I think if you really want to understand what is going on you actually have to read the DD "due diligence" and not just look at the funny memes. I found [1] might be a good starting point. I'm not that into finance stuff, but the idea of a short squeeze still happening at the end of this week definetly seems interesting. It could be triggered by all the call options expiring on Friday, which will have to be covered b…
No. As we approach Friday there will be greater selling pressure from all the weekly call buyers trying to cash out. This is because most retails who bought these options do not want to exercise the option to purchase. So what happens when millions of people smash the sell button on Friday? Most likely sell off starts tomorrow toward closing bell.
By the way, the move we saw today was not squeeze driven. It was entirely driven by speculation craze. They’re not squeezing anyone but each other.
> The "little guy" refers to the Reddit traders that are making a killing right now, with the expectation that eventually the stock price will crash again. The reddit traders are only making a killing if they're selling these inflated positions. At some point somebody will be left holding the bag, odds are it will be a bunch of people from wallstreetbets and other retail investors that are late to the party. There's…
Can someone explain how we're supposed to believe WSB can move the market that much? I mean, it's up against hedge funds etc with literal billions and we're supposed to believe a bunch of people on Robinhood can go against those higher power and cause them some inconvenience? The volume for GME today was like 89,734,235 vs an average of 24M . How does "retail" traders can keep the stock up 100% from the previous day…
This is, I think, at the heart of the problem, and vastly unreported by mainstream media. In short I encourage you to look up the “nasdaq whale” trade from this past summer 2020, of soft bank fame. Butchering the premise, algorithms (algos) front run Robinhood options. This is how Robinhood makes money, selling this access to investment firms. These algos cause a compounding effect with those Robinhood trades. When combined with the compounding effect of a “melt up” in a short squeeze (described elsewhere in this thread), the effects are enormous. I believe WSB redditors stumbled upon this unintentionally, but the market effects are demonstrated at scale with the Nasdaq Whale trade (and the Essex boys crude oil crash before it). Whether you believe this is “right” perhaps should be informed by whether you believe a market where the majority (>50%) of trades are executed by computer algorithms reacting to preceding market moves most likely executed by computer algorithms. If ever more algorithms compound each other ad infinitum, can’t the market be manipulated by an ever smaller number of market participants, their motivations however perverse?
That's not true. The same share can be borrowed an arbitrary amount of times. Palm reached short interest of nearly 150% during its heyday. By definition that would require float to be borrowed a second time. https://money.stackexchange.com/questions/126685/can-a-singl...
Yes but what I’m saying is that the float doesn’t increase from 100 -> 200. There’s still only 100 shares on the market at any given time. If Alice shorts 100 cows on Monday, and then Bob shorts 100 cows on Tuesday, and both are due at close of market on Friday, it’s gonna be a bloodbath.
There are 100 cows. A hedge-fund believes that the milk consumption will go to zero, so they borrow the 100 cows for one month and sell them for $1 each. Then they borrow them again, and sell them once more for 90c. Certain that they will worth $0 at the end of the month A Redditor notices this. She knows that in a month's time, the hedge-fund will have to buy 200 cows, and there are only 100 available. Her plan is s…
> Hedge-fund cries foul. Doesn't like being beaten in it's own game. Have any of the hedge funds actually cried foul?
yeah - this is just a squeeze. they happen. any sophisticated player in the market will recognize this as a normal (though not common) thing.
the weird and new part is that the people cornering the market are a horde of retail traders who are colluding in the open, but in a way regulators probably don't have tools to address.
This is a great example of how the stock market is not about fundamentals, just like Bitcoin, it’s all about popularity and perception. In the end, people don’t care if the “stock is really worth” the price, they only care if themselves or someone else are willing to pay the price, nothing else really matters.
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” - Ben Graham This mostly holds true depending on you define 'long run.'
It seems "the long run" in the context of this quote is getting longer over the past 20 years (or more), with high multiples and companies that won't return the capital invested in them for many, many years, even in optimistic scenarios.
Does that mean the weighing part is becoming less important, and the voting part more so?
That is not naked short selling. Naked short selling is when you sell a stock short without first borrowing it. The parent to your comment describes someone buying a stock from someone who sold it short, and turning around and it selling it short themselves. This happens organically and is not "naked." Beware the incredible amount of false and misleading information about this situation online. Things catch on in the…
Ok thanks I think I got your point but you probably worded it wrong. Some can’t buy a stock and then “short sell” it, right? He just sold it
Right. But you can buy a stock (without knowing it was a borrowed share in a short sale), and then lend it to someone else (who intends to sell, it, thus creating another short sale).
So to unwind this, the one existing share has to get bought (by someone who short-sold it), and returned (to the owner who lent it out), twice.
There are 100 cows. A hedge-fund believes that the milk consumption will go to zero, so they borrow the 100 cows for one month and sell them for $1 each. Then they borrow them again, and sell them once more for 90c. Certain that they will worth $0 at the end of the month A Redditor notices this. She knows that in a month's time, the hedge-fund will have to buy 200 cows, and there are only 100 available. Her plan is s…
And (no one seems to be talking about this) but there's definitely a systemic cost. Going forward, how do you effectively manage the risk of one of your positions becoming a meme? This happening once is an interesting situation and I've certainly enjoyed watching it play out. If it happens repeatedly it will definitely start to undermine the investing public & market participant confidence in the market. That's certa…
I don’t think dismissing this phenomenon as a stock turning into a meme is right. WSB is...something, but there is actually a rationale behind going long GME. If you think that the new CEO, known for turning dead retail into profitable online content and e-commerce businesses (as I understand it), is going to turn GME around, then buying $12 Apr 21 calls for thirteen cents or whatever it was makes sense absent any no…
> but there is actually a rationale behind going long GME.
not at this price. There's a rationale for doing so at sub $10 a share.
"I highly doubt you're going to find some Joe Nobody -- you're going to find some very well financed, planned player." Such as? It's been a week and thousands of reporters and traders can't identify a whale moving billions? Or are you just making this up?
"Or are you just making this up?" What a funny retort. Wait, are you just making up the notion that we can "identify" whales moving billions? Do we check the central trade registry and cross reference with billionaires? Do you know how any of this works? Or are you just making this up? Unless you're the SEC, this isn't possible. Reporters can't do that, so if you're taking the absence of that evidence as evidence, yo…
You can tell apart invidual retail investors vs a single whale.
But once borrowed, the shares can’t be borrowed a second time. So if 100 shares are borrowed and sold short, they’re back on the market, yes. But the total number of shares available is 100, not 200.
That's not true. The same share can be borrowed an arbitrary amount of times. Palm reached short interest of nearly 150% during its heyday. By definition that would require float to be borrowed a second time. https://money.stackexchange.com/questions/126685/can-a-singl...
Honest question. How does that explain what happened with VW? I always thought there was a supply problem with shares to be shorted.