Retail investors lost millions because of an inability to buy?
Also they apparently forced sale on some accounts, which combined with an inability to buy more, definitely affected stock prices.
Scenario 1: 1. Client buys share for $400 2. Hedge funds get short squeezed (because trading is not restricted by Robinhood) 3. Stock shoots up to $1000. Client made $600
Scenario 2: 1. Client buys share for $400 2. Robinhood restricts buying the shares (so the short squeeze doesn't happen) 3. Shares plunge to $50 because the short squeeze failed to happen (ie the hedge fund did not have to purchase the shares at higher prices, which is where the capital that the traders would share amongst themselves would come from) 4. Client lost $350
That makes no sense to me. If they really wanted to buy they could use another broker? If the market really is dropping then tough luck. You can lose all your money investing in the stock market. If you're leveraged you can lose even more (which might explain why some accounts were closed).
You cannot open the account within same day even if people wantto buy. Robinhood played with people physchology. After seeing the price drop everyone wanted take profits out because even if people want to buy they couldnot.
It was logical short squeeze which could drive price of GME significantly up but due robinhood manipulation it stopped.
The people held and the volume was low.
I disagree. They've offer a way to trade like other platforms. Other platforms did the same thing and blocked trading.
The question you need to be asking is why did they ALL block trading?
They're competitors to each other, so why did they make the same decision? Remember that these firms make money on every trade done. They want to take your trades. BUT they have to manage risk. They lose money if the client can't pay. They're there to facilitate but they are taking risk themselves if they provide leverage. They, like banks providing mortgages have to have limits set. If would be unprofessional and irrational to do otherwise. These firms are there to make money in a highly competitive environment. They are professionally run to ensure that they stay in business.
The comments here are of the theme 'RH has screwed us to make money'. No, what they've most likely done is made a decision to take no more risk to ensure that they remain in business. EVERYONE is speculating though. If that's the case these arguments that the clients are somehow being screwed over is really unfair and shows a lack of understanding. Clients need to understand the risks of what they're doing, and need to understand the risks associated with executing via one broker. It's a professional environment and drive by retail unfortunately are mostly unaware of the true risks.
Examples: 1. Traders have multiple brokers to trade via because there are technical issues
2. If something is too good to be true, it probably is.
3. If you're betting against some professionals, you need to ask what they know that you don't. Why are they comfortable taking on the risk. The professionals will try very hard not to be emotional and have more info that a retail customer will.
4. The retail investor need to understand the business model of the brokers. Why are they in business and what are their limits?
I see the real problem here is that it is easy to put a trade on. It is difficult to know how to risk manage it and understand the risks. This squeeze has identified a limit in the market that wasn't considered.
That's assuming you have multiple accounts in brokerages, and multiple other ones also have blocked buys (for example Interactive Brokers).
Market will be dropping if significant number of people who want to buy are unable due to third party actions, that's exactly what's market manipulation.
Days like this are exactly why you should always have more than one bank and more than one broker !
But in a more normal position, if there is not buyers at current offering prices, you try to sell at a lower price. Thus, the price drops.
Not sure I buy it (esp with the amount of call options that are just going to magnify the move up but also the move down).
Why don’t you “buy it”?
The anger at Robinhood reminds me of when the government in Nigeria cracked down on MMM ponzi scheme. People were furious because they all assumrd they wouldn't be the bag holders at the end. But here there's been a full day to close positions so I'm fairly sure the people who aren't doing it now wouldn't have done it whenever the stock starting going down in other circumstances
Source: https://www.ortex.com/symbol/nyse/gme/short_interest
It is a pyramid, but the base layer of “suckers”, those that end up taking the losses in a standard ponzi/pyramid are already determined ; they are the most finance literate people in the market, and they did it willingly. WSB is just adding layers in the middle which is rational.
The short sellers knew their risks perfectly well and did it willingly. They just didn’t expect anyone will figure out how to take advantage of the setup they created.
Whether buying stocks should be considered investment or gambling - is an entirely different distinction.
This is very likely criminal market manipulation, but I’d be surprised if it ends up with more than a slap on the wrist to anyone.
And ... at the time I wrote that, si/float was still more than 100%, so - no, they most definitely not. (Am on phone now, will check later)
The only reasonable valuation for either is (assets-liabilities), or liquidation value. All other value is based on a belief something will happen. In GameStop, it’s the belief that there are buyers of last resort who would pay almost any price - which is likely true for some of the shorts. Whether it is 1% or 10% or 100% is what these people are betting on.
And the call from industry to pause trading to regroup against Reddit indicates it’s likely a lot more than 1%