Stocks and Trading Thread - Channeling your inner Mono

[Admiral Yi]

There are a few relevant factors contributing to gamestop and the other short squeezes.  One is the "gamma squeeze" that exploits the fact that the securities markets rely on institutional market makers to make a liquid and fair market. Because the market makers want to stay neutral and hedge their risk, they can become heavy buyers when out of the money call options get close to being in the money, and that buying can precipitate a short squeeze and a scramble for shares.  This phenomenon is a by-product of a trading system that uses market markers - and IMO the presence of market markers is a desirable feature of the system.

So market makers are counterparties on options?

If the price rise that precipitates the squeeze occurs based on fundamentals/market news/market trends, then again it's WAD and if the shorts lose their shirt it's because they took that risk.  But if the price rise is based on some variant of pump-and-dump style manipulation, then it's not WAD and the regulators should act.

That's why I think the SEC is scratching its head on this.  If the price rise is based on a short seller vendetta, and the manipulators are indifferent to their losses, what are they supposed to do?

Another factor I think Tyr raised is that securities lending rules permit the same shares to be lent more than once (albeit subject to some limits).  I've never been able to figure out the purpose of allowing that from a market regulation standpoint.  My understanding is that it is permitted because brokerages make significant income from rehypothecation.

Please explain to me why this is a problem.
[/quote]

[Admiral Yi]

AOC has called for an investigation of brokers who blocked purchases.

Joined by Donald Trump Jr. and Ted Cruz.

[Admiral Yi]

https://www.youtube.com/watch?v=SDML5eveB34

Robin Hood to allow "limited" buying of Reddit stocks starting tomorrow.

[Tamas]

So perhaps those who absolutely had to get out of GME shorts to save their bonuses have done so.

[Sheilbh]

The modern Republican party really is a sight to behold:

[crazy canuck]

In the Congressman's defense it is not far off what AF posted in this thread.

[Tamas]

Is it true some finance people interviewed are calling Reddit the  "deep web" and claiming the wsb people are MAGA supporters? 

[HVC]

Robinhood app is not available in my area? Never checked before today so I don't know if it's not available in Canada, or if apple took it down.

[alfred russel]

In the Congressman's defense it is not far off what AF posted in this thread.

I have no clue what you are talking about. I don't catch any relation between the congressman shilling his website's promotion and anything I posted here.

[The Minsky Moment]

AOC has called for an investigation of brokers who blocked purchases.

Joined by Donald Trump Jr. and Ted Cruz.

My first thought is that the brokers overstepped by cutting off their own clients, but I'm not sure i want to join this coalition.

Yi questions - 1) yes typically a marketmaker will take the other side of a transaction, to the extent the firm has net exposure one way or another they will hedge. 
2) I'm not sure this is vendetta, I think the reddit investors are looking to make $ by forcing the squeeze
3) Over rehypothication is problematic because in a crisis event collateral that is supposed to there has already been moved and lent out, perhaps multiple times.  This was one of the problems that manifested in the 08 crisis which led the SEC to put some limits on it - but arguably not enough.

[Admiral Yi]

3) Over rehypothication is problematic because in a crisis event collateral that is supposed to there has already been moved and lent out, perhaps multiple times.  This was one of the problems that manifested in the 08 crisis which led the SEC to put some limits on it - but arguably not enough.

But isn't that a problem with rehypothecation rather than with shorting +100% of the float?

[Tonitrus]

The modern Republican party really is a sight to behold:

That they put the QAnon lady on the committee responsible for education is certainly the best(worst) example of how far they've sunk.

[Josquius]

Gamestop back in the 400s with pre-market buzz. I noticed in Trading 212 the buy button isn't locked anymore.
No intention to buy anymore myself, that's gamblers stuff, shall be aiming to sell up at some point, but looks to be an interesting day ahead. Today is the day shorts are meant to hit the end of the road and have to buy.

[Admiral Yi]

Today is the day shorts are meant to hit the end of the road and have to buy.

I think you're still confusing short selling and put options.

[Syt]

Stephen Colbert roughly explains the GameStop stuff: https://youtu.be/AfK9sb9RQ3s

(after a summary of Marjorie Taylor Greene's craziness)