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An Update on Market Volatility

blog.robinhood.com

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Re: An Update on Market Volatility

#111

Post by miguelrochefort »

totalZero wrote: post #34
miguelrochefort wrote: post #6

"As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment." Can anyone translate that? It seems to be referring to: * https://en.wikipedia.org/wiki/Net_capital_rule * https://en.wikipedia.org/wiki/Automated_clearing_house

> SEC net capital obligations They have to meet certain governmental guidelines on deposits vs asset price risk. > clearinghouse deposits Clearing members have to deposit money into clearinghouses as insurance in case a firm goes under.

I can understand how risk management might be necessary for margin trading, but is it really necessary for non-margin trading?

And if it's a scaling issue, shouldn't all stocks be equally affected, rather than cherry-picking just a few?

Re: An Update on Market Volatility

#112

Post by Cd00d »

Miner49er wrote: post #101
Cd00d wrote: post #80

I'm honestly confused. I'm seeing a lot of rage in these threads. More than I'd expect. I understand not liking the hedge funds, and wanting to "stick it to the man" in some way, but it seems like more is going on here. Nobody is buying GME long at $400. The price is crazy. GameStop's business is selling used hard copies and leaning into customer dissatisfaction. It's a clear bubble and people are going to be hurt wh…

It's a short squeeze, not just a bubble? I bought a single share near $400 for the memes, so I wouldn't say "nobody". Some retail investors will likely lose, sure, but the biggest losers will be the shorts, and retail/longs will win as a whole. That's why people are mad, with Robinhood's manipulation they are setting it up so only the shorts win and almost no remaining retail.

I'm sorry I still don't understand and I hope you will clarify.

You bought at $400 and expect that to be a good investment?

How will the longs that bought above arbitrary number $20 benefit in the long term?

Re: An Update on Market Volatility

#113

Post by DennisP »

victorbojica wrote: post #66
DennisP wrote: post #30

Earlier quoted context omitted.

It was blocked in Robinhood's UI, but on the back end the hedge funds could trade at will. And the hedge funds had to buy a lot of stock to cover their shorts, so it was handy to get the retail buyers out of the way.

How do you know this ?

I read a bunch of articles today and yesterday. Robinhood outsources their order execution to Citadel, which handles more than just Robinhood trades.

Or actually, "outsources" is a misnomer because Citadel pays them for the orders, so they can make money front-running them. That's why Robinhood trades are "free" for their retail users. You don't pay a fee but you get a slightly worse price.

Citadel also, fwiw, just loaned $2.5B to a fund with a lot of short exposure to GME.

Re: An Update on Market Volatility

#114

Post by notahacker »

gmaster1440 wrote: post #106
dcolkitt wrote: post #104

Earlier quoted context omitted.

A high short interest is not a sign of any sort of malfeasance. There’s no upper limit of shorting, since shares can be borrowed, sold, then borrowed again. Short interest above 100% is perfectly fine. Stocks can and do go over this imaginary line, without any fraud involved. It just means that many people disagree about the price. Allowing speculators to build up large short positions is a good thing, because it hel…

There is nothing inherently wrong in short interest above 100%, as you point out. There is no disagreement from me that it's possible to both have large short interest and at the same time have healthy economic activity devoid of fraud. The core of the social movement here is an asymmetry in who gets to engage in audacious economic transactions. Is it reserved exclusively for the institutions we should be thanking fo…

Anyone is able to have opposite reaction to an audacious economic transaction, it just takes a lot of retail traders to have an opposite reaction to one hedge fund. So even if the hedge fund's audacious bet is horribly wrong, the smart money reacts and profits before the crowd can coordinate their pile on. Hedge funds bet against other hedge funds too.

The asymmetry is who loses, and unlike the hedge funds with dreadful risk management, most of the retail traders piling in this week won't have mansions and yachts to go back to after their bad bet turns sour.

Re: An Update on Market Volatility

#115

Post by gmaster1440 »

notahacker wrote: post #114
gmaster1440 wrote: post #106

Earlier quoted context omitted.

There is nothing inherently wrong in short interest above 100%, as you point out. There is no disagreement from me that it's possible to both have large short interest and at the same time have healthy economic activity devoid of fraud. The core of the social movement here is an asymmetry in who gets to engage in audacious economic transactions. Is it reserved exclusively for the institutions we should be thanking fo…

Anyone is able to have opposite reaction to an audacious economic transaction, it just takes a lot of retail traders to have an opposite reaction to one hedge fund. So even if the hedge fund's audacious bet is horribly wrong, the smart money reacts and profits before the crowd can coordinate their pile on. Hedge funds bet against other hedge funds too. The asymmetry is who loses , and unlike the hedge funds with drea…

This is exactly where I will agree 100% with you, and why my original comment is more cautionary than optimistic.

Re: An Update on Market Volatility

#116

Post by ABeeSea »

nightski wrote: post #24
systemvoltage wrote: post #12

Earlier quoted context omitted.

Mark my words - Robinhood is going to be fine and it will have negligible impact. They have a strong product and better than anyone else in the market as a mobile app.

It's a pretty product but calling it "strong" is very generous. It goes down constantly and I'd personally never trust more than a few hundred bucks to the platform. It's by far one of the worst brokerages in terms of execution and reliability.

It’s not meant for day trading; it’s meant for investing.

Re: An Update on Market Volatility

#117

Post by platz »

miguelrochefort wrote: post #85
platz wrote: post #18

Earlier quoted context omitted.

Only invest what you can afford to loose

- Does this advice apply to stocks? - Does this advice apply to foreign currencies? - Does this advice apply to local currencies? See the contradiction? You're always invested.

If I'm always invested why aren't I living under a bridge because Pier 1 Imports went bankrupt in 2020?

Also, I'm concerned that the earth could get hit with a rogue planet.

Re: An Update on Market Volatility

#118

Post by Macha »

amluto wrote: post #57
DennisP wrote: post #30

Earlier quoted context omitted.

It was blocked in Robinhood's UI, but on the back end the hedge funds could trade at will. And the hedge funds had to buy a lot of stock to cover their shorts, so it was handy to get the retail buyers out of the way.

I would be rather surprised if there are serious hedge funds that buy stock using Robinhood’s backend.

No, but the retail buyers getting in their way were

Re: An Update on Market Volatility

#119

Post by reducesuffering »

cactus2093 wrote: post #92
2bitencryption wrote: post #33

Earlier quoted context omitted.

I can't help but facepalm that people are genuinely encouraging one another to buy a stock that is so obviously overvalued, and then hold it at that price as long as possible... there are not many guarantees in trading, but that is a guarantee to lose money. and because it's under the guise of "sticking it to the man" people have become even less rational about their money. so when the stock eventually corrects to wh…

> there are not many guarantees in trading, but that is a guarantee to lose money. What? This is not at all a guarantee. Even if there were a guarantee that it will come back down eventually (which seems highly likely but that's still not a guarantee), that doesn't mean it will go down today or tomorrow or next week. For all we know there is still lots of time for new investors to get in, make money, and then get out…

> For all we know there is still lots of time for new investors to get in, make money, and then get out before the price crashes.

Yes, that means an equivalent amount of people will be holding the huge loss, because they bought in when the previous person got out...

Re: An Update on Market Volatility

#120

Post by systemvoltage »

TigeriusKirk wrote: post #108
systemvoltage wrote: post #100

Earlier quoted context omitted.

You’re right. They’ve got some issues, but there is nothing else like it out there that’s easy for newbies to invest despite of reliability issues.

But they've taken themselves out of the newbie market. Newbies now see them as shady. Potential newbies now see them as shady. I think you're drastically underestimating the reputational hit they took today.

I've seen these things come and go. #DeleteUber, no one gives a shit about it anymore.

Perhaps, you're drastically overestimating the hit they took today? Let's mark this comment and check after 6 months or a year.

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