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cremeegg

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The story so far.

Shorting is selling shares that you do not own for delivery at a future date. Say the share is trading at €10 and you sell it for delivery in a month. You expect that the share price will drop and you will be able to buy it in a month for less than €10. That is perfectly respectable business practice

Now if you are a fancy Hedge Fund and you tell everyone that you are shorting Gamestop, people will think that is where the smart money is and that should push the price down. That is not respectable business practice.

If someone can buy up all the shares in the company then Fancy hedge Fund will be forced to buy at whatever price the seller wants as they must deliver the shares they have sold.

This is called a short squeeze. It happened in Volkswagen in 2008 https://www.ft.com/content/0a58b63a-4294-3e07-8390-c3aabef39a26

Recently a social media frenzy of daytraders bought up shares in Gamestop and created a short squeeze. It looks like great fun, but I wouldn't like to rely too much on owning shares in a company that is fundamentally worth about 10% of its current market cap.


Along comes Redit and Robinhood, they aggregate lots of
 
I am very disappointed that Robin Hood have now restricted purchase of certain stocks. One of them being first majestic silver minor which I own. They have also restricted SLV and of course game stop and many others.
The conspiracy theory is that Robin Hood which charges zero commission on trades, has done a deal with the hedge funds, (some of which are haemorrhaging cash) to restrict these trades. The small mum and pop investors can never be allowed to beat Wall Street!!!!
I’m sure it’s not quite as simple as that and possibly there are some regulatory reasons for these restrictions. Perhaps Robin hood has liquidity issues, which makes sense considering they charge zero commission.
 
I bought 194 shares at 77.90 and sold on Friday at 333. Made about 50k for buying and selling in a week. But its going to get nasty come Monday - if the people who control the market are going to lose, they'll change the rules and everyone holding GME in large amounts will lose badly.
 
cremeegg said:
Now if you are a fancy Hedge Fund and you tell everyone that you are shorting Gamestop, people will think that is where the smart money is and that should push the price down. That is not respectable business practice.
Click to expand...

Isnt a critical part of this story the 'naked' short sell also? That is, selling shares that they don't own and those shares amounting to more than 100% of the actual issued shares? I think in this instance, somewhere between 120%-130%.
I dont know how these things operate but it is clear corrupt practices overseen by very sleepy regulators, until the little guys get in of course.

It is a fascinating story so far.
 
audioflaps said:
I bought 194 shares at 77.90 and sold on Friday at 333. Made about 50k for buying and selling in a week. But its going to get nasty come Monday - if the people who control the market are going to lose, they'll change the rules and everyone holding GME in large amounts will lose badly.
Click to expand...
Fair play. That is done chunk of change..

Do you play the markets regularly?
 
Thursday's carry-on at Robin Hood was disgraceful. They actively stopped traders from buying while allowing traders to sell, thereby artificially impacting the price.
Even now, they have severe restrictions on buying, yet none on selling.
Free market!?
 
WolfeTone said:
Isnt a critical part of this story the 'naked' short sell also? That is, selling shares that they don't own and those shares amounting to more than 100% of the actual issued shares? I think in this instance, somewhere between 120%-130%.
Click to expand...
Tell me Wolfie, wouldn't naked shorting be complete and utter fraud? So effectively there's no proper record of ownership of equities - which facilitates this fraud? Who will be jailed for the 38% excess claims over and above actual Gamestop stock that emerged as part of this sham?

Over and above that, Robinhood are selling customer data (order flow) whilst unwitting customers think they're getting free trading - same model as facebook, google, etc - the customer is the product. Ponzi scheme artist, Bernie Madoff perfected the practice. Armed with this data, market makers can act on both sides of a trade despite the glaring conflict of interest.
The customer never actually has full legal title to an equity stock. There's no real time settlement with an opaque web of intermediaries (between brokers, market makers, centralised clearing houses, etc) in the middle and the counterparty risk and shenanigans that goes with that.

landlord said:
Perhaps Robinhood has liquidity issues
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Robinhood's CEO went on network TV and stated that the company had no liquidity issue (in responding to questions to explain away the rug pull in terms of preventing customers from buying Gamestop stock). Within hours, it emerged that it had raised $1 billion from investors.

If only there was a better way...
 
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lledlledlled said:
Thursday's carry-on at Robin Hood was disgraceful. They actively stopped traders from buying while allowing traders to sell, thereby artificially impacting the price.
Even now, they have severe restrictions on buying, yet none on selling.
Free market!?
Click to expand...

That was a very shady move my RH. If the reason they stopped the buying was to de-risk their book, they could have increased the margin requirements instead. Stopping the buying, stopped the gamma squeeze in its tracks.
 
PebbleBeach2020 said:
Fair play. That is done chunk of change..

Do you play the markets regularly?
Click to expand...

I invest using Degiro regularly but I wouldn't say I "play the markets" though. I was just very lucky and to be honest it was very dangerous and I shouldn't have done it. I invested 4k and then decided to use another 10k on margin, so I could have lost 14k in total. I decided to sell on Friday as the risk was just not worth it, plus Degiro decided to call in the margin to be closed by Monday as GME was too volatile for them to allow margin on it anymore. So if the price took a dive on Monday, I wouldn't be able to make it back in time.

It also wasn't worth it from a mental health point of view. I wasn't able to sleep most of the week. The value of my shares increased $26k in one day, dropped $10k in one day, up $36k the next day, and dropped $56k in the space of 10 mins one day. Once it went back up enough I just sold. Reminds me of bitcoin - a lot of people are going to get burned by GME at some point.
 
audioflaps said:
I bought 194 shares at 77.90 and sold on Friday at 333. Made about 50k for buying and selling in a week. But its going to get nasty come Monday - if the people who control the market are going to lose, they'll change the rules and everyone holding GME in large amounts will lose badly.
Click to expand...
Well done! You got rewarded for taking the risk and cgt tax on that will help with the vaccines distribution!:)
 
audioflaps said:
I invest using Degiro regularly but I wouldn't say I "play the markets" though. I was just very lucky and to be honest it was very dangerous and I shouldn't have done it. I invested 4k and then decided to use another 10k on margin,
Click to expand...
Didn't know Degiro allowed people use margin. did you have to take an exam to prove you understood the risks, I had to take an "exam" to prove I understood "complex investments" just to buy an investment trust recently and it wasn't a trivial one either. I presume you were always able to trade it though on degiro not like Robinhood so you could have exited it at any time. Id say Thursday night was the sleepless one. Fair play though
 
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Robin Hood don't make money from trades. If they had no liquidity issue, why did they prevent people from buying but not from selling?

We're they influenced by the Hedge Funds?
Some analysts estimate Thursday's actions by RH saved the Hedge Funds up to $6bn.

There may be a reasonable explanation but there also appears to be grounds for an SEC investigation.

Hopefully the long term impact of all of this is a restriction or banning of short selling.
 
lledlledlled said:
There may be a reasonable explanation but there also appears to be grounds for an SEC investigation.
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Twitch founder, Justin Kan was issued with a cease and desist for tweeting a tip that he got claiming that Citadel re-up'ed their shorts just before Robinhood locked down GME purchasing. Hopefully it all comes out in the wash.
 
WolfeTone said:
Isnt a critical part of this story the 'naked' short sell also? That is, selling shares that they don't own and those shares amounting to more than 100% of the actual issued shares? I think in this instance, somewhere between 120%-130%.
I dont know how these things operate but it is clear corrupt practices overseen by very sleepy regulators, until the little guys get in of course.

It is a fascinating story so far.
Click to expand...

Do you have specific "corrupt" practices in mind - or is it a general description of all financial markets?
 
People are taking big bets. Some are winning, some are losing. It's not stopping Gamestop from buying and selling video games from stores or whatever else they do.

I have not seen anything in this story that necessitates either more or less public intervention.
 
Here is what I posted on this topic on another forum:
"I have conflicting views. Like everyone, I enjoy seeing hedge funds get stuffed occasionally. The downside is that it will put professionals off short-selling if a group of amateurs, conspiring together, can exploit the unlimited upside to bankrupt them. Short sellers can discharge a valuable service to society. Back in 2008, if the Irish government had heeded the hedge funds that were short-selling the Irish banks, rather than the bureaucrats (libel laws prevent me from using a different noun) who insisted the banks were solvent, Irish taxpayers might have been spared a few billion."
 
Colm Fagan said:
The downside is that it will put professionals off short-selling if a group of amateurs, conspiring together, can exploit the unlimited upside to bankrupt them.
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I agree.

But this was a novelty. It will be hard to muster this kind of force again. A little guy can always drop out and bet against the bet against the bet!
 
joe sod said:
Didn't know Degiro allowed people use margin. did you have to take an exam to prove you understood the risks, I had to take an "exam" to prove I understood "complex investments" just to buy an investment trust recently and it wasn't a trivial one either. I presume you were always able to trade it though on degiro not like Robinhood so you could have exited it at any time. Id say Thursday night was the sleepless one. Fair play though
Click to expand...

Yes you have to pass an exam to upgrade your Degiro account
 
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