Merged Wall Street Bets subreddit / Too late to buy Gamestop stock?

[nelsondogg]

There are like 3 million subscribers, and given how popular the sub has been lately, probably at least as many regular readers who participate but aren't subscribed.

Doing a little back of the napkin, I think they could have bought the company outright back at the beginning of the month if everyone was able to put in an average of $100. The shares were less than $20 when this started and a lot of their users could easily buy a few as a lark. And the weirdness of the whole endeavor made headlines and compounded the effect.

They are doing the same thing with AMC stock. It's like they are picking absolute turkeys to prop up. I guess to lure in short sellers. Crazy strategy but it's working for now.

 

[Modified]

There isn’t a way to make a huge profit, but the short sellers have invested in call options.

None of the hedge funds will actually lose much on paper. Their deltas are covered

Then the option writers will lose. If most of the raiders get out with a profit, then that money will come from somewhere. Many of them will get burned, but I think overall a huge amount of money will flow to them from professional investors. Given that 130% of the float was shorted at one point, it's almost a certainty.

Those who shorted after this started (and that number is huge, given the rate of short-cycling) paid a high price for those calls. Of course they may have profited on them today, but at some point we'll come to the end of the line.

 

[Modified]

They are doing the same thing with AMC stock. It's like they are picking absolute turkeys to prop up. I guess to lure in short sellers. Crazy strategy but it's working for now.

AMC was already heavily shorted. It's just another raid, though with a lot less fuel (short interest) than Gamestop.

 

[lomiller]

I've been following. It's delightful! I've always considered shorting to be a nasty combination of gambling and vulturism.

This is an extremely flawed interpretation of short selling.

Short selling drives down the price of overvalued assets. In doing so it serves as a natural mechanism to moderate or even prevent bubbles. If there had been more short selling of MBS in the mid 90's, it would have moderated the sub-prime housing market and helped stabilize the financial system by giving banks a customer to sell their MBS when the bubble burst.

 

[Distracted1]

Another demonstration of the value of the Serf.

 

[TragicMonkey]

This is an extremely flawed interpretation of short selling.

Short selling drives down the price of overvalued assets. In doing so it serves as a natural mechanism to moderate or even prevent bubbles. If there had been more short selling of MBS in the mid 90's, it would have moderated the sub-prime housing market and helped stabilize the financial system by giving banks a customer to sell their MBS when the bubble burst.

I think it's immoral to gamble with borrowed money, and foolish to ever bet more than one can afford to lose. These would be unpopular notions with most of Wall Street investors and finance bros. Especially the ones currently taking a bath over this Gamestop debacle.

 

[TragicMonkey]

It's the infinite monkey typewriter problem.

There's ~620,000 stock brokers in the United States.

Even if they all operated literally 100% at random a few of them would get rich.

I believe there have been studies demonstrating that totally random stock selection pays off measurably better than experts' selections.

 

[mumblethrax]

This is an extremely flawed interpretation of short selling.

Short selling drives down the price of overvalued assets. In doing so it serves as a natural mechanism to moderate or even prevent bubbles. If there had been more short selling of MBS in the mid 90's, it would have moderated the sub-prime housing market and helped stabilize the financial system by giving banks a customer to sell their MBS when the bubble burst.

Pretty much. And this is probably why Elon Musk hates them. They're unattractive for ordinary investors, because there's a limited upside and unlimited liability. What the reddit thing shows is that it's much easier to manipulate markets with pump & dump schemes than with shorts.

 

[jnelso99]

Isn't (wasn't?) there some crazy TV stock broker guy on CNN or something where if you did the exact opposite of what he advised you'd make more money?

 

[JoeMorgue]

I ever do love investment economics.

"Well my plan is foolproof. Unless someone gets greedy. Or panics. Or panics because they think someone is going to get greedy. Or gets greedy because they think someone is going to panic."

 

[Checkmite]

Let me get this straight.

A bunch of 1%'ers with enough excess cash to be able to throw thousands of dollars of it into a worthless stock as "a joke", are causing financial damage to a different group of 1%'ers because that second group arranged their own stock buys as a bet that a certain declining national retail corporation would continue to decline; and I'm not only supposed to care about this, I'm supposed to actually be cheering the first group of 1%'ers because the second group of 1%'ers with their bet was causing financial damage to the owners and runners of the national retail corporation, which is a third group of 1%'ers.

I'm living in poverty, so you'll have to excuse me from the fanboying.

 

[TragicMonkey]

Let me get this straight.

A bunch of 1%'ers with enough excess cash to be able to throw thousands of dollars of it into a worthless stock as "a joke", are causing financial damage to a different group of 1%'ers because that second group arranged their own stock buys as a bet that a certain declining national retail corporation would continue to decline; and I'm not only supposed to care about this, I'm supposed to actually be cheering the first group of 1%'ers because the second group of 1%'ers with their bet was causing financial damage to the owners and runners of the national retail corporation, which is a third group of 1%'ers.

I'm living in poverty, so you'll have to excuse me from the fanboying.

The Reddit-driven crowd is not "1%'ers". Unless you want to do the thing where you include all the Amazonian tribes in the math so anybody making $20K a year is in the same group as the billionaires.

 

[Checkmite]

The Reddit-driven crowd is not "1%'ers".

Oh I highly doubt that. Is there actual evidence to show this effect is largely the result of several thousands of individuals suddenly buying one share each at $20 causing the price to skyrocket, as opposed to a few dozen people buying hundreds or thousands of dollars of stock at a time, which is how market trading usually works?

 

[TragicMonkey]

Oh I highly doubt that. Is there actual evidence to show this effect is largely the result of several thousands of individuals suddenly buying one share each at $20 causing the price to skyrocket, as opposed to a few dozen people buying hundreds or thousands of dollars of stock at a time, which is how market trading usually works?

You think someone has to be in "the 1%" to have hundreds or thousands of dollars?

 

[BobTheCoward]

I thought the way a short worked was the shorter pays a fee monthly to the lender. Then when the shorter chooses, they buy the stock, return it to the lender, and stop paying the fee.

What is incorrect there? If not incorrect, why would Melvin have to sell? Could they just pay their fee and let it take longer?

 

[Checkmite]

You think someone has to be in "the 1%" to have hundreds or thousands of dollars?

Lying around disposable, to spend as a lark "for the lolz"? Hey maybe not; but if not, they're close enough at the very least that there's little difference, from the perspective of someone in my position. Certainly no difference at all in terms of which of the three groups in this case I'm supposed to be cheering for, feeling sorry for, or disliking more than the others.

 

[JoeMorgue]

I don't really see what difference it makes.

The point (as much as I can tell and in as much as it has one) of these is show that people who aren't Wall Street Investment Insiders can affect the stock market in the same way the old guard could.

 

[TurkeysGhost]

I don't really see what difference it makes.

The point (as much as I can tell and in as much as it has one) of these is show that people who aren't Wall Street Investment Insiders can affect the stock market in the same way the old guard could.

It also proposes a problem that isn't immediately easy to remedy.

This is absolutely market manipulation. These people are deliberately pumping up this stock as part of a stunt or get rich scheme.

But there's no leader or group of conspirators. It's thousands of individual investors, many making small purchases. It's the financial equivalent of a DDOS strike, no one person is really playing a large role.

I think it absolutely exposes weaknesses in our stock market system, though the wallstreet bet memers are not the problem. The problem is that our institutions are able to make such absurdly risky, overleveraged positions to begin with.

The number of short sales exceeds the total available stock for Gamestop. It's all make believe. Speculative nonsense that, until now, only served to enrich the elite few.

 

[TragicMonkey]

Lying around disposable, to spend as a lark "for the lolz"? Hey maybe not; but if not, they're close enough at the very least that there's little difference, from the perspective of someone in my position. Certainly no difference at all in terms of which of the three groups in this case I'm supposed to be cheering for, feeling sorry for, or disliking more than the others.

I did a little research. To be in the American 1% it looks like you need an income of over $400,000 a year.

If you simply hate everyone who has any money to spend on stocks then no, nobody will be surprised you "don't cheer" for anybody in this matter.

 

[lobosrul5]

I thought the way a short worked was the shorter pays a fee monthly to the lender. Then when the shorter chooses, they buy the stock, return it to the lender, and stop paying the fee.

What is incorrect there? If not incorrect, why would Melvin have to sell? Could they just pay their fee and let it take longer?

For a retail investor you will eventually be forced to cover. The broker isn't going to sit there and watch as your account balance become negative. Its basically the same as a margin call. That will be automatically triggered in a self-service online account, ie Etrade or Schwab. For a hedge fund they probably have some very nervous creditors right now.