No, WallStreetBets isn’t robbing Wall Street to help the little guy
arstechnica.com
arstechnica.com
No, the active thesis on WSB is that while a few shorts closed their positions, active shorts are still >100% of float. The short squeeze has yet to happen. Thus the reason they're all holding - shorts are paying huge amounts of interest every day, so the point is to hold until they're forced to give up on their positions, which will lead to the short squeeze.
The squeeze hasn't been squoze yet.
Ultimately the big winners are those who bought @10 and sold @300, or those who shorted @300 and cover @10. Everybody in between gets rekt. That's going to include a bunch of retail buyers and a few shorts as well.
I'm hearing borrow fees are at about 80-100% annualized now. That works out to around 0.2-0.3% daily, so carrying a $10K position costs you $20-30/day, a $1M position costs $2-3K, etc. Someone with enough money to stomach that kind of risk can easily afford that.
Second, the WSB consensus is starting to build around sacrificially holding stocks through the short squeeze and subsequent decline to ensure bandwagoning retail investors are able to get back out and extract the profits from short sellers covering.
Of course it does, since the stock is ridiculously overvalued. What does the WSB crystal ball have to say about when the squeeze will happen? How would we be able to tell when it has happened?
> sacrificially holding stocks through the short squeeze and subsequent decline
This is a noble goal. It will be interesting to see if it works out, tragedy of the commons and all. If everyone else holds, nobody will mind if I sell my shares, I do so need that Ferrari...
Well. $GME closed at -100 dollars (-31%) yesterday, and it's currently down another ~95 dollars from that in the pre-market. I guess we will not go to space today.
This really has nothing to do with it.
I believe it when I see it. Isn't the majority of shares hold by the heavy pros anyway? I doubt the other Hedgefonds and Yolon Musks will sacrifice shit.
They don't need to. It's mathematically impossible for shorts to cover, because they've shorted more than the entire float.
Alice owns one GME. Bob borrows the share and sells it to John. John doesn't know this is borrowed stock and borrows it to Lisa. This way way you got two borrows on one stock.
As you can see, the hedgefonds likely already recovered some stocks from 140% down to 113%.
Their intention was to speculate on Gamespots bankruptcy and there for not even have to buy back any shares. That's why they overshot like this and also why they are human scum needing to bleed for their sins.
I honestly don't know what it means for the short squeeze, if they reach <100%. I assume at that point it becomes less of an we against them, and increasingly more of an everyone against everyone, again.
In order to cover their short, they actually need to buy shares with willing sellers. So it wouldn't be a case of everyone against everyone. The amount of holders will decrease proportional to the short percentage.
They just need to make sure they aren't buying while the sellers are decreasing their exposure. But that's quite easy to tell as the price would shoot sky high from all the short sellers buying.
Increasingly people jumping onto "the ride" up, who may not sell to shorts in time and will just lose the game?
I don't think we know the short:share ratio exactly, as double borrows would be happening for <100% too, no? I think in the end, nobody knows what situation people bought into exactly and how fast this will collapse.
People who got in late, risk not getting off in time, as GME is totally overvalued right now. There will be causalities from desperate, poor folks going all in for a lack of understanding their risk and believing the WSB hype. I don't blame them for being "stupid", as a few thousand bucks plus, can change your life, if you're poor; I blame the ignorant people on WSB not educating about the very real risks involved. Tho, it's probably a good time for everyone learning how all this works and paying 100$-500$ risk for this education.
That's the point. When its 100% shorted and hedge funds all need to cover, they would be the ones buying these worthless stock from sellers. If say there are 5 hedge funds right now shorting 100% (20% each), you wouldn't want to be the last one shorting cause the 80% short sellers that are covering could very well bankrupt your fund. The underlying stock value doesn't matter as long as someone else is paying for it (i.e. hedge funds).
That's why business schools always say a) don't short sell and b) don't over leverage your short sell or you will get into a short squeeze. Short selling in my personal opinion is really dumb because your upside is limited, but your downside is unlimited.
I very much suspect that this will be in the textbook in the coming years as a prime example of black swan/ short squeeze.
The question is what happens on the "margin". Lets say there are 110 shorted shares. You need to get rid of 11 of them to eliminate the short squeeze (assuming nobody buys the remaining 99 shares to hold them).
Lisa owes 30 shares. She only has to buy 11 shares and then the rest of her shorts will have the potential to be in the money. She could buy one share and return it to the lender. She could now make an agreement with the lender to buy a share for a fixed price from the lender and return it and repeat this 11 times.
The question is, why would the lender agree to this instead of just charging market rate?
In my opinion the lender should be on the hook. By lending out your shares you receive interest payments that cover the risk of a "default" just like a regular bank loan. If the borrower fails to return the shares due to bankruptcy you just lose your share. This would significantly reduce the potential for a short squeeze because the lender would just agree to a share price that does not leave the borrower bankrupt.
Tho, I think your scenario doesn't exactly mean "mathematically impossible" but rather speculation about the short situation's specifics. The whole situation only exists because the big fishes can deceive and manipulate the market mostly to their liking. I wouldn't bet on them not playing dirty to distort analysis of what's really going on.
Sadly, I didn't get into a broker in time. I literally have no shares in this and just hope wallstreet burns over this one way or the other. Would have preferred to throw 50€ or 100€ into the game just for the education. There will be another crisis for me :)
Does a short/float ratio of 100% require multiple brokers to participate? How is the bookkeeping on these shorts maintained?
I don't see any value in all this shit and hope shortselling and similar metashit will be outlawed all together. How is speculation a valid business?
This is fully in the open and all information is public. Pump and dump schemes are usually the reverse of this.
What evidence do you have that "all" information is public? If shady people did manipulate WSB into a frenzy to create a bubble, you'd expect them to create the appearance of a public process, wouldn't you?
GME is just a meme stock that people buy to get involved in a movement.
Isn't part of the issue not pure short positions, but short dated options? you can only hold those until expiration. If the bubble lasts longer..
It is no question whether this event will have far reaching consequences. With the SEC reacting to actions directed by common people something has changed fundamentally.
That’s not $60 billion.
I'd like to schedule an appointment with the crystal ball that generated this insight, on which the whole article is predicated.
The only connections are: if a company does a buyback if it's share price gets low and can afford it off of existing revenue, if a company needs to raise cash and does a dilutatory raise, if the company exits the market via merger, acquisition, or bankruptcy, or if it's a dividend stock. All of these events are relatively rare.
https://markets.businessinsider.com/news/stocks/tesla-stock-...
If this is what passes for explanation from tech "journalists" these days, then it's a good indication of why I've stopped reading a lot of it. It's usually BS, from the condescending think piece headlines to the simplistic and ignorant but still highly know-it-all attitude.
No, Ars Technica doesn't actually publish much quality work anymore.
I get much more enjoyment and enlightenment from the much more interesting Jon Stokes on Twitter.[2] He was one of the Ars' founders before they became a typical 6th Avenue publication with a 6th Avenue editorial stance, that is, the journalistic equivalent of neutron degenerate matter, the kind of shop that tells you to sell, but pretends not to offer financial advice (not that anyone would prosecute anyway).
Yeah, no thanks.
[1] https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...
> And if you were lucky enough to get into GameStop days or weeks ago, you should seriously consider selling. At a minimum, sell enough to recoup your initial investment. Because not everyone who made big paper profits will see those gains realized.
That could if I was a conspiracy theorist, serve the interests of the firms, but if individuals put in money they can't afford to lose and are up multiples, selling just enough to cover the initial buy seems very sensible advice.
What the article doesn't cover is the revolution that many small fish that are coordinated can outweigh the decisions made by the few sitting at a proverbial table. Even those with deep pockets discovered that they are not in control and reached levels of risk they couldn't weather.
How disconnected from reality of using the stock market as money making vehicles rather than investing in the success of underlying companies is what's on display and needs to be shaken up.
It is. However, I think the situation right now is a prisoner's dilemma where this type of "snitching" means most people will lose. If nobody sells, a lot of people will win and the hedgefonds will lose.
The hedgefonds are very much trying to provoke "sensible" decisions at all costs right now. They need people to be predictable and afraid.
> How disconnected from reality of using the stock market as money making vehicles rather than investing in the success of underlying companies is what's on display and needs to be shaken up.
This. WSB isn't the problem, they just highlight it. The naked shortselling is the malicious part. The hedgefonds weren't just speculating against GME, they were inducing Gamespot bankruptcy. That is fucked up. That shouldn't be allowed. Nobody should be allowed to bet on someone losing, especially if they got all-powerful money at their hands. I think most people just don't realize how much a billion dollars really is: More than 1,600,000 stimulus checks. And they game with it like it's nothing.
Could you elaborate on how this was supposed to happen?
They pick stocks of companies struggling, which only need a little push. Mostly their financial powers means they can speak self-fulfilling prophecies, I think. "Advice" stock holders. But they also can "attack" stocks directly teaming up, like the short ladder attack we've seen the last few days. Bad press and media manipulation do the rest. Crashing a stock probably means influencing the companies liquidity and if they don't make profit at the moment, that may be the end. Or one of their friends buys then the majority of the company's shares. You know, mafia shit, but with numbers.
Overall you can ask yourself: Is it a good idea to allow anybody speculating on someone's loss, when they got enough financial power to make everyone jump?
Respective bankruptcy hugely increases the win on betting against a stock, since they don't have to buy back the shares they borrowed. They arrogantly went all in on GME, business as usual... or so they thought :)
Just to make this clear, I don't buy into the narrative of wealth redistribution as those profiting are probably in the top 1-2% anyway. But I like to see some of these assholes losing a lot, maybe someone going to prison over this. And well Gamestop and AMC just got a second life in this game. If they get their shit together, they will have a more epic "almost bankrupt" story than Apple.
And who know, maybe this will unite people under the clear view who their real enemies are, that it's neither ethnicity, culture or religion dividing them; all their struggles are caused by billionaires playing God.