Reddit r/WSB bankrupts Hedge Fund using Robinhood

[helmut]

At the moment the SEC is looking and sifting through the wallstreetbets reddit to see if they find any illegal stuff. Just in case anyone wonders about wether they will do something against their established wallstreet customers. Never. They always go after the little average joe.

 

[Deleted70138]

Do you guys think Robinhood will be banned and trading restrictions will get tighter from now on? It seems that retail investors are manipulating the markets just like wall street hedge funds.

Here's a quick rundown of what happened this Friday. Someone read through trading reports. They found out that Melvin Capital an investment firm was shorting the Gamestop stock and would close their position this Friday. Word spread around in multiple online trading forums the main one been reddit. The forum users decided to buy Game Stop stocks to prevent the Capitol Firm from collecting on their closing position. The stock goes from around $50 to over $150 in one day. The hedge fund loses their position and goes belly up.

This short seller just got a $2.75 billion bailout

Hedge fund giants Steve Cohen and Ken Griffin are joining forces to bail out a fellow trader whose positions in runaway stocks like GameStop have been getting hammered. Griffin’s Citadel and …

nypost.com

You should not expect Ferrari when you buy Fiat

 

[Kak]

If it'll have an epic crash would it make sense to short it?

As appetizing as it looks... I wouldn’t. Lol. They are out for blood.

 

[Kak]

Clown World Finance | Mises Institute

The recent blowup of GameStop shares has revealed, if anyone was still doubting, that the center of clown world is not Washington, DC, nor Silicon Valley—but

mises.org

 

[MJ DeMarco]

GME options have implied volatility of 500-800% which means option buying isn't a feasible option. Those not familiar with IV, this means they are terribly expensive. This is like having a double wide trailer for sale for $35,000 and then next week, it is selling for $3,500,000 ... all because there might be a gold mine underneath it.

I can't remember any such IV pricing in options, perhaps in some hot bio-tech stock with clinical trial news, but then again, I tend to ignore the "hot" stocks.

Just some perspective, TSLA, which is considered a highly volatile stock, has IV of 70% ... so we are looking at unprecedented IVs and hence, unprecedented pricing.

Normally when the IV is this high, option sellers (like me) come in and start selling because the premium is so rich, but seeing this is an anomaly with no historical pattern to backtest, the only play is not to play.

Or if you're feeling speculative, the only (safe) option play on this are spreads to invalidate the high implied volatilies ... I'd go with long put spreads or short call spreads, namely because Gamestop is a turd of a company.

Also of note...

The VIX is starting to reach levels which occurred during the big pandemic crash, except we are not crashing, just merely retreating...

 

[theag]

I would be happy, if someone could explain to me in the easiest words as possible.

There is no movement. It's just plain old greed at the top of a market cycle. Fueled by dumb helicopter money.

 

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[lludwig]

Gold could be seized.

BTC cannot.

LOL... Right. Thinks something is digital means it can't be tracked. Isn't most of our currency already digital?

As proven in Communist Russia, it's true commerce will always happen even underground.

The government can make life very difficult by banning it as you are still physical.

I'm not saying I'm for any of this but it's foolish to think it can't be seized. In 1933 they didn't seize 100% of the gold either. But most they did.

 

[theag]

How do you think they'll seize a bitcoin?

Best case:
Same way as with taxes. Throwing you in jail if you don't comply. Sure, it might work for some time, but most tax evaders eventually get caught.

Worst case:
By putting a gun to your head and pulling the trigger if you don't transfer it.

 

[Kak]

 

[RemySheppard]

Personally, I'm still undecided on my move with respect to this and watching things unfold.

It's already too late.
The stock market is like anything else: If everyone is doing something, you should probably not be doing it.
@MJ DeMarco said something like that in his books. If everyone is buying, you should be selling, etc etc.
In this case, with the GME stock, it's too late to get on board and see massive positive returns. Buying in at this point is buying in to lose, especially when the hedge fund guys call their regulator friends.

 

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[Kak]

What being a dumbass with your money will eventually get you.

"I've got a really nice truck, I'm super smart and badass..."

 

[James Fake]

Hi

 

[AFMKelvin]

If I understand this correctly: wall street hedge funds get some of their own medicine, and don't like it?

pretty much, the guy that got screwed is now calling for the feds to investigate

Stunning in a negative way. Full of cursing, naming, acting childish. I have not seen a single post-reaction that could add any value. All these people there presented so far were ignorance and stupidity. It indicates that many just join the frenzy with a complete lack of understanding of what they are doing, riding the bandwagon, and maybe, in the end, they will be the lucky ones. But most will just end up holding the bag.

Lol don't be put off by the way those users act. If you missed it look on the right side and it says "like 4chan found a bloomberg terminal" if you know anything about 4chan you'll understand why they act like that.

 

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[Guest-5ty5s4]

Crazy. Shows the volatility driven by a new generation of “traders.”

Pride comes before a fall... These stocks only go up, Dave Portnoy followers are going to get burned just as bad.

GME will have an epic crash, it will just be interesting to see how long it can be staved off.

It appears to be mostly driven by the short squeeze, but exacerbated by WSB traders trying to really milk it.

I think it's pretty great. The hedge funds signed up for this.

 

[AFMKelvin]

It's already affecting other markets.

 

[maverick]

Yes, now's the kicker - i think its few quarters until someone
will do it on purpose and for profit.

"Ya know, no-one knows who I am online"

This is exactly the game wall street has been playing for decades. They never had to fear retail investors banding together though.

 

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[MJ DeMarco]

Maybe buy some long puts

Not really a good idea, they are so expensive that even a dramatic fall could yield a break-even.

I also wouldn't short them either -- I always avoid these plays were manipulation and STOCK HALTS are likely.

 

[BizyDad]

rather the idea that you can bet on a company losing. Things started to go downhill fast the day they allowed that shit to happen.

You have a strange definition of the word fast.

 

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[biophase]

Wallstreetbets can no longer be accessed on Reddit and their discord was banned.

Wow, that's crazy.

" it was banned because it continued to allow “hateful and discriminatory content after repeated warnings.”

LOL, all of reddit has that. They just needed a reason to ban it.

I think this will be the beginning of a change in wall street. The next one (crowd buying) won't be so public and WS will wonder what's going on. These hedge funds are going to be looking over their shoulders on large vulnerable positions.

 

[lludwig]

I'm going to assume you don't call it "dumb money" when you make successful trades.

I can give a number of examples where I did very well because of dumb money.

The best example in my case is made over 1700% gains on stock options from my former employer Commerce One (CMRC). Look up the history for an interesting dot-com story.

That was dumb money and hit the lottery, but realized it was just that.

Many of my former Commerce One friends weren't so lucky. Not only did many have phantom stock gains and owed taxes on gains that were underwater but many held their stock till it went to zero.

They lost everything.

 

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[James Fake]

<-- Edit Out -->

Theres also restrictions placed on how high you can place your sell orders now. I smell a liquidity crisis brewing....

Important Note: Tomorrow will be a battle; ONLY buy if it dips, if it begins running, leave it alone like its none of your business unless you hate money lol. You DO NOT want to get on the wrong side of the fence if this thing does begin to really squeeze which would climax more towards Tues/Weds of next week.

 

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[csalvato]

Besides, hedge funds don't get rich shorting stocks of well-run companies.

Sure they do. They shorted Tesla for years

 

[James Fake]

Guys...
So I found some stuff; and I need to do some deep analysis before sharing but I will say tread very carefully with the broad market here. The Meme stocks will be pumping tomorrow and things will get crazy and out of sight.

But some fundamentals on the foundation is not lining up correctly for me and I just wanted to give this heads up to you guys to watch over the next 10-20 trading days.. maybe begin pulling some profits here and there.

When I get done with the analysis; I'll share in the crypto thread.

 

[redshift]

Here's a good example of 'dumb money' lol:

Caught in the GameStop frenzy, a different GME stock goes on a wild ride

Shares of a tiny mining firm GME Resource Limited skyrocketed after investors appeared to mistake it for GameStop.

fortune.com

" Sullivan said he asked around the office about the trading frenzy that sent the company's stock skyrocketing. “I was hoping to be able to say it was more to do with our world-class nickel projects,” Sullivan told Australian media.

Not quite. "

 

[lludwig]

To me, this seems like a very logical outcome, and BTC + ETH seem like a very safe buy for the foreseeable.

Until the government tries to regulate, tax, or outright ban it.

Ask the owners of gold in 1933 how that worked out for them?

 

[socaldude]

Well, after all this is said and done you know they’re gonna push for more regulation. That’s what I’m afraid of. They’re gonna use the BS ruse that they need to “protect” the retail investor from himself and the “markets” from “instability”.

I watched all this happen from the beginning and when it reached the mainstream, I knew it was gonna cause trouble for retail investors.

Those puts on GameStop look insane though LOL. Market makers are pissed lol. The expected move is basically the price of the stock and then some lol.

The liquidity crunch across the board is probably driving up VIX.

 

[AceVentures]

By putting a gun to your head and pulling the trigger if you don't transfer it.

I mean by that logic you could say anything.

I'm not saying you should be naive about the lengths gov will go to protect its interests - but if we look at the extreme end of the probability distribution, then nothing really matters.

e.g Don't be a business owner, because the government will put a gun to your head and take your business.

 

[NovaAria]

Out of curiosity I tried to buy a long call spread on AMC and was denied -- first the spread, and then the legs.

You can only buy long calls ... TDA has restricted any kind of "sell to open"

Unbelievable, considering my account is seven figures with full portfolio margin.

Having these option strategies disallowed is like going to war with sticks and stones. They've ensured that the only bets to be made, are the sucker bets ... that's like taking away the double down in blackjack, except when dealt cards 12 thru 16. Gee thanks!

What I am really curious about is the social sentiment that comes with this.
In 2008 everyone was sitting around and then talking heads showed up on tv and said that the economy is bust because bankers gambled too much. Sure. Everyone but those at the top of the top lost from it, and everyone was angry, but at the end of the day it just came and went without anyone outside of the bankers "making a wrong move".
Right now, though, the story is completely different. People bandwagoned on a meme stock, bought in, looked at their own numbers go green and tapped each other at the back for sticking it to the man. But then brokers pulled the "we cant have you do that" card. "For your own safety we're locking you out of buying in and you will spend the night watching your tickers go red" and "A hedge fund F***ed up so watch as we just rinse you out of your money to bail them out again".

These lines are what's going on in people's heads this time. It's not like 2008 where it was someone at the top messing up and causing the economy to go bust, this time it's someone at the top messing, you making money off their mistake, and them saying "unfair, rewind and let's do it again".
Will we get another Occupy WS movement? Last one fizzled out because it lost its focus, but am curious what will happen if new regulations that will "protect people from themselves" showed up.

 

[MJ DeMarco]

the stock rised 10x since then and i'm still down on paper on that because of the IV rise.

Holy shit. So you got the move correct, but the IV explosion killed the gains... and when the stock starts to drop, the IV will keep going up. It likely will be a hard position to unwind, might need to wait to Expiry.

 

[csalvato]

@MJ DeMarco You make good points, of course.

I don't agree with all of them. Breakdown below...

When the FBI breaks down your door and arrests you for "d0m3stIc t3rr0rIsm" (because for the last 9 months, CNN and FOX has brainwashed the public that BTC owners are terr0ri5sts) what help is it that your digital wallet is secure? Will the FBI stand down and say, "Oh, you have a secure digital wallet! Let me take these handcuffs off ya!"

...

If BTC transactions are made illegal, the security of your coins is irrelevant. All they need to do is prove that you own it and have made transactions (I'm assuming originating from a Federally Insured bank account?) -- then it's off the slammer.

The argument isn't that my keys are safe and secure, thus the FBI will let me go. It means it cannot be seized. It cannot be removed from my wallets without them finding my keys, or extracting them from me.

Compare this to your brokerage account, safe deposit boxes in your bank, or your bank account. The government makes a phone call and that money is no longer yours.

So what are the practical steps that the government or an oppressive force can take, then?

1. Detainment
2. Torture
3. Threat of death (aka gun to your head)
4. Threat of death to your family

For 2, 3 or 4 to happen, it means that the government descends into full on nazi-level authoritarianism where they are incarcerating, torturing and exterminating a whole class of people who own an asset (which would legitimately cause WW3, as it caused WW2).

I think this has a probability of happening, but it's extremely small.

That means the only practical measure they will have is detainment.

So, in one scenario, they detain thousands (millions??) of people who aren't willing to hand over their wealth. Then, as we sit in our cells, the price of the illegal asset soars, making it well worth the hassle of sitting in jail.

I can get rich and stand up for liberty at the same time?

What a win.

In another scenario, they choose to make an example of a select few people, which gives folks like me time to sort out how they are going to skirt the rules until the gov't realizes this level of regulation isn't worth it.

The logistics behind arranging and enforcing such a ban are impractical, at best. Most likely, impossible.

Far more likely, I just say I lost my keys recently and can't access those funds anymore. Can they prove I haven't?

On top of that, the probability of this scenario is highly unlikely. Many of our top regulators and lawmakers now come from a crypto background.

The odds of such an oppressive ban means it is < 1% chance of the detainment situation, and less than 0.01% chance of the government threatening to kill my family.

Seems like a risk worth taking.

Right now the biggest threat to digital assets is WHO they threaten.

And guess who that is?

Your trusty government.

Definitely.

I also agree that anyone who thinks BTC is anonymous by default is naive.

BTC has been terrific for the FBI - it makes investigations much easier (which is why Cash is still king among illicit actors).

I agree that governments around the world will impose harsh bans and restrictions because of the threat it poses to them.

I disagree that this presents a probable scenario where I need to be worried about detainment or death.

 

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