OT: Investing/Stocks/Bonds/Mutual Funds/Crypto

[HaroldinGMinor]

As I understand it, Robinhood is actually losing money by restricting trading. I believe it's the clearinghouses that are forcing their hands on this. Who owns the clearinghouses? Why hedge funds of course.

[MoreTrife]

Bystander here just watching the story:

When a hedge "shorts" a stock, is there a time limit on that short or a stock price limit one way or another? When the GameStop price was going up, when does the shorting hedge fund actually have to close their position and take the loss?

Thanks for any insight.

[Ron Swanson]

Not gonna pretend that I'm an expert in trading shares, but this saga has just amplified how broken the whole system is. Love that these guys have done more to stick it to Wall Street in the last 24 hours than the "Occupy" movement did in its entire existence. But you also have to do something to protect assets and collateral that people who simply see these kinds of headlines everywhere and invest despite a lack of knowledge/information on the risks. Because that's the ultimate danger of crowdsourcing. The way they've gone about it though (literally cashing out shares against the consumer's wishes), is incredibly tone-deaf and borderline illegal. I'm guessing you're gonna see some pretty hefty class-action lawsuits in the near future...

[ackypoo]

the rich are a protected class in this country. this is a truly disgusting display by robinhood and market makers in general.

[ReasonablySober]

Read on Twitter

[bboyskinnylegs]

feel lucky having bought CEI yesterday

[bboyskinnylegs]

Robinhood's liquidity provider Citadel is actually the one that just bailed out Melvin. I'm sure there is a class action lawsuit to be made, though it's possible that is viewed as a better outcome than letting the squeeze play out.

[HaroldinGMinor]

You get to a certain level and there's no competition. It's all people just passing the dollar bong around the financial drum circle.

[Kerb Hohl]

Not gonna pretend that I'm an expert in trading shares, but this saga has just amplified how broken the whole system is. Love that these guys have done more to stick it to Wall Street in the last 24 hours than the "Occupy" movement did in its entire existence. But you also have to do something to protect assets and collateral that people who simply see these kinds of headlines everywhere and invest despite a lack of knowledge/information on the risks. Because that's the ultimate danger of crowdsourcing. The way they've gone about it though (literally cashing out shares against the consumer's wishes), is incredibly tone-deaf and borderline illegal. I'm guessing you're gonna see some pretty hefty class-action lawsuits in the near future...

It'll be great when everyone that had Robinhood gets $14.74 back and the Wall Street guys pay a $50 million fine for saving losses of $10 billion.

I'm not ripping you but just being facetious that of course this is good for the future but also the people that should've made money won't.

[M-C-G]

Read on Twitter

@elonmusk
u can’t sell houses u don’t own
u can’t sell cars u don’t own
but
u *can* sell stock u don’t own!?
this is bs – shorting is a scam
legal only for vestigial reasons

[sidney lanier]

Bystander here just watching the story:

When a hedge "shorts" a stock, is there a time limit on that short or a stock price limit one way or another? When the GameStop price was going up, when does the shorting hedge fund actually have to close their position and take the loss?

Thanks for any insight.

From its SEC filing it looks like Melvin bought 5,400 put options equivalent to 5.4M shares. It didn't technically sell short.

https://www.sec.gov/Archives/edgar/data/1628110/000090571820001111/xslForm13F_X01/infotable.xml

Buying puts means having the option to sell a stock at the specified stock price (the strike price), which looks like it was $10/share. There is no time limit. When the Robinhoods drove the price up to the sky, Melvin liquidated their position and got out, but not before they got creamed.

Whether a put or call, an options transaction always has a party betting one way, and another party betting another way. It's those other parties who scored big.

The point being missed here is that the pumpers scored big and dumped; when this $10 stock, which is now trading at $225.52, subsides to $10 again, the pumpers will have dumped already and the latecomers, like those at the top of a pyramid scheme, will be losers.

[paulpressey25]

So Robinhood sent me an email explaining what market volatility is (gee thanks) and then pulls this crap. I'm not in on any of these but it still pisses me off.

What would Robinhood charge you to say buy 100 shares of GME? And if the answer is zero, I'm wondering how the firm makes money then.

https://www.investopedia.com/terms/p/paymentoforderflow.asp

We're learning now that the 'investors' using the RobinHood platform aren't the customers here. Especially since the investors aren't paying any direct costs.

The "free trading" always had that embedded cost with a conflicted third party.

[humanrefutation]

I've been so busy work-wise that I was out of the loop on all of this. It's too bad that this didn't happen to any of the stocks I own, though I've gotten some really nice returns on most of those stocks (namely AMD, FCEL, HASI, EXAS, and SYY).

I almost pulled the trigger on AMC a few weeks ago because I figured movies would be back sometime in the next year. Darn me for missing the boat on that, but I might get back in once the dust settles.

I will say that I like the idea of just investing in companies that I believe in and avoiding companies that I don't. I wouldn't have touched GME with a ten foot pole because I think their business model is fading considerably.

[MoreTrife]

Bystander here just watching the story:

When a hedge "shorts" a stock, is there a time limit on that short or a stock price limit one way or another? When the GameStop price was going up, when does the shorting hedge fund actually have to close their position and take the loss?

Thanks for any insight.

From its SEC filing it looks like Melvin bought 5,400 put options equivalent to 5.4M shares. It didn't technically sell short.

https://www.sec.gov/Archives/edgar/data/1628110/000090571820001111/xslForm13F_X01/infotable.xml

Buying puts means having the option to sell a stock at the specified stock price (the strike price), which looks like it was $10/share. There is no time limit. When the Robinhoods drove the price up to the sky, Melvin liquidated their position and got out, but not before they got creamed.

Whether a put or call, an options transaction always has a party betting one way, and another party betting another way. It's those other parties who scored big.

The point being missed here is that the pumpers scored big and dumped; when this $10 stock, which is now trading at $225.52, subsides to $10 again, the pumpers will have dumped already and the latecomers, like those at the top of a pyramid scheme, will be losers.

If there's no time limit, why couldn't Melvin have waited for stock to come back down to ten? Too risky that it wouldn't?

[sidney lanier]

Bystander here just watching the story:

When a hedge "shorts" a stock, is there a time limit on that short or a stock price limit one way or another? When the GameStop price was going up, when does the shorting hedge fund actually have to close their position and take the loss?

Thanks for any insight.

From its SEC filing it looks like Melvin bought 5,400 put options equivalent to 5.4M shares. It didn't technically sell short.

https://www.sec.gov/Archives/edgar/data/1628110/000090571820001111/xslForm13F_X01/infotable.xml

Buying puts means having the option to sell a stock at the specified stock price (the strike price), which looks like it was $10/share. There is no time limit. When the Robinhoods drove the price up to the sky, Melvin liquidated their position and got out, but not before they got creamed.

Whether a put or call, an options transaction always has a party betting one way, and another party betting another way. It's those other parties who scored big.

The point being missed here is that the pumpers scored big and dumped; when this $10 stock, which is now trading at $225.52, subsides to $10 again, the pumpers will have dumped already and the latecomers, like those at the top of a pyramid scheme, will be losers.

If there's no time limit, why couldn't Melvin have waited for stock to come back down to ten? Too risky that it wouldn't?

Yes. Their hole looked like it could become the Grand Canyon, and they were running out of dirt to fill it in.

[M-C-G]

A LOT of messages like this on the WSB board. Like I said, you have a lot of people willing to lose money to draw blood on this one.

I just bought $5,000 in $GME. I would not have done this if the brokerages didn't try to manipulate the market.
Discussion
I've been following r/wallstreetbets for years. Usually just for a laugh as I am a stodgy buy and hold guy and don't speculate often. When I saw the $GME **** happening a week ago I thought it was pure stupidity and was not planning on investing. In fact, I bought some $GME puts (which I've since sold since somehow they've gone up based on volatility) betting against the crowd here.

However, what has started as a decentralized short squeeze has morphed into a class movement. I'm a big populist and think we need big changes in this country, especially a transfer of wealth and power from the elites to the people. When this morphed into a class movement I became obsessed. However, I still wasn't going to buy in because I shy away from speculating on ultra risky stuff like this. But when Robinhood and all the other major brokerages colluded to cause a massive sell off, that's when it became a matter of principle. I've watched all day as the stock has remained relatively stable on very little volume. People are holding despite wall street twisting your arm and trying to make you tap out by only allowing you to sell. It's a beautiful thing to see. I don't think of my purchase as an investment, but as putting my own skin in the game as a **** you against a rigged system.

[sidney lanier]

A LOT of messages like this on the WSB board. Like I said, you have a lot of people willing to lose money to draw blood on this one.

I just bought $5,000 in $GME. I would not have done this if the brokerages didn't try to manipulate the market.
Discussion
I've been following r/wallstreetbets for years. Usually just for a laugh as I am a stodgy buy and hold guy and don't speculate often. When I saw the $GME **** happening a week ago I thought it was pure stupidity and was not planning on investing. In fact, I bought some $GME puts (which I've since sold since somehow they've gone up based on volatility) betting against the crowd here.

However, what has started as a decentralized short squeeze has morphed into a class movement. I'm a big populist and think we need big changes in this country, especially a transfer of wealth and power from the elites to the people. When this morphed into a class movement I became obsessed. However, I still wasn't going to buy in because I shy away from speculating on ultra risky stuff like this. But when Robinhood and all the other major brokerages colluded to cause a massive sell off, that's when it became a matter of principle. I've watched all day as the stock has remained relatively stable on very little volume. People are holding despite wall street twisting your arm and trying to make you tap out by only allowing you to sell. It's a beautiful thing to see. I don't think of my purchase as an investment, but as putting my own skin in the game as a **** you against a rigged system.

Again, I applaud the sentiment and the principled stance many are taking against the rigged Wall St. casino. But the skeptic in me can’t help thinking about the opportunistic, profiteering pump-and-dump fellow travelers who are certainly mingling in the crowd.

[paulpressey25]

Again, I applaud the sentiment and the principled stance many are taking against the rigged Wall St. casino. But the skeptic in me can’t help thinking about the opportunistic, profiteering pump-and-dump fellow travelers who are certainly mingling in the crowd.

Agreed. There are some LED types mingled in among the common folk. And at some point the common folk holding GameStop, at acquisition cost basis ranges of of $100-$300/share, are going to have to figure out an exit strategy, which likely involves some big losses.

[M-C-G]

Again, I applaud the sentiment and the principled stance many are taking against the rigged Wall St. casino. But the skeptic in me can’t help thinking about the opportunistic, profiteering pump-and-dump fellow travelers who are certainly mingling in the crowd.

Agreed. There are some LED types mingled in among the common folk. And at some point the common folk holding GameStop, at acquisition cost basis ranges of of $100-$300/share, are going to have to figure out an exit strategy, which likely involves some big losses.

Don't disagree, just saying you have a lot of people willing to lose it in order to take this stand. Can't recall anything like it, some might say Occupy movement, but they weren't really risking the money.

All I will say, is absolutely fascinating to watch this play out.

[MickeyDavis]

It’s been a tough day, and we’re grateful to you for being a Robinhood customer. In light of the extraordinary market conditions this week, we temporarily limited buying for certain securities this morning. Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed.

This was a temporary decision made to best continue serving you, and was not an easy one to make. We know it’s led to frustration and confusion, and wanted to provide some clarity.

As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.

To be clear, this decision was not made on the direction of any market maker we route to or other market participants.
The past year in particular has shown us that the financial markets are for everyone—not just institutional investors and hedge funds.

We’ve seen a new generation enter the market, and they’re sparking conversations about what it means to be an investor. We stand in support of you, our customers. Democratizing finance for all means giving more people access, not less.

We’ll keep monitoring market conditions and will update this Help Center article with the latest changes. We also published a blog post regarding today’s events.

Thank you again for being a Robinhood customer. We’re so grateful for your support.
Sincerely,
The Robinhood Team