Re: GameStop, Reddit and Robinhood: A full recap of the historic retail trading mania
Ah, but the beauty of this situation is this:
That million dollars split among ten thousand people is pocket change for each of those folks - but, it kept the stock from sinking enough for the short sellers to cover their borrowing costs and make a profit. And, those short sellers are always the smartest people in the room and they have technical trading charts and everything - so, they doubled down on their short position. But, another ten thousand people bought in an effort to stick it to them - thus restoring the stock price.
Some of the early movers in this saga knew what a short squeeze it. They knew that they just had to wait out the call date - and, in fact they only had to wait till the first hedge fund hit their pain point.
This will not end well financially for anyone - excepting the traders that bought and sold this week. Those are likely speculators, other big hedge funds, and regretfully our S Fund (and the like). However, this was not a financial transaction for the early folks. They are getting their pound of flesh and that is all they wanted. If it cost them $500 bucks so be it. Watch it burn.
Now, for some lessons learned:
- It was weird to hear that the Reddit chaps could demand that the GameStop shares they purchased had a caveat where they could not be short sold. I always thought the big clearing house brokerages purchased pools of additional shares for liquidity purposes. I always thought THOSE shares were the ones that were 'borrowed' during short contracts. I'm now thinking there is a line item in our contracts with these slugs that allow OUR shares to fill those pools and some quants run math on loaning those shares out. If so, I DO NOT WANT my shares to enrich my brokerage house. If they want to loan out shares than they can loan out THEIR shares. This is something I will have to look into.
- It is also noted that one CAN limit their own shares exposure to the slush pool. I don't want my property speculated against by some math insurance salesman.
- I DO NOT WANT these short selling hedge funds to ask for public money. I really hope that we don't get sold on that again.
Finally, how to make money on this via TSP. How much was our S Fund affected by this stuff? And, how much is our C Fund going to be affected as a result of selling to cover the shorts? Which is the real price?
Lookin' up at the 'G Fund'!!!
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