The Active Stock Market Trader, or Traders of Other (Crypto ect.) Market's Thing's Thread.
- Thread starter Chrunch Houston
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McLaren
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This is what I've read as well. They shorted something like 140% shares, so they were potentially screwed the moment they did so b/c they were borrowing shares that aren't there.
Edit* Holy crap, this is a lot of people on multiple sides calling out Robinhood. Apparently, a lawsuit has been filed as well.
There's a Twitter thread as well showing DT Jr. & AOC's tweets together, but it's got some language in it.
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- 29,943
- Bratvegas
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If you're shorting more than 100% of possible shares, you absolutely cannot cry and go begging if it goes wrong.
Your own fault. Don't be looking for a federal bailout or intervention because your risk arrogance got the better of you.
Your own fault. Don't be looking for a federal bailout or intervention because your risk arrogance got the better of you.
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Danoff
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"alleging that Robinhood “deprived their customers of the ability to use their service,” in an effort “to manipulate the market for the benefit of people and financial intuitions.”
Is that meant to be "financial institutions" or "financial intuitions"? I can't even tell ... that's how crazy this has gotten.
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ROAD_DOGG33J
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It wasn't only robinhood that restricted trades. Other major brokerage firms also restricted trading for a few stocks. Wonder if they'll get hit with anything.
McLaren
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Webull was one, but quickly reversed. Fidelity seems to a major one that hasn't put any restrictions on.
suprajef
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Hopefully there is an investigation
killerjimbag
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Wall Street hedge funds. Look no further than Blackrock. You know that company that is worth trillions of dollars and has infiltrated the White House. Oh the irony. Go look at how many former executives of Blackrock are now part of Bidens team. The great reset is starting folks.
https://www.businessinsider.com/what-to-know-about-blackrock-larry-fink-biden-cabinet-facts-2020-12
https://www.businessinsider.com/what-to-know-about-blackrock-larry-fink-biden-cabinet-facts-2020-12
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Look for the Dutchman to assist you.
Danoff
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Oh gawd, not the Blackrock boggie man again. I have some blackrock funds. Oh no! Vanguard is going to take over the white house? Oh no! look how many people in congress have money with fidelity! Give me a break. Financial advisers like blackrock funds, that's all you need to know to know whether or not rich people hold blackrock funds.
Also, the fact that people involved in one of the largest fund managers are also involved at various levels of macroeconomic policy isn't that surprising. You need to have an in-depth understanding of wall street to make good economic policy. The latest guy looks like he was recruited out of the Obama admin to work at blackrock and then subsequently, surprise, Biden wants him back. The overlap of the skill set is pretty significant.
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ROAD_DOGG33J
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- Crash852
I think it's worthwhile to point out that before this whole thing very publicly exploded, there was a solid thesis around GameStop turning their business around. That was the basis of which that one Redditor that started all this sank his money into the stock. A billionaire who previously successfully built an e-commerce company bought a bunch of shares in GameStop, enough to get himself and two allies on its board. There's anticipation that this guy will be named CEO in the upcoming annual shareholders meeting. This was the basis for the jump to ~$20/share.
They do have to buy them though. Over 100% of the shares of the float was shorted. Shorts have to be unwound eventually; if all shorts were unwound, the entire float has to be bought and some then again bought a second time in order to close all the shorts out. In the meantime, hedge funds that holds the shorts are paying interest and premium to keep holding onto the short, as the price of the stock increases, the interest cost increases.
As long as the demand of the stock (driven by hedge funds' need to cover their shorts due to excessive contract carrying costs or impending contract expiration, or call sellers need to deliver exercised, in-the-money calls) exceeds the supply of the stock, the price should go up.
This is a case of the perfect storm where the stock float is relatively small making it easier to actually move markets, there was a high interest in the stock because a) they believed in a growth thesis or b) they see this as a potentially effective way to stick it to the man, hedge funds were excessively shorting the stock (over 100%), all of which eventually had to be unwound and covered anyways unless the shorts manage to drive GameStop out of business, and certain hedge fund managers made the wrong move early on by publicly mocking and having a condescending attitude towards the Redditors instead of eating humble pie quietly, thus pissing the Redditors off.
And those options are worth so much money because each contract gives the holder the right to 100 shares at the $12/share price, and this Redditor holds 500 contracts for a total right to buy 50,000 shares at $12/share.
That is accurate.
That's the prevailing theory floating around online, and an thorough investigation certainly needs to be done to see if there's any truth to this at all. With that said, the most straightforward answer is probably that Robinhood had liquidity problems, i.e. it couldn't put up the cash to ensure that trades actually get completed. When you buy or sell a stock, settlement is actually D+2. You see money in your account immediately, but that money won't technically arrive until 2 days later, and in the meantime, Robinhood (or your brokerage) is effectively lending that to you until that cash actually shows up at end of settlement period. Robinhood CEO wouldn't admit it, but with reports that they drew on lines of credit, Robinhood was literally running out of cash with all the trades. Either way, it looked really bad and Robinhood's silence didn't help the matter or the perception. Robinhood screwed themselves pretty hard on this one.
Keef
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Bullhonky. When you look at the price moves caused by RH's blocking the prices of all related stocks had the exact same trends, and all the stocks just happened to be shorted by the same hedgefunds. After the buys were stopped and the price stopped increasing, the hedgefunds ladder traded to drive the price down quickly in an attempt to sell off their shorts and recover anything they could. Gamestop, Blackberry, and AMC all had virtually identical price trends triggered at the exact same time and were all shorted by the same people. That is the straightforward answer. I'd argue that Robinhood didn't run out of cash because of the trades, they took the credit so they wouldn't run out of cash when their financial backers, aka the hedgefunds, lost their ass. They took the lines of credit while they could to keep themselves afloat.
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It seems like the hedge funds did ladder attack to drive the price down, I agree with you on that. It's likely they were trying to do that all morning but was unsuccessful because so many people were buying still and pushing prices up. When Robinhood stopped people from trading in those stocks, huge amount of the demand was gone, so the ladder attack then became successful. GME, BB and AMC certainly had a huge amount of downward pressure (whether from shorting or selling) going on that whole time. If you simultaneously remove demand in a significant way, of course they all would have the same subsequent price trends. I suspect that the rationale Robinhood gave publicly is not the whole truth and there's more going on in the background that they aren't saying, but it has at least some truth to it.
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Keef
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I've not been following that closely, but just looking at the chart, if you'd have bought in January at around $19, and sold at the peak of $347, you'd have had to have had $54,739 invested in Game Stop to have made $1,000,000. I doubt your average redditor had $55k in GME, and I doubt many could afford the risk to get in at that level in the hope it would jump. I'm sure a lot of people have made some good wedge on it though.
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The people who were hyping it, in my eyes, were looking to screw over hedge funds but were more looking to make their own money. Not a true pump and dump but close enough.
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