Stock market question for those in the know

I am not involved in the stock market. So is this GameStop thing as big as a mess as I am reading or is it a media hype?

From what I can tell, it's a big mess. Started hearing about it before the media decided it was worth reporting on, and sort of assumed it was just internet chatter. Guess not.

It has the potential to become extremely serious. It needs to be halted IMO before we see a complete meltdown

needs to be halted by whom and FOR whom?

It's already been halted for the most part as your not being allowed to buy the stock, only sell. My understanding is that the hedge funds had shorted more shares than there were available to purchase, a group of investors on Reddit noticed it and triggered a mess. Think of the scene at the end of Trading Places with Eddie Murphy and Dan Akroyd but in reverse. Prices started soaring as the hedge funds had to try to buy shares as quick as they could to minimize losses.

Similar stocks are in the same position and already they're blocking those shares from being bought.

It needs to be halted by the SEC for the benefit of everyone invested in the market

Apparently some of the platforms have reenabled trading as the stock is up 70% or close to it today.

BTW Bitcoin is up 6000 from yesterday

Buying is not currently halted. I can buy shares right now with one mouse click. I'm not going to but I could.

One of the problems is that one group of players is constrained by and acting within the law. The other group is not. This will not end well for anyone if it's allowed to continue.

You're right too that this same reddit group is moving on to stocks like American Airlines, Bed Bath & Beyond and a few others. Stay far away !!

Hedge fund managers have been shorting stocks since hedge funds were first established. Perfectly legal. They had a marked advantage since AUM were very large, sometimes in the billions. With this kind of fiscal power they could easily manipulate a single stock or groups of stocks. What the reddit investors learned is that if they pulled their collective resources they could counter the shorts. Perfectly legal. If people decide that these events should not occur, then the laws and rules must be changed. But new rules should not just favor Wall Street so there must be some very deliberative thought before changing the game.

The truth is that the shady hedge fund traders have made billions off of spreading negative information about companies, and then bet ("short") that the stock will go down. They benefit from the failure of companies vs. most of us who invest in the long game, meaning that we are putting money into the market which helps companies. These hedge fund guys do nothing to benefit the economy with their tactics. I think the Reddit game-plan is hilarious and exactly what Wall St. deserved. I hope the Reddit followers (and others) go after them more. This could all be solved if the hedge fund sharks didn't get too greedy. Then again, everyone is greedy on Wall St.

From my understanding, Robinhood is back to allowing people to buy GameStop, etc. on their app. I think it's too late, though. They committed suicide yesterday when they rigged the market to protect the hedge fund guys and elites at the expense of the everyday investor. I hope they have to close their doors and people should be jailed.

There's some debate as to whether the Reddit thing was legal. Most of what Ive seen suggest it is legal because it was public information.

https://youtu.be/jJTJi1zyqhw

Its the same thing the big guys do but this time its little guys banding together. Everyone I have heard involved in it invested small amounts and plan on loosing it. It is being done to srcew the big hedga fund guys.

One of the funny things on this is one of the biggest owners of GameStop stock is the biggest fund Blackrock which now had more people in the adminstration than Goldman Sachs ever had.

I disagree. Short sellers serve a public interest by raising questions about accounting practices, false reporting, defective products, misleading statements in SEC documents. Some times they are wrong but if they were wrong most of the time they would be out of business.

What the hedge funds are doing is, as Tim notes above, perfectly legal. On the other hand, the Reddit group MAY be the ones engaged in price manipulation by conspiring online with one another.. I know that sounds like a stretch, but just imagine if the hedge funds were talking with one another and coordinating their activities.

You can't have a market where only one side plays by the rules. Sort of like elections.

There is a LOT wrong with Blackrock in my opinion

I'm sure the public information part is legal. It's the coordinated action and planning by the Reddit group that will be investigated.

Wall Street can dogpile with "shorts", so the average day-trader should be able to buy "long" and drive the price up. The elites just hate the fact that the average Joe (who they view as beneath them) is beating them and costing them billions. The fact of the matter is the hedge fund game has been put on notice that they can't rape and pillage without exposing themselves and potentially taking one in the shorts. Even with the massive wrongdoing yesterday by halting all buying, I predict the elites will escape without any legal ramifications as usual. Wall St. is in bed with D.C., and we've seen how they view "justice". Its a joke.

They do have a place(short sellers)but when the CEO'S of the hedge funds companies go on tv bad mouthing a stock to manipulate it to their benefit and someone beats them at their own game, game on.

Yep.

I am not clear what you think was "wrongdoing yesterday". All buying was NOT halted. Opening purchases were halted. But you could initiate a closing trade with no problem. Brokerages are required by law to protect their customers and themselves.

I made this point yesterday and I am going to make it again. The hedge funds are covering their losses by selling off stocks that are not in play with the reddit crowd. If you want to see the fallout from this action, check the latest balance in your retirement account.

Exactly !

Just wait until one of the brokerages can't pay the clearing corporation. The domino theory will be proven at that point. Recipe for another federal bail out

Some think the government shouldn't regulate. If government can regulate this kind of activity it should for the benefit of all of us. I really don't know crap about this but why should this kind of activity be allowed to put all of us at risk?

Consequences for wrongdoing are seldom good.

Lot of the complaints are like the opening scene to Miller's Crossing. Id post it but it has some language.

I fully admit I don't know anything about hedge funds and what they do (that's why I asked); but...

it seems they are in a business where they simply CANNOT lose.

if I'm wrong, so be it.

but I'd like to see a few examples where a major hedge fund went out of business because of bad decisions.

Here ya go.

https://www.investopedia.com/articles/investing/101515/3-biggest-hedge-fund-scandals.asp

Those stories are legion.

thanks, white17...I'll give it a look.

appreciate it!

I am a little confused Hippie. What wrongdoing has the average buy and hold investor committed?

I'm not sure there is any wrong doing by anyone. I think that will take an investigation to determine. Some are certainly guilty of poor judgement

Robinhood is the one that really could get in a heap of trouble unless they corrected their actions of yesterday. It didn't take long for people to start talk of a class action suit against them.

Robinhood reinstated trading last night I think.

Wall Street complained to the White House and got them to shut Robin Hood down so the average American couldn’t buy. What’s not rigged in the system. You don’t see them complaining when the average American is losing everything. I think it was hilarious the average American figures out to stick it to the big guys.

Seems to me that's a long shot. What RH did was completely legal as far as I can tell. SEC sets minimum capital requirements and restrictions on brokers and thus on traders. There is nothing stopping a broker from setting stricter requirements than SEC mandates
' If RH had done nothing and people lots their shirts that same group would be suing them for not doing something to protect them.

If what you say made any sense, then the "White House" would have forced all brokers to shut down. But that didn't happen and only a few brokerages imposed restrictions. It was still possible to buy GME all day yesterday except for 4 or 5 brief trading halts.

There was several online trading places that was shutdown the day before yesterday.

I'm not talking about shutting the trading down. There are folks that had their GME stock sold by RH at the low price for the day, even after it was coming back up. They didn't authorize the sell. MY cousin had his sold off at $180. I haven't talked to him today to see if they had re-instated it, or what. I know late last night there was talk of a class action suit over it.

Got to say I disagree with you Ken. If this squeeze would have went the other way those hedge funds would have had no problem taking that money.

If a short squeeze in a (This word is unacceptable on Trapperman) ant company like gme can bring the whole market down the market is flawed and the answer isn't more regulation.

Free market capitalism is dead

If your cousin had his stock sold out from under him then only three things are possible.

1. He had placed a market order, rather than a limit order, when the stock was dropping............OR he had placed a sell stop below the market and it got triggered.

2. He had purchased the shares on margin and his account no longer had adequate maintenance margin to meet the SEC requirements. That could easily happen if the stock was dropping. In those situations ALL brokerages will liquidate positions in order to restore adequate equity to the account. It states it clearly in the account agreement.

As volatile as GME has been the past week it would be easy to have #2 above happen.

Volatility is the real problem here. Every stock has an Implied Volatility that changes constantly. BUT, most don't fluctuate as greatly as GME has been.

Example. Microsoft trades with a IV of between 29-30 most of the time. That means that the market expects Microsoft stock to move about 1.8 % per day. Gamestop is currently trading at an IV of just over 400.That means the market is expecting movement of 25% per day.

So you can see how it could lose a quarter of its value and thus his account no longer had adequate maintenance margin to continue holding the stock.

If neither of those is the case then there was an error and he should contest the trade.

Right after posting the above, I received this from my broker. It is right along the same line of the discussion on margin and volatility.


Interactive Brokers
Securities Subject to Special Requirements
Dear Client,

We are seeing unprecedented volatility in GME, AMC, BB, EXPR, KOSS and a small number of other U.S. securities that has forced us reduce the leverage previously offered to these securities and, in certain instances, limit trading to risk reducing transactions. IBKR currently has no restrictions on trading shares in those companies, and customers can open or close positions in those shares. Like many other brokers, IBKR placed options on certain of those stocks in closing only earlier this week. The plan is to lift those restrictions in an orderly manner while closely monitoring market conditions. To be clear, IBKR has not restricted clients’ ability to close existing positions in any of the U.S. securities subject to market volatility, and does not plan to do so.

The limits IBKR has placed have applied to all customers and were not limited to “retail clients” or any other group.

In order to keep you up-to-date on this fast-moving situation, we have put together a Knowledge Base site with current information on margin requirements and any trading restrictions for this group of securities. This site will provide the relevant information on the securities in one place, in addition to your existing ability to preview margin requirements prior to initiating a position and monitor them afterwards. Click here to review this Knowledge Base article.

We also invite you to visit the website for additional information regarding margin requirements and managing the risk of your portfolio

• For information on previewing margin requirements prior to order submission, click here.
• For general information on margin and margin requirements, click here.
• To monitor your portfolio risk using Risk Navigator, click here.

We understand that you may have experienced occasional market and systems delays or interruptions as a result of this week’s extraordinary volatility. Please be assured that IBKR is doing everything possible to keep you informed of developments that might affect your trading decisions. We appreciate your patience, and regret any inconvenience that you might have experienced over the past few days. Thank you for the trust and confidence that you continue to place in Interactive Brokers.
Interactive Brokers Client Services
Interactive Brokers LLC, member NYSE, FINRA, SIPC

Absolutely right. They would have taken the money and run.

Don't misunderstand me. I'm all in favor of the little guy making a killing when he can.

What I have a problem with is people claiming that someone did something illegal when we don't know that.

As far as regulation goes...............I generally don't like it. On the other hand, without it the retail trader wouldn't have a prayer.

I'm a lot older than you and can remember when the commission on a 100 shares of stock was over a hundred bucks.
Today it's zero in many cases. The bid-ask spread used to be several dollars wide. Today it is only a penny or two for most things. The change from fractions to decimals further reduced that spread. Regulations that force specialists to make a two-sided market at all times means there is always a buyer or seller available. All these are the result of regulations and go a long way toward leveling the playing field between professional and retail traders

A lot older than me?

I'll be 51 in a couple weeks. You're only twice as old as I am...

Oh yeah you're right !!

The market always frowns on shady dealings, cooked books, etc.

Thanks for the info white17. It explains a lot.

Ken, I'm not sure if he had a low sell price or not. I've heard rumblings of others having the same issue with them selling their shares off. I do know he bought it back in Nov. and tried to get me to buy. But they're closing Game Stops around here left and right so I was very leery of it. He lives for the thrill of buying things and seeing what happens.

He bought into Tesla real early and bought heavily. He's been grinning like the Cheshire cat since it split and started moving up.

That's a good lick on Tesla. I'd be unloading that too if I was in his shoes. )))))))))))

Not knowing your cousin it is impossible to say for sure but a lot of people, especially those who are not active traders, are confused by certain different order types. He may have had a sell stop active just for safety. Or it could have been a stop limit. The two seem like they would both work but they don't work the same. Many people get burned by little things like that.

But in this case my guess would be that RH liquidated his shares because of the aggregate maintenance requirement was not met when the value of GME in his account dropped.

What many people don't understand is that the broker is on the hook if an investor goes broke or can't come up with enough cash to meet his obligations.

If the broker fails , then the clearing corporation is on the hook. Pretty soon the entire system could have severe problems meeting the trillions of dollars per day that are being exchanged in cash and securities.

The brokers have to maintain adequate capital to meet collateral requirements, and they can't use client funds . It has to be their own.

That is why RH shut down some BUY transactions yesterday ...it allowed them time to borrow a couple billion to improve their capital requirements.

Selling on RH was still allowed because their only obligation there is to deliver the stock to the buyer's broker. They don't need cash to do that.


Personally, I can't imagine GME doing anything but entering bankruptcy eventually. They are like the buggy whip makers of the 19th century.

Regardless of how this ends I can't see many smiles among the Reddit or RH users

It's a mess but I think it will soon resolve it's self. All of those people that "drank the kool aid" will soon realize they are now holding worthless stock that they paid $300 a share for.

Robinhood had a lawsuit brought against them by an eastern state for not safe guarding people who had little investing now how. So this time they get protective and people want to sue them over it.Not saying what they did was right or wrong but can see why they did it.

Exactly what I mentioned above. Darned if they do and darned if they don't

Robin Hood came out with a new list Friday of securities that are being restricted on their platform.





American Airlines Group Inc (NASDAQ: AAL): 1 share, 10 options
Aurora Cannabis (NYSE: ACB): 1 share, standard limits
First Majestic Silver Corp (NYSE: AG): 1 share, standard limits
AMC Entertainment (NYSE: AMC): 1 share, 10 options
Advanced Micro Devices Inc (NASDAQ: AMD): 1 share, standard limits
BlackBerry Ltd (NYSE: BB): 1 share, 10 options
Bed Bath & Beyond Inc (NASDAQ: BBBY): 1 share, 10 options
BYD Co (OTC: BYDDY): 1 share
Beyond Meat (NASDAQ: BYND): 1 share, standard limits
Churchill Capital Corp IV (NYSE: CCIV): 1 share, standard limits
Clover Health (NASDAQ: CLOV) 1 share, standard limits
Curis (NASDAQ: CRIS): 1 share, standard limits
Castor Maritime Inc (NASDAQ: CTRM): 5 shares
Express Inc (NYSE: EXPR): 5 shares, 10 options
EZGO Technologies (NASDAQ: EZGO): 5 share
General Motors Corporation (NYSE: GM): 1 share, standard limits
GameStop Corp: 1 share, 5 options
Gran Tierra Energy (NYSE: GTE): 5 share, standard limits
Hims & Hers Health (NYSE: HIMS): 1 share, standard limits
Inovio Pharmaceuticals Inc (NASDAQ: INO): 1 share, standard limits
Social Capital Hedosophia Holdings Corp V (NYSE: IPOE): 1 share, standard limits
Social Capital Hedosophia Holdings Corp VI (NYSE: IPOF): 1 share, standard limits
Jaguar Health Inc (NASDAQ: JAGX): 5 share, standard limits
Koss Corp (NASDAQ: KOSS): 1 share
Lianluo Smart (NASDAQ: LLIT): 5 share
Moderna Inc (NASDAQ: MRNA): 1 share, standard limits
Naked Brands Group (NASDAQ: NAKD): 5 shares
The9 Ltd (NASDAQ: NCTY): 1 share
Nokia Oyj (NYSE: NOK): 5 shares, 10 options
Novavax Inc (NASDAQ: NVAX): 1 share, standard limits
Opendoor Technologies Inc (NASDAQ: OPEN): 1 share, standard limits
Rocket Companies Inc (NYSE: RKT): 1 share, standard limits
RLX Technology (NYSE: RLX): 1 share, standard limits
Rolls-Royce Holdings (OTC: RYCEY): 5 shares, standard limits
Starbucks Corp (NASDAQ: SBUX): 1 share, standard limits
Shoals Technologies Group (NASDAQ: SHLS): 1 share
Siebert Financial Corp (NASDAQ: SIEB): 1 share, standard limits
iShares Silver Trust (NYSE: SLV): 1 share, standard limits
Sundial Growers Inc (NASDAQ: SNDL): 5 shares, 10 options
Direxion Daily Semiconductor Bull 3x Shares (NYSE: SOXL): 1 share, standard limits
Sorrento Therapeutics Inc (NASDAQ: SRNE): 1 share, standard limits
Star Peak Energy Transition Corp (NYSE: STPK): 1 share, standard limits
Tengasco (NYSE: TGC): 5 shares
Tian Ruixiang Holdings (NASDAQ: TIRX): 1 share
Tootsie Roll Industries (NYSE: TR): 1 share, 10 options
Trivago (NASDAQ: TRVG): 55 shares, 10 options
Workhorse Group (NASDAQ: WKHS): 1 share, standard limits
Qualtrics International (NASDAQ: XM): 1 share, standard limits
Zomedica Corp (NYSE: ZOM): 5 shares

Robin hood taking it apon themselves to halt trading which killed the rally, for their own well being. If what was happening were illegal there are regulators and the SEC to handle it.

Second would be big tech yet again using censorship by shutting down chat rooms.


The average buy and hold investor probably didn't know their stock had been "borrowed" and sold by a hedge fund that didn't have the money to buy it back. That's why Robin hood shut it down.

It had to have been done in a way that the stocks had to be returned to their owners or the hedge funds could/would just give the owner the money they sold them for, not market price and say sorry, in the fine print it says we can sell at our discretion.??

I don't understand how the hedge funds got caught so flat footed by this thing. Their job is managing and I assume a part of that would involve monitoring what is going on especially with something that could result in these types of potential losses. I thought I heard one report that stated combined losses for the hedge funds involved could reach $70B? I understand you might not see it at the onset but it shouldn't get this far out of hand should it?

Hippie, the people manipulating GME on both sides are not buy and hold investors. I am talking about people holding positions in companies with strong balance sheets. They are also getting hurt in this situation. What are they being punished for exactly? I do agree that the market should be allowed to work and the speculators on both sides of that trade should be allowed to reap what they have shown. The social media sites getting involved is a completely different can of worms.

Agree, not the average buy and ho!d invester. How are they being punished as you say if their stocks would still be there for them to make 1500% if they wanted to sell?

How are they being punished other than their stocks were sold by the hedge fund with the expectation of them tanking?

This type of scenario is not new. It happened several times last spring. I think JCPENNEY was one of the companies that mysteriously spiked and just as quickly crashed. The mountains of money injected into the economy made this type of trade unnecessary because there was instantly a whole universe of stocks to put your money in. Check out the charts on a few midstream oil companies.

Hedge funds make money by people losing money.
This time it's reversed and they controlled the one-off switch which isn't right.

Hippie, I am not talking about long term investors holding GME. If there are any left they are either greedy or stupid and most probably both. I am talking about the ones holding things like axp and apple.

Elon Musk tweeted......

You can't sell a house you don't own..
You can't sell a car you don't own..
But evidently you can sell stock you don't own.

I'm talking about the principle of this, not getting into every single stock offered.

What you are alleging will be adjudicated shortly. They will find that RH was simply following the rules. If it was as you seem to think, the hedge funds would have acted much sooner and saved themselves billions of dollars.

America as we have know it is and has been tested. The backbone, jugular vein, and the very breath of a free country starts with a democracy and free markets. Regardless of ones views of the present problems of both , the one thing we know for sure is its being shook up.

Short selling serves a good purpose. I think the amount of shares should be limited to some reasonable amount of the float. I think it is clear for everyone to see that the current percentage allowed is problematic.

I'm not going to take time to read every post here, but ?I do have a question.

Do you (white17) also support stopping shorting of stocks? Especially when you short 140% of existing shares.

For a short seller to make money, one of two things are needed...

If his own stock, he needs it to go back up after he purchases it back at a lower price. Or

As in this case, he doesn't own the stock and the stock buyers take it in the shorts.

Robinhood shut down BUYING because of the law. In the Dodd-Frank legislation there is language that sets up two entities. DTCC & NSCC . Depository Trust & Clearing Corporation & National Securities Clearing Corporation.

They are mutually funded by all brokers.
As part of Dodd-Frank all brokers are required to have adequate capital to pay for all their client actives on a " minute to minute basis." That means that no matter what their clients BUY, the broker must have adequate funds on hand to pay for it. BY THE MINUTE.

Robinhood obviously got into ....or nearly got into........ a situation where they could not meet those LEGAL requirements, and consequently, stopped BUY orders from executing.
The SELL orders were not a problem because the stock was in the client account and available for delivery to the buyer.

If anything, Robinhood was COMPLYING with federal law, NOT breaking the law. Once they acquired adequate funding they again allowed buying opening positions.

But Hippie does inadvertently touch on one of the dangers in this situation.

Here's a hypothetical;

Trader A is LONG ( owns) 100 shares of stock

Trader B shorts 100 shares and sells them to trader C

Trader B borrows shares fro A and delivers them to trader C

Trader D shorts 100 shares and sells to trader E

Trader D borrows shares from trader C and delivers them to trader E

100 shares initially turns into 300 shares long and 200 shares short.


What we see here is both feasible and legal. Customer B is allowed to sell short as long as he secures a loan from A’s broker. Once customer C’s broker receives delivery from B’s sales, he doesn’t know if those were borrowed or sold outright. C’s broker can then re-lend them to D’s broker so he can sell short. And the chain can theoretically continue.

If you think about this for a minute, you can see the risk in this situation. If A sells his shares the chain unravels. Each of the shorts in the chain would have to rely on his clearing broker to find new shares to borrow, otherwise they risk being bought in. That could initiate a short squeeze.

Short sellers are a curious bunch. They willingly enter a situation with imbalanced risk/reward (stocks can only go to zero but rise infinitely) and pay for the privilege of doing so (via negative stock loan rates). That many of them manage to be consistently profitable is a testament to their courage and careful research. But no one can withstand a tsunami, and with an investor tsunami aimed at short sellers, many find themselves swamped.



Probably a lot more than anyone wanted to know !

I've never cared for the stock market in that the longs don't match the shorts. Question ? The longs get the dividend on exp date, do the shorts pay dividend on the exp date. I've never did that so really don't know the process.

NO. Short selling is both legal and ethical IMO. That said, there are UNETHICAL people on both sides of the issue. What I see as unethical is to take a large short position and then continue to release statements that may be false in an attempt to drive the price down.
I am ok with shorting a stock and stating your reasons, backed up by empirical research. That should /could be beneficial to all market participants. No one gains from a company that cooks the books and dupes investors. Getting rid of companies that do things like that is one benefit of short selling. It can also drive the price down to a level that is in fact supported by the underlying business.


The 140% issue is described in my diatribe above....concerning how 100 shares can become both 300 long and 200 short.

It's a bookkeeping entry. But it still poses a danger.......and not just to the particular stock shorted.

But don't come to the conclusion that it can be infinite. It can't.

If you write a short-sell order, you will receive a notice that yes there are shares available to sell short, or NO there aren't. You will also be shown what it is going to cost you to borrow the shares you want to short. YES it cost a fee to sell short. You are paying that fee to the shareholder you are borrowing from.

So, share availability and the cost of borrowing, both put a lid on how many shares can be shorted.

Good explanation White.

That's pretty close the way it went down White, and what I've been saying is wrong about this.

Those hedge funds that, as I've been saying "borrowed" stock should in an open market assume the risk the same as the average trader. I don't see where the pitty for them comes from when they live by people losing money in the market?

I'm not understanding you Brian. I don't see any pity for the short sellers. And they are assuming an even greater risk than other market participants.

If you buy a stock at say $20 and it goes to zero, you have lost 2000 bucks ( on a hundred shares). But if you short a hundred shares at 20 and it goes to 40 you have lost $2000. So for the shorts, the risk is infinite but if you are long the risk is limited to the amount you paid initially.

I certainly don't feel sorry for anyone involved. I think, generally, the market should be allowed to sort this out. Will some people lose a bunch ? You bet they will . And others will make some money. But it is a complex game. It isn't like a video game where you can't really get hurt.

I think the virus has put a lot of people at home with a lot of time on their hands. Some have gotten into the market when they do not have adequate understanding of a complex set of circumstances. They are going to get hurt right along with some who do understand.

The bigger problem IMO is that, as Kansas Cat has said, this is dragging the rest of the market down with it. Perfectly good company shares are being sold to cover losses in GME. But even more dangerous is a failure of a broker or brokers that leads to a failure of either DTCC or NSCC. That will freeze the entire system. Everyone will suffer at that point.

That is the only reason I believe the SEC should step into this. We are at the point where this particular set of circumstances is posing a systemic risk.

Right, agree on it could drag more down.

But!! lol. If they are allowed to stop the buying/selling of a stock on their own because they are losing, where's the risk?

Robinhood wasn't "losing" or winning. They just did not have enough funding on hand to meet the legal requirements. That is why they had to stop the buying on their platform. Now if the shorts had the power to stop the buying , that would be a different story. But they don't. If that was the case, then I would agree with your view.

Hum. Think I'll short sell 20,000 coon skins!

Too late! LOL.

No. The dividends are paid by the company to the brokers of the "shareholders of record" on the payment date. The shorts don't pay or receive anything because they don't own anything.

Couple of questions:

1. Is it true that because of the GME price manipulation , that Redditt group was within 30 to 60 minutes from bringing down the entire NYSE ? Read that on one of their posts.

2. GME stock on 3/9/2020 was $3.70 a share. If someone bought 10,000 or more shares of that stock, and then wanted to sell it when the price reached $483 a share; would the stock broker company have had enough money to pay up ?

I seriously doubt that your #1 is even close to true. And I would not accept the term "manipulation" as correct. The price was being set through supply & demand.

#2. The broker would not enter into that equation at all. If you wanted to sell 10,000 shares @ 483 the problem might have been finding enough buyers at that price. You are not selling to the broker. The broker is only advertising your shares for sale at a certain price. Just like selling your home through a real estate agent.

You may end up selling all your shares to either one or thousands of different buyers. Your broker just handles the bookkeeping for you.

A few thoughts.......going forward, this event will give the short sellers pause as to going too deep into the well.....no need to regulate it as now that the game is exposed, there will be more Reddit groups waiting to pounce on em if they do. The short squeeze. But in the short term (no pun intended), little guys got the big guy's gonads in a vice and are turning the screw handle. Big guys deserved that.

Not sure how this gets unwound when you have sold 1.4 of something when only 1 exists. Where does the .4 come from to offset the trades. Probably when the Reddit group buyers start selling to take the profits off the table. But somehow it will get unwound....and when it does, Game Stop and others will come crashing back down as fast as they went up.

So I'm seeing this as a short term fireworks show.....best to be watched from the distance, least one also gets burned. Wild ride for a week or two, but not an end of days event.

And I'm seeing Robinhood as nothing more than a bookie......who in the short run, couldn't cover the bets. But they are not the only brokerage. I would imagine an etrade, TD Ameritrade or Schwabe trader was still functioning through it all.

Back to the Hedge Funds and short selling, seems to me that has become part of a larger game. They take a well known, venerable old product line.....say Troy Bilt tillers or Powermatic tools...........and the moment they get into trouble, step 1 is to start the process of taking them down......short selling being one way to do it. Then when the stock is beaten down, company has fallen and can't get up, comes step 2. Come in, sweep up the company cheap, then start milking the company name for all it's worth. Close US factories, by cheap china replacements, slap the old name on it.....move sales from dealers to box stores......passing counterfeit as the real deal....no customer support.......and milk that until the buying public wises up and stops buying. Rise and repeat.

Seems to me that if we can avoid a complete meltdown, then the situation will be self-limiting. At that point the biggest danger IMO is congress. I fear we will see a bunch of brain-dead politicians proposing all sorts of restrictions on everyone that will do nothing but cause even more problems for them to solve !

TD Ameritrade and WeBull also stopped or restricted sales at the same time as Robinhood.

I don't understand your worry. Surely with Maxine Waters in the House and Elizabeth Warren in the Senate serving on the key committees the situation is well in hand.

Neither of those is correct Hippie.

For a short seller to make money, he only needs the stock price to decline. Once he buys it back, he is no longer short...NOR is he long. He has no position whatsoever. So it would not make him a dime regardless of how high the stock went.

#2...in this case... the stock is going up...generally....and the stock buyers are gaining. They are not taking it in the shorts.


Just to try to clarify a bit of arcane trivia I'll add this.

If you own stock you are said to be LONG

If you sell that stock, you have no position. You are not short . You cannot be both long and short in the same account simultaneously.

If you want to be short then you must sell shares that you do not own. You must borrow those shares in order to sell them.

You COULD have two accounts at different brokers and be long in one account and short in the other. But that seems rather pointless. There are easier ways to hedge.

But if you only have one account you are either long, short or have no position.

We're not understanding each other.

On one...

You have stock that's falling or going to, You sell at say 10, and buy back at 5 once it falls. You need it to go back up to make money. Ten being what you have invested originally to own them.

On two.

This is what happened in gamestop. Hedge funds borrowed stock at pretend 10 and sold them thinking they were going down and would then buy them back to return to the owner at the pretend 5, pocketing the 5 difference.

Problem when it didn't drop.

No. You 're not understanding the logistics.

If I have an account in which I own 100 shares of GME and I sell those at 10................I now have no position in GME at all. I have NOT shorted the stock.
.

That is NOT what happens in a short sale transaction.

In order for me to "get short" I have to own nothing. I have to borrow shares to sell. So I sell them at 10 and buy them back at 5. I have made 5 points. BUT the instant I buy those shares back at 5 they go back to the person I borrowed them from They do not go into my account.

Suppose being 'short' equals -1. Now when you buy to close that short it is like adding a +1. Negative one plus positive one equals zero.

You can't have the shares in your account and get short by selling those shares.



#2 that's correct but the stockholders are gaining not taking it in the shorts

One thing I know for sure is last quarter my 401K made me some money,
In crazy times I'm glad to even break even right.
But I trust the politicians stock brokers got my best interest in there actions right.
Ok enough for now gotta go make the africans some money.

Here;s a better example Hippie.

Suppose you have a brand new 1955 corvette with 3 miles on it. Also, your buddy has the identical vehicle.

If you sell your car, you have cash. You don't have a position in the 'car' at all. That's the same as selling shares out of your brokerage account.

But now your buddy loans you his car and you sell it for 100K. NOW you are SHORT. Next week the buyer decides he doesn't like it and sells it back to you for 90K. You return the car to your buddy. You keep the 10k profit minus a fee to your buddy.

That's the way a short transaction works

Yes, and why I said the stockholder took it in the shorts is in your example.

He loaned you a 100,00 car that you made ten on and gave it back worth only 90,000 if he wants to sell.

Didn't 2 people actually lose 10k ?

The guy you sold it to lost 10 when you bought it back plus the original owner has a car only worth 90k now.

NO. He got back the same car he loaned you PLUS he got paid for loaning it to you. He still owns his car plus additional cash.

The only person who lost anything is the guy who bought and sold it back to you. He lost 10 K


I am just trying to illustrate that when you sell stock from your account you are not shorting. You are just eliminating your position.

Ok.

White17. Best explanation I heard

LOL The other thing to consider is that maybe the car really is only worth 90K and your buddy should have sold it to someone else. That's the point of short selling . It, under normal circumstances, attempts to discover what the correct value of something is.

Hey....Im just looking in through the window , trying to get the gist of things

if I sell something that's not mine, I go to jail...

If you want a safe place to make money you have to look at risk and reward. The more risk , the more reward. You have to laugh at the experts crying they may lose if stock market crashes so better get government to level the playing field in their favour. The Hunt brothers fought the same stuff. they about broke the game wide open so they were legislated in to place to protect a corrupt system. Looks like Trump exposing more corruption in a subtle way. Like how great a system is it if a bunch of 100 gamers can break it. The USDA has been playing the same games with farmers forever. Welcome to real world

I’ll bet Jim Cramer regrets doing this interview all those years ago.

Probably why he’s been MIA this last week.

https://www.youtube.com/watch?v=gMShFx5rThI

I came here from Reddit to see if there was a thread on this topic, I mostly lurk, but i'll post my 2 cents.

I believe that this movement is actually quite amazing. People are starting to realize they have power in numbers. These people are on a crusade against the establishment, the corrupt, politicians, the bankers/hedge funds that are blamed for 2008. The people who have beaten them for years and kept the poor poor, and the rich rich.

A lot of people using the reddit board are millennials who watched their parents suffer through 2008 (including myself.) They've finally found a way to beat the "hedgies" at their own game, now everyone wants a piece of the pie by buying a share, even a fractional share. Several friends of mine have already taken positions, whether its a fractional, 1, or 20+ shares. To be honest many of them don't expect to see any $ back, so long as they see Melvin Capital and friends go under for trying to bankrupt (by shorting) Gamestop and other retail stores struggling from the pandemic.

This cause has made many, many new millennials very wealthy overnight. At the click of a mouse, many of them could sell their shares and become millionaires, but they're holding their shares until Melvin covers for $1-$10k or better per share.

This is class warfare.

How high do you think GME will go before it plummets?

Yep.

Yeah me too, but white 18 will bale us out plus we might get a way with a corvette an 10 k
It's been a long night shift

What stocks were shorted before 911? I know there was book keeping and other issues so it was justified. I also know a pile of money was made, and nobody knows by whom. 3 days into current short and everybody involved is exposed. Nothing to see here
It would take a 100 years of mineing to cover current short in silver if nobody sold. Funds are just doing their job cleaning up mismanagement. Yea rite

Was Robinhood commission free? Were they selling info to hedge funds cover costs ? The small investor is the plancton that Wall Street feeds on

One thing for sure, these guys can't keep these prices inflated forever and when the selling starts, it will take on the shape of a tsunami. The rats wont be able to jump off the ship fast enough. You have to realize, they're manipulating and colluding to inflate the prices of struggling companies. I don't see that ending well. Value based on sentiment and not fundamentals is dangerous because of the fickleness of sentiment. Fear WILL strike sooner or later.

It is affecting the broader market. Good companies with great earnings reports losing value, while struggling companies share prices are "going to the moon", as Reddit forum members like to say.

The market is really getting rattled by this. It may crate some decent buying opportunities...in good companies. I think its a good time to buy Apple, for example. But I hope it ends soon.

Actually it's something that everyone should know about the massive risks that are being taken in the financial system and equities market. Short selling stocks is along the same concept that sunk the market and almost destroyed the world's financial system in 08. We could argue it did sink it but that's a convo for another day. It wasn't people not paying their mortgages as much the gambling going on behind it in the derivatives market.

Sad part is when this is all done there will be more regulation when o\in reality is there should be less regulation. Of course with less regulation should be their should only be one new one. No government bailouts. Without never ending bailouts these too big to fail risks wouldn't happen.




If the regulators and trading platforms don't intervene? The short positions on GME are still approximately 120 percent of the float. If the Reddit crowd can wait it out who knows? $1200?
Hang on boys, the ride is just getting interesting.

'Ken you'll have to excuse me if I am jumping around here a bit. I was pretty busy the last couple days and haven't had time much to discuss. First off I think you misunderstood some of the details that happened with RH, they didn't shut down buying over their entire platform, only a few select stocks.

I understand their "reasoning" was they capital requirements and they had to raise said capital but then why not shut down buying over the entire platform? Why only a few select stocks?

What about the other platforms that suspended or limited buying, there were several. Did they all need to raise capital? Of course not, some said it was to protect the investors.

Call me a kook but Melvin Capital was bailed out by two funds one of which was Citadel. Citadel just happened to give Janet Yellin 800,000 dollars in speaking fees. Janet Yellen for those who may not know was the Chairman of the Federal Reserve and now is our new Secretary of Treasury.

Do we think she is going to look out for the little guy? Crony Capitalism at it's finest.

Gamestop was struggling long before this happened.

.


My last jump around for the day.

My position in Tesla is very short and I'm going to ride it out for the loooooooooong haul. With that said, if I had a thousand shares, I think I'd short half of them lol.

If the reddit crowd gets involved in the metals market I do believe I will short some of my physical position if they drive it high enough. That pool is where the real sharks swim.

At this point in time Gamestops viability as a company has ceased to matter.

Melvin capital has closed out its short position on Gamestop.

This is the best explanation I have read.

liars crooks and thieves....oh my....

Yea, and the funny part is, when they started buying again on their second short....it helped the rally.

so, if I'm understanding the system...I can sell a bunch of silver (that I don't own) and make a mint...yes?

I also have a line on a bridge in Brooklyn that I might be able to cut you in on....

That's correct. It was only a few stocks that were restricted. The reason for that is as I touched on way back up the thread.......VOLATILITY. It was the stocks that were restricted that were exhibiting extreme volatility. Robinhood's capital requirements change...."minute to minute" as stipulated by law. As volatility increases so does the amount of collateral that RH must have on deposit with DTCC & NSCC. So it makes perfect sense to restrict the stocks that are causing your capital requirements to fluctuate so wildly.

I agree that there certainly seem to be things worth looking into where Yellen, Melvin Capital, Citadel et al are concerned.

WAIT. PLEASE lets use the terms correctly. I think that is what is causing some confusion on this thread.


You say your position on TESLA is very " short". I believe what you mean is very " small". You bought some shares of Tesla. That means you are LONG not short.

Also you comment that......" if I had a thousand shares, I think I'd short half of them lol." What I think you really mean is you would sell half of your shares. That would not be a short sale. It would NOT make you short. It would only make your long position smaller. I know you understand this but words actually do matter.

Absolutely correct. People seem to think that when someone buys or sells or sells short a stock, that it somehow takes money away from or sends money to, the company. No such thing happens.

GME could , at this point offer NEW shares for sale at this ridiculous price. Current shareholders would see the value of their holdings diluted and more people would lose more in the long run.


The other thing that is happening is that large institutional investors are taking advantage of this grossly distorted share price on GME. They are selling large blocks of shares that they have been stuck with for years. If the Reddit people think that isn't going to affect the price ,they are nuts.

On Friday I was watching a time & sales screen on GME. I saw three separate trades go through. They were all three SELLS . Each trade was 50,000 shares @ 335$. That equals 16.75 million per trade.
I don't care how many millennials own 1 share, they can't overwhelm volume like that in the long run

Ken you are correct in your first assumption that my position in is minimal, not "short".

My poor choice of words probably led you to not assume I would sell shares of Tesla if I had more. I did mean short them.

SO just so I understand you.............if you had 100 shares of TSLA you would sell 150 shares ?

Nope, keep the 100 in my account and open a short position for another 50.

Personally I think at the moment Tesla is overvalued in the near term, we can thank the RH crowd for that. In the long term long term I can see the valuation.

I'd gamble the price is going to fall and cover that bet with my current long position. I suppose one could just sell half of my long position and buy back in when the price drops to a predermined level.

Here is a question, isn't short selling more stock in circulation against the rules

I see. Problem is you can't do that without having a second account elsewhere. You COULD take an offsetting options position though.

I think you are correct about TSLA.. Overvalued right now but long term it is a real disrupter if they can get the battery technology right. The other problem is they have a lot of competition coming on.

No, the reason total short volume can exceed total float is because the same 100 shares can be shorted multiple times. If I borrow from you I can sell to x, and x can loan those to Y so he can short them to Z.
It is still all backed up by the original 100 shares that I borrowed from you.

That is legal but maybe it shouldn't be

I don't necessarily think it should be illegal. I think it should be illegal for the gubbemint to bail out irresponsible behavior

I do too !!

This is all above my paygrade.
but i have one question.
If my hedge goes short on CoXX, and some guys figure that out and go and buy everything. Does that probably trigger the same legal stop buying scenario as we saw here. And if I see that will I have time to "fix" my position.
I'm thinking I borrow some shares of CoXX, to go short, if the word gets out a buying frenzy ensues, the platform stops the buying , I return or whatever my borrowed shares easing my potential losses, if the word doesn't get out and there is no buying frenzy I ride the short.

I'm not sure I understand your question but..........

If you decide to "sell short" share s of company XX........ first you must borrow those shares from someone who owns them.

Now you can sell those shares. Others may share your opinion of the company and short it also. OR they mat think you are wrong in your assessment of the prospects for company and so they will buy shares in company XX.

Usually we do not see things like we have witnessed over the last 10 days.

Most short selling is done by large firms who spend a lot of time in fundamental analysis of the company that they sell short. They do so because they believe the empirical evidence indicates that the shares are selling for far more than the company is actually worth.

Most individuals do not get involved because it costs a rental fee to borrow those shares you want to sell short. So you need to have a lot of faith that your research is correct.

I was thinking about this this morning. there are 15 million Reddit users alone. 50,000 goes into 15 million quite a few times

That's true but my bet is that all 15 million don't own GME shares. I would also suspect that if they do, they won't hold on once the price starts to drop. GME down 25% right now

Reminds me of that old saying by J Paul Getty...I think. " If you owe the bank $100 that's your problem. If a million people owe the bank $100, that's the bank's problem".

As I see it, this is the problem: INSIDER manipulation is acceptable, especially when the INSIDERS make a lot of money.

When OUTSIDERS practice it and the INSIDERS lose big bucks............... its a travesty!

Pete

Can I remember the quote differently and I'm pretty sure I'm correct it goes something like this if you owe the bank $100 million that's the bank's problem if you owe the bank $100 that's your problem.



Doesn't really matter that pertains to death different set of circumstances.

I'm with you in regards to GameStop someone's going to get left holding the bag it's not going to be pretty I wouldn't touch it with a 10 ft pool

Yes, all you have to do is look at the company's financials and it is clear that the 'shorts' are correct.

Consider that Apple is currently earning $3.69 per share and trading at 134+

On the other hand, GameStop is losing $4.22 per share and trading at $258.

Which one is the better purchase ?

Depends if the squeeze can continue lol

I don't think that's possible in the long run