OT: Game Stop

[FloridaFan]

'Stop f---ing selling!!!' WallStreetBets Redditors go ballistic over GameStop's sinking share price

Reddit favorite GameStop isn't looking so hot this week and some of the stock's biggest backers are freaking out.

us.cnn.com

WSB is dying. Inactive admins have came back to the subreddit and kicked out in order for them to sell T-shirts and movie rights

 

[bpo57]

Some painful lessons learned here. I read recently that Mark Cuban encouraged those on WSB to hold onto GME stock. He said that he didn't own the stock but that those that did should hold. That was about $150 ago. What an irresponsible tool.

 

[Forza Azzurri]

Depends which hedge fund.

LOL...no kidding...

$1 invested in S&P in 1988 is now worth $20
$1 invested in Medallion fund in 1988 is now worth 20k.

 

[Forza Azzurri]

I think the situation is a little more complicated than that. When it first unfolded, I very much believed there were shady forces at work (Stevie/Melvin/Citidel) blocking people from buying.

Then digging deeper into volatility and the credit that needed to be posted to the clearinghouses, it made me realize there were more logical explanations. The fact that RH's CEO could not articulate the problem made it sound worse than it was in practice.

Edit - adding a couple things on RH. They did raise $3.4 billion last week and had 600K downloads on Friday. I see people talking about leaving, but need to see some evidence

Say GME and the other meme stocks give back all the gains. Who loses, who is to blame? Portnoy is still blaming RH. Let's be clear though. RH blocking those buy orders actually kept people from buying the top, and the restriction was for one day. I don't know if that narrative will hold for the long term.

Portnoy sold everything this morning, and then tweeted about it. He front ran his disciplines. That's only a minor point. Portnoy does an excellent job trash talking, and took Stevie Cohen down. He very much connects with the regular person and points out hypocrisy when he sees it. However, he is also promoting behavior that is financially unhealthy (reckless day trading). He can scream all he wants about the system being rigged. In the end, if you are a person who pissed away a bunch of money in the market, you have to decide what you learned from the experience. And the world moves quickly. That anger may be channeled to something else than the hedge funds.

The fact is there are all sorts of relationships within Wall Street that are less than moral, and borderline illegal. I'm just not convinced this was the moment that changes things

What may happen? More restrictions on short selling, and more circuit breakers for single stock volatility. That is my best guess, and even lean towards no new regulations.

There are 1000s of hedge funds. If 1-2 blow up because of GME, they are a minor blip in a long history of hedge funds blowing up

Yup. I have enough knowledge of the clearing houses to know what they are, the purpose they serve and, at a 10,000 ft level, how they calculate their margin requirements that it was pretty easy to connect the dots between RH drawing down on their credit lines, having to raise a ton of new capital and the clearing house drastically increasing the margin requirements.

Of course conspiracy theories involving hedge funds is much more interesting than the mundane business of clearing trades so that is what won the day.

And, in this day and age, where any idiot with a mic and a sharp tongue can attract a sizeable following, and the truth is much less important than the number of views and clicks, the truth never really had a chance.

Ultimately, nothing should change. There is nothing wrong with shorting stocks. the ability to short serves a useful purpose. And the retail crowd is just going to be another variable in the market equation. With stock commissions set to zero, and options commissions down drastically, the retail trader is here to stay.

What I don't understand is how you can short 140% of the float. If every short has to have a locate and borrow, how do you locate that 40% that is not outstanding? That piece I do not understand.

 

[City of Cuse]

Some painful lessons learned here. I read recently that Mark Cuban encouraged those on WSB to hold onto GME stock. He said that he didn't own the stock but that those that did should hold. That was about $150 ago. What an irresponsible tool.

He said if you can afford to, keep it, but that he doesn't own it so take that for what its worth. So not necessarily an irresponsible tool, just a tool?

 

[bpo57]

He said if you can afford to, keep it, but that he doesn't own it so take that for what its worth. So not necessarily an irresponsible tool, just a tool?

That's true. I just happened to read all of his comments. Maybe a combo of being irresponsible and being an idiot. But yes certainly a tool.

 

[Todoubled23]

Yup. I have enough knowledge of the clearing houses to know what they are, the purpose they serve and, at a 10,000 ft level, how they calculate their margin requirements that it was pretty easy to connect the dots between RH drawing down on their credit lines, having to raise a ton of new capital and the clearing house drastically increasing the margin requirements.

Of course conspiracy theories involving hedge funds is much more interesting than the mundane business of clearing trades so that is what won the day.

And, in this day and age, where any idiot with a mic and a sharp tongue can attract a sizeable following, and the truth is much less important than the number of views and clicks, the truth never really had a chance.

Ultimately, nothing should change. There is nothing wrong with shorting stocks. the ability to short serves a useful purpose. And the retail crowd is just going to be another variable in the market equation. With stock commissions set to zero, and options commissions down drastically, the retail trader is here to stay.

What I don't understand is how you can short 140% of the float. If every short has to have a locate and borrow, how do you locate that 40% that is not outstanding? That piece I do not understand.

Perhaps a combination of naked shorting and puts? Unsure definitely. Markets humbled the shorts that for years have literally counted their short position, then watched it print money when they put out a hit piece. Its gonna just go back to where we just aren't sure who is short and on what stocks. I mean these guys had it made for years, money printer.

 

[Todoubled23]

Yup. I have enough knowledge of the clearing houses to know what they are, the purpose they serve and, at a 10,000 ft level, how they calculate their margin requirements that it was pretty easy to connect the dots between RH drawing down on their credit lines, having to raise a ton of new capital and the clearing house drastically increasing the margin requirements.

Of course conspiracy theories involving hedge funds is much more interesting than the mundane business of clearing trades so that is what won the day.

And, in this day and age, where any idiot with a mic and a sharp tongue can attract a sizeable following, and the truth is much less important than the number of views and clicks, the truth never really had a chance.

Ultimately, nothing should change. There is nothing wrong with shorting stocks. the ability to short serves a useful purpose. And the retail crowd is just going to be another variable in the market equation. With stock commissions set to zero, and options commissions down drastically, the retail trader is here to stay.

What I don't understand is how you can short 140% of the float. If every short has to have a locate and borrow, how do you locate that 40% that is not outstanding? That piece I do not understand.

If I'm recalling correctly there's been a lot of failure to delivers these last few years, which would imply only one thing to me. Phantom shares that were never borrowed to begin with, while simultaneously diluting the float.

 

[Fat tire 13]

Yup. I have enough knowledge of the clearing houses to know what they are, the purpose they serve and, at a 10,000 ft level, how they calculate their margin requirements that it was pretty easy to connect the dots between RH drawing down on their credit lines, having to raise a ton of new capital and the clearing house drastically increasing the margin requirements.

Of course conspiracy theories involving hedge funds is much more interesting than the mundane business of clearing trades so that is what won the day.

And, in this day and age, where any idiot with a mic and a sharp tongue can attract a sizeable following, and the truth is much less important than the number of views and clicks, the truth never really had a chance.

Ultimately, nothing should change. There is nothing wrong with shorting stocks. the ability to short serves a useful purpose. And the retail crowd is just going to be another variable in the market equation. With stock commissions set to zero, and options commissions down drastically, the retail trader is here to stay.

What I don't understand is how you can short 140% of the float. If every short has to have a locate and borrow, how do you locate that 40% that is not outstanding? That piece I do not understand.

Here is a pretty good explanation (not from me, I read it in an article). Shares can get lent out more than once if they follow a certain path

but I want to offer an even simpler explanation. There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but 190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine.

 

[Forza Azzurri]

Here is a pretty good explanation (not from me, I read it in an article). Shares can get lent out more than once if they follow a certain path

but I want to offer an even simpler explanation. There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but 190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine.

Ah...that makes total sense...technically you could have infinite shorts relative to float...

Also explains why short covering can cause such violent upward price action...

 

[Todoubled23]

Bump, so glad interactive found me shares to short only once most of the big guys covered.

 

[Fat tire 13]

well the hearing is happening right now... with all the major players. It is entertaining thus far

Virtual Hearing - Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide | U.S. House Committee on Financial Services

financialservices.house.gov