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GameStop Is Rage Against the Financial Machine

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Re: GameStop Is Rage Against the Financial Machine

#211
post #199
post #188

Earlier quoted context omitted.

You can have a short squeeze without naked shorting. Shorts who aren't naked have borrowed the stock from someone. If that person asks for it back, they have to go out and buy it in order to return it. At least in theory, if retail investors buy up the stock, some of the institutional investors who own it, and who have lent it out, will sell it to them. This could mean that they recall lent stock. As this happens, sh…

So it seems the issue is that people have borrowing agreements that can be recalled early (seems like it functions like a margin call in a way). Call it half-naked shorting, I guess. Still seems risky. I feel like they could've just bought call options and called it a day instead. Maybe that's too naive or call options are hard to find/pricey for Gamestop? That still doesn't explain how you know folks aren't naked sh…

I don't know they aren't, but it's illegal. Large hedge funds are unlikely to be breaking the law, and I haven't seen any evidence that they are which wasn't based on a misunderstanding of the free float numbers.

Stock borrowing is very very commonly done and renewed per-day, in the vast majority of situations this works fine.

Re: GameStop Is Rage Against the Financial Machine

#212
post #173

Earlier quoted context omitted.

> Right now there appear to be curbs on GME and AMC buy orders for TD Ameritrade and Schwab customers. Yes indeed. Ameritrade won't even let me exercise the calls I already own. It's ridiculous.

This is absolutely fucking ridiculous. Someone is getting fucked by their own leverage, they got caught, isn't that what the market is supposed to do? Kill the overleveraged non-sense to redistribute wealth to more efficient investments? It isn't a bank run to be blocked for the sake of society, this is just a bunch of rich people paying the price for risking too much... Boils my blood so deeply.

This is part of the game, though.

The hardest part of gambling is not coming up with the big winning bet -- it's getting whatever counterparty to pay you once you've won. It's always been this way, in sports, in horses, and on Wall Street. People come up with all sorts of reasons to not pay you and you have to shape your strategy around this.

Aaron Brown talks about how being a successful gambler is not about a few high-stakes wins, or a super-consistent record. It's about winning the right fraction of bets, so that nobody suspects you're a winner.

Re: GameStop Is Rage Against the Financial Machine

#213
post #166
post #23

Earlier quoted context omitted.

I don't think you understand what's happening here. There's only so much volume available as a result of the short positions. WSB et al are putting in money on a long hold. As a result that drives up the price. Yeah gamma's are in for sure making money. There are some people who have made multiple millions. One individual sitting at $31M currently on a $50k investment. Some retail will lose, but wall street instituti…

> One individual sitting at $31M currently on a $50k investment. What happens when one tries to cash out this kind of position? Does he or she actually walk away with $31M?

In this case (/u/DeepF*ckingValue) it's a rolling options positions so: yes, less the fees they've accumulated over the 2+ year history of the position.

Re: GameStop Is Rage Against the Financial Machine

#214

Earlier quoted context omitted.

I believe you are far off the mark here. Retail investors are well within their rights to drive up a stock to what could be above fair market value....some may well lose money in doing so. The whole narrative around retail vs. hedge funds/wall street is naive to say the least...people in financial services are worried that retail investors may lose a lot of money here which may dent confidence in the market. The iron…

value of a stock is what the market dictates is the value of the stock, not what an analyst wants the price to be. It is laughable to say that Hedges were using purely "fundamentals" for the past 10 years. Were people in the financial services worried about retail investors when Melvin was shorting GME into the ground at $5 a share? Intentional manipulation to quickly bankrupt a company. How about with the 2000s deri…

Price is what you pay in the market and value is what something is worth...clear difference.

Some people with in a group who hold a view does not mean the entire group holds that view.

In this game, I believe retail investors feel like they are winning now but ultimately many will lose money when the price comes down. In my view the price is not sustainable....

Re: GameStop Is Rage Against the Financial Machine

#215
post #172

Earlier quoted context omitted.

Really the only thing the hedge funds could do to "win more" in the long run is to stop shorting stocks en masse. The more they short sell, the more this can be pulled off again and again. Which is good IMO, I'd be happy in a market where short selling and negativity in general just isn't a thing. If you aren't optimistic about a company just stay out.

Hard no! I want scams and shady schemes uncovered. What a disappointment that Herbalife wasn't brought down by the shorts. I'm struggling to even understand what a market with "no negativity" means. We want to evaluate firms with a critical eye. If they are mis-valued, that serves no one.

>I'm struggling to even understand what a market with "no negativity" means.

Just imagine basically... every single other market. The price of goods at Walmart is not based on your bet on supply and demand.

If there are more buyers than sellers, the price goes up. If there are more sellers than buyers, the price goes down. If a business wants to raise money by issuing new shares, supply and demand will dictate the price.

The market doesn't need uninvested third parties sitting outside the ring gambling on the supply and demand outcome in order to set a price.

Re: GameStop Is Rage Against the Financial Machine

#216

Earlier quoted context omitted.

No it isn't. You know why front running isn't illegal? Because it keeps happening and companies keep getting fined for it. A "law" that allows you a merely pay a fine isn't a law, its a revenue-generating procedure. Murder is illegal. You can't pay $500,000 to the authorities and then go on about your business. For a law to have any weight, you have to be inconvenienced regardless of your financial status.

> You know why front running isn't illegal? Because it keeps happening and companies keep getting fined for it. This is not a logical sentence. They are obviously getting fined because it's illegal. The traders involved are also terminated, fyi. All banks are required to submit automated reports on Front Running detection algorithms daily to the regulators. Every trade is evaluated by the compliance systems. If you t…

> If you think the fines are not big enough

With crimes like these, it is nearly definitional.

It is trivial to put a price on the value of an action like this; if the fine for the action is less than it grosses, it is just a tax.

Re: GameStop Is Rage Against the Financial Machine

#217
post #30

Earlier quoted context omitted.

the reality is all of their major shorts are being squeezed not just Gamestop, but I agree I think their CNBC interview was just a distraction and doubt they could’ve closed out their entire short position overnight.

Dumb question - could the shorts actually negotiate with Gamestop directly to get them to issue new stocks? Wouldn't that be a win-win (and the retail loses, because a) the stock is diluted, and b) no one would be "forced" to buy from them)

I believe those shares would not be tradable for 6 months. But I am no expert.

Re: GameStop Is Rage Against the Financial Machine

#218
post #23

Earlier quoted context omitted.

I don't think you understand what's happening here. There's only so much volume available as a result of the short positions. WSB et al are putting in money on a long hold. As a result that drives up the price. Yeah gamma's are in for sure making money. There are some people who have made multiple millions. One individual sitting at $31M currently on a $50k investment. Some retail will lose, but wall street instituti…

> For them to win this they need to keep putting more money into the fire which pulls in bigger and bigger fish. This isn't true. The institutions with Short Exposure are connected to the institutions who buy Robinhood data and perform high frequency trading on those orders. Citadel and Melvin can BUY GME themselves to mitigate the risks. It is likely that a substantial amount of GME is being held by the institutions…

> This isn't true. The institutions with Short Exposure are connected to the institutions who buy Robinhood data and perform high frequency trading on those orders. Citadel and Melvin can BUY GME themselves to mitigate the risks. It is likely that a substantial amount of GME is being held by the institutions who had short exposure. It's basic risk mitigation.

-- They would have to do this at great cost and loss (rumor mill has it at current loss of $4B). If you believe the reports in the media Melvin has had to go ask for money from other institutions. Thus bigger fish would now be involved as they are putting money out to Melvin.

> The high frequency traders who have the Robinhood data are making money on every Buy GME order and will make money on every sell when this bubble collapses.

-- Agreed i said as much in my comment that people will make money on it - some retail some institutionals.

> It is wrong to present this as a populist uprising.

-- Disagree. This is a trade that at its core is a sentiment of disenfranchisement, anger at wall street short sellers, financial establishment - and of course with the hope of making money.

> This is an incredible fluctuation, a hilarious anomaly, but it is nothing more than that. It will have no lasting impact.

- Agree - most likely - it will however make wallstreet institutional short sellers think more carefully about their positions. There will be impacts but doubtful anything transcendent on the markets. If anything SEC will investigate Wallstreetbets traders as opposed to doing anything to Wall street (which has been having carte blanche under the last administration's effort to neuter the SEC).

> I firmly believe that the hedge funds that held GME short positions have bought into GME to mitigate their exposure. They likely bought in algorithmically using robinhood data and are making money off of retail right now.

-- Might be, however the losses they took at the beginning on their position were pretty steep to jump right back into the pool.

> My message to the people here: /r/wallstreetbets is not a gameshark. You are still playing their game. You are still playing a rigged game and you are still losing.

-- I don't think anyone has allusions that the tables have turned. This is more like the chance for this one time give a giant F U to wallstreet who has been perceived to be making money off the backs of the population without any care at all from retail investors.

Re: GameStop Is Rage Against the Financial Machine

#219

So, can someone explain rationally how options/derivatives are actually useful to the economy, rather than a market manipulation and gambling mechanism? In the traditional, elementary school understanding of stock, people buy into a company because they want part ownership, and the stock goes up as the company does well and has solid financial strength. Derivatives seem to be an unnecessary accelerator.

So many ways:

- If you own a stock and want to reduce the downside risk, you can buy a put option to ensure you'll always be able to sell your stock for a reasonable price, even if there's a financial crash.

- If you have the ability to produce some product (e.g. grain) but need some extra money (e.g. to buy seed or fix a tractor) or just want to lock in a sale price for your product, you can sell a futures contract.

- If you want need some product at some point in the future (e.g. fuel for your jets) and want to lock in the price, you can buy a futures contract.

Fundamentally, derivatives allow you to trade risk. You can pay somebody to absorb some risk for you or you can accept some risk in exchange for money.

Re: GameStop Is Rage Against the Financial Machine

#220

Earlier quoted context omitted.

Same stuff goes down on 4chan and several other sites. Not to mention the fact that the SEC has neglected to investigate insider trading for years now. IMHO why the fuck is shorting legal to begin with. Short insurance should be mandatory for short trading.

Well, the IRS doesn't go after rich people because they don't have the funding[1]; they only go after the people they can afford to go after[2]. I know the IRS is different from the SEC, Apples to Oranges. But like you said, they've neglected insider trading; it's probably for very similar reasons, because those being investigated just have too much power to take down. I'm sure the SEC will hammer these easy targets…

SEC got neutered when the previous US administration got into power. The administration before that was actively pursuing cases.
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