General > General Technical Chat
Gamestop: Reddit vs. Wall St.
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nctnico:

--- Quote from: DrG on January 30, 2021, 01:45:02 am ---The whole topic is beginning to remind me of years ago - all that crap with buying and selling puts and calls and covered and naked... Black–Scholes....some of the most boring areas I have ever spent time with. To have to do it for a living would have crushed my spirit for sure, but that is me and everyone finds their own way.

--- End quote ---
Tell me about it... I understand about shares but options with straddles, butterflies and 'being at the money' is nothing for me. Though it did gave me respect for my co-workers being on the exchange floor the entire day and working out all these calculations in their heads quickly.
bdunham7:

--- Quote from: wraper on January 30, 2021, 02:20:46 pm ---The risk in the system is that 140% of all existing Gamestop shares were shorted, and around 80% for AMC IIRC. And way way less than 100% of actual shares were in free circulation. And everything piles up from there in chain reaction. Since shorts cannot cover due to meteoritic rise of price and lack of shares to buy and cover short positions. It can be said that reddit traders broke the system, but the flaw which allowed this was too greedy institutionalized short sellers.

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I minimize my news consumption to preserve my mental health, so I was not aware that the short interest in GME had exceeded 100%.  I'm sure someone took notice of that and understood the opportunity it provided for a crowdsourced short squeeze riot.  Allowing this to happen is essentially removing the protections against 'naked' short selling.  It is allowing certain players to take risks that other people pay for.  As I said, the risk was never that the retail investor from Robinhood would become a counterparty default, and I don't think it was that Webull or Robinhood themselves were the counterparty risk either. 

Greed and stupidity will always be there, but the real flaw in all of this IMO is the clearing system itself.  The fact that a stock trade takes 2 days to settle is absurd.  Every share of every stock should have an ID# and every investor entity should have an ID#.  The transaction should take place instantly, like Bitcoin before it became popular.  Specific share IDs would be have their ownership changed to the new ID# and the appropriate account is credited instantly.  If the share you bought is from a short seller, they have to provide specific IDs and the broker and clearinghouse are responsible for verifying that the two parties actually have the funds or rights to sell the specific stocks, whichever is the case.  This would eliminate naked shorts and the sort of thing going on right now, plus a lot of other shortcomings in the current system.  But those rules would be more difficult to exploit and the big traders would lose some of their arbitrage opportunities.
wraper:
DrG:
Majority Shareholder, Gamestop - SNL
~2:11-3:58

Ed.Kloonk:
Yawntube says upload has not made video available in my country.

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