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u/DeepFuckingValue and the GameStop Reddit mania

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Re: u/DeepFuckingValue and the GameStop Reddit mania

#391

Post by wrycoder » Sat, Jan 30, 2021, 3:04 AM UTC

codeisawesome wrote: post #277

fractionalhare wrote: post #249

Earlier quoted context omitted.

Yes, exactly. When a hedge fund is getting its face ripped off because its shorts are up 50 - 200%, it will liquidate its longs to cover. The rotational dynamics of many funds doing that at once can drive the price down on traditionally stable stocks that everyone owns. In a worst case scenario that could trigger a massive selloff which would crash the market. This is compounded by the fact that funds will defensivel…

After the sell-off, there’s a lot of cash (yes even more) washing around right? It has to go somewhere , and so it will come back into securities in probably a few weeks or max, months. The value represented isn’t exactly disappearing it’s still in the ‘system’. So why is a crash in equities prices such a big deal?

It only becomes a big deal when the government steps in to "assist" in any way beyond providing copious liquidity.

Downdrafts and even crashes are called corrections for a reason. They eliminate the weak holders and cause the remainder to carefully evaluate their positions. In the absence of interference, they will be over quickly.

They are a disaster for retail investors on margin. I've never understood why the SEC doesn't gradually increase margin requirements across the board when the market starts to get overheated. (But not once it tops!!)

Re: u/DeepFuckingValue and the GameStop Reddit mania

#392

Post by jaycroft » Sat, Jan 30, 2021, 3:06 AM UTC

scythe wrote: post #383

jaycroft wrote: post #217

Earlier quoted context omitted.

I think there's also evidence that the "short bubble" might be more widespread than we think. I'm not entirely convinced that Melvin was able to unwind their 50mln short position and drive the short interest down on Ortex (they're the best thing we've got in terms of guessing how much true short interest there is, because exchanges only report once or twice a month on a week or more delay) by covering. Equally likely…

>Equally likely in my mind is that Citadel bought Melvin's book thinking that it had a better plan than unwinding the short just yet. Instead, "hide" the short someplace that Ortex isn't looking and that the exchanges won't report on for another 3 weeks. That would be their order flow with a company they are in a unique position with - Robinhood - where lots of the buy orders are coming from. If you were Citadel and…

Probably a little bit illegal (like, hundreds of dollars of fines per millions of dollars of infringement) and this is pure speculation.

But as I understand it, the Market Makers like Citadel are only required to be market neutral in terms of their statistical exposure at the end of the day, and don't need to report their long/short position. On the other hand, brokers aren't required to be delta neutral, but do report their long/short position. You can probably hide a lot of these shorts in this baby. I guess this also doesn't count short interest that's in bespoke one-off derivatives that hedge funds and investment banks trade between themselves.

Also, nobody has to tell Ortex what their short interest is. The only true numbers we can sort of trust are the twice monthly delayed reports. Ortex is just a third party service provider that goes around calling brokerages and doing some stats on the market to see how they think the short interest has changed.

So, I can see it being pretty low risk even if you do get caught.

I think (with very low probability, but it is an explanation) this could also be why we're seeing random 100% spikes in unrelated stocks that claim to have approximately 0% short interest. Some hedge fund somewhere is in some sort of hidden short, getting margin called, or nervous, or just de-risking and getting out of an off the books short trade, causing a mini short squeeze. There are a couple companies with suspicious pops this week, and I'd be on the lookout for more of this activity on Monday. Could just be people getting out of high volatility positions though, or freeing up capital for other things. But that would be selling pressure, not buying. So, -\?/-

Re: u/DeepFuckingValue and the GameStop Reddit mania

#393

Post by fsckboy » Sat, Jan 30, 2021, 3:06 AM UTC

junippor wrote: post #75

eMGm4D0zgUAVXc7 wrote: post #24

Earlier quoted context omitted.

Why do people constantly have to re-invent the wheel? :( Freenet [0] has been providing censorship-resistant, anonymous, decentralized hosting for 20 years - and is still in active development! You could upload it to Freenet without any server whatsoever and it would stay online for as long as it is popular, even if your machine goes offline. And you'd be anonymous while doing so! [0] https://en.wikipedia.org/wiki/Fr…

Wow ok. The value of HN has decreased to almost zero for me, but you've made it worth it this month. Thanks for this!

your account is 4 days old... what did it decrease from? exponentially?

Re: u/DeepFuckingValue and the GameStop Reddit mania

#394

Post by adolph » Sat, Jan 30, 2021, 3:07 AM UTC

jbverschoor wrote: post #129

billylindeman wrote: post #98

Earlier quoted context omitted.

Any stock that does not pay dividends _has no fundamentals_. It's just supply / demand.

If nobody sells, any seller can charge ANY price they want. 1 trillion per share. When more is shorted than exists, you’re in a let good place to know that there’s no such thing as the last biggest fool.

If nobody buys, does the trillion dollar seller make a sound?

Re: u/DeepFuckingValue and the GameStop Reddit mania

#395

Post by tartoran » Sat, Jan 30, 2021, 3:10 AM UTC

pishpash wrote: post #298

ggggtez wrote: post #183

Earlier quoted context omitted.

To be honest, this is kind of the problem I have to stock investing as a whole. It sounds great to "invest on the fundamentals", but there doesn't appear to be a way for the average person to even comprehend what "the fundamentals" even are. But there has to be at least one fundamental: If the company goes bankrupt, the stock is worth nothing. Gamestop is most certainly going to go bankrupt eventually. Their business…

"Gamestop" is a string of letters. Unless it has a pile of unrestructurable liabilities, what's forcing it to become bankrupt vs. being a startup?

It’s its management. Gamestop wasnt able to catch up with the times and a pile of money won’t help them. The model isn’t vaible anymore and if they pivot into something else they may as well change the name as it would be irrelevant. A start up experiences most progress when they’re small and nimble. I assume Gamestop as a corp has accumulated a lot of cruft and that would hold them back.

Re: u/DeepFuckingValue and the GameStop Reddit mania

#396

Post by adolph » Sat, Jan 30, 2021, 3:11 AM UTC

UncleMeat wrote: post #234

eurasiantiger wrote: post #219

Earlier quoted context omitted.

More bonkers than Amazon?

Yes. Amazon dominates a market and is making outrageous revenue and income. Tesla doesn't compare.

Which market?

https://en.m.wikipedia.org/wiki/List_of_largest_retail_compa...

Re: u/DeepFuckingValue and the GameStop Reddit mania

#397

Post by runawaybottle » Sat, Jan 30, 2021, 3:13 AM UTC

franklampard wrote: post #108

ggggtez wrote: post #63

Earlier quoted context omitted.

Just because he's still in doesn't mean that it's actually worth $300 on the fundamentals. I could definitely see the argument that $20 was undervalued, but it's plain to see that the short-squeeze is now part of the calculation of value. There is no way that GameStop has an actual fundamental value of $300 per share. That price is clearly inflated, and in a few weeks will decrease, probably to somewhere above $20, b…

what is the fundamentals for the short positionsv

The incredible due diligence of ‘I think no one is going to buy cds anymore yo’.

Re: u/DeepFuckingValue and the GameStop Reddit mania

#398

Post by albedoa » Sat, Jan 30, 2021, 3:23 AM UTC

always_left wrote: post #310

sjtindell wrote: post #289

Earlier quoted context omitted.

Not a pro but I recently started learning some poker. Two texts that absolutely opened the game up to me were The Grinders Manual (fundamentals) and The Mathematics of Poker (where your stats/math background will be useful). The way I started was by dedicating 2 hours per day (1 hour studying, one hour playing online micro stakes). Next I will start learning and memorizing output from Solvers, that seems to be key to…

I’m curious. Poker has a lot of strong strategies and what not, but if a new player comes in, how do those strategies prevail? You may be confident with two Aces, but the player could be extremely confident in their king pair and wager as if they have a straight

I know what you are trying to say here, but the example is funny to us veterans. That player's extreme confidence has won us a lot of money with our aces.

New strategies have to be pretty extraordinary to disrupt a game as mature as poker. There is a lot of innovation to be tapped, but that usually isn't happening at the low- and mid-stakes games in your home room. For the most part, my skill is being able to adapt to you faster than you can adapt to me. I am relying on you playing your kings like a straight.

(Also, it's a well-known phenomenon that recreational players will hear about and mis-apply contemporary strategies with the same confidence. Somebody like Doug Polk professing about "GTO" on his hugely popular YouTube channel is often creating many more fish than he is sharks.)

Re: u/DeepFuckingValue and the GameStop Reddit mania

#399

Post by korethr » Sat, Jan 30, 2021, 3:23 AM UTC

raziel2701 wrote: post #22

On wsb u/deepfuckingvalue showed he still holds 50,000 shares and 500 deep ITM call options. He has secured a profit of $13.8 million dollars, and his remaining open position is valued at $45 million. I would caution people to not quickly fall into the "if he's still in, I'm still in" meme. He has secured a $14 million bag, regardless if the stock goes to zero he's already secured a life changing amount of money, he…

> A sustained short interest does not necessarily mean that the shorts are holding their initial position, they could have closed and reopened at these elevated levels.

This occurred to me today. I see it as entirely plausible that one or more large funds willingly took the loss to exit their initial short position, and proceeded open new short positions at the current crazy prices. In fact, I would not be surprised if they haven't been doing that all this past week with iceberg orders[1] so to not tip their hands by driving the price that much higher while doing so. It doesn't matter if they were able to bankroll the new position themselves or had to take on additional leverage to do so. A huge profit could be made from trying to short from these new crazy prices, and I'd not be surprised if big money was willing to fund such an attempt.

With all the hype this past week, a bunch of people have jumped onto the bandwagon. I'd wager many are doing so out of an emotional excitement, without honestly considering the risk and whether they're truly willing to lose everything they put into this play. I'd also wager there are many who only think they're willing to lose everything they spend on $GME. But, when the share price starts going down, whether crashing from a panic selloff, or gently drifting downward as people start exiting their positions to lock in their profits, many will realize they're not as willing to lose everything as they thought.

I fully expect the funds to try to play chicken with those trying to short squeeze. I fully expect them to try every dirty trick in the book to kick off a panic selloff. I would not be surprised if new dirty tricks get invented. I would not be surprised if favors get called in from politicians and other persons of power to try to scare everyone out of holding, whether that's looking the other way while the big funds do something maybe-not-so-legal, or other shenanigans, like very public arrests of u/DeepFuckingValue and others on BS charges.

There's potentially very big money to be had here, and the big hedge funds everyone wants to screw over didn't get to their present riches by playing nice or fair.

1. https://www.investopedia.com/terms/i/icebergorder.asp

Re: u/DeepFuckingValue and the GameStop Reddit mania

#400

Post by MrFoof » Sat, Jan 30, 2021, 3:26 AM UTC

jbay808 wrote: post #333

fractionalhare wrote: post #249

Earlier quoted context omitted.

Yes, exactly. When a hedge fund is getting its face ripped off because its shorts are up 50 - 200%, it will liquidate its longs to cover. The rotational dynamics of many funds doing that at once can drive the price down on traditionally stable stocks that everyone owns. In a worst case scenario that could trigger a massive selloff which would crash the market. This is compounded by the fact that funds will defensivel…

Is there some reason a crash shouldn't happen? If you have a stake in the market, even in diversified index funds, presumably you know the risk is non-zero, and accept that because the rewards are higher than lower-risk choices like, say, stuffing your money under the mattress.

Been ten years since I was last in it, but a lot of large investment firms (before automated trading was prevalent in the older large institutions) don't have people responding to the market ad hoc. Trades are executed infrequently (weekly, if not monthly) and are approved upfront during trade planning meetings to define the qualifying parameters for a particular order.

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