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Thread: GameStop, Reddit and Robinhood: A full recap of the historic retail trading mania on

  1. #1

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    Post GameStop, Reddit and Robinhood: A full recap of the historic retail trading mania on

    GameStop, Reddit and Robinhood: A full recap of the historic retail trading mania on Wall Street

    GameStop mania took Wall Street by storm, thanks to a legion of retail traders glued to the WallStreetBets message board on Reddit.

    More @ CNBC...


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  3. #2

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    Default Re: GameStop, Reddit and Robinhood: A full recap of the historic retail trading mania

    Folks seem to be misunderstanding this...

    1. The 'Legion of Retail Traders' were able to 'invest' only an amount that stopped the stock from dropping in price - see the chart.
    2. The wonderful short selling hedge funds needed the price to drop to make a profit.
    3. The stock did not drop - the long purchases were small in the particular but large enough in the aggregate to stop the slide and level the price.
    4. Some hedge funds hit their pain point and started buying the stock to cover their short orders.
    5. THEY were the cause of the parabolic rise in the stock - NOT the little retail traders. The little guys are not market movers.
    6. Additionally, the quants (or their automated progeny) in other hedge funds may have initiated purchases based on some dumb automated technical analysis - further increasing the price.


    Finally, a very big percentage of these retail purchases were small purchases by people who DO NOT CARE if the price goes up. They just found a way to give hedge funds a black eye. They do not care if their $500 goes to 0. So, they do not have to be protected from themselves.

    Shorts have to be covered within a contracted timeframe - generally one to three months. The following is the three month GameStop price/volume chart:
    GameStop.JPG
    From what I have heard/read, the average call date is February 19th.

    All that happened is that these guys outwaited some short selling hedge funds. Additionally, I hear they forced the clearing house brokerage to disallow their stocks from being placed in the borrowable pool. In mid-January some of those hedge funds started buying stock to get out of a losing position. They started making large purchases - which put enormous upward pricing pressure on the stock. That caused other hedge funds to hit their pain point. Rise and repeat. Again, a short squeeze is what these 'investors' wanted but it is the hedge funds that are doing the killing via a circular firing squad. They are eating their own. I hope it's tasty.
    Lookin' up at the 'G Fund'!!!

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    Default Re: GameStop, Reddit and Robinhood: A full recap of the historic retail trading mania

    Besides and evil hedge fund or two, we're only being told the positive outcomes from this story. If 10,000 people lose all of their $1,000 gamble, that's a cumulative $1M loss that is going to someone else. In either case, it's a lotto ticket that will see more losers than winners. All who participate will NOT get out of this with a profit.

    I remember reading in a book once about a guy who took a few enormous bets on corn or wheat futures because of some event that he felt was coming. By end of day Friday, this guy had a couple million worth of profit on his trade because it was looking promising. He said he was actually making plans life changing plans over the weekend and all he thought about was how much he had made. By time the market opened on Monday, he had lost everything and was completely wiped out since the story had changed.

    The point is, it's not worth anything until you sell it.

    Retail trading, and going for the one shot knockout, is not going away. It's only going to get bigger.
    Last edited by Bullitt; 01-30-2021 at 12:15 PM.

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    Default 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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    Default Re: GameStop, Reddit and Robinhood: A full recap of the historic retail trading mania

    Hedge funds blow up all the time. I doubt the tax payer will be on the hook, especially when most operate outside the US. Let's be honest, Gamestop is not all of a sudden a $300 company.

    Funds don't sell short without offsetting the trade somehow, so forced buying would produce forced selling somewhere else. Active management and individual stock picking is back in vogue and will not end well. Nobody ever thinks of what can go wrong. Instead they fixate on the small percentage in which it works out for and then complain the system is rigged when they lose their life savings or in the case of a robinhood investor, their $1,000.

    I understand your concern, but I don't think this would have any effect on C or S funds. Markets go up and down and sometimes they actually are not rational. Buyers and sellers make a market. Making investment decisions in your favor when markets are not acting rational is the best you can do, ie: buy more in March 2020.

    RE: lending shares; depends on the broker and I think it's only if you bought the shares on margin. Robinhood, I don't think they actually own the stocks at all. I know they don't own the crypto and no matter who the broker, partial shares are not yours. Interactive brokers you can make money by lending the shares out in their program. Fidelity you need some $250,000 in your account to even be considered for the program.

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    Default Re: GameStop, Reddit and Robinhood: A full recap of the historic retail trading mania

    In one day Citadel looks to have made $100M making orders from Gamestop. So who's the big winner here?

    https://twitter.com/EricBalchunas/st...95480606203910

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    Default Re: GameStop, Reddit and Robinhood: A full recap of the historic retail trading mania

    Last Look Report |TSP Talk Weekly Wrap Up
    Chart Patterns | An ETF Trading Primer

    Disclaimer: This is not advice or a recommendation.

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    Default Re: GameStop, Reddit and Robinhood: A full recap of the historic retail trading mania

    Once again, who's the big winner here?

    Robinhood Markets Inc. scored a victory as a federal judge dismissed a lawsuit accusing the brokerage of colluding with electronic trading firm Citadel Securities to stop investors from buying GameStop Corp. and other meme stocks in January.

    Robinhood welcomed the ruling. “This further confirms that the conspiracy theory of collusion has no basis in fact,” a company representative said.

    “We are pleased that the court agreed that there is no basis for the plaintiffs’ conspiracy theories and summarily dismissed the case,” Citadel Securities said.
    https://www.wsj.com/articles/judge-d...s-11637265778?

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