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GameStop Is Rage Against the Financial Machine

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Re: GameStop Is Rage Against the Financial Machine

#231

Post by koheripbal »

bilegeek wrote: post #178
jimbob45 wrote: post #138

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…

If you look at the SEC website, they list all their current complaints filed against people for Insider Trading.

There are many [1].

[1] https://secsearch.sec.gov/search/docs?utf8=%E2%9C%93&affilia...

Re: GameStop Is Rage Against the Financial Machine

#232

Post by esoterica »

The "retail traders vs Wall Street" narrative is so fucking stupid. Who do you think is earning PFOF for every trade that someone makes through their brokerage? Who do you think is earning the bid/ask spread every time someone buys or sells? Who do you think is collecting the theta from all the calls and puts people are buying?

And last of all, who do you think is going to be left holding the bag when the price eventually collapses after the short squeeze ends?

Re: GameStop Is Rage Against the Financial Machine

#233

Post by dheera »

amalter wrote: post #194
dheera wrote: 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.

> We want to evaluate firms with a critical eye. If they are mis-valued, that serves no one.

Hard disagree here. Sometimes mis-valuing firms serves a LOT of people. There are many firms who could create value if only they had more capital to work with. As an example, it's very possible that a company hard hit by COVID could recover if they got fresh capital and used it to explore new business models that are quarantine-friendly. I'm all for kicking out non-believers from being involved in their equities in any way.

You can't short sell most early stage startups. If you don't believe in them you just don't invest in them. It's that simple.

As for companies who do bad things, like laundering money or misusing funds, we don't need to short their stock, we need to take them to court and get them punished.

You know which firms are really mis-valued? Hedge funds. They sit in armchairs in high rises on Wall Street and do nothing for me.

Re: GameStop Is Rage Against the Financial Machine

#234

Post by corey_moncure »

cbozeman wrote: post #136
unethical_ban wrote: post #72

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.

They're not useful. They're a means of wealth extraction disguised under whatever load of bullshit someone wants you to believe. I'll even prove it to you. Ask someone with skin in the Wall Street game to explain this stuff to you, not mathematically, but in layperson's terms, so simple that a young child could understand it. They either won't be able to do it, or they won't do it. You'll get one of two answers, "It'…

Tell your 5 year old you're going to give him 10 cookies, but he has a choice. Either he can have the 10 cookies right now, or he can pick up his room, and then he has the option of getting 10 cookies from you any time of the day or night during the next month, whenever he wants, no questions asked, no matter how busy daddy is. Or he can sell the option to any one of his friends or family, to guarantee they get 10 cookies in exchange for those pokemon cards he's had his eye on.

That's an options contract.

Re: GameStop Is Rage Against the Financial Machine

#235

Post by cannabis_sam »

boringg wrote: post #221
Blackstone4 wrote: post #201

Earlier quoted context omitted.

Well I work in financial services and I care about people including retail investors which disproves your point. Everything is not black and white. There are of course people in the sector who dont care. There are a mix of views.....

Agree - and glad to hear that. I think the statement should have been posted along the lines of a majority of people who are in positions of power in the financial industry barely care about retail.

> majority of people who are in positions of power in the financial industry barely care about retail.

Yeah, I agree. I should have worded it more like that.

Re: GameStop Is Rage Against the Financial Machine

#236

Post by berns »

koheripbal wrote: post #175
cbozeman wrote: post #164

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…

> This is not a logical sentence

It's illegal by definition. But since they can pay a fine for a net gain, you can say that they legally profit from doing something illegal.

Re: GameStop Is Rage Against the Financial Machine

#237

Post by cannabis_sam »

Blackstone4 wrote: post #201
cannabis_sam wrote: post #191

Earlier quoted context omitted.

>people in financial services are worried that [this will] dent confidence in the market. They they don’t give a single fuck about retail investors. (Outside of PR initiatives of course)

Well I work in financial services and I care about people including retail investors which disproves your point. Everything is not black and white. There are of course people in the sector who dont care. There are a mix of views.....

You are correct. I should have worded it more like the sibling comment.

Re: GameStop Is Rage Against the Financial Machine

#238

Post by mdnahas »

unethical_ban wrote: post #72

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.

Options are valuable because they are how Wall St. deals with probabilities.

We don't actually know what a company is worth. You can imagine estimating the worth (a.k.a., "net present value") of a company based on its future dividends (or stock buybacks). But any formula will contain a lot of probabilities of when each dividend will occur, the amount, and the discount factor (that is, how much future money is worth today). So what you get is actually a distribution of how much a company is worth.

The stock market doesn't deal with distributions directly. It uses options. A call option is the ability to buy a stock at a given price called the "strike price". So, from the prices for two call options, you can infer the probability that the stock's worth is between their strike prices.

Re: GameStop Is Rage Against the Financial Machine

#239

Post by koheripbal »

cwhiz wrote: post #208
koheripbal wrote: post #120

Earlier quoted context omitted.

Front Running is illegal, and companies get busted and fined for doing that. High Frequency trading is actually GOOD for retail investors because it reduces spreads and increases liquidity.

Ha! Not only does front running happen all the time, but high frequency trading is de facto legal front running. Just beat them on a shorter or faster wire. The whole thing is rigged.

That isn't Front Running - by definition.

Front Running is when you receive an order from a large client and you yourself trade in the same stock before them, and then sell the stock to them, or allow the spread to narrow and pocket the difference.

High frequency trading is not front running unless it illegally takes data from the client trading desk - which would be both obvious and highly illegal.

Re: GameStop Is Rage Against the Financial Machine

#240

Post by fairity »

chrchang523 wrote: post #186
fairity wrote: post #146

Earlier quoted context omitted.

Agree 100%. I think the smartest bet here is buying put options that expire far out. Currently, the price of the $320 GME PUT expiring in Jan 2022 is $240. That's free money...

I've been keeping an eye on the far-out-dated put options, and I haven't seen anything that's more compelling than simply leaving money parked in an index fund. The expectation that GME will drop back down to Earth over that timeframe remains priced in. The main takeaway from this incident is that margin-call-constrained short selling is even more dangerous than previously understood.

>The expectation that GME will drop back down to Earth over that timeframe remains priced in.

Yea, it does seem largely priced in, but perhaps not completely. If share price is $60 in 1 year, the ROI on that contract would be 9% -- so slightly better than what you'd reasonably expect an index fund to return. A $60 share price is higher than GME's all-time high prior this fiasco.

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