Some smart person explain the GME (gamestop) thing

[DeathRaven]

At what point do you just walk away and say I won the game and I don't want the mental stress of playing anymore. Or is it a form of addiction? Straight question.

After rubbing shit all over the car door handles and windshield wipers, I think.

[RShea]

A few things in this thread that is way over my head and complete understanding (like why would a company have more than 100% of the stock short position?)

First question is Motty Fool recommended this GME a buy back in late 2020. There was a long time since the Reddit discussions started about GME and when the market went completely crazy and wild ride it has been this past month basically. Would not the Hedge Funds try and reduce their short positions?

Will this affect other stocks or could it destroy the market? (And does the Government step in fast if these Hedge Fund companies that are under water or just change the Short rules?)

Elon Musk helped with his Gamestonk comment also possibly.

The same effect is already happening to other stocks, such as AMC, BlackBerry and Nokia. How are these similar large short positions found out, reading through all the Hedge Funds Trading and Position Reports?? Are there very easy other ways to find what I will call #Samestonks (same crazy over 100% of the stock being shorted) other than being on Reddit and hoping other report it to the subreddit called r/Wallstreetbets?

[jono]

A lot of people have questions, this person would like to answer them:

https://www.reddit.com/r/funny/comme...d_by_a_normal/

[schuss]

At what point do you just walk away and say I won the game and I don't want the mental stress of playing anymore. Or is it a form of addiction? Straight question.

I mean, he's already liquidated 75% of it in the money, so the rest is just a lottery ticket. My personal take is that for things like this either say "let's go" and enjoy the ride or preset your decision limits to take emotion out of it.

[LeeLau]

I mean, he's already liquidated 75% of it in the money, so the rest is just a lottery ticket. My personal take is that for things like this either say "let's go" and enjoy the ride or preset your decision limits to take emotion out of it.

Good question Makers.

I didn't trade for about 5 years thinking I'd take a break and enjoyed it and sometimes wondering if I was addicted. My ability to take a break leads me to conclude that I wasn't an addict.

I did get back into it circa 2013 but would take a small % of the portfolio and put in into a YOLO account. If that account blew up then that was it for the year. If it exceeded a certain limit then I'd draw it down. Because of COVID I had more forced downtime for work as opposed to generally farting around so I definitely traded more this year. I've seen better opportunities this year than I've seen in 20 years.

But GME was the best. I've not had so much conviction about a position in a long long time

Yup. Imo its more likely that my remaining 25% will be 2x the profit of my other 75% then that it goes to below my breakeven.

Edit DeathRaven I see you're still annoyed that I said you'd make the world a better place by killing yourself. Do it for real kittenz DR.

[Cono Este]

People who short stocks and do other kinds of questionable financial transactions--remember credit default swaps?- like to trot out the same arguments about liquidity, about driving bad companies out of the markets, about protecting little investors--without ever quite explaining how that works. It's all just naked greed--figuring out ways to take other people's money without doing anything useful. When you're tied up in that world it's hard to appreciate what it is you're doing, but those of us on the outside see.

Putting together bogus defaults and giving them bogus ratings has little to do with market structure and liquidity.

I’ll say this for the 10th time. Most short interest is a hedge against derivatives. Highly, highly unlikely any true hedge fund l, worth its weight, was short anything naked.

An over whelming majority of volume traded on a daily basis in stocks is a hedge against derivatives. And an overwhelming majority of those derivatives are hedged. I’m not talking about 10 lots, but the 1000 lot trades.

I won’t argue it all generates fees and commissions for the industry, that’s why I don’t recommend small investors even trade options, they have no idea how they work, but It all adds liquidity. If you took away derivatives and short selling, and had a long only policy, we’d have more volatility, and less liquidity.




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[jono]

Seems like the importance of this is really overblown. The market pays short sellers to punish the greedy and/or stupid on the long side. Sometimes short sellers get greedy and/or stupid on the short side. This is them getting punished. Both cases tend to help temper greed and stupidity. The people who try to repeat the squeeze ad infinitum will get punished before long, too. So it goes.

[Cono Este]

Seems like the importance of this is really overblown. The market pays short sellers to punish the greedy and/or stupid on the long side. Sometimes short sellers get greedy and/or stupid on the short side. This is them getting punished. Both cases tend to help temper greed and stupidity. The people who try to repeat the squeeze ad infinitum will get punished before long, too. So it goes.

If it was long only, how hard do you think retail investors would get fucked? It would be like no checks and balances. They’d walk the stock up, and up on no volume, then print 99% of the days volume at the top and drop the fucker a dollar on the first down tick. ALA NYSE specialists in the old days.

I know, I fucked people in illiquid markets for 10 yrs. me, and two other guys, in about 10 issues. We couldn’t lose. That is until, matching orders to accommodate the customers without us showed up. And guess what they were doing? Opening shorts quite often.

Fucking sucks we couldn’t be the only liquidity providers. I’d be a billionaire by now if they had just left us alone.

You can get into the Greeks, back spreads vs front spreads, adding to volatility, but that all depends on who is holding the positions, and how they manage them. It can calm volatility as much as it can excite it. But like Petteffy, the IB owner, and perhaps greatest trader in the world says, he has 27000 acts in game stop, who knows who they are and what their intentions are?


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[LeeLau]

If it was long only, how hard do you think retail investors would get fucked? It would be like no checks and balances. They’d walk the stock up, and up on no volume, then print 99% of the days volume at the top and drop the fucker a dollar on the first down tick. ALA NYSE specialists in the old days.

I know, I fucked people in illiquid markets for 10 yrs. me, and two other guys, in about 10 issues. We couldn’t lose. That is until, matching orders to accommodate the customers without us showed up. And guess what they were doing? Opening shorts quite often.

Fucking sucks we couldn’t be the only liquidity providers. I’d be a billionaire by now if they had just left us alone.

You can get into the Greeks, back spreads vs front spreads, adding to volatility, but that all depends on who is holding the positions, and how they manage them. It can calm volatility as much as it can excite it. But like Petteffy, the IB owner, and perhaps greatest trader in the world says, he has 27000 acts in game stop, who knows who they are and what their intentions are?


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If it was long only the whole world of stocks will be the pink sheets.

[rideit]

I wasn’t a thousandaire at 10...

https://www.mysanantonio.com/news/lo...p-15905836.php

[Stu Gotz]

When all the smoke clears and the congressional hearings have been held, it will simply boil down to Robin Hood pissing off its non-paying customers to save itself. Short-term pain for hopefully long-term gain.

And the rest of the discount brokerages not wanting to play the game.

[cravenmorhead]

The hedge fund guys at this point all likely covered their shorts last night and are out. Still at a big loss but nothing like it would have been if they hadn’t been able to halt the RH trading.

I don't believe there was enough volume traded at the low numbers for this to be true, but I'm also not very good at math.

[JimmyCarter]

I don't believe there was enough volume traded at the low numbers for this to be true, but I'm also not very good at math.

Lowest shorts have been covered, but shorts at higher prices keep taking their place and as stock price has kept rising most are still losing.

[rideit]

Stolen from reddit

There's a rich kid in town. Let's call him Melvin. He thinks he's really smart. He finds a coupon for $5 off the new Nintendo Switch during the holidays with no limit on number of units. This is easy. I'll go ahead and sell the Switch now for $200 and then buy it for $195 with the coupon. Easiest $5 I'll ever make. He goes and tells all his parents' friends at the Citadel Country Club that he can get them the new Nintendo Switch for their kids. He collects $200 each from 200 parents. He now has $40K and will use that money to purchase Nintendo Switches for $39K. He'll have earned $1K in just a few hours. His parents will be so proud.

There's another kid watching Melvin this entire time. Let's call him Keith. Keith doesn't like Melvin. Keith is good friends with the guys over at Gamestop. He finds out that there are were only 100 new Switches shipped to the entire country. Keith and his 99 friends buy all 100 Nintendo Switches on the spot.

Later in the day, Melvin goes to Gamestop with his $5 off coupon and says, "I'll take 200 Nintendo Switches please." Gamestop guy looks at him and says, "Sorry, we're all sold out." Melvin goes to the next Gamestop. Same story. All sold out. He goes to all the Gamestops in the city and can't find a single Switch. He won't be able to fulfill the orders.

Meanwhile, Keith is telling all his friends about what Melvin promised the members at the Country Club. Nobody sell him the Nintendo Switch that you bought, no matter how much he offers you. Nobody likes Melvin, so everybody holds on to their Nintendo Switch.

Melvin is in trouble. His parents rich friends are all asking when they are getting their Nintendo Switch. Melvins parents are angry, but they don't want to lose their standing in the Citadel Country Club. They have to help Melvin gets 200 Nintendo Switches.

The price of Nintendo Switches in the city skyrockets. Melvins parents were able to get a few units from Keiths friends, but they had to pay really inflated prices for them, first $1,000, then $2,000, now $3,000. It's nearing Christmas, and every rich parent at the Country Club is desperate for the Nintendo Switch they promised their kids. They can't trust that Melvin will be able to get them one. They all start bidding against each other for Switches. Everybody in town is in on the action now. Everybody wants to get a Nintendo Switch to sell at the country club for $10,000. Meanwhile, Keith and his friends are just hanging out and playing Animal Crossing.

[KQ]

[ColMan]

Get ready for even more insanity if the next round of stimulus passes and RH removes the buy side restrictions.


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[old goat]

Too bad we can't get the Proud Boys to attack the NYSE. Or maybe we can.

[MontuckyFried]

Ha! That's perfect.

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[Bunion 2020]

Opinion: The good guys in the GameStop story? It’s the hedge funds and short sellers.

Sebastian Mallaby
Contributing columnist
Jan. 30, 2021 at 1:35 p.m. MST


Sebastian Mallaby is the Paul A. Volcker senior fellow for international economics at the Council on Foreign Relations and a contributing columnist for The Post. He is the author of “More Money Than God: Hedge Funds and the Making of a New Elite.”

Until last week, the quintessentially absurd bubble was the Dutch tulip mania. At least the South Sea bubble of the 18th century involved fraud: Investors thought they were buying shares in a valuable company. At least the dot-com bubble of 1999 involved technological promise: Investors thought the Internet would transform business even faster than it has. But in Holland in the 17th century, investors bid the price of simple tulip bulbs up to ridiculous heights. It was the purest of idiotic fantasies.

Last week, a similar fantasy reared its head: the idea that GameStop, an ailing retailer whose shares had slumped from $57 to $4 since 2013, should suddenly trade at $350. The speculators driving this 8,750 percent revaluation have no evidence that this makes sense: Indeed, they disdain evidence. GameStop’s price-to-earnings ratio is infinite, because the company earns nothing. Its prospects are grim, because it is mainly a brick-and-mortar vendor of video games, a product best sold digitally. But the speculators don’t care. They believe. And the force of their belief has been contagious and self-fulfilling.


This is not the worst of it, however. Financial markets are usually stabilized by rational investors: If the crazies drive stocks to an absurd height, thoughtful people take the other side of the trade until prices reconnect with reality. The correction can be late and messy — it’s hard to be thoughtful when markets are wild — but at least our culture generally applauds the partisans of rationality. After the subprime bubble popped, the plucky minority that called out the excess became minor folk heroes. There was even a movie about them.

So far, this time is different. The GameStop speculators are not merely in a frenzy about one stock. Their goal is to destroy the traders who link stock prices to fair value. To suggest a political analogy, they are not just blindly devoted to their candidate; they deny the legitimacy of the opposition party. They are not just acting within the system; they want to overthrow the system. It’s as though — just imagine — a rabble gripped by conspiracy theories were to attack the rules of democracy itself. The name “GameStop” is apt.

The particular targets of the GameStop crowd are hedge funds and short sellers. Here, a couple of definitions may be useful. Generally speaking, a hedge fund is a small-to-medium-size company that makes money by choosing smart investments. There is nothing nefarious about this. To the contrary, if you don’t like too-big-to-fail banks that get backstopped by taxpayers, small-enough-to-fail hedge funds ought to be celebrated. If you worry about complex financial conglomerates with corrupting conflicts of interest, single-purpose investment boutiques are simpler and healthier. On the online forums where the GameStoppers congregate, you read complaints about hedge funds being bailed out during the crisis of 2008. Actually, banks, brokers, insurers, mortgage providers, money market funds and even car companies got rescues. Hedge funds got nothing.

What about short sellers? These are specialists who research stocks that might go down, sometimes because bosses are illegally covering up bad news about their companies. When short sellers identify a case of fraud or similar, they borrow and sell the stock, hoping to buy it back at a lower price later. Again, there is nothing evil about this. To the contrary, it’s a way of keeping prices honest. A market without short sellers is like a political system without investigative journalists.

This, however, is not how GameStoppers see things. They have gone after a short seller named Andrew Left, hacking into his social media accounts, sharing his personal information online, ordering dozens of pizzas to be delivered to his home in the middle of the night, and texting his children with threatening and profane language, according to the Wall Street Journal. Perhaps not surprisingly, Left has announced he will stop playing the game. Irrational stock prices will be that much likelier.

The worry is that the GameStoppers will now target others. Short sellers operate in the open: You can check short-selling volumes for any given stock on Yahoo. By whipping up frenzied buying of a heavily shorted company, speculators can cost the shorts billions and maybe put them out of business. Already, GameStoppers are buying other beaten-down companies, such as cinema giant AMC. A Goldman Sachs index of heavily shorted stocks is up sharply this month because the shorts have been routed.


Hedge funders and short sellers are out to get rich: They are certainly not angels. But there is a difference between trading based on evidence and research and trading based on conspiracy theories and mob tactics. Over the past week, it’s been tempting to celebrate the colorful rebels — they represent the democratization of finance, the revenge against the fat cats. Now it is time to remember that truth matters.

.

[m2711c]

womp, womp.

[LeeLau]

Hahaha. Won't anyone spare a tear for the short sellers!!!

And now https://www.wsj.com/articles/melvin-...share_facebook



WSJ NEWS EXCLUSIVE HEDGE FUNDS
Melvin Capital Lost 53% in January, Hurt by GameStop and Other Bets
Citadel, its partners and Point72 took losses from their investment in the hedge fund

Melvin Capital was founded by Gabe Plotkin, a former star portfolio manager for hedge-fund titan Steven A. Cohen.

PHOTO: ALEX FLYNN/BLOOMBERG NEWS

By Juliet Chung
Updated Jan. 31, 2021 10:14 am ET

Melvin Capital Management, the hedge fund that has borne the brunt of losses from the soaring stock prices of heavily shorted stocks recently, lost 53% in January, according to people familiar with the firm.

Melvin was founded by Gabe Plotkin, a former star portfolio manager for hedge-fund titan Steven A. Cohen. It started the year with about $12.5 billion and now runs more than $8 billion.

The current figure includes $2.75 billion in emergency funds Citadel LLC, its partners and Mr. Cohen’s Point72 Asset Management injected into the hedge fund last Monday.

As part of the deal, they got noncontrolling revenue shares in Melvin for three years. So far, Citadel, its partners and Point72 have lost money on the deal, though the precise scope of the loss was unclear Sunday.

Melvin has massively de-risked its portfolio, a client said. People familiar with the hedge fund said its leverage ratio—the value of its assets compared with its capital from investors—was the lowest it has been since Melvin’s 2014 start. They also said the company’s position-level liquidity, or its ability to exit securities in its portfolio easily, had increased significantly.

New and existing clients have signed up to invest money into Melvin on Feb. 1, according to the people familiar with the matter. It was unclear how much they would be adding.

Melvin had established itself in recent years as one of the top hedge funds on Wall Street, but a short position in GameStop Corp. GME 67.87% hurt the firm in recent weeks. Losses extended beyond GameStop, with declines coming from throughout its portfolio during a period of market turmoil in January. Positions in which Melvin had publicly disclosed owning put options—bearish contracts that typically profit as stocks fall—in its last quarterly regulatory filing soared, while positions in companies it held sold off.

Bed Bath & Beyond Inc., BBBY 5.02% New York-listed Chinese tutoring company GSX Techedu Inc. GSX 0.24% and National Beverage Corp. FIZZ -3.58% were up 78.4%, 62% and 99% at their intraweek highs last week, respectively. Meanwhile, Booking Holdings Inc. BKNG -4.41% and Expedia Group Inc. EXPE -2.08% were down 9.9% and 13.4% at their intraweek lows.

Traders say as GameStop continued to soar—from $30 to $75 and higher—there was a contagion effect. Managers lost confidence that short positions would stop rising in value and covered heavily shorted names, worried social media-fueled investors would focus on companies they were short. They also started cutting their stakes in companies to reduce the risk in their portfolios, hurting other investors in those companies. Last week alone, GameStop shares soared more than four times.

“The performance pain…has been record breaking,” read a note from Morgan Stanley MS -3.27% to its trading clients last week.

Indeed, hedge funds set near-daily records of various sorts last week for how much they pulled back their exposure to the U.S. stock market by covering their shorts and selling out of their wagers on companies, according to client notes from Morgan Stanley and Goldman Sachs Group Inc. GS -1.40% On Wednesday, this type of so-called degrossing contributed to the largest one-day drop in funds’ use of leverage on record, a Goldman note said.

Maplelane Capital, another hedge fund that has sustained significant losses this month, ended January with a roughly 45% loss, said a person familiar with the fund. It managed about $3.5 billion at the start of the year.

The frenetic trading that catapulted GameStop, AMC Entertainment Holdings Inc. AMC 53.65% and BlackBerry Ltd. BB -3.75% into the ranks of the most traded stocks in the U.S. market and captured the attention of the White House and regulators also hit prominent hedge funds Point72 and D1 Capital Partners.

D1, which ended the month down about 20%, was short AMC and GameStop, said people familiar with the fund. One of the people said D1 had exited both positions by Wednesday morning but that those were small drivers of losses. A more significant factor was shares of travel-related companies declining.

Some fund managers say the episode is likely to change how the industry works.

Fewer hedge funds are likely to highlight their bearish positions by disclosing put options, they said. Instead, funds may use Securities and Exchange Commission rules to keep confidential those positions, a tool activist investors have long used to build positions in companies quietly. More funds also may institute rules about avoiding thinly traded, heavily shorted stocks.

Write to Juliet Chung at juliet.chung@wsj.com

[jono]

By whipping up frenzied buying of a heavily shorted company, speculators can cost the shorts billions and maybe put them out of business.

That's gold, Jerry, Gold!

[kathleenturneroverdrive]

Last week, a similar fantasy reared its head: the idea that GameStop, an ailing retailer whose shares had slumped from $57 to $4 since 2013, should suddenly trade at $350. The speculators driving this 8,750 percent revaluation have no evidence that this makes sense: Indeed, they disdain evidence. GameStop’s price-to-earnings ratio is infinite, because the company earns nothing. Its prospects are grim, because it is mainly a brick-and-mortar vendor of video games, a product best sold digitally. But the speculators don’t care. They believe. And the force of their belief has been contagious and self-fulfilling.

I'd recommend stopping reading any argument with a paragraph as dumb as the one above. That guy's trying to paint the GME investors as dumbasses who just like GME, but (while I am a certified dumbass about this stuff) that's not really what's going on from my POV.

As for how this ends? Who knows. I think a true short squeeze, SEC intervention, the shorters letting the price go to like $1k to force sellers out before a bigger squeeze happens, or the shorters fighting this off for weeks until everyone gets bored and gives up are all about even money. But again, I have no idea what I'm talking about with this stuff.

Also, don't forget - this really isn't Reddit v. evil hedge funds in some class war. This is just big money vs. big money like usual, but this time there are a few million, very, very vocal Redditors in the mix.

[ColMan]

Melvin posted a 53% loss. Ouch.

https://www.google.com/amp/s/www.wsj...ts-11612103117

[fomofo]

Stolen from reddit

There's a rich kid in town. Let's call him Melvin. He thinks he's really smart. He finds a coupon for $5 off the new Nintendo Switch during the holidays with no limit on number of units. This is easy. I'll go ahead and sell the Switch now for $200 and then buy it for $195 with the coupon. Easiest $5 I'll ever make.

Thanks for sharing that - best simple summary I've seen yet!

People who short stocks and do other kinds of questionable financial transactions--remember credit default swaps?- like to trot out the same arguments about liquidity, about driving bad companies out of the markets, about protecting little investors--without ever quite explaining how that works.

Haven't read the entire thread - in case this didn't make it here yet...

A bit of a different opinion

Opinion: The good guys in the GameStop story? It’s the hedge funds and short sellers.

Sebastian Mallaby
Contributing columnist
Jan. 30, 2021 at 1:35 p.m. MST
...
What about short sellers? These are specialists who research stocks that might go down, sometimes because bosses are illegally covering up bad news about their companies. When short sellers identify a case of fraud or similar, they borrow and sell the stock, hoping to buy it back at a lower price later. Again, there is nothing evil about this. To the contrary, it’s a way of keeping prices honest. A market without short sellers is like a political system without investigative journalists.

See vid above.