also I have been actively trying to get in on these for the past year but due to my own intense fear of losing money and unwillingness to spend time on reddit my success rate has been only ok, so if anyone wants to guarantee the long term future of the selectbutton meetup and has an inside line on something, and investing has become ridiculous enough to not be considered profane, feel free to point me at it
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âŚsame here
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I really want this to be the year a bunch of internet people take down a hedge fund. A real David v. Goliath moment here.
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I mean at the level we are at (not plugged in the financial sector, donât spend large amounts of time on reddit and co), this is just gambling with less of a house advantage.
You either have huge amounts of money to throw around when certain things are exploding (were you willing/able to buy 1000s of dollars of gamestop stock on Friday when it was around 100 dollars a share, let alone yesterday or today or tomorrow?) or you get lucky getting in on the ground floor of a random stock cheap based on some random Internet tip (this has never backfired). Would have bought a single stock of gamestop 1 month ago, based either on your knowledge of its business model (if you believe this drives its stock price) or your willingness to trust a bunch of insane redditors telling you itâs actually massively under leveraged by short sellers? Are you willing tomorrow to buy stock in AMC movie theaters in the middle of a pandemic?
And remember, buying stock at the right time is only half the game. You need to sell it too. All of these stocks are going to pop, at the end of the day itâs pure speculations. When the redditors decide to sell, they are all going to sell and many people are going to be screwed being too late or because Robinhood crashes.
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I just did!!!
Iâm also watching taxi driver which feels a little on the nose but reading paul schraderâs facebook posts put me in the mood
has there been any news since the hedge fund needed the 2.5 billlion dollar bailout?
I had a mini explanation in the news thread last week, but letâs try to do a bit more involved one here. The first part of this is the short squeeze. Short selling is a way to make money on a stock (or other asset) losing value. You borrow a stock from a broker, at an interest premium, and immediately sell it on the open market. Now you have whatever money you made from that sale, but youâre still on the hook for the stock. When the stock goes down in value, you buy it back, give it to the broker, and pocket the difference minus the premium you paid to borrow. A hedge fund will be extended large amounts of margin to do this, which means they can borrow shares worth a multiple of whatever collateral in their account they are putting up against the short. As the price of the stock goes down, you can buy to close your short. Or you can use greater margin against the unrealized gains of your short sell to, say, double down on the short. And maybe you keep doing that, all the way down, even when the stock is trading at $4.
Short selling has capped gains, because the stock can only fall to zero, and uncapped loses, because you owe the stock back to the broker to close the position; while youâre open the stock can theoretically jump to any number under the sun. What happened here is hedge funds doubled down on their shorts so many times, to such a large degree, that the collective short position on gamestop was 140% of the available pool of shares, called the float. Their goal was to bankrupt the company and profit on the literal delisting of that float. But the thing about shorting is you always have to buy the stock to close, and it turns out buying 140% of the float is a difficult proposition. reddit found out about this ridiculous short position and decided that holding a stock that hedge funds must purchase was a worthwhile investment. as a shorted stock rises and rises and rises, short sellers either buy to cover or they bleed. if the stock liquidity dries up, the price can rise very dramatically, because the short sellers donât have an option. they have to convince you to sell to them. remember the margin they were extended to make these plays? everyone with access to margin, from you on robinhood to a giant hedge fund brokering with JP Morgan, is subject to the possibility of a margin call. if a margin trade moves against you, your broker can margin call you as the value of your portfolio falls below a certain percentage of the extended margin. this means they will forcibly liquidate your open positions, at any price, to recover their money. if they lent you shares to short sell, they will sell everything you own if need be to buy those shares back at whatever price that costs. if that bankrupts your hedge fund, so be it. the resulting price moves on an illiquid stock that is heavily shorted can be very, very dramatic.
thereâs another part of this story. wallstreetbets does not primarily trade in shares, because buying shares has a relatively low risk/reward skew. it takes money to make money. wsb is an options trading forum. buying an option on a stock is purchasing a contract that gives you the option to buy or sell 100 shares of a stock, at a given price, by a given day, per contract you purchase. you buy an option by choosing the direction (call = you think stock goes up, put = you think stock goes down), the date, and the price. so a gamestop 1/29 115c contract says you can buy 100 shares of gamestop no later than 1/29 for 115 dollars per share. if the stop is at $1000, you still get it at $115. people who buy options contracts like this donât generally want the shares, they want to collect the premium on the contract. buying a 1/29 115c on GME on 1/5 when GME is trading at $25 is very cheap, because it is not likely to be worth anything. when itâs 1/26 and GME is trading at $210, that contract is worth a lot of money. you donât want the shares, you want the appreciation of that contract.
so why do options matter here? when you buy an option contract, someone has to be on the other end of that trade. âmarket makersâ are financial institutions who will facilitate almost any idiotic trade you want to make; they exist (or that desk of their larger company exists) to provide liquidity to the market. they make money by volume, on the difference between the bid/ask spread of a trade. when you buy an option contract, they want to make money or mitigate losses regardless of the outcome. this means if you buy a call option contract, market makers will purchase shares of the underlying stock to hedge the risk of your call paying off. the greater the chance of it hitting, the more shares they will buy to manage the risk. they have high frequency trading algorithms to balance this risk in real time, on every trade they facilitate. if you buy a weekly GME 115c when GME is at $40, they donât have to buy shit for shares to hedge your dumb trade. if you get lucky, because, say, GME is stupidly shorted and is being squeezed by covers and speculators as a result, and GME starts jumping, the makers will have to buy more shares to hedge the greater probability of your option contract expiring in the money (lower than the price of the stock). if lots of calls are purchased at a given strike and a given date, as that date approaches the makers buy more and more to hedge the risk. by the close of that date, they are 1:1 hedged by expiration. this can trigger whatâs called a gamma squeeze if the stock is illiquid (gamma is a derivative of the rate of change of the value of an option contract given a move of the underlying value of the stock; the closer to expiration and the closer the strike of the option is to the value of the stock, the more volatile gamma is). the makers have to buy, because they are paying out the extreme appreciation of the moonshot option contracts.
so what happens when a short squeeze meets a gamma squeeze? stonks go up. very up. and people know this, so theyâre buying. and theyâre holding. because they have something that very rich people must buy, at literally any price.
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also please do not take this as financial advice, etc. if youâre buying GME to hop on the squeeze train, do not use money you canât afford to lose. the stock will tank like a rock at some point, and it can and probably will do so with astonishing violence
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fucking yes it did! burgers werenât bad but it occupied the same mental space as gamestop so i got them confused all the time
one time i walked into a gamestop and one of the employees called out âwelcome to gamestop, where the fun stopsâ
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[aaand-its-gone.gif]
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I should also mention that itâs unlikely for something like this to get rolling on pure technical fuckery. gamestop stock started going up for a while as a result (presumably) of people discovering the absurd short and taking positions against it, but this didnât start in earnest until last month when gamestop announced a large restructuring and hired a magic dog food salesman as their new CEO
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i hope everyone loses
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Yeah, itâs weird. Is the lesson that the stock market is bullshit, or is it that the stock market is exciting bullshit?
Theyâre now trying it with AMC and BlackBerry.
Yes constantly
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will be extremely funny if this stuff is what ends up precipitating the next crash. austerity politics 2: gamestop preorder edition.
i feel like a lot of people online are trying to draw the former conclusion and say that the scales have fallen from peopleâs eyes vizaviz the substanceless mirror game that is financial capitalism but it also seems to be⌠a case of weird deluded wish fulfilment / activism by âcore gamersâ acting out arcane grievances about not being adequately centered by the market and believing an online dog food guy will be the one to remedy thisâŚ?? in which case i have no idea what the moral is. but good to see a bunch of phynance ghouls get wiped out by this before they go on to spend the next five years writing weepy editorials in which they blame it all on âpopulismâ or something.
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Ok I got in on AMC weâre good for a few years
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Should⌠should I be doing this?