Anyone Here Play the Market?

[Grime Time]

Thing is if WE screw up and lose money we don

[GordonGekko80]

this is a troubling new trend

https://www.huffpost.com/entry/in-battle-over-gamestop-shares-two-big-players-flinch_n_60119c83c5b67848ee7d4deb


It's also why I am glad I am an investor and not a trader.

This is very, very, very worrying.

But I am sure the SEC will be monitoring this closely. Matter of fact there are selling restrictions applied on this stock I believe.

Overall, the volatility on this stock is absolutely unbelievable. To me, this is a Ramping / Pump and Dump scheme. Problem is that if you do not monitor the communications between the individuals in agreement to put those schemes up you will never find anything from an order / trade manipulation perspective as they potentially fly under the radar with lower volumes.

[GordonGekko80]

Thing is if WE screw up and lose money we don

[GordonGekko80]

I have digged a little deeped on that, and there's 2 sides of things:

1. The Dodd Frank Regulation clearly forbits naked short sellings. First issue is how can a Hedge Fund go naked short if it's against the Rules? Second issue is, how can they go short with a value that is 140% of the oustanding shares through levereged products?
2. The scheme that has been put up by hobbytraders / retail investors is wrong. In fact the selling restrictions put in place aim to limit speculators.

[GordonGekko80]

The new "Robinhooders" (those who trade on Robinhood) are millennials who are driving traditional stock professionals crazy. The youngsters treat it like it's a game and try to outsmart the big guys. They certainly did with GameStop, which is now trading as though the little store is twice as valuable as WalMart. They understand how big guys set up computers to automatically buy and sell using the "short selling" method. In fact, the computers do all the work for them and the computers simply mine money from the market and at night time, the big guys look at how much money was siphoned off the system for the day before heading home to their mansions. So a huge group of the Robinhood 20-something kids communicated via a website to target them by pushing up the price of GameStop forcing the big guys (well...their computers do it automatically) to buy the stock because it doesn't short as long as the stock doesn't fail (go lower); therefore, the computer automatically buys it back. Hence, some big hedge funds have nearly gone bankrupt while some kids have become millionaires overnight and at least three guys have made over a billion dollars from it. Since the stock has been sitting around 5.00 a share for the last couple years and the company just went into debt to keep the company afloat, it made sense for the big guys to short it betting on it to fail. So if you bought a thousand dollars worth of stock, it would have been worth over 9 million dollars at the close yesterday. Gotta hand it to the kids, they took down some fat cats and became very wealthy. And it was all legal. And quite frankly, genius.

I am sure the SEC will come up with new regulations to keep that from happening again. Protect the big cats!

I've read some complaints by the fat cats on Wall Street hating on the Robinhooders. One guy wrote, "go ahead kid - you're so smart - nothing could go wrong....and make sure to use all your margin...etc., etc."

One kid responded, "my grandfather left me 100,000 dollars and I turned it into 800,000 in the past year. Now I've gotten a professional trader and have diversified 75% of it into a variety of options like precious metals, various energy companies, tech, EV, etc., but have taken 200,000 to purchase real estate in a growing area near Phoenix that has nowhere but to go up. Make fun of me all you want, I am going to be a millionaire before I turn 30".

Crazy world in the stock market right now. And I love it! Keeps the big guys on their toes, LOL

This trend is making INVESTORS lose confidence into the markets, and this is worrying. In fact the Swiss Market Index is down 2% today. Why? Because of the lack of confidence into the markets.

We can talk about transparency and all that buzz as long as we want, but is this transparent? No, it's not.

[MightyGiants]

I have digged a little deeped on that, and there's 2 sides of things:

1. The Dodd Frank Regulation clearly forbits naked short sellings. First issue is how can a Hedge Fund go naked short if it's against the Rules? Second issue is, how can they go short with a value that is 140% of the oustanding shares through levereged products?
2. The scheme that has been put up by hobbytraders / retail investors is wrong. In fact the selling restrictions put in place aim to limit speculators.

I think you are mixing up two different things.  Short selling by its nature is "naked" (meaning you don't have the shares)

What you are referring to involves options trading (which is essentially is buying or selling the right to buy or sell stocks at a given price in the future).   If you buy and option to sell stocks (a call) you don't actually own.  The Dodd-Frank act actually covers something similar but with Mortgages

I think a simple way to look at this is

The hedge firms were engaging in perfectly legal and legit investments involving short selling.   When you short sell you are betting that a stock will go down in price and you essentially "borrow the stock" and agree to buy it at a later date to pay those stocks you owe back.     Short selling has been around for a long long time and it's a way for investors to make money in a bear (when markets are going down) market or if you think a company's stock is going down.   It's a risky investment in the sense that stocks have theoretical unlimited upsides and the losses are hence unlimited.


What the people on Reddit did was get together as a group and MANIPULATE the price of a stock to go up with coordinated buying.


So while the "big cats" are ingrained in many people's minds as always being the evil villains, in this case, they were not.   On the other hand, any action intended to CHANGE the price of a stock (rather than betting on the natural changes) is immoral and unethical and harms all investors not involved in the scheme

[GordonGekko80]

The Reddit community pumped the price with a coordinated action (so called "collusion" practice, which is forbidden from a Market Manipulation standpoint) to a level where the hedge funds needed to buy the stocks to cover their shorts and limit their losses, which made the price spike even further.

But: How can a platform, like for example Robbinhood, restrict trading in GME for Retailers then, while professional investors such as Hedge Funds, can continue trading normally?

Another question:

Who owns Robbinhood? 70% Citadel.
Who owns the Hedge Funds which were short? Citadel.

Is this not also a clear conflict of interest?

[GordonGekko80]

any action intended to CHANGE the price of a stock (rather than betting on the natural changes) is immoral and unethical and harms all investors not involved in the scheme

The prices we're seeing in GME, AMC or BBBY are disconnected from any fundamentals whatsoever. This is what harms the markets and the investors in general.

This will be a hollywood movie at some point for sure.

[MightyGiants]

The Reddit community pumped the price with a coordinated action (so called "collusion" practice, which is forbidden from a Market Manipulation standpoint) to a level where the hedge funds needed to buy the stocks to cover their shorts and limit their losses, which made the price spike even further.

But: How can a platform, like for example Robbinhood, restrict trading in GME for Retailers then, while professional investors such as Hedge Funds, can continue trading normally?

Another question:

Who owns Robbinhood? 70% Citadel.
Who owns the Hedge Funds which were short? Citadel.

Is this not also a clear conflict of interest?

If we get into the Robinhood investment platform and it's the relationship with hedge funds we go down a rabbit hole full of questionable ethics and practices.  Perhaps the most troubling is that Robinhood's relationship with a hedgefund allows that hedgefund to know all the sell and buy requests of those traders before they are executed

[Jolly Blue Giant]

The prices we're seeing in GME, AMC or BBBY are disconnected from any fundamentals whatsoever. This is what harms the markets and the investors in general.

This will be a hollywood movie at some point for sure.

Robinhooders have been disconnected from fundamentals for a long time now. It goes to the old stock trader's saying, "when you start, it's all about the money, but at some point it becomes all about the game". This morning I've read that Blockbuster Video (has been bankrupt and in solvency for a long time and has only one store left [in Bend, Oregon]) is up 700%! 

I have no problem with it at all. I don't hate the rich. I say "more power to them", they figured out a way to beat the system so now they live in luxury in a high rise condo and keep a million dollar yacht in Miami along with their second home along the beach. However, they have also become complacent knowing they can simply let their expensive computers and their algorithms keep their cash flow coming. They beat the system. Now there's a new group that is "beating the system" at the expense of those who live the good life from beating the system. The little guy pushing back...and winning.

I suspect the insiders will come up with a method to protect their monopoly on milking the market like a farmer milks his cows. I don't know if there is a good football analogy here. It's probably closer to the "Battle of Bighorn" where Custer had sophisticated weaponry and training, but was overwhelmed by a hoard of angry natives with far inferior weapons.

As a side note, this morning on TD Ameritrade (the platform I use) I got this warning:

"Securities with trading restrictions

We have placed some restrictions on the following securities. These restrictions will not prevent clients from making basic buy and sell transactions. This list is as of January 28, 2021, 4:00PM ET.

    AMC, CVM, EXPR, FOSL, GME, NOK, BB, BBBY, FIZZ, GSX, IRBT, NCMI, TR, UONE, VIR, NAK, NAKD, DDS, KOSS

The following restrictions are in place:

- Stocks - 100% holding requirement (not marginable)
- Long calls and puts are allowed
- Covered call and short put orders may only be placed with a broker. Please be aware that wait times to speak with a broker may be longer than normal due to current market conditions.
- Covered calls only allowed if your account currently has the shares
- Short puts only if you have the maintenance/cash to cover the entire exercise amount of the short puts
- All other complex options orders will not be accepted
- We may also implement additional restrictions on the opening of option trades that expire Friday, January 29th


Please keep in mind that this list is not inclusive of every security restriction and may change at any time."

[MightyGiants]

Robinhooders have been disconnected from fundamentals for a long time now. It goes to the old stock trader's saying, "when you start, it's all about the money, but at some point it becomes all about the game". This morning I've read that Blockbuster Video (has been bankrupt and in solvency for a long time and has only one store left [in Bend, Oregon]) is up 700%! 

I have no problem with it at all. I don't hate the rich. I say "more power to them", they figured out a way to beat the system so now they live in luxury in a high rise condo and keep a million dollar yacht in Miami along with their second home along the beach. However, they have also become complacent knowing they can simply let their expensive computers and their algorithms keep their cash flow coming. They beat the system. Now there's a new group that is "beating the system" at the expense of those who live the good life from beating the system. The little guy pushing back...and winning.

I suspect the insiders will come up with a method to protect their monopoly on milking the market like a farmer milks his cows. I don't know if there is a good football analogy here. It's probably closer to the "Battle of Bighorn" where Custer had sophisticated weaponry and training, but was overwhelmed by a hoard of angry natives with far inferior weapons.

As a side note, this morning on TD Ameritrade (the platform I use) I got this warning:

"Securities with trading restrictions

We have placed some restrictions on the following securities. These restrictions will not prevent clients from making basic buy and sell transactions. This list is as of January 28, 2021, 4:00PM ET.

    AMC, CVM, EXPR, FOSL, GME, NOK, BB, BBBY, FIZZ, GSX, IRBT, NCMI, TR, UONE, VIR, NAK, NAKD, DDS, KOSS

The following restrictions are in place:

- Stocks - 100% holding requirement (not marginable)
- Long calls and puts are allowed
- Covered call and short put orders may only be placed with a broker. Please be aware that wait times to speak with a broker may be longer than normal due to current market conditions.
- Covered calls only allowed if your account currently has the shares
- Short puts only if you have the maintenance/cash to cover the entire exercise amount of the short puts
- All other complex options orders will not be accepted
- We may also implement additional restrictions on the opening of option trades that expire Friday, January 29th


Please keep in mind that this list is not inclusive of every security restriction and may change at any time."

JBG,

Do you see a difference between betting on a price going up or down (not actually affecting the price) and actively conspiring to change the price of a stock?

It seems to me, a lot of people are acting like short selling is some sort of sinister unethical action, which it is not.   They act like hedge funds are these sinister organizations when they are just private mutual funds that have pretty high fees (which had them out of favor for many years).


I believe very firmly that using insider knowledge or actively conspiring to change the price of a stock is both highly unethical and very harmful to investors, the market, and ultimately our economy.   The market needs to allow market forces to change prices, not some billionaire, not a bunch of people on Reddit, not any person.  You talked about doing stock research.   What schemes people are plotting to change a stock price is not something you can generally research

[GordonGekko80]

If we get into the Robinhood investment platform and it's the relationship with hedge funds we go down a rabbit hole full of questionable ethics and practices.  Perhaps the most troubling is that Robinhood's relationship with a hedgefund allows that hedgefund to know all the sell and buy requests of those traders before they are executed

Does Frontrunning ring a bell? 

Robinhood has articulated their restrictions with the fact that they were asked to post 1bln USD in Margins as Security to the Clearing Houses.
Well, go ask Citadel for that then...

@ JBG - Isn't TD Ameritrade owned by Charles Schwab?

[Jolly Blue Giant]

Does Frontrunning ring a bell? 

Robinhood has articulated their restrictions with the fact that they were asked to post 1bln USD in Margins as Security to the Clearing Houses.
Well, go ask Citadel for that then...

@ JBG - Isn't TD Ameritrade owned by Charles Schwab?

Yes, Schwab purchased it last year

[GordonGekko80]

Yes, Schwab purchased it last year

Not sure they were involved in the shorts too, though.

Apart from TD, WeBull have also restricted the opening of new positions.

The explanation across the board appears to be the Clearing House asking for that restriction to be applied - simply because the margins to be posted on such volatile issuers are extremely high (e.g. the more volatile, the more the margins cost).
Obviously this leads to expensive Margin Calls, such as the one of 1bn USD to Robinhood, which is massive.

But obviously the constellation of Robinhood vs Citadel being a major shareholder of Robinhood vs Citadel's Hedge Funds being short GME is one that looks really, really bad. That's the worst part of it all I think.

[Grime Time]

So when a big firm downgrades a stock and makes it go down and makes money on that dip which might create a panic sell and make them more money.  How