down amid AMC and GameStop
stock frenzy
Author : allie1
Score : 83 points
Date : 2021-01-27 15:35 UTC (7 hours ago)
(HTM) web link (uk.finance.yahoo.com)
(TXT) w3m dump (uk.finance.yahoo.com)
| marzell wrote:
| Vanguard went down for me about 5 minutes ago. Possibly related?
| meowster wrote:
| Charles Schwab's phone system isn't working for me. Also
| possibly related?
| thebean11 wrote:
| Yes I just finally got through, definitely related.
| zaroth wrote:
| It's fun to actually delve deeper than the headlines on this one.
|
| The main driver of this trade on WSB is a user
| "deepfuckingvalues". As of September 2019 they were posting GME
| holdings of 1,000 Jan 21 calls at $8, a position they built up
| since June 2019. [1]
|
| The user then posted monthly updates ever since.
|
| By May 2020 they had 2,500 call option contracts and had a net
| loss of $10k. By August 2020 they had lost $60k on $145k. Then it
| all started turning around.
|
| They were an activist investor that actively rallied the Board to
| do buybacks and pushed overall interest in a GME turnaround.
|
| As usual, by the time the mass media picks up on something it
| looks to the outside world like something that just magically
| happened like a rocketship taking off in just the last week.
|
| In reality this was over a year in the making by a devoted user
| of WSB who gained a following over many months of persistence in
| the face of mounting losses. It was in fact the perfect WSB
| story. Initially every comment is begging them to sell, and then
| mocking their losses, and then reveling in their pain... and
| still they held and posted YOLO month after month.
|
| As of their last update on the 26th their account value is $23mm.
|
| [1] - https://www.reddit.com/u/DeepFuckingValue/
| jerry80 wrote:
| DFV also has a YouTube channel called RoaringKitty [1]. It's
| pretty entertaining.
|
| [1] - https://www.youtube.com/c/RoaringKitty/videos
| conanbatt wrote:
| He might be at 50 million profit by now
| onion2k wrote:
| He hasn't made a penny in profit until he sells.
| zaroth wrote:
| He had to at least exercise those Jan 15th 2021 calls at
| $8, but he rolled it all back into a combination of shares
| and April calls.
| nrmitchi wrote:
| > They were an activist investor that actively rallied the
| Board to do buybacks
|
| I think you might be getting DFV and Michael Burry confused
| here.
| zaroth wrote:
| You're probably right.
|
| I thought I saw something in the comment history about him
| mailing the Board and being on the calls, but now I can't
| find it.
| LeonM wrote:
| DFV is an interesting one.
|
| As far as I can tell from the comments on Reddit, most people
| are holding because DFV is holding. So, I expect, that soon as
| he sells it is likely that the price will collapse.
|
| That said, the volume that DFV holds is not very big (I read
| around .2%), so it will likely go unnoticed. As long as DFV
| doesn't post that he's out, the rocket keeps going up.
|
| I don't doubt that DFV's investment is real, but he might
| already be out without anyone knowing.
|
| edit: typo
| vorpalhex wrote:
| Robinhood frequently goes down during busy trade windows. It's
| bad enough that I warn people against using them if they intend
| to do any kind of active trading.
| seddin wrote:
| DEGIRO for example does not work AT ALL. It is still showing
| prices from last day. What an unreliable service.
| allie1 wrote:
| On reddit /wallstreetbets people report other trading platforms
| down as well, not sure if true
| ianhawes wrote:
| I maintain accounts on Robinhood, TD, and Interactive
| Brokers.
|
| Typically, Robinhood is always down at market open (even on
| low volume days).
|
| On high volume days, IB has been down several times.
|
| However, the thinkorswim platform on TD is great and I've yet
| to encounter downtime.
| DenverCode wrote:
| Vanguard, Robinhood, Charles Schwab, and TD Ameritrade are
| all having outages.
|
| Regarding TD,
| https://twitter.com/TDAmeritrade/status/1354447688205443076
| toomuchtodo wrote:
| Fidelity Active Trader Pro has been flaky all day,
| intermittently freezing when streaming data is
| temporarily lost.
| 52-6F-62 wrote:
| WealthSimple is still functioning fine here in Canada.
| They're probably just overloading their servers.
| rlyshw wrote:
| can't even access my vanguard account. Hearing reports from
| friends/family across the board that they can't access their
| financial accounts. Fidelity, Schwab, more.
| amansidhant wrote:
| What platform would you recommend for shares and options?
| lordnacho wrote:
| Interactive Brokers seem cheap and have APIs and apps for
| everything.
| snug wrote:
| I've never had a problem
| [deleted]
| Fjolsvith wrote:
| Hedge funds loosing their shirts to nerds and soccer moms.
| asdfasgasdgasdg wrote:
| Plenty of "nerds and soccer moms" are going to lose their
| shirts in this too. Whoever is buying this stock today is
| likely to have a bad time (unless they can keep the pyramid
| going for a little longer and hand the bag to someone else).
| Miner49er wrote:
| I doubt this is the end. It still has a lot of room to run,
| probably. The shorts haven't covered, they've doubled down.
| asdfasgasdgasdg wrote:
| Why wouldn't they double down? Fundamentally, Gamestop
| isn't a thirty billion dollar company. The odds that retail
| investors stay greedy long enough to force the current
| shorts to cover are not very high, IMO. Some of these
| redditors are going to want to cash in their gains, and
| when that happens I guess it's going to collapse very
| quickly.
|
| I don't buy individual stocks and even I'm tempted to get
| in on the short side right now. Seems like an easy way to
| turn $1k into $10k. Take my wife out for a nice dinner or
| something.
| thebean11 wrote:
| The stock is going up because of shorts. If the cycle of
| old shorts covering and new shorts taking positions
| continues, combined with the positive feedback loop of
| retail FOMO, the stock will continue to go up.
|
| > I don't buy individual stocks and even I'm tempted to
| get in on the short side right now. Seems like an easy
| way to turn $1k into $10k.
|
| Sure, if you call the top, otherwise you'll turn $1k into
| -$20k pretty quickly
| andrethegiant wrote:
| This doesn't have to do with GameStop as a company --
| they are merely the rope in a tug of war between retail
| investors and wall st. Buying shares seems like the easy
| way to turn 1k into 10k given how many success stories
| have happened over the last few days.
| stu2b50 wrote:
| If you short gme you're about to be in very heavy debt to
| your broker. At least buy a put or something instead.
|
| I don't think anyone is actually long on gamestop at $350
| per share, but trying to short is not about company
| expectations at this point, it's about timing this
| hysteria wave, and if you mistime it you get destroyed by
| infinite risk and your broker liquidate your position and
| you leave with not 10k, but -100k.
| hervature wrote:
| The max gains on shorting stock is 100% and that's
| ignoring fees you have to pay which are extremely high
| for GME right now.
|
| Unless you plan to use 10x leverage or trade options,
| which I doubt if you don't trade individual stocks, you
| can't 10x by shorting. On the flip side, if you shorted
| at $20, you would have lost your entire portfolio if you
| shorted with 5% of your capital.
|
| Shorting here is trying to catch a falling knife, don't
| do it.
| asdfasgasdgasdg wrote:
| I definitely won't. Thank you for the correction r.e.
| short selling upside. If I had realized it was max 100%
| upside, it wouldn't have been tempting. There's not an
| amount I'm willing to risk on this trade that would make
| a mere doubling of my money worth the effort.
| Majromax wrote:
| > Why wouldn't they double down?
|
| Because short sellers accept potentially unlimited
| liability in the event of a price increase. Remember the
| old maxim: the markets can remain irrational longer than
| you can remain solvent.
|
| The operating theory of the WallStreetBet hivemind is
| that the short sellers (collectively) are in so deep that
| further price increases will force them to close out
| their positions by buying back stock at a loss. Short
| sales are ultimately made on margin (because they're a
| debt of a share), and margin accounts will be called in
| at some ratio.
|
| That "short squeeze" would cause the price to spiral ever
| further, and that price increase would then force any
| remaining short sellers out of the market.
|
| See https://moxreports.com/vw-infinity-squeeze/ for a
| well-known, circa 2008 short squeeze that happened to
| Volkswagen.
|
| The issue with the operating theory is that it's fuzzy;
| there's no way to know what price point will trigger such
| a short squeeze.
|
| > I don't buy individual stocks and even I'm tempted to
| get in on the short side right now. Seems like an easy
| way to turn $1k into $10k.
|
| Only if you are highly leveraged yourself, exposing you
| to those dramatic losses if you mis-time the market even
| slightly. If you do want to take the down-side of
| Gamestop, it'd be safer to buy a put option to limit your
| potential loss. However, the high implied volatility also
| makes the trade a bit expensive right now.
|
| (Edit to add: I have no financial interest in Gamestop,
| up or down.)
| nkozyra wrote:
| > Seems like an easy way to turn $1k into $10k.
|
| Who wants to tell him?
| Miner49er wrote:
| Fundamentals don't matter right now. If you don't time it
| just right, and it keeps going up, you'll get margin
| called and be forced to cover for a huge loss.
| asdfasgasdgasdg wrote:
| Yeah I'm not actually going to do it. Also, as someone
| pointed out, max gain is 100% (I was confused), so
| there's really not enough upside to bother with, at least
| for the amount of money I'm willing to plonk down on it.
| deeeeplearning wrote:
| >Why wouldn't they double down?
|
| Because everyone with an internet connection and half a
| brain knows that the shorts are totally screwed if the
| WSB turds keep buying.
| tzfld wrote:
| As I see, many of them are aware of this and doing mainly for
| fun/revenge/etc and ready to lose the 'investment'. Basically
| a special kind of bubble scheme to deliberately pushing an
| actor to the top of it to maximalize it's loss. Not sure if
| there was anything like this in the past. Interesting story.
| anewaccount2021 wrote:
| Shorts have been getting slaughtered in covering rallies
| since the first short was allowed.
|
| I can't believe these "professional" funds would keep short
| positions open on an equity with crazy-high short
| interest...that's like Trading-For-Dummies grade fail.
|
| What's more amazing is many of their clients will be
| destroyed in the largest bubble in history, where money was
| given out to every idiot with a TD Ameritrade account.
| [deleted]
| manomanowicz wrote:
| The 'losers' are the one's who are buying high and selling
| low. Ironically in this case, it's the short sellers who
| can't cover their positions who are being forced to buy at
| the top, having already sold low.
| anewaccount2021 wrote:
| Exactly! /r/wallstreetbets are also trading against each
| other, without mercy! Not sure why people think that sub is
| some sort of group trading account...
|
| But, chances are, a lot of them will make incredible gains by
| betting on the misery of hedge funds who themselves bet on
| misery. No tears shed for the hedge funds or the account
| holders who are now basically zero'd out. Imagine having your
| life savings in one of these funds...in the biggest bubble in
| history, your account went to ZERO!
| davewritescode wrote:
| I made 5 figures yesterday after I had bought in around $40.
| My initial investment was pretty low and when it hit high
| $140s I took my money and ran.
|
| At these boosted stock prices all it's going to take to sink
| anybody is an after hours announcement of additional shares
| being offered.
|
| I couldn't made a lot more money but I try not to be greedy.
| berrynice wrote:
| Alot of people aren't trying to make money, they just want to
| kill a few hedgefunds regardless how much money they lose,
| they know they'll never retire and they're already broke,
| many of these people have nothing to lose
| germinalphrase wrote:
| It's a fascinating little story. Cant help but think that
| there is someone in the industry making the real money here
| and all the "soccer moms and nerds" are just cover/dopes.
| robjan wrote:
| HFT firms are making a killing on the volatility and order
| flow
| lordnacho wrote:
| As an ex hedge fund / HFT options guy, I would be intrigued
| to know who is lending their stock out to be shorted. You'd
| think they have some incentive to stop lending them out,
| especially if the options are pushing the gamma so short
| that the sellers need to cover. If the options guys are
| needing to buy but nobody can sell, that would seem to be
| quite good for someone who is holding the stock.
|
| I'm not so sure about the soccer moms thing. The FT has a
| chart of how many small players there are, and although
| it's shot up it doesn't look huge to me. Seems to me the
| WSB crowd IS making money, but there's probably more
| institutions jumping on for a piece of meat too.
| [deleted]
| wp381640 wrote:
| Chatter in the last 12 hours on discord and on the
| threads has been a lot about having holders call brokers
| to ask that their stocks not be lent out
| [deleted]
| mannykannot wrote:
| Matt Levine said this a couple of days ago:
|
| "Bloomberg tells me that short interest is 71.2 million
| shares, while GameStop has only 69.7 million shares
| outstanding." (As he explained in a footnote, this does
| not necessarily imply massive naked shorting.)
|
| I don't know how things have changed since then. Maybe
| this morning would have been a good time for GameStop to
| issue more shares?
| geogra4 wrote:
| That's my sense too. There's gotta be some big muscle
| behind this.
| 52-6F-62 wrote:
| Because that's usually how it goes. It appears that every
| bit of skepticism has been thrown out the window. I think a
| lot of people are about to get burned who expected riches.
| And all because of empty promises by anonymous message
| board users. It's disconcerting.
| berrynice wrote:
| Alot of people don't care about riches, they just care
| about winning, they want revenge even if it'll cost them.
| asdfasgasdgasdg wrote:
| Maybe I'm just a bad person but I don't feel much for
| people who get scammed due to their own greed.
| 52-6F-62 wrote:
| I'm a little more ambivalent, myself. But I think I just
| don't like seeing it at all.
|
| If the entirety of the human were, functionally, a
| complex organism then the result of this sudden and
| energy-expensive outgrowth will likely be a sudden and
| intense immune response that will have effects beyond
| those directly involved.
| eloff wrote:
| Some valuable stock market lessons available at $300 a
| piece right now.
|
| Probably not going to end well, but they'll learn
| something from it.
| nrmitchi wrote:
| > but they'll learn something from it.
|
| Unfortunately, I disagree. I think there will be stories
| written for the next bit about the handful that make
| bank, very few stories written about the people who lose
| their shirts and end up with their financial life in
| ruins.
|
| When nonsense like this happens again, no one will
| remember the downside.
| eloff wrote:
| Everyone who loses their shirts will learn a lesson
| they'll never forget. Pain is the best teacher.
|
| The smart people learn from other people's pain.
| addicted wrote:
| There was a story yesterday (I'm not sure of its validity)
| that Citadel has paid for advance knowledge for Robin Hood
| stock transactions, so they are almost certainly making
| money on this.
|
| And unsurprisingly they've fronted money to at least 1 of
| the hedge funds on the wrong side of these trades. They're
| probably making bank. A couple of particular hedge funds
| will lose money.
|
| But what happens to the people who are carrying GME when
| this frenzy ends and no one is willing to buy GME at a
| $24Bn market cap valuation.
|
| They end up being the ones who paid for everyone else to
| "lose their shirts".
| mason55 wrote:
| > _There was a story yesterday (I 'm not sure of its
| validity) that Citadel has paid for advance knowledge for
| Robin Hood stock transactions_
|
| That's a complete distortion of what's actually
| happening. If this were actually happening and people
| knew about it there would be absolute outrage.
|
| The truth is that Citadel is one of a few firms that pay
| Robinhood for the option to take the other side of
| trades. It's pretty innocuous but people get upset about
| it and turn it into "Citadel get advance knowledge of
| Robinhood trades".
|
| Citadel is in the business of making markets. Instead of
| taking a position on a stock, they just happily take the
| other side of most trades. They make their money by
| offering slightly below the "true" market price and in
| exchange they provide liquidity to the market so that you
| can sell your stock pretty much whenever you want. The
| idea is that most trades are pretty random and for each
| trade on one side you have a trade on the other side that
| balances it out and Citadel keeps the difference between
| the "true" price and what they pay/sell at.
|
| The problem is that sometimes lots of stock will be sold
| for a good reason (imagine someone finds out that there's
| an accounting fraud at some company). In this case,
| Citadel loses money because the trades don't balance out
| and the stock just goes down.
|
| From Citadel's perspective, traders on Robinhood are much
| more likely to be random people with no extra info
| (retail investors) and so they're willing to pay
| Robinhood to route the orders to them because it reduces
| the risk of adverse selection. In exchange, Citadel _has_
| to give a price that 's at least equal to the best price
| in the market or else they're not allowed to fulfill the
| order.
| deeeeplearning wrote:
| >That's a complete distortion of what's actually
| happening. If this were actually happening and people
| knew about it there would be absolute outrage.
|
| The SEC disagrees
|
| https://www.cbsnews.com/news/robinhood-sec-
| fine-65-million/
|
| "Federal officials said that between 2015 and 2018 the
| company only partially explained on its online FAQ page
| how it makes money, omitting details about its largest
| revenue source -- trades. Robinhood takes a user's stock
| order and sells it to a larger trading firm that executes
| the trade, a process known as "payment for order flow,"
| the SEC order states."
| MrMan wrote:
| Robin hood is free because their flow goes to third
| parties like citadel instead of smart order routers at
| sell side firms. But that is an edge of a less than a
| second. It is generally good to be able to ascribe an
| identity to order flow, but retail tends to behave in a
| predictable way at medium time scales
| Red_Leaves_Flyy wrote:
| (Some?) Of the people carrying gme are saying that
| because >100% of the float on gme is shorted with ~6 days
| to cover; gme only needs to stay high until the shorters
| are forced to cover their short by buying at whatever
| prices they can.
| allie1 wrote:
| "bulls last until the last person willing to buy a share at
| quoted price, buys it"
|
| This too will go down, violently.
| saalweachter wrote:
| The interesting thing to me is that -- in so much as this is
| being done for profit making and not more abstract reasons --
| if 90% of the jumpers-on lose their money, it won't
| necessarily dissuade that many people from the community in
| the future. There will be a _lot_ of people making a lot or a
| little money, and sharing their stories, and the ones who
| lose this round will be able to tell themselves that _next
| time_ , if they are faster and get out at the right time,
| _they too_ can be one of the winners...
| [deleted]
| gruez wrote:
| I know this is a popular sentiment (ie. the little guys
| prevailing over the big guys in wall st), but this is likely
| not the case.
|
| >In general, a crafty short seller (a.k.a. most long/short
| funds) will do the following to ensure the internet doesn't
| outsmart them:
|
| > 1. Capping loss with put options -- With a put option, you
| roughly get all the benefit of shorting a stock (minus the
| premium paid and strike) with a finite amount to lose.
|
| > 2. Capping loss with OTM call options -- This is my favorite,
| and one of the more common strategies. When you assemble a
| short position, you aren't stupid hopefully -- you understand
| stocks only go up, and infinity is a much farther number from
| current price than 0 (using a discrete numeraire, of course).
|
| https://nope-its-lily.medium.com/gamestop-power-to-the-marke...
| anewaccount2021 wrote:
| Read the news - what you are describing didn't happen.
|
| Look at Melvin - they are trying to convince the market they
| are still solvent.
|
| Citron closed their shorts at a huge loss.
|
| This really is a case of "seasoned professionals" getting
| slaughtered on awful trades, and they didn't appear to have a
| safety net set up.
|
| edit: people seem to think I am cheerleading WSB...far from
| it, someone there will also get slaughtered by being the last
| fool to walk in on a risky trade. Trading is merciless,
| caveat emptor!
|
| edit2: the article above does NOT refute my claims. Melvin
| took a $2 billion emergency infusion from Citadel. You don't
| do that if you safely closed your trades without hazard.
| Sorry I'm going to trust Bloomberg over "nope-its-lily"
| darepublic wrote:
| Egging on reddit certainly doesn't help. I agree with the
| notion of shorting game stop but don't make a big fuss
| about it.
| TameAntelope wrote:
| WSB certainly has the narrative locked up, but that doesn't
| actually mean anything when it comes to who is walking away
| with fatter wallets.
|
| There is zero percent chance that this is actually playing
| out the way WSB is claiming it's playing out.
| allie1 wrote:
| >There is zero percent chance that this is actually
| playing out the way WSB is claiming it's playing out.
|
| What makes you say that? Any idea of what is happening?
| TameAntelope wrote:
| Basically, because they're not wrong on the facts, and
| they're far from the first to realize that.
|
| There's a decent not-meme-based story around GameStop's
| turnaround, and a number of actual investment firms saw
| it weeks before they did. Investment firms are betting
| against each other, as per usual.
|
| Also, now that GameStop has all this extra value, they
| can _actually_ improve, so the not-meme-based story
| becomes even more compelling.
| gruez wrote:
| >Look at Melvin - they are trying to convince the market
| they are still solvent.
|
| From the article in my previous comment:
|
| >Even assuming the worst case scenario here (let's assuming
| somehow the put value was $10 and they held until now and
| the put is worthless, the max loss is $54 million for a
| hedge fund with $20 billion AUM, for a max risk of about
| 0.27%), Melvin Capital is sleeping fine. Because they
| bought puts, and didn't short shares directly, their max
| loss is capped (the premium they paid).
| deeeeplearning wrote:
| Daddy Cohen just loaned them 3 Billion so they could stay
| solvent. Might want to check your math.
|
| https://www.ft.com/content/8be64f49-7c90-4fae-8370-c5c5c9
| 6d8...
|
| TLDR Melvin Capital is already down 3.75 Billion 3 weeks
| into 2021...
| mmastrac wrote:
| Kinda feels like Billions got this whole industry right.
| anewaccount2021 wrote:
| ftfy!
|
| https://www.cnbc.com/2021/01/27/hedge-fund-targeted-by-
| reddi...
|
| "Melvin Capital closed out its short position in GameStop
| on Tuesday afternoon after taking a huge loss, the hedge
| fund's manager told CNBC's Andrew Ross Sorkin."
| nceqs3 wrote:
| You don't know if they shorted shares. Shorts are not
| disclosed on 13f's. Often times funds buy puts and short
| at the same time.
|
| It sounds like they did short shares of gamestop. When
| the first article came out it said their puts had already
| expired. Gabe Plotkin called into CNBC this morning and
| said their "short had been covered" meaning that they did
| short shares.
| bityard wrote:
| I couldn't view the story because it requires you to click-
| through a legal agreement in order to bring up the content.
| exabrial wrote:
| Currently queuing, but should be available in 10m or so:
| https://archive.is/wip/avECz
| nfriedly wrote:
| Money Stuff had some good coverage of the GameStop /
| r/wallstreetbets shenanigans over the past couple of days:
|
| Monday:
| https://www.bloomberg.com/news/newsletters/2021-01-25/money-...
|
| Yesterday:
| https://www.bloomberg.com/opinion/articles/2021-01-26/will-w...
|
| Update: here's today's issue:
| https://www.bloomberg.com/opinion/articles/2021-01-27/reddit...
| motohagiography wrote:
| Totally random outage I'm sure. From what I am interpreting, the
| people who have most to lose on this are the banks and brokerages
| who needed to buy the GameStop stock to cover their positions
| after selling the options to all these retail traders.
|
| There are regulatory "circuit breaker" conditions but I wonder if
| this was a more informal one. The internet hive mind wasn't in
| their risk models and I would wonder if there was risk of this
| event causing a cascading blow-up effect.
| robjan wrote:
| The outages are caused by the execution brokers not being able
| to execute orders fast enough resulting in the order queue
| getting longer and longer. Also other capacity issues caused by
| everyone logging in simultaneously.
| motohagiography wrote:
| That surprises me, as horizontal scaling to demand is a
| solved problem. One provider, sure, but cascading failures
| through many, that's a systemic critical infrastructure
| vulnerability that is going to bring down the regulatory
| hammer.
| bpicolo wrote:
| I'm under the impression that order books tend to be hard
| to scale horizontally, because they have tremendous
| atomicity requirement.
|
| Can anybody chime in whether these systems, today, tend to
| be on distributed infra versus e.g. mainframes or other big
| vertical compute pieces?
| LittlePeter wrote:
| The matching of orders for a single asset happens on one
| machine, call it matching engine. Matching is done based
| on price-time priority. Price is set by the trader, the
| time is set to the time the order was received by one of
| the order gateways sitting in front of the matching
| engine.
|
| The order gateways' clocks are in sync, up to precision
| epsilon. So if you send two orders serially from same
| data center (to ignore effects of public Internet
| latencies and routing), and if they happen to be
| processed by different gateways, you still will see same
| ordering of your orders in matching engine, bar some
| cosmic ray events.
|
| It is all commodity hardware running some flavor of
| Linux.
|
| However this was couple years ago, they may be using
| ASICs and FPGAs now. The matching of orders for a single
| asset must still be done in single process otherwise you
| cannot guarantee price-time priority.
| motohagiography wrote:
| Following up, there was a random theory on WSB that since
| hedge funds were short over %130 of Gamestop's stock,
| there is a real risk that this will cause a liquidity
| crunch where there is literally no available stock to
| cover their positions.
|
| As in there does not exist the stock to cover those
| positions, which means institutions are going to be in a
| race to avoid bankruptcy and have to outbid each other to
| acquire the remaining stock held by all these retail
| investors who know what they have. This is why WSB
| posters are saying $5000 is a conceivable price.
|
| This is what would cause regulatory intervention, and
| certainly sets up the means/motive/opportunity for
| interrupting trading. Like the Fed steps in and buys it
| out or something. This looks like an LTCM level event.
| hangonhn wrote:
| I don't know the specific answer to your question but I
| do have a data point to add. When I was just starting out
| in my career in the early 2000s, I worked for a hedge
| fund. One curious thing I noticed is that all the traders
| had time stamping machines on their desks that are
| inspected and sealed regularly. I was told that during an
| outage, these timestamp machines allow trades to continue
| to happen because the trader can write down the order and
| stamp it and their counter party would presumably do the
| same. Later the orders can then be reconciled when things
| are back up and running. This leads me to think that it
| is at the very least possible for transactions to be
| recorded in a distributed manner.
|
| Example of machine:
| http://www.carpenterstimesystems.com/Amano-TS3000i-OATS-
| Time...
|
| This might all be historical now.
| chippy wrote:
| There are also screenshots from some apps (I don't use them,
| dont know which ones) with messages saying that only AMC and
| GME stocks are being limited to protect risk, as well as total
| outages. I've seen one screenshot saying that users can only
| sell and not buy.
| ISL wrote:
| Somebody, somewhere, is going to get paid a lot of money when
| they figure out how to stabilize this inefficiency.
|
| If there is a way to insure traditional shorts and the option-
| sellers against the losses they incur in this sort of situation,
| those actors are now going to be willing to pay at least a small
| amount to ensure smooth operation of the markets.
|
| The transients right now (especially their emergent origins!) are
| interesting in the abstract, but generally antithetical to the
| efficient flow of capital.
| alephnan wrote:
| It's not inefficiency. Recklessness isn't the word, neither. It
| was greed and arrogance.
|
| (1) They borrowed more shares than in circulation
|
| (2) They double downed on their losing position and lost a $3
| billion bailout within a day.
|
| Their bet was, really, that financial institutions can stay
| solvent longer than retail can be "irrational". It was a game
| of chicken, but The emperor has no clothes.
| ummonk wrote:
| Well let's say a company is trading at 1 dollar per share with
| a billion shares outstanding. And some short-sellers are
| shorting it believing it is worth almost nothing. Now a bunch
| of traders buy up shares, sending it to $20, at which point the
| company dilutes by 10% by selling 100 million shares. All of a
| sudden the company has 2 billion in cash, and even with a
| complete collapse, it will still be worth more than the price
| at which the short-sellers shorted.
| vincentmarle wrote:
| Yes, but it's not easy: you have timing risk, litigation
| risk, and SEC enforcement risk.
| ISL wrote:
| Such an outcome is clearly possible. It is unclear whether or
| not it is efficient.
|
| This situation has shorts identify a probably-failing company
| and set the stage for traders to (possibly) detonate a
| GameStop/Hertz cash-bomb. It yields a transfer of cash from
| "greater-fools" to a probably-failing company.
|
| As a value-investor, it seems to me that occasionally raining
| cash upon failing companies seems like a strategy with a
| below-average probability of long-term success. Extracting
| that cash from unsophisticated investors seems to risk moral
| hazard -- the school of hard knocks is expensive and
| bruising.
|
| Someone, somewhere, should be able to profit from blunting
| these explosions. Why aren't options prices increasing to
| make this effect unlikely? Surely there are options-traders
| who are incurring losses as they expand their hedges.
| ummonk wrote:
| So one could argue that short interest is actually
| inefficient since it soaks up capital that would have gone
| into equity raises by a struggling company. I.e. that in a
| traditional market short sellers function as a sort of
| reverse pump and dump, preventing an otherwise viable
| business from raising short term capital and forcing it
| into bankruptcy and shuttering.
|
| Arguably, by injecting large amounts of cash into a handful
| of such companies, WSBers are not only saving those
| companies, but helping save others by puttinf predatory
| shorters out of business.
| ISL wrote:
| Understood and agreed, at least in part. In the best
| case, short-sellers are the jackals/vultures that cull
| the weak and free up capital for new ventures. To the
| extent that shorts engage in reverse pump-and-dump, that
| is likely, too, to be inefficient.
|
| It is my expectation that in the long term, both
| nefarious shorts and WSBers will lose to those working to
| create real value. It is simply unfortunate and perhaps
| unnecessary that the war between the chaos monkeys
| involves collateral damage. Such an environment adds
| reasons for successful companies to stay privately-
| traded, which is probably a net-negative for humanity.
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| paulpauper wrote:
| There is no rational reason to ever short this. The funds that
| are shorting this deserve to be liquidated for being so foolish.
| At best you can only double your money with thirsting , unless
| you keep adding to your short. Losses however are unlimited. Too
| many people think that they can make a fortune shorting, like in
| 2008. But the reason why a movie was made about those guys is
| because success at shorting is so rare and difficult that when
| someone does it successfully , it is big deal. No one makes
| movies about people who buy and hold stocks.
| paulpauper wrote:
| It is hard to fathom how much money ppl are making with options
| on this. I have never seen anything like this. It is like
| everyone is becoming multi millionaires on walsltreetbets. Like
| the fakebook IPO or What's App acquisition, when a bunch of
| people suddenly became millionaires. It is probably keep going
| up. This is the stuff dreams are made of, the stuff of legends.
| People think it cannot happen but then it does.
| xedeon wrote:
| Roughly $22M
| https://www.reddit.com/r/wallstreetbets/comments/l5nphz/gme_...
| xangel wrote:
| What about smaller brokers with less users?
|
| Robinhood is the biggest broker in the USA, Trading 212 is the
| biggest broker in Europe and the UK.
| andjd wrote:
| This seems like a classic pump-and-dump scheme to me. The twist
| is that instead of claiming that the target company is going to
| start doing way better, they're claiming that the upside comes
| from hedge funds over-shorting the stock.
|
| The people who are going to make a lot off this are the people
| who sell before the stock crashes. If those people were also
| suggesting others buy the stock on reddit, they may be criminally
| liable for securities fraud.
| mckirk wrote:
| There's a critical difference though: The amount of stock sold
| short is externally verifiable -- and it's still more than the
| available stock.
| firstfewshells wrote:
| Where is this information available?
| [deleted]
| [deleted]
| cdiamand wrote:
| I track /r/wallstreetbets chatter as a sideproject.
|
| https://topstonks.com/stocks/gme
|
| The chatter levels are through the roof today. Even more than
| when the market dropped in April due to the coronavirus.
| chippy wrote:
| There are around 800,000 people reading that subreddit right
| now. It seems like around 60 posts being submitted every
| second. Could you record these figures too?
| roybattylives wrote:
| The mods have a dashboard
|
| newest link: https://wsb.gold/public/dashboard/e65fcfcb-70a4-
| 4d86-b7fb-88...
|
| old link: http://104.131.48.154:3000/public/dashboard/e65fcfc
| b-70a4-4d...
|
| (not available right now .. no surprise)
| marzell wrote:
| I had never previously considered how website performance
| of individual subreddits might differ. I'm not a web dev,
| so it's probably not like an interesting engineering
| matter, but it is kinda interesting to witness this first-
| hand as a user. At least the rest of the site seems to be
| working ok.
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