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Robinhood and Didi to Kick Off a Hot IPO Summer

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Re: Robinhood and Didi to Kick Off a Hot IPO Summer

#61

Post by quickthrowman »

jw1224 wrote: post #45
quickthrowman wrote: post #36

Earlier quoted context omitted.

> The SEC made naked short selling illegal after the 2008 financial crisis. Market makers are not allowed to naked short. Actually, they are allowed to naked short. It’s essential for them to be able to do so to hedge their exposure and provide a bid/ask at all times. https://www.sec.gov/investor/pubs/regsho.htm

Thanks, that’s the first I’ve heard of that. I’ll have a read, cheers.

The reason they’re allowed to is precisely for a GME type situation, if there is a massive buy-side imbalance and there aren’t enough shares to borrow to short (aka sell to buyers), market makers are allowed to naked short to remain delta neutral.

Citadel (probably[0]) isn’t going to naked short GME to take a directional position, they just want to capture the bid/ask and hedge the directional risk, which sometimes requires naked shorting. I suppose they could (and might) use synthetic shorts (long atm put, short atm call) to hedge. I’m not sure if only a designated market maker is allowed to naked short, or if supplemental liquidity providers or other types of MMs I don’t know about are also allowed to naked short.

[0] I say this only because I’m not Ken Griffin and don’t know with absolute certainty, but generally a market maker aims to stay delta neutral.

Re: Robinhood and Didi to Kick Off a Hot IPO Summer

#62

Post by quickthrowman »

Traster wrote: post #20

These valuations are crazy - meaning one of two things are going to happen in the mid-term. Either we see inflation outside of asset prices (wage rises, increased consumer spending) and the revenue of these companies rise to justify the valuations, or we don't see that inflation and these stock prices slide since they can't justify their values. Now I'm not an economist - so maybe someone can help me out here. If the…

> These valuations are crazy

To whom? 0% interest and the Fed put have a massive impact on valuations, particularly growth stocks.

Re: Robinhood and Didi to Kick Off a Hot IPO Summer

#63

Post by quickthrowman »

fnord77 wrote: post #21

there's no way to bet against freshly issued IPOs, right? I think for both shorting puts, there's a lockout period after the stock is issued. And limited inventory for borrowing. Or has that changed? I see almost all recent high-flying IPOs as overly inflated investor cashouts. Steve Blank had a post about this...

You could do an OTC swap with Goldman Sachs, or just wait a week for the market makers to open up the option chains.

Once the chain is open, you can sell as many puts as your heart desires (or as many as your broker will let you) FYI, shorting puts is long delta, so you’d want the price to go up if you sold puts. Long puts and short calls are negative delta (short)

Re: Robinhood and Didi to Kick Off a Hot IPO Summer

#64

Post by quickthrowman »

jw1224 wrote: post #49
kasey_junk wrote: post #48

Earlier quoted context omitted.

RH self clears: https://blog.robinhood.com/news/2018/10/9/introducing-cleari... Before that they used Apex. This commenter seems disastrously uninformed about something they have very strident beliefs about.

I just re-read my comment and saying Citadel was Robinhood’s prime brokerage was definitely an error (too late to edit the comment now). I should’ve said market-maker. Nonetheless, all the conflicts-of-interest between Citadel, Robinhood, and Melvin still stand. Citadel own Melvin, Citadel are market-makers for Robinhood, Citadel are members of the DTCC, Robinhood users cost Melvin billions, Citadel are footing the b…

Correction, Citadel is a PFOF customer of Robinhood, not a market maker for Robinhood. Market makers are retained by the exchanges.

Re: Robinhood and Didi to Kick Off a Hot IPO Summer

#65

Post by quickthrowman »

flefto wrote: post #52
jw1224 wrote: post #19

Earlier quoted context omitted.

> The only people allowed to naked short are market makers The SEC made naked short selling illegal after the 2008 financial crisis. Market makers are not allowed to naked short. > Clearing houses don't lose anything during a short squeeze, as long as funds committed to a trade actually clear Exactly my point — as long as funds clear , which they were at risk of not doing, thus putting clearing houses like the DTCC o…

On the day in question, Robinhood posted to say this is what it was doing, and it explicitly stated that it was doing so to protect its customers from volatility. It absolutely said nothing at all about doing it because of regulatory or other requirements. Robinhood has since deleted that post from its site. And no matter how you cut the cake, if you put your money into Robinhood then you risk losing it when Robinhoo…

If Robinhood hadn’t disabled GME buys, one possibility was RH customers not being able to trade any stocks. Which one do you think is the better choice, limiting a single stock, or potentially losing the ability for all customers of RH to trade all stocks?

Re: Robinhood and Didi to Kick Off a Hot IPO Summer

#66

Post by quickthrowman »

imdsm wrote: post #25
PaywallBuster wrote: post #22

Earlier quoted context omitted.

Merely speculation that that was done to favor their partner other than something else.

What is not speculation is that they restricted the buying of stocks while not restricting the selling. The rest, though it may be speculation, has enough circumstantial evidence to allow most regular folks to make up their mind. The people who will invest in the IPO aren't going to be the people who lost money due to RH locking the purchasing of stocks and stopping the price from sky rocketing. But in terms of a cus…

> What is not speculation is that they restricted the buying of stocks while not restricting the selling. The rest, though it may be speculation, has enough circumstantial evidence to allow most regular folks to make up their mind.

Right, because sell orders would lower the clearinghouse margin requirements. If there are $100M GME buys on RH with 2 days to clear and $100M GME sells with 2 days to clear, their clearinghouse margin requirement is $0.

Re: Robinhood and Didi to Kick Off a Hot IPO Summer

#67

Post by Traster »

quickthrowman wrote: post #62
Traster wrote: post #20

These valuations are crazy - meaning one of two things are going to happen in the mid-term. Either we see inflation outside of asset prices (wage rises, increased consumer spending) and the revenue of these companies rise to justify the valuations, or we don't see that inflation and these stock prices slide since they can't justify their values. Now I'm not an economist - so maybe someone can help me out here. If the…

> These valuations are crazy To whom? 0% interest and the Fed put have a massive impact on valuations, particularly growth stocks.

To people who existed in 2020. Let's take the example someone else mentioned of Uber. Uber is worth close to 50% more than it was worth at the beginning of 2020. This is what I mean by talking about the macro effects, as we get back to relative normal, what happens to these valuations? Is it a real reflection of inflation? Maybe, seems unlikely.

Re: Robinhood and Didi to Kick Off a Hot IPO Summer

#68

Post by elevenoh »

JumpCrisscross wrote: post #3
elevenoh wrote: post #2

FYI for those interested: you can get exposure to Robinhood's post-IPO market cap outcome right now via FTX.com pre-IPO futures. This is something I'm pleasantly surprised by in 2021: Deposit crypto. Transact pre-ipo futures, stock futures, commodities like lumber etc. 24/7 with solid-liquidity.

> you can get exposure to Robinhood's post-IPO market cap Ish. Creating derivatives around private assets is hard. Anyone who bought FTX swaps in e.g. Coinbase pre-IPO lost money on bad pricing alone. It’s for these reasons that their product is not compliant with decades-old U.S. securities law. Unfortunately, it’s free to roam in younger jurisdictions. Disclaimer: I work in the private markets. I used to make marke…

>Anyone who bought FTX swaps in e.g. Coinbase pre-IPO lost money on bad pricing alone.

Not sure what you're talking about here, I bought it & I certainly didn't...

Re: Robinhood and Didi to Kick Off a Hot IPO Summer

#69

Post by fnord77 »

quickthrowman wrote: post #63
fnord77 wrote: post #21

there's no way to bet against freshly issued IPOs, right? I think for both shorting puts, there's a lockout period after the stock is issued. And limited inventory for borrowing. Or has that changed? I see almost all recent high-flying IPOs as overly inflated investor cashouts. Steve Blank had a post about this...

You could do an OTC swap with Goldman Sachs, or just wait a week for the market makers to open up the option chains. Once the chain is open, you can sell as many puts as your heart desires (or as many as your broker will let you) FYI, shorting puts is long delta, so you’d want the price to go up if you sold puts. Long puts and short calls are negative delta (short)

sorry I meant "shorting or puts (buying)"
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