Explaining What Has Been Going On In the Market

[Rocko]

Melvin capital went bankrupt because of GameStop, and then the other hedge funds pulled strings to minimize their losses. We’re talking about institutions. How many of the short sellers didn’t have the buying power to cover their shorts?

Melvin Capital received a $2.5 billion infusion of cash. They haven't gone bankrupt. They're down 30% for the year.

When a stock has a 140% short interest - that is 14 shares of stock sold short for every 10 shares of float - then many short sellers don't have the buying power to cover. That's why I have no sympathy for them. They're stupid.

I thought they went bankrupt. If I’m wrong about that I own it. I know they took a large haircut on selling GameStop short and closed their position. Dude Short selling GameStop was as obvious a play as shorting Barnes and nobles. No one thought retail investors would band together and spoil the party. I firmly believe these institutions got what they’ve been dishing out forever, and they had to change the rules to minimize the damage

 

[Toro]

And you think that's okay?....

Yes.

They're execution brokers, i.e. like a real estate broker. The real estate broker doesn't take on the risk of your house going up or down. They are the middle man. Same here.

But the execution broker lends you money to buy or short sell the stock. The lender has every right to call back their loan to you because the loan is on demand. And if you can't pay the loan back immediately, they sell (or buy) the stock to cover their loan.

 

[Toro]

If you are going to defend short sales than you need to let people lose when they miscalculate...or else its all a scheme.....

Oh, I agree. And they have. They've lost a lot of money. The hedge fund community has lost hundreds of millions of dollars. Back of the envelope based on what I've heard, they've lost nearly $300 million.

 

[Rambunctious]

Oh please it should be illegal...

Why?

To me its changes the investment market into a crap table...but that's just me....

 

[Toro]

To me its changes the investment market into a crap table...but that's just me....

If you believe in free markets and capitalism, you should believe in short selling.

Whenever there is a trade, someone buys and someone sells. The someone selling usually has a reason. Often times, people sell based on a view of the stock. A short seller is expressing his or her view that the stock isn't worth what the market is paying.

One of the best things about capitalism is price discovery, i.e. allowing individuals and markets to set prices. Short selling helps with price discovery. It's not perfect, just like capitalism isn't perfect. But generally, it does a very good job.

 

[Toddsterpatriot]

Oh please it should be illegal...

Why?

To me its changes the investment market into a crap table...but that's just me....

How would making short sales illegal make it less like a crap table?

 

[Toro]

How would making short sales illegal make it less like a crap table?

It would make it more of a crap table.

 

[wamose]

The market will be fine for a while because of what Trump did but next winter expect a crash. Biden is doing everything wrong. He's a bigger economic fuck up than AOC. All Biden ever knew about economics is to bail out the banks that assured his reelection.

 

[tyroneweaver]

Oh please it should be illegal...

Why?

Could be talking about naked shorting
What’s hard to fathom is a stock that is shorted 138 pct higher than their float
And it still shows 138 pct even today

 

[Rocko]

Oh please it should be illegal...

Why?

Could be talking about naked shorting
What’s hard to fathom is a stock that is shorted 138 pct higher than their float
And it still shows 138 pct even today

Naked short selling is already illegal

 

[Toro]

Naked short selling is already illegal

But never enforced

 

[Toddsterpatriot]

Oh please it should be illegal...

Why?

Could be talking about naked shorting
What’s hard to fathom is a stock that is shorted 138 pct higher than their float
And it still shows 138 pct even today

Naked shorting is already illegal.

 

[Rocko]

Naked short selling is already illegal

But never enforced

By whom? The custodians? The regulators? I’ve never known it to be a prevalent practice

 

[tyroneweaver]

Oh please it should be illegal...

Why?

Could be talking about naked shorting
What’s hard to fathom is a stock that is shorted 138 pct higher than their float
And it still shows 138 pct even today

Naked short selling is already illegalL

Look at this web page, and see who's leading the league in hits.
No wonder what happened happened.
Hit each tab at the top and see how far out of line GME was
This was a disaster waiting to happend

High Short Interest Stocks

highshortinterest.com

 

[Missourian]

I'll say a few things.

First, I applaud the people who made money long GME stock. Good for them. And if the hedge funds lost money, that's the way the cookie crumbles. They're pros. They know the risks.

Second, at some point, it's going to collapse. And it's going to collapse because what is occurring is a mania driven by technical conditions in the market. GME is not worth $30 billion. It's probably not worth $3 billion. Eventually, it will go to $0 because it's a broken business model. A retail investor buying at these prices is going to lose almost everything.

Third, there may be nefarious things going on, which I will address in my last point, but you must understand why brokers are shutting down trading in these stocks. They've done it in the past, and they will do it in the future.

At least three brokerages said the trading restrictions stemmed from mandates from their clearing firms, which process the securities on the back end after a user executes a trade with their brokerage. Webull Chief Executive Anthony Denier said his platform’s clearing firm, Apex Clearing Corp., notified him Thursday morning that Webull needed to shut off the ability to open new positions in certain stocks. Otherwise, Apex wouldn’t be able to settle the trades. ...​

​

“It’s a domino effect,” Mr. Denier said, adding the industry was likely reckoning with the question of whether “customers could pay for the stocks they had to buy to cover their short positions.”​

​

“If [they] are not able to pay to cover their short positions, someone else is going to have to pay for that purchase,” he said. “And if their clearing firm fails and there’s not enough collateral in the account to cover the purchase, that trade fails and will cascade into multiple trades with multiple customers.”​

Robinhood, Other Brokerages Restrict Trading on GameStop, AMC

Popular online brokerages restricted trading in some highflying stocks, sapping some of the euphoria around shares of companies that individual investors have sent skyrocketing in recent days.

www.wsj.com

That last point is important. In effect, the brokers were cutting trades because if they didn't, they'd risk losing money themselves. These brokers make money matching trades for a buyer and a seller. This business is not about taking market risks. It's about their ability to execute your stock trade. You would not be able to trade stock without this service.

Finally, I have heard from reputable sources - i.e. not on the Internet - that one firm may have done illegal things. If what he said was true, then those people should be prosecuted to the fullest extent of the law.

This is a very informative thread.

Thanks for taking the time to explain it to those of us not overly familiar with the ins and outs of trading.

 

[Missourian]

So..Citadel owns Melvin...

...and Citadel underwrites Robinhood...

...and Citadel is the company that demanded Retail Trader apps like Robinhood no longer allow retail traders buy Gamestop, AMC and others?

Is this correct?

 

[theHawk]

If you are going to defend short sales than you need to let people lose when they miscalculate...or else its all a scheme.....

Oh, I agree. And they have. They've lost a lot of money. The hedge fund community has lost hundreds of millions of dollars. Back of the envelope based on what I've heard, they've lost nearly $300 million.

Don’t worry, Toro , you and your buddies can learn to code, or get a job in China making solar panels.

 

[theHawk]

So..Citadel owns Melvin...

...and Citadel underwrites Robinhood...

...and Citadel is the company that demanded Retail Trader apps like Robinhood no longer allow retail traders buy Gamestop, AMC and others?

Is this correct?

Yup. It’s that blatantly corrupt.

Citadel also owns our new Treasury Secretary. She’s already bought and paid for with $800k that we know of. God knows how many other officials are bought off. So they effectively own this administration and probably most of Congress.

 

[Jimmy_Chitwood]

Selling short has no value to the economy....

Yes it does. It helps with price discovery.

Short sellers have also uncovered frauds. Uncovering fraud protects investors.

Manias have done more damage to the economy than short sellers.

They also add liquidity And each trade involves both a buy and a sell So sometimes when a stock is falling most of the liquidity is short sellers Selling and buying to each other

 

[Deplorable Yankee]

I'll say a few things.

First, I applaud the people who made money long GME stock. Good for them. And if the hedge funds lost money, that's the way the cookie crumbles. They're pros. They know the risks.

Second, at some point, it's going to collapse. And it's going to collapse because what is occurring is a mania driven by technical conditions in the market. GME is not worth $30 billion. It's probably not worth $3 billion. Eventually, it will go to $0 because it's a broken business model. A retail investor buying at these prices is going to lose almost everything.

Third, there may be nefarious things going on, which I will address in my last point, but you must understand why brokers are shutting down trading in these stocks. They've done it in the past, and they will do it in the future.

At least three brokerages said the trading restrictions stemmed from mandates from their clearing firms, which process the securities on the back end after a user executes a trade with their brokerage. Webull Chief Executive Anthony Denier said his platform’s clearing firm, Apex Clearing Corp., notified him Thursday morning that Webull needed to shut off the ability to open new positions in certain stocks. Otherwise, Apex wouldn’t be able to settle the trades. ...​

​

“It’s a domino effect,” Mr. Denier said, adding the industry was likely reckoning with the question of whether “customers could pay for the stocks they had to buy to cover their short positions.”​

​

“If [they] are not able to pay to cover their short positions, someone else is going to have to pay for that purchase,” he said. “And if their clearing firm fails and there’s not enough collateral in the account to cover the purchase, that trade fails and will cascade into multiple trades with multiple customers.”​

Robinhood, Other Brokerages Restrict Trading on GameStop, AMC

Popular online brokerages restricted trading in some highflying stocks, sapping some of the euphoria around shares of companies that individual investors have sent skyrocketing in recent days.

www.wsj.com

That last point is important. In effect, the brokers were cutting trades because if they didn't, they'd risk losing money themselves. These brokers make money matching trades for a buyer and a seller. This business is not about taking market risks. It's about their ability to execute your stock trade. You would not be able to trade stock without this service.

Finally, I have heard from reputable sources - i.e. not on the Internet - that one firm may have done illegal things. If what he said was true, then those people should be prosecuted to the fullest extent of the law.

Robin hood was forced to let trading game stop resume
I got alerts in Robin hood ,interactive brokers and td accounts lol
They're crying like hysterical fags ...beat em at their own game
Hedge fund guys should just learn to code ..lol

Elon Musk was even rubbing it in

Financial data analytics firm Ortex estimates that short-sellers have lost USD$70.87 billion on their investments. The company made this calculation through data collected from agent lenders, prime brokers, and broker-dealers.



That's how it all started. But it is of course still going on and doesn't seem to be slowing down. This entire GameStop saga has had a massive impact on the stock market, to the extent that Melvin Capital Management ended up needing an investment of nearly USD$3 billion just to stay alive after GameStop first started to rocket upwards.



White House press secretary Jen Psaki also recently confirmed that the US government is 'monitoring the situation', which suggests that this story is far from over.