GameStop Is Happening Again
bloomberg.com
bloomberg.com
I'm not sure what the truth is here, but if the accusations are correct I think it's fraud level stock market manipulation.
I've only seen those accusations on reddit and twitter. The only "evidence" I've ever seen in support of those accusations is repeated citation of short interest. Short interest is an aggregate figure which doesn't track specific firms, so it can't be used to discover if an individual fund closed or opened a short position.
Put yourself in the firm's position and think about this from a game theoretic perspective...what is the upside in lying? The thinking is that you might convince people to lay off the voracious buying if you make it seem like the short squeeze isn't possible because you're out? That seems like a stretch and would require navigating lots of wild assumptions about why this almost unprecedented price action is happening.
On the other hand, there is tons of downside. If the plan doesn't work and the price continues its meteoric rise, you're bankrupt. If you're caught lying, you're additionally hit with securities fraud. Then the veil is pierced and the partners are at risk of losing their money. On top of this if your investors are savvy they'll sue you for breaking fiduciary duty because you didn't close out a position that makes selling naked SPY calls look safe. This also puts the partners' private capital at risk.
It would be cartoonishly dumb to lie about closing the position instead of actually doing it.
Random redditors, and they were quoted by CNBC and the like
The post I replied to asked what people are demanding. They are demanding that institutions not lie to manipulate the market. I am not claiming this lying ever took place.
> The only "evidence" I've ever seen in support of those accusations is repeated citation of short interest.
In addition to that, they claimed that volume in GME was not high enough for the shorts to be closed. I'm not familiar enough with the markets to know what I don't know here though.
dark pools/OTC trades, maybe?
- Total short interest in every stock updated daily, both settled and in progress.
- (edit) report daily fails to deliver (not just a running total), and published at T+2 rather than every couple weeks.
- For every trade, publish whether it's a short sale or sale of an owned asset.
- SEC tracks each companies' daily borrows and fails to deliver, with consequences.
- Every short sale must be submitted with a borrow agreement from someone who has already agreed to lend you the shares. SEC checks these are not fraudulent or frequently cancelled.
- Everyone should have access to the trading data that you currently need a Bloomberg terminal for.
- Every share has a serial number. Every trade must include a list of serial numbers of every share in that trade, with proof that you own or were lent those exact shares.
Like I said, I"m no expert, so responses welcome.
- If you lend out your shares, you can't "sell" them until you've recalled them and had them delivered to you.
If the float is X, then there shouldn't be more than X shares available to sell at any given time. In the current system shorting increases apparent supply which devalues the stock.
I really don't understand why FTDs are allowed. Seems like they just add systemic risk in order to enable shorts to manipulate the market more easily. Can't think of a reason why that is desirable unless the goal is to fleece retail investors.
Why not just force the BD to buy at market price to ensure delivery?
This isn't a reddit, or even retail, pump and dump.
https://i.imgur.com/Rz1kUp7.mp4
EDIT: https://twitter.com/deitaone/status/1364957363724288000 "Gamestop Short Sellers Estimated To Have Lost $818 Million On Their Bearish Bets on Wednesday - Ortex"
update: literally 1st pair of comments i read in WSB on this one is:
"Lol Cramer is such a great actor. “What?! Seriously?!” What a douche"
"Is he okay? He was looking off camera so frequently I thought maybe they are holding his wife hostage there or something.
Cramer, buddy, blink twice if we should call the cops."
As a more general aside: take everything said on Cramer's show with a grain of salt. He is a deeply unserious character in the financial space. His angle is to be provocative, not accurate.
https://www.reuters.com/article/us-retail-trading-melvin/mel...
https://www.cnbc.com/2021/01/29/gamestop-short-sellers-are-s...
> Short-selling hedge funds have suffered a mark-to-market loss of $19.75 billion year to date in the brick-and-mortar video game retailer GameStop, according to data from S3 Partners.
Doesn't attribute losses to specific firms, but the damage is spectacular.
losses on options contracts arent limited to invested capital. AUM is irrelevant
i withdraw.
"Retail on reddit" doesn't use a broker that allows after-hours trading? Or am I reading this phrase incorrectly?
Of course it could be that nobody posting on reddit has a single share, and all the screenshots are just virtual profiles on various accounts, but if we're assuming what people on reddit are saying is broadly true then that's the case
Don't try to apply logic to this, it's meme trading, it's not meant to be rational.
edit: These are the only 3 platforms I have experience with, there are certainly others.
Only in this age that a stock going up is bad.
Even if 10 million redditors were buying, that would be $1400 each. That's ridiculous
Retail traders were not "locked out". Practically every retail brokerage offers extended hours trading, many from 4AM to 9PM.
If you're still using Robinhood after what they pulled last month... that's on you.
Retail can buy/sell call options overnight.
The Bloomberg opinion article states:
> Yesterday someone bought thousands of GameStop call options with an $800 strike price expiring tomorrow. They cost 87 cents per share. If the stock closes above $800 tomorrow those options will pay out; also though all notions of money and value and human society will be rendered meaningless, so I don’t know what you’ll do with your payout.
That hypothetical person YOLOing $100,000+ could very easily be a retail investor throwing away money for the lulz. Maybe someone who won big a few months ago and feels fine throwing their excess money away.
Open interest increases if someone opens a position.
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Open Interest is well over 10,000 on $800 GME expiring tomorrow. So __somebody__ bought-to-open call options at $800. (I presume the sell-to-open side of that call option is just the Market Maker who happened to close that deal, taking the free money).
This is well over $1-million USD being YOLO'd onto an outrageous bet (that GME is going to be over $800 tomorrow at 4:30pm).
https://www.nasdaq.com/market-activity/stocks/gme/option-cha...
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In any case, my point is that retail is absolutely allowed to trade options overnight. Just because stock market is closed doesn't mean that the options-market is closed. The options-market is 24/7.
Options are only traded during market hours.
Retail traders can't swing that kind of volume in the underlying shares, no. But retail call buying as a proportion of total equity options volume is up massively in the past two years. The trading leverage inherent to retail call options herding together combined with the requirement for market makers to hedge the options they sell induces these huge movements. From there, momentum traders exacerbate the spark that's already lit.
> Fun fact, the Bloomberg options value calculator tells me that the delta of that $800-strike call option expiring tomorrow is zero. That is, the right theoretical hedge for a market maker who sells that option is to do nothing, to buy zero shares to hedge against the minuscule risk of the stock going to $800. Standard options math, and also frankly common sense, tells you that if the stock is trading at $40 or $90 or whatever, and someone comes to you and asks to buy a two-day option struck at $800, the proper reaction is to say “lol okay sure pal,” take their money and never think about it again. But I’m sure people bought other options that market makers did hedge, why not. We’ve discussed some recent research finding that options positioning predicts late-in-the-day trading moves, and I suppose the shape of yesterday’s late-afternoon rally could be partially explained by options.
I hope if anything, this Gamestop saga has turned a lot of people onto Matt Levine's writing. He consistently puts out some of the most laugh-out-loud hilarious things I will read every day, in a way that is actually able to concisely explain really complex subjects. And he cranks out one of these every single day. I am simply in awe of him.
> also though all notions of money and value and human society will be rendered meaningless, so I don’t know what you’ll do with your payout.
Also, you have to decide: do you think this was a stupid (retail) investor or a smart (institutional) one? If stupid, how do they have a few million dollars to blow on a bet like this? If smart, might they have some plan, like they think they can trigger a squeeze of some kind? This all just raises so many questions for me.
> To be clear, market makers are not required to do what the model tells them, and the “common sense” answer is perhaps ambiguous. Arguably the fact that someone bought thousands of these options means that the probability of them paying off is a bit higher than the model suggests. If you are selling way-way-way-out-of-the-money options, you probably should not be blindly following your model. Here is a story I likefrom Nassim Nicholas Taleb.
Just imagine this discussion one month ago - ha ha, there is no way in hell GameStop will trade in 4 days at 500 when now it's 20.
Of course, if you only care about this years bonuses, ....
> To be clear, market makers are not required to do what the model tells them, and the “common sense” answer is perhaps ambiguous. Arguably the fact that someone bought thousands of these options means that the probability of them paying off is a bit higher than the model suggests. If you are selling way-way-way-out-of-the-money options, you probably should not be blindly following your model. Here is a story [https://twitter.com/matt_levine/status/555913245589250048] I like from Nassim Nicholas Taleb.
He has a hilarious video on how he animates the cartoon videos: https://www.youtube.com/watch?v=tq_KOmXyVDo
That's the funniest shit I've ever seen in my entire life.
I do not encourage anyone else to do the same. My risk tolerances are different from yours.
Surely some of them will have lasting mental issues when it all ends.
Gotta get dem tendies.
You're right, there are uninformed people buying into the hype. But who are you to tell them how to spend their money? Why are you such an authority on their autonomy?
But you're right. Chances are a lot of people are going to lose money investing in something they don't understand, including people who can't afford to lose that money. But I genuinely believe most of the people are actually aware of the risks, even if they aren't intimately familiar with the market.
I know it sounds crazy, but a significant chunk of people doing this genuinely don't care about the money. As to what the breakdown is between people trying to profit, people that have no idea what they're doing, and people that just want to fuck the system? I don't know, but I bet each category has at least 10% in it.
Even if they did it's unclear if it would be enough to end the situation because the shorts clearly think GME is on a one way road to bankruptcy. After initial short positions were unwound new shorts entered when the stock was flying super high so short interest naturally remains high.
GME already has a decent pile of cash on the books (which is why attracted Burry in the first place) so it's also not clear if a secondary offering would do much to dissuade the shorts from re-entering their positions after using the offering to cover.
To add to this, the SEC issued a statement in the middle of it all that seems to discourage Gamestop from offering more shares. It's unclear to me but that's my interpretation of the last sentence of this paragraph:
> In addition, we will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws. Market participants should be careful to avoid such activity. *Likewise, issuers must ensure compliance with the federal securities laws for any contemplated offers or sales of their own securities.*
https://www.sec.gov/news/public-statement/joint-statement-ma...
Could you 'beat' / get the shares sold before the price dropped dramatically?
And let's assume you get them sold / what happens when you just dumped bunch of shares out there and the inevitable price crashes? What value can you ever provide those share holders?
But in the first place I kinda wonder if just trying to cash in would trigger the drop...
Also, execs can start cashing in themselves.
If they have anything to be ashamed of is not repurchasing more shares when Burry told them to. Good riddance to the outgoing CFO.
Some hedge fund bought a bunch of calls and then pumped the underlying. Option sellers had to buy shares to cover.
Genuine question, I only have very superficial understating of the option market.
--Call options cannot be exercised (this would be requesting the shares) until the stock price exceeds the strike price. American options can be exercised at any time, European options can only be exercised at expiry.
--It's typically better to sell an American option rather than exercise early. Options have "intrinsic" and "extrinsic" value. The intrinsic value is what you get when you exercise. Simplifying a bit of messiness away, if your strike price is $30 and the stock is at $50 then by exercising and selling the shares you net $20. But the option at the same time will sell for more than $20. Thus by exercising early, you leave extrinsic value on the table. The time-to-expiry aspect is a significant portion of an option's extrinsic value.
[1] https://old.reddit.com/r/GME/comments/ls830a/found_the_reaso...
Why would be the shares be hard to borrow? Isn't short interest relatively low compared to a few weeks ago?
If you like a stock, buy it, and enjoy.
If you're gambling, tough.
If you're a short seller who lost the best part of a billion dollars today, thoughts and prayers?
https://www.reuters.com/article/us-retail-trading-gamestop-l...
Wow this writer is condescending towards financial innovation. Snubbed.
Here's a free archive for good measure: https://archive.is/MysFz