Play Nice Random Chat Thread V

[Snake_Baker]

I wonder what happens now? Reddit must be getting some pressure to shut them down. It’s so much money. The Wall Street people must be shitting themselves. fu** I wish I was doing it with them.

In a nutshell, what is going on?

 

[Val Keating]

In a nutshell, what is going on?

Spoiler

They’re using weight of numbers to shorting companies and pushing the price up. Apparently they did one yesterday, the one they did today was worth $13Billion and they’re going to do another one tomorrow.

 

[Val Keating]

Bitcoin, GameStop, and the Price of Taking on Wall Street - Decrypt

The future was supposed to belong to Bitcoin, not video game store stocks. GameStop shares closed today at $147.98, fueled by Redditors.

decrypt.co

 

[DesertRoo]

In a nutshell, what is going on?

Hedge funds have to publish their short positions, in advance, ie they think a company is overvalued so I bet it’s going to drop by X amount.

so you’ve got a bunch of trolls on an Internet forum who have brought up all the stock raising its value to way above market value. The hedge fund now has to comeup with a lot of money to pay the internet trolls or go into insolvency.

obviously there’s a lot more to it, and big money came in when they smelt blood in the water.. basically hedge fund company at the centre, got greedy, and is screwed.

 

[Snake_Baker]

Internet trolls did this? Kids? Activists?

How? Where did they find the funds?

 

[Themanbun]

In a nutshell, what is going on?

Hedge funds shorted GameStop stocks with BIG money.

Essentially borrowed a share from someone, and promised to give them that share back a week from now. They sell those shares pretty much immediately at say $10 a pop, and expect the share price to go down by the time they need to return the share to its owner. If it goes down, they pocket the difference between the original price and the price they bought it for to return it to its owner.

Their short options become due really soon. Reddit coordinated a massive buy (increasing demand and share price) of GameStop stock. These hedge funds now need to buy back that stock at a greatly inflated price.

The end result is redistribution of wealth from wall st cronies to internet memers.

(Above numbers and time frames just made up to illustrate the point)

 

[Themanbun]

Internet trolls did this? Kids? Activists?

How? Where did they find the funds?

Plenty of apps now let you trade with minimal funds. There has been a great democratisation of the share market that came with investment apps. These internet activists are using volume of people to pump the share price, rather than the billions of dollars the hedge funds can leverage. 2m people popping in $1k each is a loooot of money and enough to pump a stock like the one identified.

I'm surprised it took this long for social media to effectively crowd source the moves that hedge funds pull against each other all the time.

When you short a stock like the hedge funds did, theoretically your potential losses are infinite. Far more risk involved in shorting than in buying a stock, where your liability is limited to the amount you bought it for.

 

[Val Keating]

One of them made over $22 million today.

 

[Snake_Baker]

Hedge funds shorted GameStop stocks with BIG money.

Essentially borrowed a share from someone, and promised to give them that share back a week from now. They sell those shares pretty much immediately at say $10 a pop, and expect the share price to go down by the time they need to return the share to its owner. If it goes down, they pocket the difference between the original price and the price they bought it for to return it to its owner.

Their short options become really soon. Reddit coordinated a massive buy (increasing demand and share price) of GameStop stock. These hedge funds now need to buy back that stock at a greatly inflated price.

The end result is redistribution of wealth from wall st cronies to internet memers.

(Above numbers and time frames just made up to illustrate the point)

FFS, why haven't I got in on this?!

 

[Themanbun]

FFS, why haven't I got in on this?!

I tuned out over the long weekend and missed it all brewing. Absolutely spewing.

 

[Snake_Baker]

I tuned out over the long weekend and missed it all brewing. Absolutely spewing.

That's it. I'm taking a crash course in tech savvy.

 

[DesertRoo]

Internet trolls did this? Kids? Activists?

How? Where did they find the funds?

the company was a computer games retailer, worth effectively nothing, think block buster with all the gaming companies going online..
but they managed to get hold of a couple of angel investors in the gaming/online space. They’ve still got 100million odd members. So might be worth something..


But they way they’re looking at banning memes around stock options, might be something a little more nefarious around troll farms.

 

[Themanbun]

The thing I notice about this is it effectively makes a mockery of the entire system. I liken it to the scalping debate: "oh no, the wrong people are doing [insert activity that more powerful market actors do daily]." It's democratising the same mechanisms that the big players have been using without repercussions for centuries. The internet is an amazing thing.

 

[Snake_Baker]

The thing I notice about this is it effectively makes a mockery of the entire system. I liken it to the scalping debate: "oh no, the wrong people are doing [insert activity that more powerful market actors do daily]." It's democratising the same mechanisms that the big players have been using without repercussions for centuries. The internet is an amazing thing.

How can they stop it?

 

[Val Keating]

That's it. I'm taking a crash course in tech savvy.

To late. They’ll change the rules to suit the top end of town as always. Maybe keep an eye on that sub forum and have something ready to go.

 

[DesertRoo]

FFS, why haven't I got in on this?!

It’s still gambling, and at some point the person holding onto this stock is going to lose a hell of a lot of money.

 

[Themanbun]

How can they stop it?

There's rumours about banning stock market memes (lol). I suspect they'll try to target retail traders and the apps that give the everyday bloke access to the share market. Can't have the plebs having access to the tricks of the trade!

 

[Val Keating]

The thing I notice about this is it effectively makes a mockery of the entire system. I liken it to the scalping debate: "oh no, the wrong people are doing [insert activity that more powerful market actors do daily]." It's democratising the same mechanisms that the big players have been using without repercussions for centuries. The internet is an amazing thing.

That’s why they’re doing it. It’s why they are going after the people that short businesses, it’s why Elon tweeted about it, Melvin shorted Tesla.

 

[DesertRoo]

There's rumours about banning stock market memes (lol). I suspect they'll try to target retail traders and the apps that give the everyday bloke access to the share market. Can't have the plebs having access to the tricks of the trade!

They could just go back to before 2008 and have hedge funds short positions not published.

 

[Themanbun]

It’s still gambling, and at some point the person holding onto this stock is going to lose a hell of a lot of money.

You only lose what you put in, though. The advantage of the investor is that your liability is limited by shares. Lots of people treating it like gambling in that sense, which is a good comparison.

The shorters have far more to lose since their losses can be infinite. This goes far enough and some of these funds may legit be liquidated.

 

[Themanbun]

They could just go back to before 2008 and have hedge funds short positions not published.

That's an option, but do the hedge funds want that? By virtue of them publishing their short positions they often trigger the market to sell by reducing confidence in the stock, creating a self fulfilling prophecy. Effectively tanking a business so they can make a buck.

Did they bring it in in 2008 to address short selling takeovers? (Genuine question, I'm curious)

 

[DesertRoo]

You only lose what you put in, though. The advantage of the investor is that your liability is limited by shares. Lots of people treating it like gambling in that sense, which is a good comparison.

The shorters have far more to lose since their losses can be infinite. This goes far enough and some of these funds may legit be liquidated.

Absolutely, but what I meant gambling wise was everyone knows at the end of the day this stock isn’t worth what it is, everyone’s holding on to make the hedge fund pay up..
the moment the hedge fund can get enough shares to get out of their position, and there’s other hedge funds that are helping them, those stocks will be worth 20c again. There’s going to be a lot of people who brought the stock at $200 dollars holding thier dick in their hand at the end of it..

 

[Snake_Baker]

What are the thoughts of you folks regarding bitcoin?

 

[AnEmptyChair]

To late. They’ll change the rules to suit the top end of town as always. Maybe keep an eye on that sub forum and have something ready to go.

Apparently Blackberry is what they're going after next and apparently that share price has started to rise.

I'm absolutely no expert and in no way offering anyone advice, but if you want to try to get in on it you can set up an etoro account pretty easily where there's 0% commission on any stock you buy on the NYSE and NASDAQ. Pretty sure they don't have a minimum deposit either. It's pretty easy to get into trading if you want to do it without going through the banks, but if you do you have to obviously manage everything yourself and it can be easy to lose a lot of money if you're reckless.

 

[DesertRoo]

That's an option, but do the hedge funds want that? By virtue of them publishing their short positions they often trigger the market to sell by reducing confidence in the stock, creating a self fulfilling prophecy. Effectively tanking a business so they can make a buck.

Did they bring it in in 2008 to address short selling takeovers? (Genuine question, I'm curious)

I know in Australia you've always had to declare it before trading.

I thought it was so the SEC could monitor limits cos certain stocks you can't short more than a percentage.

That's direct trading thou I’m not sure options and futures count to those limits