It appears Robinhood teamed up with Little John today to fight the his Merry Men. The Gamestop story has gone viral.
The nutshell version is a hedge fund over-leveraged itself in shorting Gamestop and some other stops. Gamestop was seen as a dying company and going the way of Blockbuster. Several rather savvy investors in a Reddit subgroup saw an opportunity and started buying the stock on the Robinhood trading platform. Result? A bargain basement stock went up to $350 a share. Wall Street started crying to CNBC about how unfair it was. Robinhood shut it all down and then with no warning, started liquidating Gamestop shares of its customers without their consent. The agreements probably contain a clause allowing them to do so. Such companies usually have a right to liquidate to avoid margin calls but why should the company "protect" the client if his account is not leveraged or he paid cash?
To say the forced liquidations generated outrage is an understatement. David Portnoy called it out as only he can:
Kingfish note: Hmm..... there is another possibility...... what if a bucket shop is broke? Too bad Mr. Speed isn't here. He would get a kick out of watching this take place. Wait, this is funny. I'm watching CNBC right now. The reporter is trying to tie Trump into this. Funny.
This post appeared on Reddit today. Consider it fun reading and take it with a grain of salt.
I'm glad this place has quieted down enough for some actual DD written by a monkey with a keyboard and Adderall. Disclaimer: I am that monkey. Let me explain to you what happened, play by play. I will give you illiterates who hate reading a spoiler up front: We were within approximately 30 seconds of triggering a nuclear bomb that would have blown up the market. Do I have your attention? Here goes:
Yesterday, new call option strike prices were added all the way up to $570. Do I have to go over gamma squeezes again? Really? We've been over this: when deep out-of-the-money call options start being gobbled up and the price starts moving towards being in-the-money, the call writers have to hedge their risk of having their sold calls exercised, typically by buying stock. This creates upwards pressure on the market. We've been seeing these movements all week.
Yesterday after market, you probably saw that coordinated effort to drive the price down and spook retail investors into a mass sell-off. It didn't work.
Last night, Robinhood sent out a message to users: you could no longer enter into new options. You could exercise them if you had the collateral (money in the account) to do so. Very interesting and the first sign of pants-shitting fear.
Today, the market opened very strong. It opened so strong that we were looking at a self-perpetuating gamma squeeze all the way up way past $570.
At approximately 9:58 am, the stock had reached $468 in a parabolic move. Two minutes earlier, at 9:56 am, Robinhood tweeted that they were not allowing users to buy GME stock, but they would allow selling.
The trend instantly halted and started a collapse downwards, before picking up a bit, especially after some retail was allowed back in.
Okay, now that you are clear on the facts, understand this: The market ran out of liquidity today, or was threatening to get close enough that they killed it. What does that mean? It means they ran out of shares and/or capital. They wouldn't let you buy new shares because we were burning through all the shares on the market. I saw an unsubstantiated post from a user who said a small sell limit order executed at $2600 for him. Do you get the severity of the situation, if that's true? It means the buying was getting to the point where it was just about to put INFINITE pressure on the price of the shares. It means virtually any ask was getting bid.
How do you get infinite upwards pressure? A gamma squeeze triggering the mother of all short squeezes, just like we predicted. The call writers need shares to hedge. Retail is still buying more. The short sellers need over 100% of the float back. Add these together. There were more shares needed than existed on the open market. That's what a liquidity crisis is.
Listen to this remarkable (if infuriating) interview where the chairman of Interactive Brokers admits that they didn't have the capital to pay out the winners (us), so they took their ball and went home. DO YOU GRASP HOW INSANE IT IS THAT HE SAID THEY NEEDED TO SHUT DOWN BUY ORDERS TO "PROTECT THE MARKET"? Hello! He's not talking about the market for GME shares. He's talking about the entire market! The New York Stock Exchange. The NASDAQ. All that.
Remember the movie Snowpiercer? Do you remember that scene where the lower class people realize the soldiers who oppress them have no bullets? Go to the 1:00 minute mark of this link: LINK
It kick starts a full blown rebellion. They have no bullets. It's the exact same in this market: No capital. No shares. Infinite losses inbound.
TL;DR: For all you who will just skip to the bottom to ask, "Do I get my tendies now?" the answer is this: they NEED NEED NEED your shares. Do you get that? HOLD. Like the guy in the movie, scream, "They're out of bullets!" and create a stampede. That's how we win.
They needed your shares so badly that they literally risked PRISON TIME to get them. They tried robbing you, and I'm not even exaggerating. They were within 30 seconds of all being wiped out today.
24 comments:
I'm an educated guy, generally considered smart by people that I respect. I freely admit that I don't have a background in finance, and I don't really understand securities trading.
That said, if someone who is not my agent sells something that I own to someone else, without my consent, a court order, or a statute giving them the right to do so, I call that "stealing," a/k/a theft, larceny, embezzlement, etc.
Whenever the money-changers invent a language that only they can understand, it's time to move my wallet to my front pocket.
My momma told me life wasn’t fair
A fool and his money will soon part ways!
Those dummies might snag a hedge fund scalp or two or three but they have made the savvy big money players, the same group of people the Democrats and Bernie Bros and AOC types love to démagogue, an absolute ton of money over the past few days.
10:12 PM, Wall Street is corrupt…2008 was a “heads Goldman wins, tails we the tax payers lose”…hedge funds scalp the 401Ks of middle class investors…etc., etc., etc.
But, short selling is necessary. Otherwise, the sheep (401k investors, etc.) would cause the bubbles to be exponentially worse.
Make no mistake, we are watching two sets of corrupt thieves go at each other; and it is mighty fun watching the hedge fund shorts get their asses wiped clean.
But, the GameStop crash is coming; and the poor f’ers that are buying this stock via a Reddit chat room recommendation are going to get their clocks cleaned as well, while the “Roaring Kitty” types get filthy rich (and become the new elites) off of the sheep longs that have no clue.
Much much more to come on this. Books will be written once the dust settles. Markets must be open and free and but the shut down of certain stocks by the brokerages was not about protecting individual investors. We were within spitting distance of a strain on the entire system. Actions were taken to avoid a system meltdown aka, the greater good. Stay tuned.
Toke On 7:01.
7:40 Books will not be written about this. This was not occupy Wall Street or anything like this. People (not the rich ones) are going to lose a lot of money in this.
Markets must be open and free and but the shut down of certain stocks by the brokerages was not about protecting individual investors.
Trading in the actual stocks was only halted for a few minutes here and there. The actions of the brokerages to restrict trading of those stocks through their platforms is a different matter. This is nothing more than the classic pump and dump using modern tools and nanoseconds.
Damn millennials are always disruptive! Do they not understand that their shenanigans are effecting retirees right now? Thankfully Reddit and Discord will turn over all private chat records of their plotting and conspiracies to the SEC.
This action is only slightly more irrational than the valuation of Tesla, which is totally irrational.
🚀🚀🚀
9:22 AM
Occupy Wall Street wasn't anything to write a book about. It's a footnote in history. At best. It was co-opted by a bunch of anarchists with no goal and no plan. The original Libertarians who were protesting the Fed walked away as soon as they figured out the Progressive Stack was tilted against anyone with a plan.
I fully expect the SEC/government to 'regulate' this by driving the divide wider by making it harder for retail investors (read: common Americans) to invest. Maybe that'll redpill lukewarm Democrats and see that they aren't on anyone's side but the Moneyed Interests.
"Millennials" don't give a damn about retirees. They don't value anything except, maybe, getting high.
I fully expect Dems/SEC will fuck this up by regulating retail investors instead of naked shorts. At no point should a stock be shorted greater than the amount of stocks available on the market, but watch. "It's for your own good citizen". When the billionaires get rich government cheers. When the common man screws the billionaires government screws the common man.
@9:44
Teslas stock price is Fed driven. Tesla’s rise is an unholy feedback loop of government carbon credits, retirement fund investment, and direct federal reserve intervention.
The millennials haven't purchased nearly as much TSLA as one might think. It makes perfect sense if you research the details of dark arts that are being practiced. .
Also, there will never be another catastrophic stock market crash. The concept is now obsolete. The market can drop 3000 points in a day and bounce back before close because computer algorithms will always buy the dip.
January 29, 2021 at 9:25 AM
Last sentence, +1,000,000
10:01 AM Well Said!
When the common man screws the billionaires government screws the common man. This is the Democrats mantra.
Retirement funds like CalPERS buying Tesla and other high risk paper tigers because their Ponzis are on verge of collapse.
People will soon regret KF not loading up the truck at a buck a round.
At $ 295.00 per market share for GameStop, that equates to GameStop being a 25 billion dollars company!
That is crazy. Do you really think GameStop is worth 25 billion dollar? They just closed 1000 stores.
Nope. Some crazy stuff going on.
@12:53 PM
It is no different than the price of Tesla. A company that sells fewer cars than the number of Corollas that Toyota sells. And Toyota makes a good profit on each Corolla. As a matter of fact, Tesla’s most profitable product is their stock!
I can’t wait to see how they blame millennials for the next crash. The commission-free, everything bubble is gonna be fabulous.
3:14 PM
Literally everything is the fault of millennials. Even things that happened before they were born. Like Nixon visiting China and the Immigration Act of 1965.
Damn punk kids with tech startups and their electric self driving cars!
8:25AM, remember the old saying " “We mock that which we don't understand.”
The rest of you stop blaming millennials; they are they way they are because we boomers lied and told them how incredibly special they are.
Besides, the same boomer parents are grandparents now i.e. masters of that lie, so just wait and see what this next generation turns into.
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