Gamestop Reddit Revolution

[Abraxos]

It's funny how political cronies such as Elizabeth Warren are now wanting to regulate the stock market when Wall Street get a taste of their own manipulation game from the 'regular people'.

 

[klutedavid]

Heard about this yesterday but didn't really understand the details pertaining to stock trading. The video below helped me understand that. The basic gist of the story is a bunch of Reddit users some of which were former Gamestop employees noted how that stock is over valued. (That once was a nice video and computer game chain but in the era of streaming services like Steam etc. has much less demand). It was obvious that stock was being artificially manipulated and inflated by wall street Moghuls for their own ends, most likely so they could crash it and buy it on the cheap. So the Reddit folks decided to jump on and do the same. They bought the stock high, and instructed their broker to not short it. So from I've read or heard the Stock has surged this last year 2000%. And now that the major Wall Street Companies, are likely to loose a lot of money when it crashes they are upset and whining to congress for regulation and other kinds of action.

PS - I guess the story right now relates to hedge funds. They got out of the market on the stock when it went too high.


Reddit co-founder calls GameStop frenzy a 'bottom-up revolution,' shifting power to small investors

That's not how it worked.

The hedge funds were short selling the share, meaning that they bet the share was decreasing in value. The reddit folk noticed what the hedge funds were doing and pushed the value of the share up. Thereby causing the hedge funds to lose money. It's not easy to understand.

You can make money on the share market by backing a rising share, and a falling share (short selling).

 

[LightLoveHope]

Heard about this yesterday but didn't really understand the details pertaining to stock trading. The video below helped me understand that. The basic gist of the story is a bunch of Reddit users some of which were former Gamestop employees noted how that stock is over valued. (That once was a nice video and computer game chain but in the era of streaming services like Steam etc. has much less demand). It was obvious that stock was being artificially manipulated and inflated by wall street Moghuls for their own ends, most likely so they could crash it and buy it on the cheap. So the Reddit folks decided to jump on and do the same. They bought the stock high, and instructed their broker to not short it. So from I've read or heard the Stock has surged this last year 2000%. And now that the major Wall Street Companies, are likely to loose a lot of money when it crashes they are upset and whining to congress for regulation and other kinds of action.

PS - I guess the story right now relates to hedge funds. They got out of the market on the stock when it went too high.


Reddit co-founder calls GameStop frenzy a 'bottom-up revolution,' shifting power to small investors

This whole situation is about holding a position with a certain amount of capital which covers the position if it goes bad. Shorting a stock is lending a share at a price and guaranteeing to buy it back at what you hope is a lower price and then the difference is your profit.

If the price goes up wildly you then have a debt exposure where your capital might not cover the liability so you are forced to buy the share.

Shorting a stock that goes good, by a large margin, greater than your reserve sends you bankcrupt.
If you have a big pocket and you can weather the storm, shorting a stock can send it through the floor if the buyers run out of money to hype the price. The shorters could borrow more, promising things will turn round. Companies often have to use their capital value to borrow money against, so reducing their value with shorting them, can cost companies higher borrowing rates, so there is no innocent outcome, it can cause companies to fold etc.

If your audience is large enough, and they put up the cash they can blow out the shorters, who when they close their positions, have to buy the stock so hyping the price higher.

The market regulates itself by suggesting movements need to be proportionate and not intentional to shift the price for personal gain, ie. pump and dump operations. Gamestop is just playing with a failing company, but that is not illegal or wrong. Whether someone is manipulating the information for their own gain with insider information etc, that would be wrong, but probably difficult to prove.

 

[Pavel Mosko]

That's not how it worked.

The hedge funds were short selling the share, meaning that they bet the share was decreasing in value. The reddit folk noticed what the hedge funds were doing and pushed the value of the share up. Thereby causing the hedge funds to lose money. It's not easy to understand.

You can make money on the share market by backing a rising share, and a falling share (short selling).

yeah thanks. I realize that now after watching various news commentaries etc.

 

[ViaCrucis]

That's not how it worked.

The hedge funds were short selling the share, meaning that they bet the share was decreasing in value. The reddit folk noticed what the hedge funds were doing and pushed the value of the share up. Thereby causing the hedge funds to lose money. It's not easy to understand.

You can make money on the share market by backing a rising share, and a falling share (short selling).

Right, basically borrowing the share then having to give the share back, but keeping the difference as profit.

A $10 dollar share drops to $7, the share is returned and the short seller gets $3 profit. It's betting on a loss and reaping the reward.

I'm frankly just tickled pink watching the wealthy who game the system all the time get beat at their own game by regular people, and then go into panic mode.

Watching not only Goliath get knocked down by David, but then cry about losing afterward is some pretty tasty schadenfreude.

-CryptoLutheran

 

[friend of]

I don't understand how any of this works but I choose to laugh anyway.

 

[Gregory Thompson]

Heard about this yesterday but didn't really understand the details pertaining to stock trading. The video below helped me understand that. The basic gist of the story is a bunch of Reddit users some of which were former Gamestop employees noted how that stock is over valued. (That once was a nice video and computer game chain but in the era of streaming services like Steam etc. has much less demand). It was obvious that stock was being artificially manipulated and inflated by wall street Moghuls for their own ends, most likely so they could crash it and buy it on the cheap. So the Reddit folks decided to jump on and do the same. They bought the stock high, and instructed their broker to not short it. So from I've read or heard the Stock has surged this last year 2000%. And now that the major Wall Street Companies, are likely to loose a lot of money when it crashes they are upset and whining to congress for regulation and other kinds of action.

PS - I guess the story right now relates to hedge funds. They got out of the market on the stock when it went too high.


Reddit co-founder calls GameStop frenzy a 'bottom-up revolution,' shifting power to small investors

I recall an election speech by a man who is no longer president, said somethings about removing regulations for more profits or whatnot ... hmmm . is this reaping what was sown?

 

[Pavel Mosko]

I recall an election speech by a man who is no longer president, said somethings about removing regulations for more profits or whatnot ... hmmm . is this reaping what was sown?

No. Not according to pundits I've listened to. Actually one of Biden's cabinet, that governs this sort of thing was around in 2008 as an Obama Economist when this sort of thing was actually theoretically possible, and she currently is compromised on the issue.


By the way, you imply this is bad in your wording, I think just to try to get in one last ditch cheap shot against Trump. I don't think this is bad, when the little guy is able to get a nice big share of the pie that is a good thing! So if Trump did something to lead to this bravo, because this was an area lurking below the water line that needed to be exposed. But it looks like things are wrapping up for Crony Capitalism rather than the little guy...

Yellen received $800G from hedge fund in Gamestop controversy; WH doesn't commit to recusal

 

[GDL]

Right, basically borrowing the share then having to give the share back, but keeping the difference as profit.

I'm not watching too closely, but didn't the reddit group notice the short positions exceeded the existing shares?

If so, shouldn't we be looking at "naked shorting"?

 

[Athanasius377]

What I think is missing here is that if anyone thinks that there aren't hedge funds profiting off the inflating the price of Gamestop I have a bridge to sell you. Short selling works like this. First you need margin. Then you need to locate shares to borrow in order to sell. If the shares go down in value you buy back the shares at the lower price and keep the difference. If the shares increase in value you loose money. Potentially a lot. In theory the potential loss on a short position is infinite. So what happened was the hedge fund that sold short received proceeds from the sale. When the stock began to rise the fund began to loose money because short positions have to go through a weekly "Mark to Market" where the proceeds from the sale are adjusted by the market value of the short position. Eventually the shares of gamestop rose such that it likely triggered a margin call where the fund had to either buy to cover (close the short) or increase equity via a deposit cash or securities. The risk to anyone who short sells as opposed to buying long (normal stock buy) is that you can loose way more than your initial investment.

What upset people is that short selling can manipulate the price by keep the price artificially low. What's why in the 2008 crisis there was a ban on short selling financial firms and the instituting of the "uptick" rule. While I have no love for short sellers it is a legitimate way of making money in the market. However regulators are not wrong for being concerned here. This targeting of Gamestop wrecks havoc in the marketplace by market makers not being able to establish an orderly market, investors getting pinched by trading halts (due to the former). Not to mention the effect it has on pricing options contracts on the stock. I saw put options that had a $112 bid/offer spread this week. That's insane. And make no mistake, it might be retail investors who started this but I guarantee you it will be retail investors that also get hurt.

 

[Jeff11]

When the large hedge funds started losing billions they stopped trading in gamespot stock. The red Robin app is owned by one of these hedge funds That had billions in losses. They had a vested interest in stopping trading. If they do a congressional investigation people are going to go to jail.

 

[Gregory Thompson]

No. Not according to pundits I've listened to. Actually one of Biden's cabinet, that governs this sort of thing was around in 2008 as an Obama Economist when this sort of thing was actually theoretically possible, and she currently is compromised on the issue.


By the way, you imply this is bad in your wording, I think just to try to get in one last ditch cheap shot against Trump. I don't think this is bad, when the little guy is able to get a nice big share of the pie that is a good thing! So if Trump did something to lead to this bravo, because this was an area lurking below the water line that needed to be exposed. But it looks like things are wrapping up for Crony Capitalism rather than the little guy...

Yellen received $800G from hedge fund in Gamestop controversy; WH doesn't commit to recusal

It's not so much a shot against Trump, but the things he said appealed to a wide audience, it was more of a comment on that.

 

[Jeff11]

What I think is missing here is that if anyone thinks that there aren't hedge funds profiting off the inflating the price of Gamestop I have a bridge to sell you. Short selling works like this. First you need margin. Then you need to locate shares to borrow in order to sell. If the shares go down in value you buy back the shares at the lower price and keep the difference. If the shares increase in value you loose money. Potentially a lot. In theory the potential loss on a short position is infinite. So what happened was the hedge fund that sold short received proceeds from the sale. When the stock began to rise the fund began to loose money because short positions have to go through a weekly "Mark to Market" where the proceeds from the sale are adjusted by the market value of the short position. Eventually the shares of gamestop rose such that it likely triggered a margin call where the fund had to either buy to cover (close the short) or increase equity via a deposit cash or securities. The risk to anyone who short sells as opposed to buying long (normal stock buy) is that you can loose way more than your initial investment.

What upset people is that short selling can manipulate the price by keep the price artificially low. What's why in the 2008 crisis there was a ban on short selling financial firms and the instituting of the "uptick" rule. While I have no love for short sellers it is a legitimate way of making money in the market. However regulators are not wrong for being concerned here. This targeting of Gamestop wrecks havoc in the marketplace by market makers not being able to establish an orderly market, investors getting pinched by trading halts (due to the former). Not to mention the effect it has on pricing options contracts on the stock. I saw put options that had a $112 bid/offer spread this week. That's insane. And make no mistake, it might be retail investors who started this but I guarantee you it will be retail investors that also get hurt.

The short sellers are the ones who bankrupted Sears Montgomery ward other retailers etc. they would’ve bankrupted game spot if they got their way. When they were making millions on shortened stock companies like Sears no one said a word but when they lose millions on the short position they stop trading. I agree with what others have said it’s criminal

 

[Jeff11]

The Biden administrations is not going to address this. His Secretary of the treasury was an executives for one of the large hedge funds who largely profited by short selling.

 

[jacks]

Just a note, this situation has been painted as Big guy vs Little guy i.e. hedge funds vs private investor. However, hedge funds often manage pension funds, 403b's and other retirement vehicles. So really when they get hurt so do some of the really small investors, people who don't even realize their retirement is associated with a hedge fund. Most of us will never rise to the financial level of "private investor", that is going out and buying stock on our own. That said, I've never liked short selling, it reminds of the "Don't Pass" bet in craps, legal but just kind of rude.

 

[Athanasius377]

The short sellers are the ones who bankrupted Sears Montgomery ward other retailers etc. they would’ve bankrupted game spot if they got their way. When they were making millions on shortened stock companies like Sears no one said a word but when they lose millions on the short position they stop trading. I agree with what others have said it’s criminal

I can’t speak to MW but Sears went bankrupt due to almost criminal incompetence. And you are partially correct in that SS didn’t help. The biggest problem that Sears had was they were a retailer that became a landlord all the while online retailers ate their lunch. And to be clear I have no use for anyone who manipulates the market regardless of which side of the trade their on. No matter how you cut this GameStop issue it’s a classic pump and dump operation and it will be the small retail client that’s going to get pinched. While the hedge funds that are in the long side dump their shares at $300. Just wait and see.

 

[Athanasius377]

Just a note, this situation has been painted as Big guy vs Little guy i.e. hedge funds vs private investor. However, hedge funds often manage pension funds, 403b's and other retirement vehicles. So really when they get hurt so do some of the really small investors, people who don't even realize their retirement is associated with a hedge fund. Most of us will never rise to the financial level of "private investor", that is going out and buying stock on our own. That said, I've never liked short selling, it reminds of the "Don't Pass" bet in craps, legal but just kind of rude.

Great point. Hedge funds are not subject to registration infer the investment co act of 1940 like mutual funds are. They are inherently risky which is why they are open mostly to accredited investors such as institutions and high net worth individuals as defined by FINRA. Short selling is a legitimate albeit risky and obsolete way to take a bearish position. The capital requirements to involve the stock directly make the strategy useless to retail investors. The better route would be to limit your exposure to an adverse market by say buying put options to open. That way the most you can lose is your initial investment yet you profit as the stock decreases. It seems to me that this hedge fund manager did exactly what retail investors are often accused of. Meaning opening a risky position without giving much though about bad things that can and will happen. If that’s the case I don’t have any sympathy for said manager. They knew better. Just my two cents. Not trading advice.

 

[Yekcidmij]

When the large hedge funds started losing billions they stopped trading in gamespot stock. The red Robin app is owned by one of these hedge funds That had billions in losses. They had a vested interest in stopping trading. If they do a congressional investigation people are going to go to jail.

Not really. When the DTCC's risk models started blowing up, they demanded more collateral from RobinHood who couldn't provide it without limiting their "customer's" positions and obtaining additional funding. There's nothing nefarious here. The DTCC's risk models required more capital, because if the risk was realized, then the result could be far more damaging than is being imagined at the moment.

What’s the DTCC and How Did It Stop GameStop Mania?

Failure of the Clearinghouse: Dodd-Frank’s Fatal Flaw? | CLS Blue Sky Blog

 

[Sparagmos]

It's funny how political cronies such as Elizabeth Warren are now wanting to regulate the stock market when Wall Street get a taste of their own manipulation game from the 'regular people'.

Im surprised this got so many “agrees.” Warren has been going after Wall Street for years. I though that was common knowledge.

 

[SamanthaAnastasia]

“Rules for thee but not for me” and “Do as I say, not as I do” is all I can think of. These hedge fund managers are literally doing the exact same thing as these redditors.