Robinhood and Other Stock Platforms Banning Stock Purchases (1 Viewer)

[BassNBrew]

The people who make money on these pump and dump schemes are the people who started it and got out.  Now it is just a bunch of random volatility that soon will go back below $5 a share.  Robinhood is doing people a favor by stopping people from buying into this now.  The only people buying now are the bag holders who will lose 90 percent if their investment..  

So @jon_mxare FB and Twitter doing prominent conservatives a favor by banning or restrictive their use of their platforms?

 

[tonydead]

The people who make money on these pump and dump schemes are the people who started it and got out.  Now it is just a bunch of random volatility that soon will go back below $5 a share.  Robinhood is doing people a favor by stopping people from buying into this now.  The only people buying now are the bag holders who will lose 90 percent if their investment..  

You're wrong on this one bud.  The protection came in for the hedge fun guys that lost billions on Wednesday and stood to loose mountains more.   All you have to do is look at the huge volumes and ask yourself who is buying when all the brokerage firms were shut down to normal investors.

 

[2Squirrels1Nut]

Robinhood is free trades.  They sell information to make revenue vs. making money on stock commissions.  Also, it takes a few days to move over to Fidelity and if you want/need to trade now it isn't relistic.  

After they launched most places offer free trades now.

 

[jon_mx]

You're wrong on this one bud.  The protection came in for the hedge fun guys that lost billions on Wednesday and stood to loose mountains more.   All you have to do is look at the huge volumes and ask yourself who is buying when all the brokerage firms were shut down to normal investors.

Hedge funds already got their butts handed to them.  It makes no sense to continue.  This was a pump and dump and it is unsubstainable..  At the end of the day this stock is about worthless.  At this point there is very little upside and the downside is losing everything. 

 

[uwillbsoon]

From Robinhood re: their decision.

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.

Can anyone explain this to me? What net capital obligations and clearinghouse obligations would they have?

 

[BassNBrew]

Hedge funds already got their butts handed to them.  It makes no sense to continue.  This was a pump and dump and it is unsubstainable..  At the end of the day this stock is about worthless.  At this point there is very little upside and the downside is losing everything. 

Now up another $50 or 30% gain since you doubled down on this.  If you keep saying it, you'll eventually be right, but in the mean time many retail investors can't access the opportunity to make money at a time Wall Street can.  Also last I heard, short interest still exceeded 100% so this isn't over by a long shot.

 

[John123]

From Robinhood re: their decision.

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.

Can anyone explain this to me? What net capital obligations and clearinghouse obligations would they have?

I don't know, but it wouldn't explain why they were selling people's shares without those people asking them to.

 

[tonydead]

Hedge funds already got their butts handed to them.  It makes no sense to continue.  This was a pump and dump and it is unsubstainable..  At the end of the day this stock is about worthless.  At this point there is very little upside and the downside is losing everything. 

Wrong, some not all.  Only 20m out of the 71m shorts have posted.  They are still oversold and can't get out of it. 

The only way out of it is if there is a huge sell off and the price drops, so if you have millions of followers on twitter or something please don't tweet this type of nonsense. 

 

[BassNBrew]

I don't know, but it wouldn't explain why they were selling people's shares without those people asking them to.

They would be allowed to if they were bought on margin and the margin requirements changed.

 

[tonydead]

Now up another $50 or 30% gain since you doubled down on this.  If you keep saying it, you'll eventually be right, but in the mean time many retail investors can't access the opportunity to make money at a time Wall Street can.  Also last I heard, short interest still exceeded 100% so this isn't over by a long shot.

Correct, it's not over by a long shot.  If people are allowed to buy tomorrow.

 

[Maurile Tremblay]

This is a good explanation of the GameStop stuff:

https://yudkowsky.medium.com/r-wallstreetbets-is-trying-something-unprecedented-in-history-and-the-medias-not-reporting-it-7ab507e4a038

 

[BassNBrew]

This is a good explanation of the GameStop stuff:

https://yudkowsky.medium.com/r-wallstreetbets-is-trying-something-unprecedented-in-history-and-the-medias-not-reporting-it-7ab507e4a038

Here's a good explanation....

https://twitter.com/endtwist/status/1354554168686628866

 

[tonydead]

When hedge funds stand to loose 70 billion dollars to regular guys the rules start to change.

 

[TwinTurbo]

The idea of r/wallstreetbets being a coordinated effort from the start is overblown.  The subreddit is filled with general lunacy, mostly ####posts, and occasionally nuggets of solid due diligence.  There's a media narrative that the subreddit is some sort of cohesive mob - as someone who's lurked there for a long time, trust me, it's not.  Right now there's a collective "#### Wall Street" going on, but that is not the norm.

One poster did his own research and due diligence months ago, and put together an argument that Gamestop was legitimately undervalued.  His idea was that Gamestop would stay afloat by moving to online sales model (buoyed by Chewy's CEO becoming the largest investor), cutting costs by closing physical stores, and the fact that they have a surprisingly strong real estate holding portfolio.

Nearing the end of 2020, someone else did some digging and discovered that the amount of shares shorted exceeded the number of shares available.  Combining the idea of it being an undervalued investment, and the concept of potentially rising stock prices from hedge funds making irresponsible short-sale bets, people started buying Gamestop stock.  It wasn't originally a massive collective effort, just once the momentum got going and hedge fund people started attacking back, people started realizing "holy ####, we're actually doing something here", and more money poured in.  The more CNBC, Wall Street types denigrate r/wsb, the more people will invest.  The big push this week in particular is because a significant number of options close tomorrow. 

Is Gamestop way, way, way overvalued right now?  Absolutely yes.  But the difference between a hedge fund and r/wsb investor is that the average wsb investor has much less on the line.  For the hedge fund, it's a legitimate loss.  For a wsb investor, it's an investment on principle now.  

This. On paper GME should be a $20-$40 stock. But when you have traders shorting over 100% of the float, there are going to be other heavy hitters that will take the other side. In addition, options trading exploded on this security which added more fuel to the fire. Tomorrow should be interesting. 

 

[Thunderlips]

I can't edit but at the *** I would add that this is a feedback loop:  people buy, the price goes up, Melvin has to keep buying as it's losses widen.

How does it compare to Duke and Duke and Frozen OJ in Trading Places?

 

[The Commish]

Here's a good explanation....

https://twitter.com/endtwist/status/1354554168686628866

I've probably said a billion times on this board alone that perception is reality in a confidence based market like our stock market.  Economic rules mean very little these days.

 

[jm192]

Can somebody explain why Redditors and other folks don't just open up a Fidelity account (or whatever) to buy GameStop?  I can see where that's a pain, but it's not as if RH is literally forcing anybody to sell.  Or is this one of those things where Melvin is just expecting people to be too lazy to do that?

My friend is in on this and is up $58,000+.

I admittedly don't completely understand it.  But if you hold stock, there were 60$ options tied to it.  Which as I understood it meant you could buy more at 60$ regarldess of the current price? 

He went to initiate a transfer to Chase but was told it would be 2-3 days. 

He had put in for a 12,000$ deposit to Robinhood, but it was going to take several days to clear.  

So his money is in the grey zone.  His shares to buy options would take 2-3 days to transfer over.  

 

[jm192]

The idea of r/wallstreetbets being a coordinated effort from the start is overblown.  The subreddit is filled with general lunacy, mostly ####posts, and occasionally nuggets of solid due diligence.  There's a media narrative that the subreddit is some sort of cohesive mob - as someone who's lurked there for a long time, trust me, it's not.  Right now there's a collective "#### Wall Street" going on, but that is not the norm.

One poster did his own research and due diligence months ago, and put together an argument that Gamestop was legitimately undervalued.  His idea was that Gamestop would stay afloat by moving to online sales model (buoyed by Chewy's CEO becoming the largest investor), cutting costs by closing physical stores, and the fact that they have a surprisingly strong real estate holding portfolio.

Nearing the end of 2020, someone else did some digging and discovered that the amount of shares shorted exceeded the number of shares available.  Combining the idea of it being an undervalued investment, and the concept of potentially rising stock prices from hedge funds making irresponsible short-sale bets, people started buying Gamestop stock.  It wasn't originally a massive collective effort, just once the momentum got going and hedge fund people started attacking back, people started realizing "holy ####, we're actually doing something here", and more money poured in.  The more CNBC, Wall Street types denigrate r/wsb, the more people will invest.  The big push this week in particular is because a significant number of options close tomorrow. 

Is Gamestop way, way, way overvalued right now?  Absolutely yes.  But the difference between a hedge fund and r/wsb investor is that the average wsb investor has much less on the line.  For the hedge fund, it's a legitimate loss.  For a wsb investor, it's an investment on principle now.  

It's 1000% a principle thing. My buddy has ~60,000$ in GME now and when it tanked yesterday, he said he'd let it go to zero before selling just hoping it stablizes enough to stick it to the hedge funds. He's winning today.

 

[JAA]

Good read - https://arstechnica.com/gaming/2021/01/robinhoods-plan-to-democratize-finance-hit-a-gamestop-shaped-speed-bump/

 

[JAA]

Hedge funds making billions off of everyday joes losing billions - OK

Everyday joes making billions off of hedge funds losing billions - NOT OK

 

[jm192]

Someone posted on Twitter:

Billionaires:  "600$ is a lot of money if you invest it wisely"

Also Billionaires "Wait, no.  Not like that."

 

[That one guy]

I’ve read the links provided here, found some others online, still don’t really understand at all the entire dynamics of everything.  My only real takeaway is “but online poker and sports betting is what’s illegal rather than this?!”

 

[Chaz McNulty]

The people who make money on these pump and dump schemes are the people who started it and got out.  Now it is just a bunch of random volatility that soon will go back below $5 a share.  Robinhood is doing people a favor by stopping people from buying into this now.  The only people buying now are the bag holders who will lose 90 percent if their investment..  

If this was a normal stock that was just a pump and dump I would agree with you.  A lot of these end up being pyramid schemes where the folks that got in late are the bagholders.  But the folks at Reddit discovered a couple stocks that were massively shorted by Hedge Funds.  With GME I believe that 150% of their pool of stocks were borrowed (shorted).  Now the people that borrowed these stocks and sold them at $40, have to buy the stocks back and return them at the new price.  The Reddit folks started to buy these stocks on mass and drove the price up to $300.  If they can hold these prices, the Hedge funds eventually have to buy the stock back (which drives the price up further).  In this scenario, the Hedge Funds will be the bag holders.  All the people at Reddit need to do is to convince everyone not to sell and hope the government doesn't step in to save the corporations.  And eventually the Hedge Funds people will have to purchase their shorted stocks back.  And there is a lot of them.

 

[Chaz McNulty]

The people who make money on these pump and dump schemes are the people who started it and got out.  Now it is just a bunch of random volatility that soon will go back below $5 a share.  Robinhood is doing people a favor by stopping people from buying into this now.  The only people buying now are the bag holders who will lose 90 percent if their investment..  

If this was a normal stock that was just a pump and dump I would agree with you.  A lot of these end up being pyramid schemes where the folks that got in late are the bagholders.  But the folks at Reddit discovered a couple stocks that were massively shorted by Hedge Funds.  With GME I believe that 150% of their pool of stocks were borrowed (shorted).  Now the people that borrowed these stocks and sold them at $40, have to buy the stocks back and return them at the new price.  The Reddit folks started to buy these stocks on mass and drove the price up to $300.  If they can hold these prices, the Hedge funds eventually have to buy the stock back (which drives the price up further).  In this scenario, the Hedge Funds will be the bag holders.  All the people at Reddit need to do is to convince everyone not to sell and hope the government doesn't step in to save the corporations.  And eventually the Hedge Funds people will have to purchase their shorted stocks back.  And there is a lot of them.

 

[jon_mx]

If this was a normal stock that was just a pump and dump I would agree with you.  A lot of these end up being pyramid schemes where the folks that got in late are the bagholders.  But the folks at Reddit discovered a couple stocks that were massively shorted by Hedge Funds.  With GME I believe that 150% of their pool of stocks were borrowed (shorted).  Now the people that borrowed these stocks and sold them at $40, have to buy the stocks back and return them at the new price.  The Reddit folks started to buy these stocks on mass and drove the price up to $300.  If they can hold these prices, the Hedge funds eventually have to buy the stock back (which drives the price up further).  In this scenario, the Hedge Funds will be the bag holders.  All the people at Reddit need to do is to convince everyone not to sell and hope the government doesn't step in to save the corporations.  And eventually the Hedge Funds people will have to purchase their shorted stocks back.  And there is a lot of them.

That is the problem though, there are too many pieces that have to hold the line.  When the price drop, it will fall like a rock.  It will start hitting people's stoploss levels and will go from $300 to under $100 in a blink of an eye.  If everyone could collude and agree on a selling price you could get maximum squeeze.  But there is not an infinite amount of funds available.  If the demands are too high then you could force these hedgefund investors into bankruptcy where you could end up with just pennies on the dollar.  

 

[Chaz McNulty]

That is the problem though, there are too many pieces that have to hold the line.  When the price drop, it will fall like a rock.  It will start hitting people's stoploss levels and will go from $300 to under $100 in a blink of an eye.  If everyone could collude and agree on a selling price you could get maximum squeeze.  But there is not an infinite amount of funds available.  If the demands are too high then you could force these hedgefund investors into bankruptcy where you could end up with just pennies on the dollar.  

Wouldn't the broker accounts prevent this?  That's the whole reason for margin calls.  I am not sure how that would be handled when shorting - the stock just can't disappear.

 

[jon_mx]

Wouldn't the broker accounts prevent this?  That's the whole reason for margin calls.  I am not sure how that would be handled when shorting - the stock just can't disappear.

I am not sure all the ins and outs, but in the movie The Big Short, they were not able to collect all the money they were owed because it did not exist.  The broker made sure the investor could cover a large loss,  but only to some limit.  I don't think the broker gaurentees complete coverage.  

 

[Chaz McNulty]

I am not sure all the ins and outs, but in the movie The Big Short, they were not able to collect all the money they were owed because it did not exist.  The broker made sure the investor could cover a large loss,  but only to some limit.  I don't think the broker gaurentees complete coverage.  

I don't have any money in GME, but I am hoping they can hold out long enough for the eventual short squeeze.  Could drive the stock into the 1000's.  When this is all over, I'm sure they will create some new regulations regarding shorting stocks.  I still have no idea how you can borrow more of the stock then actually exists.  Just seems greasy.

 

[The Commish]

Wouldn't the broker accounts prevent this?  That's the whole reason for margin calls.  I am not sure how that would be handled when shorting - the stock just can't disappear.

This is correct

 

[Navin Johnson]

The people who make money on these pump and dump schemes are the people who started it and got out.  Now it is just a bunch of random volatility that soon will go back below $5 a share.  Robinhood is doing people a favor by stopping people from buying into this now.  The only people buying now are the bag holders who will lose 90 percent if their investment..  

The guy who started cashed out $13M Friday.  He still has over $30M in play.  

 

[Navin Johnson]

I've probably said a billion times on this board alone that perception is reality in a confidence based market like our stock market.  Economic rules mean very little these days.

The Burry he is referring to is Michael Burry from Scion.  Same guy from The Big Short was taking the same position and jacking up the price of the calls.