Stocks and Trading Thread - Channeling your inner Mono

[Habbaku]

I am: WSB Redditor.

[HVC]

What Is Pump-and-Dump?

Pump-and-dump is a scheme that attempts to boost the price of a stock through recommendations based on false, misleading or greatly exaggerated statements. The perpetrators of this scheme already have an established position in the company's stock and sell their positions after the hype has led to a higher share price. This practice is illegal based on securities law and can lead to heavy fines.

https://www.investopedia.com/terms/p/pumpanddump.asp

Hmm. I wonder if "buy it for Lolz" counts as  false, misleading or greatly exaggerated statements. Lawyers of languish, what say ye?

*edit* and thanks Yi

[Sheilbh]

Hmm. I wonder if "buy it for Lolz" counts as  false, misleading or greatly exaggerated statements. Lawyers of languish, what say ye?

*edit* and thanks Yi

Yeah it seems like something different to me.

I understand the automatic market suspensions have been triggered a number of times.

[Admiral Yi]

Hmm. I wonder if "buy it for Lolz" counts as  false, misleading or greatly exaggerated statements. Lawyers of languish, what say ye?

*edit* and thanks Yi

Right.  AFAICT this is about a Reddit community agreeing amongst themselves to buy shitty stocks because they hate short sellers and want to punish them, not about a few con men talking up the brilliant business prospects of Gamestop and Blackberry to entice the gullible.

Which is why I asked what the end game is.  After you and your Reddit friends and crushed the short sellers, you're left holding stock you paid $300 for and which is virtually worthless.  Gamestop lost $4.57 per share last year.  So now what?

[Admiral Yi]

So I think another rationale for trading restrictions is to protect the stupids from themselves.

[HVC]

Hmm. I wonder if "buy it for Lolz" counts as  false, misleading or greatly exaggerated statements. Lawyers of languish, what say ye?

*edit* and thanks Yi

Right.  AFAICT this is about a Reddit community agreeing amongst themselves to buy shitty stocks because they hate short sellers and want to punish them, not about a few con men talking up the brilliant business prospects of Gamestop and Blackberry to entice the gullible.

Which is why I asked what the end game is.  After you and your Reddit friends and crushed the short sellers, you're left holding stock you paid $300 for and which is virtually worthless.  Gamestop lost $4.57 per share last year.  So now what?

i figure the person (people) who started it had gamestop stock originally and sold for a profit already. I agree, its the dumb redditers i don't get. guess a laugh is worth a few hundred bucks when you're bored

[Tamas]

So I think another rationale for trading restrictions is to protect the stupids from themselves.

Yeah I guess they don't want the hassle or tons of margin calls to deal with.

[Josquius]

Hmm. I wonder if "buy it for Lolz" counts as  false, misleading or greatly exaggerated statements. Lawyers of languish, what say ye?

*edit* and thanks Yi

Right.  AFAICT this is about a Reddit community agreeing amongst themselves to buy shitty stocks because they hate short sellers and want to punish them, not about a few con men talking up the brilliant business prospects of Gamestop and Blackberry to entice the gullible.

Which is why I asked what the end game is.  After you and your Reddit friends and crushed the short sellers, you're left holding stock you paid $300 for and which is virtually worthless.  Gamestop lost $4.57 per share last year.  So now what?

The idea as I gather for those who are in on it big is that the short sellers will be effectively forced by the institutions who loaned them the stock to pay huge money for actual stock as happened with volkswagen.

[Admiral Yi]

The idea as I gather for those who are in on it big is that the short sellers will be effectively forced by the institutions who loaned them the stock to pay huge money for actual stock as happened with volkswagen.

Right.  Apart from the "forced" part, I get the logic of the short squeeze driving up the price.  But for that to work you still need willing buyers at a price above what you paid.  Where are those willing buyers?  Except for the members of the Reddit flash mob, everyone else thinks it's a $6 stock.

[Sheilbh]

So I think another rationale for trading restrictions is to protect the stupids from themselves.

How you do that with expanding retail platforms is difficult.

[Admiral Yi]

https://www.youtube.com/watch?v=0Ii1U7UW-jE

Endowment manager of Akron U. thinks several short hedge funds will go bankrupt and explains today's market sell off as short funds liquidating their positions to cover.

[crazy canuck]

what's the rational for imposing restrictions? As far as i know buying stock stupidly isn't illegal. if it was there would be no market

One rationale would be to prevent a pump and dump.

Is that illegal? Serious question.

There are what are referred to as circuit breakers built into the electronic trading systems that kick in when there are dramatic fluctuations.  The main purpose is to give people who are not trading by computer algorithm have a chance to react.  Not sure it works as designed but it also works here.

[DGuller]

The idea as I gather for those who are in on it big is that the short sellers will be effectively forced by the institutions who loaned them the stock to pay huge money for actual stock as happened with volkswagen.

Right.  Apart from the "forced" part, I get the logic of the short squeeze driving up the price.  But for that to work you still need willing buyers at a price above what you paid.  Where are those willing buyers?  Except for the members of the Reddit flash mob, everyone else thinks it's a $6 stock.

I think that's the point; you buy up on the cheap to drive up the share price, and then sell when short sellers are forced to buy the stock to close out their position.  I did this regularly in Railroad Tycoon 3.

[DGuller]

what's the rational for imposing restrictions? As far as i know buying stock stupidly isn't illegal. if it was there would be no market

One rationale would be to prevent a pump and dump.

Is that illegal? Serious question.

There are what are referred to as circuit breakers built into the electronic trading systems that kick in when there are dramatic fluctuations.  The main purpose is to give people who are not trading by computer algorithm have a chance to react.  Not sure it works as designed but it also works here.

I think the point of the circuit breakers is to save the market from the fluctuations themselves.  Fluctuations can feed upon themselves, like a structure that hits its resonant frequency.  For example, a sharp fall in stock prices, if reacted to quickly, can lead to people selling off said stocks to limit their losses, which on aggregate just amplifies the fluctuation and triggers further stop loss orders.  At some point the dynamic moves quicker than people can rationally react to it, so circuit breakers let people catch their breath.  That's my understanding of it anyway.

[crazy canuck]

what's the rational for imposing restrictions? As far as i know buying stock stupidly isn't illegal. if it was there would be no market

One rationale would be to prevent a pump and dump.

Is that illegal? Serious question.

There are what are referred to as circuit breakers built into the electronic trading systems that kick in when there are dramatic fluctuations.  The main purpose is to give people who are not trading by computer algorithm have a chance to react.  Not sure it works as designed but it also works here.

I think the point of the circuit breakers is to save the market from the fluctuations themselves.  Fluctuations can feed upon themselves, like a structure that hits its resonant frequency.  For example, a sharp fall in stock prices, if reacted to quickly, can lead to people selling off said stocks to limit their losses, which on aggregate just amplifies the fluctuation and triggers further stop loss orders.  At some point the dynamic moves quicker than people can rationally react to it, so circuit breakers let people catch their breath.  That's my understanding of it anyway.

Yes, we are saying the same thing. They kick in with individual stocks as well as the market as a whole (which is much more rare).