Stocks and Trading Thread - Channeling your inner Mono

[Admiral Yi]

What would you classify it as?

Propping up the banking system (and the auto industry later).

[HVC]

Maybe I'm misremembering, or misunderstanding , but didn't most of the money go to investment banks? Wouldn't that be classified as "big investors"?

[Admiral Yi]

Maybe I'm misremembering, or misunderstanding , but didn't most of the money go to investment banks? Wouldn't that be classified as "big investors"?

When I read "big investors" I think individuals.  Does the statement work in regards to big financial institutions?  I need to think about it.

[crazy canuck]

Maybe I'm misremembering, or misunderstanding , but didn't most of the money go to investment banks? Wouldn't that be classified as "big investors"?

When I read "big investors" I think individuals.  Does the statement work in regards to big financial institutions?  I need to think about it.

Odd to disassociate big investor from the big institutional investors.

[Habbaku]

WSB is public again.

[Admiral Yi]

Maybe I'm misremembering, or misunderstanding , but didn't most of the money go to investment banks? Wouldn't that be classified as "big investors"?

Well, some of them were big (and some were small and some were medium sized) and some of them did engage in proprietary trading.  But they weren't the biggest investors.  Those would be pension funds, insurance companies, university endowments, mutual funds, and hedge funds.  And proprietary trading was a small part of those banks' business.

So no, I don't think it's fair to say "big investors got bailed out."

[Admiral Yi]

https://www.youtube.com/watch?v=1HYBo5teFTU

Bottom of the "hedge funds got bailed out" story.  Melvin Capital, which shorted Gamestop, got an "infusion" of three billion from two other hedge funds.  No details on whether that's a loan, or equity, or what.

[DGuller]

Is there any fundamental reason why anyone would short sell a stock?  There must be some, because some very smart people are doing it, but it sounds like such a dangerous hassle.  Can't you just buy a put or sell a call if you are bearish on the stock?

[Admiral Yi]

Is there any fundamental reason why anyone would short sell a stock?  There must be some, because some very smart people are doing it, but it sounds like such a dangerous hassle.  Can't you just buy a put or sell a call if you are bearish on the stock?

Dunno.

You have leave to ask Habbaku. 

[Admiral Yi]

https://www.youtube.com/watch?v=WOLn07bCSEQ

Ryan Cohen (co-founder of Chewy), Donald Foss (ex-CEO of dodgy car loan company), and Michael Burry (from The Big Short), all invested big in Game Stop and made a bunch of dough.

[Jacob]

https://www.youtube.com/watch?v=WOLn07bCSEQ

Ryan Cohen (co-founder of Chewy), Donald Foss (ex-CEO of dodgy car loan company), and Michael Burry (from The Big Short), all invested big in Game Stop and made a bunch of dough.

I saw an interesting a twitter thread that lays out how "the little guys vs big wall street" narrative is a bit off.

Step 0: Citadel pays Robinhood for order flow. Citadel gets to see RH's orders a few milliseconds before they're filled. Citadel may choose to front-run some of those trades.

Step 1: RH's customers and WallStreetBets start manipulating $GME. This is happening in the open.

Officially, they're manipulating $GME (and $BB and $KOSS) because these low-value stocks are being very heavily shorted, and if something moves the value of the stock up (like, tens of thousands of retail investors acting in near unison), those short-sellers may be forced to sell

...to cover their borrowed shares. If most shares are held by retail investors who won't sell, the price will skyrocket (supply/demand) until someone does. The bear hedge funds and such will still have to buy to cover, which may cause a bit of a liquidity crisis for the funds.

The concept of "Screw the hedge fund vampires who exist only to destroy companies like Gamestop" is a big part of /r/WallStreetBets's messaging. It's a compelling message, and a decent secondary reason for this.

The primary reason to manipulate markets remains profit, though.

Step 2: HFTs buy shares ahead of Robinhood users.

Remember Citadel, the firm who can front-run robinhood trades, and got to see all of that RH data a little early because they paid for flow? Yeah. When do you think they started buying $GME in front of RH traders on momentum?

Because the volume of shares exchanged suggests that the HFT folks were all over this, all the way to $150. The message on WSB might be "lots of little guys screwing big Wall Street", but the truth is that the HFT robots were screwing everyone, while paying RobinHood a kickback.

Step 3: A hedge fund becomes insolvent. Today it was Melvin Capital Management. It very likely won't be the last.

Melvin immediately sells off a portion of itself, because it needs the influx of cash or it will vanish in a poof of smoke, vaporizing ~$15 Billion in the process.

Step 4: Who's the lead investor, picking up part of a usually successful fund at fire-sale prices?

Right. Citadel, probably with some of the cash they made by repeatedly profiting in the milliseconds before filling the trades that collapsed this fund.
Citadel, Point72 to Invest $2.75 Billion Into Melvin Capital Management
WSJ News Exclusive | Citadel, Point72 to Invest $2.75 Billion Into Melvin Capital Management
Hedge fund Melvin Capital has been hit hard by a series of short bets to start the year, down nearly 30% for 2021 through Friday, people familiar with the firm said.

Step 5: Citadel still has access to RH order flows, is still allowed to front-run them and/or pocket the spread, and can use that and other information to determine the next over-leveraged fund that's going to get squeezed.

So, the next time you discount the impact of "4chan with a bloomberg terminal", remember that they are not the only ones who stand to benefit from intentionally screwing exposed short-sellers.

The professionals are all too happy to amplify the efforts of the amateurs for profit.

Because if amateurs manipulate the market, uh, truthfully, then nobody loses their license.

"I (retail investor) bought because I hate Citron & hedge funds, and we're going to screw them for profit. Join us, but do your own due diligence. YOLO!" might just be legal. IANAL.

If a licensed broker/dealer did this, they'd lose their license, and probably go to jail. Martha Stewart did time for less.

But Citadel, by paying for order flow and sitting in the middle, gets to legally ride-along, printing money the whole way.

So, when you ask yourself, "who pays for no-commission trades, and why?" or "what's the harm of RobinHood's business model?", take a look at what happens behind the scenes, in the milliseconds after you press buy, but before you own those shares.

It's vampires all the way down.

[Zoupa]

[Valmy]

 

Damn well done.

[Admiral Yi]

Straw man

[Josquius]

I still see WSB just fine.
I note its member count has doubled.

But yeah. There's a lot of worry there they'll be shut down. Talk that some idiots are sending threatening messages to the short sellers, that they keep being infiltrated by dodgy accounts posting misleading stuff, etc...
Their general takeaway is that they're onto something and the man (tm) is scared.

As to doubting WSB is behind it.... Look at the numbers some of the guys on there are pouring in. It's not just kids with $100 to burn. Some are dealing in the millions.