Some smart person explain the GME (gamestop) thing

[Stu Gotz]

Ha! That's the most perfect explanation I've seen. WoW raids were epic back in the day. Wanna see people take this stuff next level tho? Check out the EVE Online crowd. Those guys go bonkers with their spreadsheets and epic space battles. Intergalactic financial wars and stuff. Wall Streets got nothing on that community. That could very well be the Redditors they're dealing with.TGR Forums mobile app

We joke about this, but its serious business that regulators need to understand and quick. Robinhood was accessing credit lines today and I'm sure the rest of the discount brokers were buttoning down to stop things from spiraling out of control. This time it was a small(ish) cap stock that got pumped. The next time its some smart due who figures out a real pressure point and you've got the unwashed masses creating real systemic risk.

[LeeLau]

I can't keep track of all the terms--what's this called after the float exceeds outstanding shares? Naked? Skinless?

Ambush

[char_]

We joke about this, but its serious business that regulators need to understand and quick. Robinhood was accessing credit lines today and I'm sure the rest of the discount brokers were buttoning down to stop things from spiraling out of control. This time it was a small(ish) cap stock that got pumped. The next time its some smart due who figures out a real pressure point and you've got the unwashed masses creating real systemic risk.

Serious question.

If this pressure point exists, and is presumably profitable, why hasn’t some smart dude with access large sums of money hasn’t done it already? I assume some other smart trader could have done the same thing to Melvin that reddit did? (Pretty sure Lee Lau has explained similar things happening, maybe I am misunderstanding.)

Is it illegal for Jim Cramer to get on TV and say “hey, this stock is being shorted in a stupid way, you should buy it and make money the same way those reddit guys did.?

[gravitylover]

Ha, that would be fun to watch happen.

Re: targets - What if one of these extreme groups put together a large enough bundle of cash to hit a couple of those pressure points?

[jono]

To take ^^that a step further, even if we assume that WSB attracts lots of attempts to do this again, the whole thing is based on real facts. WSB (or any collection of investors) should naturally be wary of people wandering in and talking their own books--and will tend to be the more often it happens.

This whole thing seems a lot closer to open source security than dark pool manipulation to me.

[char_]

Another question:

would it it be illegal for another investment firm to notice Melvin’s position, take the opposite position and advertise publicly that they had taken that position? I assume not since Didn’t we watch this sort of thing play out with a supplements company a few years ago?

[LeeLau]

Serious question.

If this pressure point exists, and is presumably profitable, why hasn’t some smart dude with access large sums of money hasn’t done it already? I assume some other smart trader could have done the same thing to Melvin that reddit did? (Pretty sure Lee Lau has explained similar things happening, maybe I am misunderstanding.)

Is it illegal for Jim Cramer to get on TV and say “hey, this stock is being shorted in a stupid way, you should buy it and make money the same way those reddit guys did.?

Not illegal at all. In my 20 years of shortselling nothing has been as such a suicidal short trap as GME. I've not had such conviction in a trade for a long time. This thing was a slam dunk for 30s. Cashing out at 450s was, of course, unexpected.

Ha, that would be fun to watch happen.

Re: targets - What if one of these extreme groups put together a large enough bundle of cash to hit a couple of those pressure points?

It happens all the time. They happen to be called "funds" and they wear nice suits

[char_]

Not illegal at all. In my 20 years of shortselling nothing has been as such a suicidal short trap as GME. I've not had such conviction in a trade for a long time. This thing was a slam dunk for 30s. Cashing out at 450s was, of course, unexpected.



It happens all the time. They happen to be called "funds" and they wear nice suits

So so is there a serious case to be made for regulation, or is this just elites trying to protect themselves?

[alias_rice]

Robinhood says they are allowing “limited trades” of everything they shut down today. I’m not sure what that means, but I have a feeling it will be another wild day tomorrow.

[LeeLau]

So so is there a serious case to be made for regulation, or is this just elites trying to protect themselves?

There is regulation against shorting shares without a borrow aka naked shortselling. There are numerous loopholes to circumvent the laws. The loopholes are, of course, available only to well-capitalized funds

[MTT]

No one has talked about the part b of this. Think of the real estate guys waiting for a fire sale on gamestop stores after they went bankrupt.
It's covered in this long segment.
Robinhood saved the hedge funds billions today by letting them drive the price down. Making the short positions hurt a bit less.

[shroom]

let them losses trickle down baby

[Stu Gotz]

https://mobile.twitter.com/WallStCyn...98065393000449

This is a good read by Jim Chanos, noted short-seller.

[dannynoonan]

Har

[BmillsSkier]

No one has talked about the part b of this. Think of the real estate guys waiting for a fire sale on gamestop stores after they went bankrupt.
It's covered in this long segment.
Robinhood saved the hedge funds billions today by letting them drive the price down. Making the short positions hurt a bit less.

That's neat that you think there's gonna be a fire sale on vacant strip mall property in the middle of a pandemic.

What I can tell you is the REITs that own the strip malls have mortgagees to answer to as well. One more vacancy in the name of an internet mob casualty will look just like the vacant 10,000 sq/ft next to it. Wanna buy?

[rideit]

They happen to be called "funds" and they wear nice suits

Nowadays most of them work in their pajamas, I would think.
In their second home at the beach or up in the mountains...

[MTT]

That's neat that you think there's gonna be a fire sale on vacant strip mall property in the middle of a pandemic.

What I can tell you is the REITs that own the strip malls have mortgagees to answer to as well. One more vacancy in the name of an internet mob casualty will look just like the vacant 10,000 sq/ft next to it. Wanna buy?

Thanks for saying it for me. Game stop might be one of the last stores in the mall keeping the mall group one step ahead of foreclosure. Cave in gamestop and you get the whole mall for pennies on the dollar. I don't think this is fantasy land. They think this shit through. They got the resterant, the bar, hair Solon. But that big store is keeping them afloat. Still a few cars in the lot. Only question do the funds Short a publicly traded company 150% just to take the liquidity. Or they are bankrupting them to pick the bones.

[Cono Este]

The stock must be what is called “hard to borrow”. Meaning there are no shares to borrow and short. And if you short Intra day, you risk being “bought in” over night.

You can tell by put/call parity bring out of whack. Selling puts, and buying calls, then shorting stock for a big credit. If you can borrow stock, you can essentially make a fortune risk free.

Since I stopped doing it, I’ve heard people are now paying stock loan departments a credit to borrow stock when they can put on the reversal for a bigger credit. I miss the 90’s when we actually earned interest, plus got paid a credit for the reversal, then just sit back, hope we did not get bought in, and collect a dollar per share, per month. Easiest money ever. Did it for 18 months straight once on about 250k shares. Never got bought in, which means I fucked up and should have strapped on more.




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[jackattack]

let them losses trickle down baby

I laughed

[shroom]

see, those dudes at melvin will be fine

this was OPM

[LeeLau]

The stock must be what is called “hard to borrow”. Meaning there are no shares to borrow and short. And if you short Intra day, you risk being “bought in” over night.

You can tell by put/call parity bring out of whack. Selling puts, and buying calls, then shorting stock for a big credit. If you can borrow stock, you can essentially make a fortune risk free.

Since I stopped doing it, I’ve heard people are now paying stock loan departments a credit to borrow stock when they can put on the reversal for a bigger credit. I miss the 90’s when we actually earned interest, plus got paid a credit for the reversal, then just sit back, hope we did not get bought in, and collect a dollar per share, per month. Easiest money ever. Did it for 18 months straight once on about 250k shares. Never got bought in, which means I fucked up and should have strapped on more.




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Its been htb for 20 sessions straight

[Cono Este]

Its been htb for 20 sessions straight

Fun will probably die out when those big reversals expire. I’d look at open interest. Probably all kinds of vol from the options. Stock loan business is a serious, serious racket.

Good luck, you seem to be killing it.


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[Cono Este]

If people cant short the stock, then they do it synthetically. They buy puts, and sell calls. The puts become super inflated, so I wouldn’t speculate by buying puts. Too hard to make money.

The people who make the real money are the ones playing the stock loan game successfully, and buying stock synthetically, accommodating the speculators trying to short it synthetically. And the only people who have that kind of stock borrowing ability are the biggest customers at the biggest clearing firms. I.e the big hedge funds and market making firms. They get bought in last.


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[CovertM]

Another question:

would it it be illegal for another investment firm to notice Melvin’s position, take the opposite position and advertise publicly that they had taken that position? I assume not since Didn’t we watch this sort of thing play out with a supplements company a few years ago?

There are public SEC filings of a number of large funds that took that opposite position (Blackrock, Fidelity, DFA, RC Ventures). All took substantial ownership (8-13%) of GME at the tail end of last year. They clearly were setting themselves up to profit on the over shorted position of Melvin, etc.


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[LeeLau]

Fun will probably die out when those big reversals expire. I’d look at open interest. Probably all kinds of vol from the options. Stock loan business is a serious, serious racket.

Good luck, you seem to be killing it.


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Right now my play is to hang on to as much stock remaining as possible selling the highest call strike for the highest IV. Then buying back the calls to roll diagonally. So far so good. Another week and the premium gains will be also as much as the stock.