GME

[InsuranceGuy]

[deleted]

[Mark Leavy]

Could either Vanguard or Fidelity be questioned as to whether they might lack the requisite financial liquidity?

IMO, those are your two best bets. BTW, two interesting things I learned this week are 1) what payment for order flow is, and 2) that neither Vanguard nor Fidelity accept it. I like how that eliminates a shadier section of the financial plumbing that tripped up several competitors.

Interactive Brokers allows you the option of a free account or a paid account if they don't sell your order flow.
I pay.

They still ended up restricting GME, AMC, and others just like RH/TD.

Yep.
I still think it was managing volatility risk for the 2 day float.
But it could have been any number of reasons. It's tough running a business.

[flyingpylon]

Could either Vanguard or Fidelity be questioned as to whether they might lack the requisite financial liquidity?

IMO, those are your two best bets. BTW, two interesting things I learned this week are 1) what payment for order flow is, and 2) that neither Vanguard nor Fidelity accept it. I like how that eliminates a shadier section of the financial plumbing that tripped up several competitors.

+1 Here's a good explanation of payment for order flow: https://www.investopedia.com/terms/p/pa ... erflow.asp

[Smith1776]

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[dualstow]

I bought a put option at the close on Friday, and closed out the position today at a 50% gain in less than 3 days.

Nice.
I applied to trade options some years ago but have never done so. Matt Levine makes it clear.

Puts. Benn Eifert of QVR Advisors pointed out a fun options fact on Twitter. Let’s say that, back on Jan. 21, when GameStop’s stock closed at $43.03, you thought it was wildly overvalued and wanted to bet against it. You could have sold the stock short: Borrow shares, sell them for $43.03, hope to buy them back cheaper.

Or you could have bought a put option: Pay a premium, and then if the stock plunges you can sell the stock at the put strike price. You could have bought a $10-strike April put for just 33 cents: If the stock fell below $10 by April, you’d get back the difference between the stock price and $10; if it went to zero by April, you’d get back $10 for your 33-cent investment. The day before the Reddit rally really took off, the $10 puts were a way to bet on GameStop’s stock collapsing quickly and totally.

If you shorted GameStop stock on Jan. 21, you got absolutely ruined. It closed on Friday at $325; if you stayed in for that you have lost, uh, 655% of your money, oops oops oops. On the other hand, if you bought those puts, you did great. Those $10 puts, which traded at $0.33 on Jan. 21, last traded at $1.55 this past Friday. You’re up 370%. The people who bought the stock did better—they’re up 655%—but of course they were right; the stock went up. You were wrong; the stock did not go to zero, but you’re still up 370%. Good trade! “Well risk managed shorts should be absolutely crushing it,” was Eifert’s conclusion.

So the price didn’t fall below 10 of course, but the put instrument itself became more valuable.

[dualstow]

Senvest Management LLC, a NY hedge fund, made $700MM trading Gamestop.
https://www.wsj.com/articles/this-hedge ... 1612390687

What that story fails to tell you, is that the bid/ask on many of those options is 10% of the price and that the volume can be very thin.
...

It’s already a very lengthy newsletter and I’m glad he keeps it simple, but yup, good to know.

[dualstow]

Also Keith Gill/ Roaring Kitty says he lost $13MM.
https://www.cnbc.com/2021/02/02/reddit- ... ng-on.html

[InsuranceGuy]

[deleted]

[glennds]

I'd like to better understand the ramifications of short interest greater than 100% of a company's stock. Obviously it is not possible in this situation for all short positions to be covered. So what happens to those positions that cannot be covered? Is it the broker that is on the hook for selling a naked short (i.e. selling the short position when the broker does not have access to the underlying shares)?

In reality, long position stockholders have to agree to lend their stock in the first place, and not all will do so, so I would think the universe of stock available to brokers would be some number significantly less than 100% thus exacerbating the naked short situation? Unless the broker is forced to go out an acquire the shares on the open market in order to cover the transaction?

Or is it a situation like fractional banking where so long as there isn't a run on the bank the house of cards continues standing?

I'd appreciate it if anyone could explain this aspect of the mechanics.

[vnatale]

The GameStop Story You Think You Know Is Wrong

by Derek Thompson
The Atlantic / 2021-02-03 06:54


The story you might have heard goes like this: A group of regular-Joe traders on Reddit took down a hedge fund by bidding up the stock price of the sleepy video-game store GameStop. Their righteous revolution was briefly thwarted last week when Robinhood, the popular brokerage app, restricted trading because it was secretly in cahoots with the hedge funds. This was an outrage: It was as if, in the matchup between David and Goliath, the magical slingshot stopped firing because it was secretly controlled by the giant. So, right-thinking people on TV and social media hailed the common day traders, demanded prison for various Robinhood executives, and generally extolled the salutary populism of stock speculation and day-trading.

Almost every piece of that story is misleading, tendentious, or totally wrong.

First, are the Reddit revolutionaries new populists descended from the radicals of Occupy Wall Street? No. They’re basically a bunch of dudes upvoting memes with cash. Or, to be more generous, they represent an extremely online evolution of Big Finance itself, a kind of decentralized hedge fund duking it out with other hedge funds. The typical day trader is a pretty well-off man in his 30s, and various reports so far show that some of the Reddit group’s leading members are current and former finance workers, some of whom make enough money to live in gated communities. By using a message board to move markets and cream billionaires, they’ve done something truly fascinating. But while some Redditors made millions recently, the largest holders of GameStop stock, like the giant asset manager BlackRock, made billions. None of this has anything to do with “the little guy”��a moniker that, by any reasonable definition, refers to the roughly 50 percent of American adults with no money whatsoever in the stock market and who probably shouldn’t kick off their investment career by buying into a mania.

[Derek Thompson: The whole messy, ridiculous GameStop saga in one sentence]

Second, when Robinhood restricted trading on GameStop, was it trying to squash a populist rebellion? “I think there has to be an investigation and people have to go to jail,” Dave Portnoy, the founder of Barstool Sports, told Tucker Carlson.* “I’ve never been more convinced about market manipulation and hedge funds controlling the game than today.”

But what really happened had little to do with manipulation or hedge funds. Robinhood just ran out of money. With the sudden explosion in price and volatility for stocks including GameStop and AMC, the brokerage had to fork over several billion dollars to a clearinghouse of stocks, the National Securities Clearing Corporation. But Robinhood didn’t have the cash. So the company restricted trades on high-flying “meme stocks” for a few hours, while it went out to raise several billion dollars from investors. If Reddit’s goal was to expose the weakness of traditional financial institutions by using Robinhood, the gambit accidentally exposed the temporary weakness of Robinhood by embarrassing the company at its moment of maximal scrutiny and popularity. (Larger brokerages, such as Charles Schwab, didn’t pause buying in the same way.)

Third, is the GameStop saga an example of investing gone right? On Thursday evening, Representative Alexandria Ocasio-Cortez seemed to valorize the revolution, saying, “One of the reasons for this populist rally is that it felt like the first time that anybody was holding these folks accountable.” She went on to ask if the Reddit traders’ brief victory might “change how the game is rigged” and if there might be “glimmers” for an “everyday retail investor.”

But trying to punish the rich by buying and selling stocks all day doesn’t make any sense. We’ve seen over and over and over that most day traders lose money; they routinely get smoked by bigger players. What’s more, it’s impossible to participate in markets dominated by large institutional investors on both sides of almost every trade in a way that punishes the financial industry. Waging war against Big Finance by becoming a day trader is like waging war against the casino industry by becoming a gambling addict. Even if you’re winning, you’re still participating in a broader casino economy�buying drinks, eating dinner, throwing chips to dealers, filling out tables�that, over time, gguarantees that the house keeps winning.

[Smith1776]

How quickly the winds change.

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[dualstow]

P.S.

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[Smith1776]

lol!

I lost it at "unironically retarded."

[dualstow]

I lost it at "unironically retarded."

This has been a weird sustained diversion from the reality of investing. And yet, it’s nice to see something in the news besides covid, politics, another cop shot another African-American, and did I mention covid?

One element of the GME story may as well have been about lottery winners. Good for them.

[Kriegsspiel]

lol!

I lost it at "unironically retarded."

+1

[Smith1776]

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[vnatale]

He died by suicide thinking he owed $730,000. Now his family is suing Robinhood

https://www.cnn.com/2021/02/09/investin ... index.html

[dualstow]

He died by suicide thinking he owed $730,000. Now his family is suing Robinhood

https://www.cnn.com/2021/02/09/investin ... index.html

I remember when we were posting about that guy. I feel bad for his family, but what a maroon.

[Smith1776]

Okay, okay, okay. You HAVE to watch this one. You won’t regret it. Trust me on this one. So hilarious.


https://www.reddit.com/r/wallstreetbets ... s_no_sell/

[Kriegsspiel]

Rep. Maxine Waters announced that Reddit investor DeepFuckingValue, aka YouTuber Roaring Kitty, aka former insurance marketer Keith Gill, will testify before Congress about what the hell has been going on with GameStop’s stock later this month.
link

SO YOU THINK YOU'RE RETARDED?!

I'LL SHOW YOU RETARDED

[Kriegsspiel]

Okay, okay, okay. You HAVE to watch this one. You won’t regret it. Trust me on this one. So hilarious.


https://www.reddit.com/r/wallstreetbets ... s_no_sell/

I lold at the diamond hand.

[dualstow]

Mr. Vergara, a 25-year-old security guard in Virginia, started investing four years ago after deciding he wanted to retire young. To save money, he drives a 1998 Honda Civic, eats a lot of rice and lives with his dad. He stashed his savings mostly in diversified index funds, which are now valued at about $50,000. Then Mr. Vergara, a longtime reader of the WallStreetBets page on Reddit, saw others posting about buying GameStop shares and the stock’s colossal rise.

He didn’t want to touch his index-fund investments, so instead he got a personal loan with an 11.19% interest rate from a credit union and used it to fund most of his GameStop purchase. He bought shares at $234 each.

https://on.wsj.com/3ppzobr

[vnatale]

RIght now on C-Span there is a live hearing of the House Committee on Financial Services.

As I write this the Co-Founder and CEO of Robinhood is speaking.

If you cannot watch it now you can later watch it any time on C-Span.org.

[dualstow]

RIght now on C-Span there is a live hearing of the House Committee on Financial Services.
As I write this the Co-Founder and CEO of Robinhood is speaking.
If you cannot watch it now you can later watch it any time on C-Span.org.

I watched a lot of it throught the day on various channels.

i thought Keith Gill/ Roaring Kitty/ DFV was utterly eloquent.

When i switched to the computer, i missed a good screenshot by a fraction of a second: Maxine Waters with her finger up in front of her camera, waiting on a technical glitch. That woud have made a wonderfully obnoxious avatar.

[InsuranceGuy]

[deleted]