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Roaring Kitty to testify on GameStop alongside hedge fund managers

reuters.com

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Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#201

Post by sumedh »

dehrmann wrote: post #163
sumedh wrote: post #13

Earlier quoted context omitted.

> but it feels like there are more important things to be working on right now. Institutions abusing the system is not important?

I don't actually see much institutional abuse. Some hedge funds got squeezed, but that happens. Robinhood faced capital requirement issues, but considering the circumstances, it seems fair. Market makers kept trades happening. The only abuse I see is Robinhood encouraging retail investors to make risky trades and possibly some people on WSB organizing a pump and dump. Institutions acted pretty responsibly.

> I don't actually see much institutional abuse.

DTCC blocked buying for the little guys and changed the rules without any notification, I dont know why you dont think that is not institutional abuse.

> but considering the circumstances, it seems fair.

No its not fair, if it was really serious the exchanges could have stopped trading in GME but they did not.

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#202

Post by paul_f »

valuearb wrote: post #164
dagmx wrote: post #21

Earlier quoted context omitted.

This doesn't imply that he did anything illegal. It's standard in hearings to get any/all prominent people/corporations involved to testify to paint a clearer picture for law makers to then potentially act on. It's more research than anything.

He clearly violated his professional obligations, but congress doesn’t prosecute anyone, Massachusetts will if anyone does.

what professional obligations specifically?

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#203

Post by zht »

ramblerman wrote: post #193
codecamper wrote: post #135

The elephant in the room that I don't see much discussion about is the use of options by small retail accounts. There are piles of rules around trading in accounts But then those same guys are allowed to trade options. An option has a 100x built in leverage. A simple solution to this problem is to require the underlying amount of margin or cash in the account to purchase the option. ie. If you want to buy a $3 option…

> But then those same guys are allowed to trade options. You act as if they are allowed to so symmetrically. I'm pretty sure they can only *buy* options, in which case there is no "extra" risk outside of what they paid up front. Why would you hinder that from a false risk/margin perspective, if not but just to block the little guy.

No you can absolutely sell options (even uncovered)

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#204

Post by ramblerman »

zht wrote: post #203
ramblerman wrote: post #193

Earlier quoted context omitted.

> But then those same guys are allowed to trade options. You act as if they are allowed to so symmetrically. I'm pretty sure they can only *buy* options, in which case there is no "extra" risk outside of what they paid up front. Why would you hinder that from a false risk/margin perspective, if not but just to block the little guy.

No you can absolutely sell options (even uncovered)

Ah wow didn't know that. Then I join your initial sentiment.

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#205

Post by valuearb »

paul_f wrote: post #202
valuearb wrote: post #164

Earlier quoted context omitted.

He clearly violated his professional obligations, but congress doesn’t prosecute anyone, Massachusetts will if anyone does.

what professional obligations specifically?

He’s a licensed broker carrying five license, working for a licensed brokerage. They aren’t allowed to make public investment recommendations.

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#206

Post by Supermancho »

sumedh wrote: post #200
Supermancho wrote: post #160

Earlier quoted context omitted.

> Then where is the right place for that? (rehash in political theater) Within the SEC or at a performing arts center, depending on what level of scrutiny, the discussion of the topic is to be given. A congressional hearing is the equivalent of a discussion between a beat cop and hostile witness at a coffee shop.

> Within the SEC 2008 should have demonstrated that SEC is virtually powerless to take on the big guys. The purpose of a congressional hearing is to create awareness.

> 2008 should have demonstrated that SEC is virtually powerless to take on the big guys.

They are the ONLY organization mandated to do so. Lacking specific power "to take on the big guys" (whatever that means) is a different issue. The SEC has the awareness of the market manipulation, as this monitoring and analysis is what they do. Congress should be speaking to them, not holding some theater.

> The purpose of a congressional hearing is to create awareness.

The awareness comes from media more than any other source. Are you implying that there is a lack of awareness for any individual interested in this topic? I feel like I'm talking to someone who participates in a different reality. GL with whatever.

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#207

Post by blablabla123 »

valuearb wrote: post #153
blablabla123 wrote: post #142

Earlier quoted context omitted.

> The DTC said 'we need 100% collateral on these trades' (probably because they viewed there being a significant risk that someone, somewhere, would not be able to pay up for the trades they're making in a big way This sounds like nonsense to me. After all the job of the Clearing House is to make sure the cash is balanced correctly after the transactions. Or realistically speaking a never ending chain of transactions…

GME was having 400% swings in a day, and being bought in a large part by brand new retail investors who had just opened accounts. That’s a perfect storm for nonpayment issues.

> GME was having 400% swings in a day

Well, if that's what people want. At that point in time it's about buying, not selling.

> and being bought in a large part by brand new retail

> investors who had just opened accounts.

> That’s a perfect storm for nonpayment issues.

Ok but they need to go through some sort of payment processing that checks the credit rating. Even if the credit card is close to the limit, we are probably talking about amounts smaller than 1000 $. Anyone able to visit the Reddit homepage and installing the Robinhood app should have that amount of cash in hardware. FWIW, normal eCommerce payment processors deal with nonpayment issues in the sub percent range.

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#208

Post by bsanr2 »

ivalm wrote: post #197
bsanr2 wrote: post #192

Earlier quoted context omitted.

Weekly moves. GME, VW, and the one I'm talking about are all comparable in that sense.

No, you’re wrong even in this narrow sense. GME had a weekly move from $61 to $483, or 8x. $VW went $201 to $1005 (actually split over two trading weeks, in a single trading week it was $324 to $1005). So between 3 and 5x. The weed stocks are even less. But the thing is what makes GME an especially big risk is not any weekly move, it is the repeated weekly moves. It is the 100x growth in a stock that has essentially…

A great deal of GME's move before last month was fighting back against a short attack that had artificially pushed the price down. $5 was not the natural price. $5 was the price as hedge funds attempted to drive Gamestop out of business, in the midst of the COVID crash. I would accept $20, which was what the stock price climbed to before a positive earnings report and moves to restructure increased positive sentiment. The squeeze we saw was, then, 10x at best. This is in line with the 12x I mentioned earlier. VW was less, but had started at a higher point and moved similarly to GME over several months before the major event.

The 28th WAS that event for GME, but it was cut off. It's impossible to say how the differing circumstances between GME and VW's squeeze would have changed the magnitude of its peak, but they're similar enough that we could expect similar movement from $300-$400 to the actual peak if major retail brokerages hadn't prevented traders from opening positions. Go look at a chart of those two weeks. GME's looks similar to VW's, except there's a massive hole on the 28th. When buying resumed (however limited) the price shot back up to match sentiment, above $300, and then mirrored the trend over the following days. That hole is where the squeeze would have been.

Finally, the valuation during action like this is not based on the company's fundamentals but on the magnitude of the bets placed against it. Shorts piled on at extremely low price levels; the more the market decided they were wrong, the more they lost, theoretically without limit.

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#209

Post by valuearb »

blablabla123 wrote: post #207
valuearb wrote: post #153

Earlier quoted context omitted.

GME was having 400% swings in a day, and being bought in a large part by brand new retail investors who had just opened accounts. That’s a perfect storm for nonpayment issues.

> GME was having 400% swings in a day Well, if that's what people want. At that point in time it's about buying, not selling. > and being bought in a large part by brand new retail > investors who had just opened accounts. > That’s a perfect storm for nonpayment issues. Ok but they need to go through some sort of payment processing that checks the credit rating. Even if the credit card is close to the limit, we are p…

To be more clear DTCC gets its collateral from the broker, ie Robinhood, not the actual clients. And the broker is not allowed to use client funds for collateral.

So the DTCC has to worry about Robinhood, and Robinhood has to worry about their clients.

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#210

Post by sumedh »

Supermancho wrote: post #206
sumedh wrote: post #200

Earlier quoted context omitted.

> Within the SEC 2008 should have demonstrated that SEC is virtually powerless to take on the big guys. The purpose of a congressional hearing is to create awareness.

> 2008 should have demonstrated that SEC is virtually powerless to take on the big guys. They are the ONLY organization mandated to do so. Lacking specific power "to take on the big guys" (whatever that means) is a different issue. The SEC has the awareness of the market manipulation, as this monitoring and analysis is what they do. Congress should be speaking to them, not holding some theater. > The purpose of a con…

> Lacking specific power "to take on the big guys" (whatever that means)

If you knew the history of SEC you would know what that meant. Look up Steve Cohen. Big guys just get a slap on the wrist.

SEC missed the $18 billion Madoff fraud and yet you think SEC has the awareness of market manipulation, they dont.

> Are you implying that there is a lack of awareness for any individual interested in this topic?

Isnt that why the politicians want to know more about this topic.

> I feel like I'm talking to someone who participates in a different reality.

That we can agree, the reality is that SEC is incompetent yet you chose to believe it is not.

GL with whatever.

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