Shorting Gamestop
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@bobjanova said in Shorting Gamestop:
This is one 'investment' I'm staying the hell away from - nothing about this stock's current valuation has anything to do with the company's actual value,
Correct.
it's a pure emotional bubble,
Not quite. While it has nothing to do any more with Gamestop's value, it does very much have something to do with the market supply and demand of Gamestop stocks. Usually those are more closely related, but right now the company could go bankrupt and there'd still be forced demand for their stock because of the short squeeze.
and that's almost impossible to predict.
Correct again. Only a fool (or a genius) would invest into this, but as people mentioned above, right now it seems to be not about the money.
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@topspin said in Shorting Gamestop:
right now the company could go bankrupt and there'd still be forced demand for their stock because of the short squeeze.
Actually I wonder if that's not one way the shorters could get out? What happens to a short if the company disappears (or goes into administration, which is the first step and might have the same effect on the stocks... or maybe not...)? In theory I think that any stock of a company that goes bust is immediately turned into a debt (of the lower priority, IIRC), since after all that's what a stock is in the first place, so they would get a share of what's left after liquidating the company and serving higher priorities creditors (i.e. bupkis, in all likelihood). And then the stock simply cease to exist. Trading probably stops at the moment the bankruptcy (or going into administration) starts? So what happens if you had an option to buy (sell, whatever) a share that no longer exists?
I imagine that this must be covered somewhere in the thousands of pages of T&C that no-one has any idea even exist, but on which some wily traders are making a killing...
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@remi said in Shorting Gamestop:
In theory I think that any stock of a company that goes bust
When that happened to me, the stock just kind of withered away. After sitting at some sub-penny amount forever, my broker finally wrote it off somehow so it vanished from my account.
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@error Because the company can raise more capital by selling new shares, ideally at or near the market price. So the higher that is, the easier it is for them to start new product lines.
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@topspin said in Shorting Gamestop:
@loopback0 great rant.
I wonder what the legal side of this is, but brokers preventing buying of GME stocks (but allowing sales) in this situation seems much more like active market manipulation than a bunch of
retardsupstanding redditors publicly egging each other on to ruin the day of a hedge fund.
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@cvi I don't know why Robinhood isn't allowing buying, exactly, but I can imagine a scenario where Robinhood is selling order flow to people who don't want to buy it. Robinhood doesn't actually go out and buy your stock. They sell your order to one of the big boys. Robinhood is basically a proxy for however many stock accounts you "really" have behind there. And if nobody wants to buy your order, you're not going to get it filled.
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Robinhood Hit with Class Action After Blocking GameStop Trades
"Robinhood purposefully, willfully, and knowingly removing the stock 'GME' from its trading platform in the midst of an unprecedented stock thereby deprived retail investors."
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@remi said in Shorting Gamestop:
What happens to a short if the company disappears
That's the bet.
With a short, you borrow a stock from someone else and promise to return it at a later date. You take the borrowed stock and sell it immediately. Then, at the later date, you buy a replacement share of the stock to return to whoever you borrowed it from.
Your costs are the cost to buy the replacement share at the later date plus a few that the guy who lends you the stock charges so he makes his profit.
Your profit is the sale price of the borrowed share minus your costs. Your maximum profit is fixed at the sale price of the borrowed share. How much profit you make is determined by how low the stock goes between when you sell the borrowed share and when you buy the original share.
If the company goes bankrupt, it won't cost you anything to replace the borrowed share, making your initial sale all profit.
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@Captain Don't know those companies, so I have no idea how they operate. According to the interwebs (so, yeah, totally reliable sources), the message on one of the platforms was that they've disabled buying to protect their customers. If what you say is true (i.e., it's not their fault, but whoever they sell the orders to), then that message seems somewhat misleading.
Either way, doesn't look good in my eyes. But neither legalese nor stock trading are really my areas of expertise, so what do I know.
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@cvi Yes, I don't know the details of their choices or even if they had a choice. One is worse that the other, for sure.
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AAAAAAAAAAAAaaaaaaaa!
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@TwelveBaud said in Shorting Gamestop:
It got worse.
But it's okay, because nobody lies on the internet.
Also, there's no possibility of collusion between financial firms. After all, it's illegal, and nobody does illegal things!
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For tracking the drive to keep this going:
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@remi said in Shorting Gamestop:
@boomzilla said in Shorting Gamestop:
The ride continues:
I have a very vague recollection (probably from the tons of articles about financial markets back in 2008?) that there was some sort of investment strategy where you bet on the volatility of a stock (not a specific raise or fall). I have no idea whether it was just a way to summarise some sequence of simple operations or a specific operation, but if that's really a thing (it maybe isn't...), there probably are a few traders who are keeping mum but raking in a fortune due to the those swings...
There's VIX, where you bet on the volatility of the entire market. Volatility of specific stocks is trickier, generally involving doing esoteric multi-pronged things with options. Best avoided unless you really know what you're doing.
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@abarker linked to:
They borrowed and sold a record amount - they sold more shares, in fact, than are actually traded, far more than Gamestop's float. This shouldn't have been allowed to happen and probably means they were selling shares they never even bothered to borrow - naked shorts. (Where were you on that one, SEC?)
So how is that even a thing?
I get that shorting, i.e. selling something you don’t have, works by borrowing it first. But how can you sell “naked”, without borrowing? What did the buyer actually get?
And considering that it’s mentioned elsewhere you also pay the one you borrowed from interest for the time borrowed, why would you ever do that if you don’t have to?
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@topspin said in Shorting Gamestop:
@abarker linked to:
They borrowed and sold a record amount - they sold more shares, in fact, than are actually traded, far more than Gamestop's float. This shouldn't have been allowed to happen and probably means they were selling shares they never even bothered to borrow - naked shorts. (Where were you on that one, SEC?)
So how is that even a thing?
I get that shorting, i.e. selling something you don’t have, works by borrowing it first. But how can you sell “naked”, without borrowing? What did the buyer actually get?
And considering that it’s mentioned elsewhere you also pay the one you borrowed from interest for the time borrowed, why would you ever do that if you don’t have to?Not a clue.
Another possible explanation would be that they borrowed shares from Broker A. Those shares were then sold to Broker B. At that point, they turned around and borrowed the shares from Broker B to Broker C (could be Broker A again, doesn't really matter). Repeat until the number of shares shorted is greater than the actual shares available. Ultimately, this would mean that shares must later be purchased and returned to one broker, then repurchased and returned to another broker.
Of course, things would be really complicated if they are using short options instead of just trying to short the stocks. That's a somewhat different strategy.
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Hell just froze over, Satan last seen desperately shoveling coal.
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@topspin said in Shorting Gamestop:
Hell just froze over
Froze over the first couple of times this was posted too
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@loopback0 TBF, those were both in the
thread
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@loopback0 wait what? Is it linked from within something linked here, because I don’t see it?
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@hungrier said in Shorting Gamestop:
@loopback0 TBF, those were both in the
threadAh yes. I thought at least one of them was here, but no.
@topspin said in Shorting Gamestop:
because I don’t see it?
My bad. Both in the dark place
apparently.
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Just got this email from RH:
It’s been a tough day, and we’re grateful to you for being a Robinhood customer.
In light of the extraordinary market conditions this week, we temporarily limited buying for certain securities this morning. Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed.
This was a temporary decision made to best continue serving you, and was not an easy one to make. We know it’s led to frustration and confusion, and wanted to provide some clarity.
As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.
To be clear, this decision was not made on the direction of any market maker we route to or other market participants.
The past year in particular has shown us that the financial markets are for everyone—not just institutional investors and hedge funds. We’ve seen a new generation enter the market, and they’re sparking conversations about what it means to be an investor. We stand in support of you, our customers. Democratizing finance for all means giving more people access, not less.
We’ll keep monitoring market conditions and will update this Help Center article with the latest changes. We also published a blog post regarding today’s events.
Thank you again for being a Robinhood customer. We’re so grateful for your support.
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@acrow said in Shorting Gamestop:
So there is a special newspaper published by the government, that has a paper print run, but is read by absolutely no-one except lawyers. Full of very specifically formatted announcements by lawyers.
Such newspapers exist in the US, too, but not government-printed. For example, if you want to start a business as a sole proprietorship, rather than forming a corporation (bad idea; don't do that, but that's a separate topic), in addition to getting the necessary licenses and permits and whatnot, you'd publish a "fictitious business name" statement saying, say, "<your legal name> is doing business as '@Acrow's Bird and Pet Shop', <business address>, <phone number>." You could publish the same announcement in the regular Podunk Times newspaper, but it would cost more with no benefit, so everybody publishes them in the Podunk Business Record, instead. Same for other such "public" notices.
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@boomzilla said in Shorting Gamestop:
Of course, now the Redditors get to play the Greater Fool game with each other, and hopefully they haven't taken as monumental a risk
Why?
assuming anyone has the attention span to follow it.
:goldfish:
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@topspin said in Shorting Gamestop:
@dangeRuss said in Shorting Gamestop:
@abarker Would now be a good time to sell options on this?
I think the best use of your money here is
buyingselling some
and watching it from the sideline.
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@hungrier said in Shorting Gamestop:
I had heard they blocked buying but not selling
You can't sell if nobody can buy what you're trying to sell.
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@HardwareGeek said in Shorting Gamestop:
@hungrier said in Shorting Gamestop:
I had heard they blocked buying but not selling
You can't sell if nobody can buy what you're trying to sell.The point is that it was done asymmetrically.
RobinHood wouldn't let you buy, but they'd let you sell your shares to professionals that don't buy with RobinHood, like Melvin Capital.
And of course, by massively limiting the number of people who want to/are able to buy Gamestop shares, Melvin is driving the price down.
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@topspin said in Shorting Gamestop:
Hell just froze over, Satan last seen desperately shoveling coal.
Her reply back is probably better suited to the garage topic.
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@abarker said in Shorting Gamestop:
Her reply back is probably better suited to the garage topic.
Pretty sure it's already in there. At least I saw it somewhere. Not looking tho.
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@dcon said in Shorting Gamestop:
@abarker said in Shorting Gamestop:
Her reply back is probably better suited to the garage topic.
Pretty sure it's already in there. At least I saw it somewhere. Not looking tho.
I first saw it in an article ... somewhere. It's in the garage thread now.
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@topspin said in Shorting Gamestop:
@abarker linked to:
They borrowed and sold a record amount - they sold more shares, in fact, than are actually traded, far more than Gamestop's float. This shouldn't have been allowed to happen and probably means they were selling shares they never even bothered to borrow - naked shorts. (Where were you on that one, SEC?)
So how is that even a thing?
I get that shorting, i.e. selling something you don’t have, works by borrowing it first. But how can you sell “naked”, without borrowing? What did the buyer actually get?
And considering that it’s mentioned elsewhere you also pay the one you borrowed from interest for the time borrowed, why would you ever do that if you don’t have to?Well, here's the Investopedia: https://www.investopedia.com/terms/n/nakedshorting.asp
Are naked shorts the equivalent of the Canadian Girlfriend? "I have a short position on this stock, but you can't see the share I borrowed – it's in Canada." Do you just... lie? I mean, you had to sell a share to start the short position, because you owe somebody a stock. Is this, like, an exploit-via-policy or something? Maybe you can record a borrowed share (and then sell it) without ever having owned it?
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@PotatoEngineer said in Shorting Gamestop:
@topspin said in Shorting Gamestop:
@abarker linked to:
They borrowed and sold a record amount - they sold more shares, in fact, than are actually traded, far more than Gamestop's float. This shouldn't have been allowed to happen and probably means they were selling shares they never even bothered to borrow - naked shorts. (Where were you on that one, SEC?)
So how is that even a thing?
I get that shorting, i.e. selling something you don’t have, works by borrowing it first. But how can you sell “naked”, without borrowing? What did the buyer actually get?
And considering that it’s mentioned elsewhere you also pay the one you borrowed from interest for the time borrowed, why would you ever do that if you don’t have to?Well, here's the Investopedia: https://www.investopedia.com/terms/n/nakedshorting.asp
Are naked shorts the equivalent of the Canadian Girlfriend? "I have a short position on this stock, but you can't see the share I borrowed – it's in Canada." Do you just... lie? I mean, you had to sell a share to start the short position, because you owe somebody a stock. Is this, like, an exploit-via-policy or something? Maybe you can record a borrowed share (and then sell it) without ever having owned it?
It sounds like you sell a phantom share, and then purchase one before the initial sale clears. That way, the later purchase can be used to fill the pending sale. Hopefully.
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@PotatoEngineer said in Shorting Gamestop:
@topspin said in Shorting Gamestop:
@abarker linked to:
They borrowed and sold a record amount - they sold more shares, in fact, than are actually traded, far more than Gamestop's float. This shouldn't have been allowed to happen and probably means they were selling shares they never even bothered to borrow - naked shorts. (Where were you on that one, SEC?)
So how is that even a thing?
I get that shorting, i.e. selling something you don’t have, works by borrowing it first. But how can you sell “naked”, without borrowing? What did the buyer actually get?
And considering that it’s mentioned elsewhere you also pay the one you borrowed from interest for the time borrowed, why would you ever do that if you don’t have to?Well, here's the Investopedia: https://www.investopedia.com/terms/n/nakedshorting.asp
Are naked shorts the equivalent of the Canadian Girlfriend? "I have a short position on this stock, but you can't see the share I borrowed – it's in Canada." Do you just... lie? I mean, you had to sell a share to start the short position, because you owe somebody a stock. Is this, like, an exploit-via-policy or something? Maybe you can record a borrowed share (and then sell it) without ever having owned it?
I believe it's the functional equivalent of kiting a bad check just ahead of payday. Except instead of payday being guaranteed to make the check good, probably before it hits the bank, you're basically relying on being able to buy an actual share in the market before you have to complete fulfillment of the share you sold short.
In principle, it's allowed in part to help provide liquidity in the case where the market is very lopsided, without requiring the market makers to assume risk in transactions when they're supposed to just be middle man facilitators.
In practice, Wall Street Casino, baybee!
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@GuyWhoKilledBear said in Shorting Gamestop:
@HardwareGeek said in Shorting Gamestop:
@hungrier said in Shorting Gamestop:
I had heard they blocked buying but not selling
You can't sell if nobody can buy what you're trying to sell.The point is that it was done asymmetrically.
RobinHood wouldn't let you buy, but they'd let you sell your shares to professionals that don't buy with RobinHood, like Melvin Capital.
And of course, by massively limiting the number of people who want to/are able to buy Gamestop shares, Melvin is driving the price down.
RobinHood wouldn't let you do that. But other, better, brokerages absolutely would let you do so.
I sometimes get the feeling that firms like RobinHood are playing backend games with trades and that is how they make their money. Stuff like this causes them to bleed money as a result, so they have to stop the bleeding.
I can tell you, without a doubt, that other brokerages did not put such restrictions in place. I won't say that none of them did, but I know for certain that one of them did not.
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@topspin said in Shorting Gamestop:
@bobjanova said in Shorting Gamestop:
This is one 'investment' I'm staying the hell away from - nothing about this stock's current valuation has anything to do with the company's actual value,
Correct.
Stocks are generally not priced in relation to a company's value (i.e. its actual assets) but to expectations of future profits.
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@cvi said in Shorting Gamestop:
@Captain Don't know those companies, so I have no idea how they operate. According to the interwebs (so, yeah, totally reliable sources), the message on one of the platforms was that they've disabled buying to protect their customers. If what you say is true (i.e., it's not their fault, but whoever they sell the orders to), then that message seems somewhat misleading.
Also according to the interwebs, their actual customers are hedge funds to whom they borrow shares "owned" by their ostensible customers (the retail ones).
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@Polygeekery said in Shorting Gamestop:
I can tell you, without a doubt, that other brokerages did not put such restrictions in place. I won't say that none of them did, but I know for certain that one of them did not.
So how much "FUCK YOU" money did you put on the table?
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@GuyWhoKilledBear said in Shorting Gamestop:
RobinHood wouldn't let you buy, but they'd let you sell your shares to professionals that don't buy with RobinHood, like Melvin Capital.
I heard that both RobinHood and Melvin Capital are owned by the same firm. I don't know if that's true, but…
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@izzion said in Shorting Gamestop:
In principle, it's allowed in part to help provide liquidity
According to the investopedia link, it's not allowed
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@LaoC said in Shorting Gamestop:
@topspin said in Shorting Gamestop:
@bobjanova said in Shorting Gamestop:
This is one 'investment' I'm staying the hell away from - nothing about this stock's current valuation has anything to do with the company's actual value,
Correct.
Stocks are generally not priced in relation to a company's value (i.e. its actual assets) but to expectations of
future profits.stock pricesThe two tend to be correlated, but not always
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@Polygeekery said in Shorting Gamestop:
I sometimes get the feeling that firms like RobinHood are playing backend games with trades and that is how they make their money.
That's what all brokers do. They buy and sell at different (but advantageous to them) prices than what their customers get.
How do brokerage firms make money: Yahoo U
Yahoo Finance's Brian Cheung explains how brokerage firms make money amid the elimination of commission fees.
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@Polygeekery said in Shorting Gamestop:
I sometimes get the feeling that firms like RobinHood are playing backend games with trades and that is how they make their money.
That's exactly what they're doing:
Stuff like this causes them to bleed money as a result, so they have to stop the bleeding.
In this case there is a direct link between who pays Robinhood money for the above (Citadel Securities) and who invested billions in one of the worst affected hedge funds, Melvin Capital (Citadel LLC). But I'm sure that's just a coincidence.
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Trades are public records, right? I'd love to see a tracker of exactly how much money they're losing and when.
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@dkf said in Shorting Gamestop:
@GuyWhoKilledBear said in Shorting Gamestop:
RobinHood wouldn't let you buy, but they'd let you sell your shares to professionals that don't buy with RobinHood, like Melvin Capital.
I heard that both RobinHood and Melvin Capital are owned by the same firm. I don't know if that's true, but…
I don't know for sure about ownership but Citadel LLC was one of the hedge funds that bailed out Melvin, and are supposedly heavily invested in Robinhood as well.
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x.com
Payment for order flow - Wikipedia
