General > General Technical Chat
Gamestop: Reddit vs. Wall St.
DrG:
--- Quote from: nctnico on January 29, 2021, 07:40:00 pm ---
--- Quote from: DrG on January 29, 2021, 06:18:06 pm ---
--- Quote from: nctnico on January 29, 2021, 06:12:34 pm ---/--/ If they want to 'unshort' then they have to buy the shares back at the current market price.
--- End quote ---
Are you sure? I don't know, but I am not willing to accept that at face value, even if there are "tax consequences" and even if brokers or money people have specific regulations...again, I don't know, but I think that all trades (covering shorts would be a buy I guess) get recorded - right?
--- End quote ---
A very long time ago I to worked at an investment / stock trading firm to get the IT part going so I do know a little bit about it. If you sell short you are selling the shares just as if you own the shares. In the background you 'borrow' the shares from an entity who actually owns those shares. At some point that entity will want the shares back which forces the short seller to buy the shares at the market price. There is more information here:
https://www.investopedia.com/terms/s/shortcovering.asp
--- End quote ---
Yes, I think I have an idea of what shorting a stock is. My question was specifically in reference to this part of your quote "at the current market price" as I hoped was clear by the thread that I linked. I don't think you answered that question nor did the link that you posted. It looks to me like I could, in theory and in practice, sell you 100 shares of Gamestop for $1, regardless of the current market price. I don't see any law preventing me from doing that although it would pretty much constitute a bailout of sorts. Not saying this has, or will, happen, I am raising the question.
Additionally, I could, conceivably, keep my short position for a very long time as long as there was no margin call and I kept paying interest on the loan. Again, this would sound more like a bailout as margin requirements are set with a brokerage account - at least for the smaller guy, but what about a margin call that would doom a large fund - that is a relevant question in my view.
What changed in the short time that buying, not selling, was halted at numerous brokerage firms? Was there an infusion of investor cash that changed RobinHood's mind about allowing buying; did they meet those requirements that quickly- the requirements that the CEO was going on about? Or was their decision to briefly not allow buying out of "an abundance of caution"? Ameritrade's decision was "to mitigate risk for our clients and our company" - which is it primarily?
The Reddit group WallStreetBets has spiked from under 1 million to over 5 million members in a CoVid year. The story is on the front page of most US "papers" today and the story is not over. This is something that sounds to me like it will demand answers to a lot of questions.
I'm really not trying to to argue about it, but I do have investment experience and those questions come to mind although I will plainly admit that I am no expert. Still, when those shorts no longer exist, you don't have to be a stock expert to speculate on what happens to the price.
DrG:
--- Quote from: fourfathom on January 29, 2021, 08:10:06 pm ---As far as price goes, during the huge run-up in oil stocks an advisor I knew liked to say : "The markets can stay irrational longer than you can stay solvent".
I assume a lot of those Reddit folks are planning to lose their investment, and see it as the price of "sticking it to the man".
--- End quote ---
Personally, I set a much lower price on that :) but there does seem to be that aspect to the whole thing and when you turn on a big spotlight, roaches scatter.....but that doesn't mean they are gone.
Edited to add:
https://www.cnn.com/2021/01/29/investing/wallstreetbets-reddit-culture/index.html
Many celebrated WallStreetBets' war on GameStop short-sellers as a populist campaign against hedge-fund raiders looking to profit off the destruction of a well-known retail brand like GameStop. But unlike many other similar online communities, there is also a clear financial goal for the people in it.
and my personal favorite:
Enter WallStreetBets for the first time and you'll almost certainly be a bit lost.
The forum's language can be difficult to understand, even for someone who knows typical Wall Street jargon. The vocabulary specific to the subreddit is extensive, and it will almost never be explained to a newbie earnestly asking for a term's definition. Posters revel in their crudeness; homophobic epithets are tossed around as terms of affection.
I wonder what he would think about this forum?
https://www.nytimes.com/2021/01/29/business/elon-musk-gamestop-twitter.html
On Tuesday, as GameStop shares skyrocketed, Mr. Musk weighed in with a one-word tweet — “Gamestonk!!” — and a link to the Reddit forum where much of the discussion has unfolded. Mr. Musk’s message was seen as an endorsement of sorts from one of the most powerful figures on the web, and in the days that followed, investors bid up the price of GameStop to new highs.
Gamestonk!! https://t.co/RZtkDzAewJ
— Elon Musk (@elonmusk) January 26, 2021
It is a spectacle tailor made for Mr. Musk’s live-wire online persona. He is at once a capitalist hero, a glossy magazine celebrity and a bomb-throwing troll with 44 million Twitter followers, inhabiting his role as the chief executive of two major companies with a bravado that most corporate leaders wouldn’t dream of. The richest man in the world is also, somehow, a hero to the anti-establishment crowd, riling up the digital masses one tweet at a time.
The whole thing has this weird counter-culture, stick it to the man, feel about it, but these don't appear to be like the radical ultra right/left nutjobs, they are probably closer to folks you might see at Harbor-Freight :).
Time and a computer can be a dangerous combination.
Ed.Kloonk:
--- Quote from: Stray Electron on January 29, 2021, 02:50:30 pm ---
--- Quote from: floobydust on January 29, 2021, 07:09:37 am ---It's going to be very ugly, Wall Street is really showing its true colours.
Janet Yellen was paid by hedge fund Citadel $810,000 to speak at three events in 2019, 2020.
US Treasury Secretary for what, two days now, she should recuse herself.
--- End quote ---
American politics is a F U mess! And that includes most or all of the US federal government agencies. That is a CLEAR conflict of interest. when I was US military government contractor we literally couldn't even provide free coffee at meetings because it could have been perceived as some sort of payoff. But Bill Clinton, Janet Yellen and just about every other high level US government employee is allowed to take hundreds of thousands of dollars from the same groups that they're supposed to be regulating for doing next to nothing.
--- End quote ---
There was a meme some time back that posed the idea of these individuals being made to wear their sponsor's patches not unlike motor racing drivers.
nctnico:
--- Quote from: DrG on January 29, 2021, 08:53:40 pm ---
--- Quote from: nctnico on January 29, 2021, 07:40:00 pm ---
--- Quote from: DrG on January 29, 2021, 06:18:06 pm ---
--- Quote from: nctnico on January 29, 2021, 06:12:34 pm ---/--/ If they want to 'unshort' then they have to buy the shares back at the current market price.
--- End quote ---
Are you sure? I don't know, but I am not willing to accept that at face value, even if there are "tax consequences" and even if brokers or money people have specific regulations...again, I don't know, but I think that all trades (covering shorts would be a buy I guess) get recorded - right?
--- End quote ---
A very long time ago I to worked at an investment / stock trading firm to get the IT part going so I do know a little bit about it. If you sell short you are selling the shares just as if you own the shares. In the background you 'borrow' the shares from an entity who actually owns those shares. At some point that entity will want the shares back which forces the short seller to buy the shares at the market price. There is more information here:
https://www.investopedia.com/terms/s/shortcovering.asp
--- End quote ---
Yes, I think I have an idea of what shorting a stock is. My question was specifically in reference to this part of your quote "at the current market price" as I hoped was clear by the thread that I linked. I don't think you answered that question nor did the link that you posted. It looks to me like I could, in theory and in practice, sell you 100 shares of Gamestop for $1, regardless of the current market price.
--- End quote ---
You can. The threat you linked to does raise some good points about taxes because it isn't a loop hole you can exploit to give someone something valuable for free. You can sell me the shares for $1 but I'll have to value them for what they are actually worth (at a certain date) when I fill in my income tax forms.
Side note: Stock exchanges will allow you to set any price you want. It is up to the buyers to accept your price or not. When I was working at the stock trading firm they told me three things when it came to testing with trading platforms: 1) make sure you are in the test environment, 2 make sure you are in the test enviroment, 3) make trades with the smallest number of units only for testing. If you can sell 1 share the system will also work with selling 10,000 shares. It has happened that someone made the mistake to open the real trading environment instead of the test environment and tested with large numbers of shares at crazy low prices costing that particular company lots of money. Not all the buyers where so friendly to undo the transactions.
--- Quote ---Additionally, I could, conceivably, keep my short position for a very long time as long as there was no margin call and I kept paying interest on the loan. Again, this would sound more like a bailout as margin requirements are set with a brokerage account - at least for the smaller guy,
--- End quote ---
In theory that is possible but it could be that the short position is covered by an option which expires at some point. Another issue is that the potential loss needs to be covered. I have seen clients of the investment firm to be required to sell at a loss because they couldn't provide the funds to cover the risk of their position. A particular nasty situation was that at some point the bank holding the accounts with the shares and derivatives had identified a new risk with certain derivative products which required several customers to add more cash into their accounts to make sure the risk was covered.
--- Quote ---but what about a margin call that would doom a large fund - that is a relevant question in my view.
--- End quote ---
That is probably why the large funds are doubling up so they have to buy their own shares back.
ebclr:
"Additionally, I could, conceivably, keep my short position for a very long time "
It's not cheap to be short with 1400% against you
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