Redditors vs the hedge funds

[ska invita]

With an interesting crowd/nihilism element to it.
Not sure if it can be done again either. It relied on the big boys ignoring reddit. Now they won't be.

Shorting wont stop though, and even if the hedges catch wind of a counter-shorting move it still forces them to panic and have to sell up at a loss, no?

And if it is really impossible to pull this off again, that might be all the more motivations for the WSB mob to push this moment that much further?

??

 

[Lord Camomile]

I once caused a hedge fund to lose £60k. Can I have 10 urban75 points please?

Pfft, I mean, it's not ruining your mates' evening down the pub by being a dick in a board game, but sure, whatever...

 

[two sheds]

I once caused a hedge fund to lose £60k. Can I have 10 urban75 points please?

You worked for a hedge fund?

 

[teqniq]

Will give Margin Call and Inside Job a watch. The Big Short is indeed great.

Liked Inside Job a lot. Lots of squirming by very wealthy people when faced with awkward questions which they know the answers to but are unwilling actualy say. But no jail time for anyone, of course. Margin call not so much.

 

[quimcunx]

You worked for a hedge fund?

I was but a child and needed a job. This was when hedge funds were brand new. I failed to return a borrowed stock. Fuck em though. I was covering someone else on 5 times my salary and working 16 hour days to keep up with a 400% increase in trades that coincided with him taking a holiday. There was no oversight on the process. So their own fault really.

 

[BigTom]

Once all the dust has settled this will turn out to be a classic pump and dump scam

With an interesting crowd/nihilism element to it.

Not sure if it can be done again either. It relied on the big boys ignoring reddit. Now they won't be.

Not really. This isn't a pump and dump (or at least it's mostly not). It's a short squeeze, it's happened before (see Volkswagen infinite squeeze, 2008) and it can happen again with a big BUT.
The pump and dump element may be happening now with early entry redditors calling people to buy and hold and trying to pump up the stock price before they dump their shares on the recent entries but that's not how this started or what caused it to go so crazy.

What caused it to go so crazy was hedge funds shorting 140% of the shares in a company, where that company had around 20% of shares held by insiders who cannot sell without notice.
In the circumstance where short sellers have overshorted a company, it's possible to control enough of the available shares that they cannot buy enough shares back to cover their position without buying yours. You refuse to sell and they keep offering higher and higher prices because they have to cover their short position. Whilst they are short they are paying rental fees to the people they borrowed shares off, and have the prospect of a margin call from their brokerage to prove they have the capital to cover their short position. At some point they have to buy shares at whatever prices or buy their way out of the short contract because the cost of rental fees and possibility of the margin call force them to do so.
Melvin got $3bn off Citadel last week or the week before to cover their capital requirements for a little while in the hope that this would give enough time for the WSB brigade to break, but they are holding - in part because some of them just want to fuck wall street over and aren't interested in making money.

So anytime short sellers overshort a company, and there's enough other people able to buy and hold to restrict the available number of shares for the short sellers to buy that the price can be forced up and up and up.

the BUT is that there will almost certainly be new regulations after this. Nothing happened after VW because it was just the wall street boys playing their games. Now this is out and open to loads of people who are meant to be excluded from beating the house, they'll crack down. Possibly this will be on short sellers rather than retail buyers/day traders, and they'll make naked short selling illegal to prevent the easiest way of overshorting a company from happening, idk if they can regulate in a way to prevent overshorting happening through a chain of short seller -> buyer -> short seller.
The other thing that's happening is that Citadel (I think) have said they are no longer going to publish research on short positions which will make it harder for the WSB crowd to locate companies that have been overshorted.

 

[stdP]

Not sure if it can be done again either. It relied on the big boys ignoring reddit. Now they won't be.

Many investment firms have been doing at least token monitoring of social media for years already - either using their own methods, or buying info feeds from companies specialising in it already. Even if they didn't twig to reddit in time, the volume of trading on the gamestop stocks should have told them something was awry. I still find it rather surprising they were caught out to the extent they have been but I suspect it was mostly due to bloody-mindedness - they were aware of the existence of the movement, but ignored the potential scale of it. Irony in a nutshell really

So derivatives on derivatives? Now you’ve made my brain hurt

Turtles Derivatives all the way down! Finance is full of mind-bending contortions like this. The "synthetic CDO" exposition scenes in the aforementioned The Big Short are a good pop-culture reference point for this, half the people in the film remark on how they make no sense.

Liked Inside Job a lot. Lots of squirming by very wealthy people when faced with awkward questions which they know the answers to but are unwilling actualy say. But no jail time for anyone, of course. Margin call not so much.

Glad you enjoyed Inside Job.

Margin Call may be more of an acquired taste predisposed to people who've worked in finance; I do IT support work for insurers so I've seen small-scale versions of this play out frequently. It was written by the son of a NY trader.

 

[ska invita]

Seems like a fair bit of it depends on how many people are still looking to make money, and how many just saw it as buying a "fuck you" to Wall Street. I've definitely seen some people at least claiming they did the latter, so presumably they're not too fussed about cashing out while there's still a profit to be made - they already chalked up the 'loss' as the cost of playing when they bought the stock.

yeah those with minimum held shares might well hold out for the glory...though theres a few people who have put in tens of thousands., i cant see them going down with the ship...on channel 4 news yesterday it was said the average buy in was $40 - if that is true (not sure it is tbh - cant see a source) then theres at least a chance they'll successfully send the gamma squeeze spiraling into the stratosphere

gamma squeeze...what a world

 

[Lord Camomile]

Sounds like something from the new Godzilla film or out of the pages of a Hulk comic.

<edit: oh, or a signature move of ex-pro wrestler Adam Bomb

 

[Fez909]

Interesting that it didn't go up yesterday like expected. I wonder if that meant the WSB people were wrong....or something else.

The price is still insanely high compared to what it was a few weeks ago, so the short squeeze is working, I guess.

 

[Fez909]

Sounds like something from the new Godzilla film or out of the pages of a Hulk comic.

gamma squeeze...what a world

Apparently, there's lots of these terms floating around finance, all based on greek letters.

I don't understand enough maths (calculus?) to know what they mean.

What Are the Greeks?
"Greeks" is a term used in the options market to describe the different dimensions of risk involved in taking an options position. These variables are called Greeks because they are typically associated with Greek symbols. Each risk variable is a result of an imperfect assumption or relationship of the option with another underlying variable. Traders use different Greek values, such as delta, theta, and others, to assess options risk and manage option portfolios.

 

[ferrelhadley]

$GME posts on r/wallstreetbets has been getting onto the front page of r/all since about Christmas.
It was not some super secret project cooked up on the darkweb. It was on the front page of one of the most visible websites. It was almost certainly read by huge numbers of people who work at hedgefunds. Its very likely traders from the relevant hedgefunds were regular readers and posters on the sub. The juvenile humour like appeals to many in the field. More likely they thought it was just a load of hot air.

 

[ska invita]

Interesting that it didn't go up yesterday like expected. I wonder if that meant the WSB people were wrong....or something else.

The price is still insanely high compared to what it was a few weeks ago, so the short squeeze is working, I guess.

i need to stop reading the WSB threads...its kind of rotting my brain and stimulating it at the same time
this is interesting though - long post though i don't really understand it and find it contradictory - both suggest the gamma squeeze can still happen and wont happen?


finishes with "TL;DR Shares most likely already bought so no gamma squeeze, doesn't matter anyway" --suggests they've already covered themselves? i don't really understand.

of course comments below it are just of the " There’s a lot of words here and if I could read I’d probably agree but ultimately I’m gathering that we should FUCKING HOLD " ilk

will be interesting how this all looks this time next week.

 

[not-bono-ever]

The Greeks are straightforward really and just serve as a portmanteau for technical data. Eg when you write an option, you hedge its delta ( the relationship between the future price and the movement of the option up to a value of 1) on the related future to flatten risk. You kinda need to know them and what they represent but don’t worry too much about how they get there iykwim

 

[alex_]

Not really. This isn't a pump and dump (or at least it's mostly not). It's a short squeeze, it's happened before (see Volkswagen infinite squeeze, 2008) and it can happen again with a big BUT.
The pump and dump element may be happening now with early entry redditors calling people to buy and hold and trying to pump up the stock price before they dump their shares on the recent entries but that's not how this started or what caused it to go so crazy.

What caused it to go so crazy was hedge funds shorting 140% of the shares in a company, where that company had around 20% of shares held by insiders who cannot sell without notice.
In the circumstance where short sellers have overshorted a company, it's possible to control enough of the available shares that they cannot buy enough shares back to cover their position without buying yours. You refuse to sell and they keep offering higher and higher prices because they have to cover their short position. Whilst they are short they are paying rental fees to the people they borrowed shares off, and have the prospect of a margin call from their brokerage to prove they have the capital to cover their short position. At some point they have to buy shares at whatever prices or buy their way out of the short contract because the cost of rental fees and possibility of the margin call force

With an interesting crowd/nihilism element to it.

Not sure if it can be done again either. It relied on the big boys ignoring reddit. Now they won't be.

That’s the clever bit - normally a pump a dump is “buy this stock, it’s going to go up” this is “ “buy this stock, and stick it to the man”.

But fundamentally for the guys in first it’s a pump and dump, and they’ve made a shitload.

but the business has crap fundamentals, it isn’t worth 25bn - the share price will fall, and people will get hurt and they won’t all work for hedge funds

 

[Fez909]

finishes with "TL;DR Shares most likely already bought so no gamma squeeze, doesn't matter anyway" --suggests they've already covered themselves? i don't really understand.

Doesn't matter anyway is because he's not selling...diamond hands, hold forever, etc.

Thanks for the link though, makes sense now. I think...

 

[BigTom]

That’s the clever bit - normally a pump a dump is “buy this stock, it’s going to go up” this is “ “buy this stock, and stick it to the man”.

But fundamentally for the guys in first it’s a pump and dump, and they’ve made a shitload.

but the business has crap fundamentals, it isn’t worth 25bn - the share price will fall, and people will get hurt and they won’t all work for hedge funds

Well u/deepfuckingvalue invested $53k in 2019 thinking the business was undervalued. He was in years before for traditional investment reasons.
For people who went in in the last quarter of 2020 it's not pump and dump when they went in - they saw the overshorting and the chance of a short squeeze and went for that.
Now they may be pumping up the stocks by getting people to buy in but they may just be trying to engineer the short squeeze.
Regardless it is fundamentally a short squeeze, not a pump and dump, even if there are now people trying to pump the share price up in order to dump their stocks.

 

[DaveCinzano]

I love that just as a bunch of people have just come out of a waking nightmare of QDrops on the chans, a bunch of people are walking into a maelstrom of SECRET INSIDER $GME HEDGEFUND INTEL from random Redditors

 

[BigTom]

another thing about hedge funds "waking up" to the existence of reddit is that most (if not all) of the wsb posters use Robin Hood to do their trading. Robin Hood sold user data, including info about what levels people have stop-losses and things like that set to, to the big hedge funds: Robinhood is Making Millions Selling Users' Data to Financial Companies - Bitcoinist.com
So they already knew and were watching these things, indirectly at least.

 

[quimcunx]

Yep. Just seen this post:

edit: just come back and seen they've removed the post, I quoted it here then realised it previewed the post so deleted the quote!
anyway the gist of it was that the 2008/9 crash destroyed his dad and uncle's business and his dad was and still is fucked by this - depression and alcoholism - and he still remembers the bankers drinking champagne when occupy wall street was up and sees this as his chance to fuck the bankers and get some revenge for his dad and uncle.

and plenty of similar ones. I see this as political but it's not party political and I can see why some would not see it as political, but for me it is. There is a whole load of people buying a handful of shares and intending to lose a few hundred dollars just to fuck over wall street hedge funds that fucked them back in 2008/9.

There is a podcast called endless thread in collaboration with reddit. He is interviewed on the latest show.

 

[ferrelhadley]

I do not know who is passing out "super secret information from hedgefunds" or whatever.
Most of the current hype is about one simple, public list.

High Short Interest Stocks

GME is a one off.
Buying AMC is more a traditional buy and hold, they borrowed a shedload to do a coast to coast refurbish, including expensive new kit for cinema management. It was thought that without a revenue stream the debt could take them under. With $600 million less debt and with a likely long list of big films to come out once the pandemic recedes they do not look that bad a stock. Its just about knowing the business and its market and knowing why they were being shorted.
WSB people bit hard into TSLA in 2019 and last year when it was shorted to hell and did very well out of the rebound so that explains much of the "Papa Elon" chat.
They also tried to pull a "gamma squeeze" on Hertz last year so its not like this is all newly discovered on about January 18th.

Its just so fucking weird seeing something I would occasionally browse through for the laughs being taken so seriously by every talking head and political commenter.

 

[ferrelhadley]

Also Michael Burry was publicly long on GME early last year. He is the Christian Bale character in The Big Short. If he was long on it you can bet your bottom dollar there was big financial money betting on a rebound and likely there will be big "whales" holding this squeeze hard. If WSB can work out that idiots got greedy and exposed themselves to severe risk you can be certain professionals spotted it as well.

My guess is in the blow out of all this, those who got hurt or those who seek to push a "narrative" will try to spin this as Redditors getting manipulated by Big Money interests to manipulate the market, harrumph, harrumph etc. People who are active in this know that. They are not idiots..... ok they are not as big a bunch of idiots as they seem. Shit, well ...... yeah. They know big money is very heavily invested into this. But they are in it as much for the YOLO meta vibe as for the payout. If you are all about seeking value as a retail investor you would follow r/investing or something. Hangout out at a meme subreddit wallowing in "lossporn" (when someones trade positions blow up and they post their tear stained screenshots for one last YOLO before having to explain to the wife why they have to sell their house) is about the weirdo humour.

 

[Fez909]

Hedge funds rush to get to grips with retail message boards

Professional speculators start efforts to scrape data from Reddit to avoid assaults

www.ft.com

 

[ska invita]

Little Twitter thread here from Afed pouring cold water on this whole thing


the interesting bit for me though is posts 12-14 which say a better thing to be doing is buying up peoples debt and shredding it:

" bulk buy deliquent debt, junk bonds & CDOs and then shred it. It's not like it's without precedent. look up RIP Medical Debt, a former CA who bought debt and wiped it out. People who'd been getting fucked over got a letter saying debts gone, have a nice day. A $10 donation can buy — and eliminate — $1,000 in long-delinquent debt."

anyone know about the possibilities of that? beyond medical debt? this is that thing mentioned Homepage - RIP Medical Debt

PS Inside Job doc is online here for free stream

 

[ska invita]

FT reckon no prosecutions:

The Securities Exchange Act of 1934 makes it illegal to use “any manipulative device or contrivance” in buying or selling regulated shares. But manipulation, say legal scholars, is a term of art. “Manipulation is like what [Supreme Court justice] Potter Stewart said about obscenity,” said Todd Henderson, a law professor at the University of Chicago.

“You know it when you see it.” Most commonly, regulators have interpreted manipulative trades to involve deception: whether lying about a company’s performance, or the true owner of a share, or a trader’s true opinion about a company. And while Reddit users appear to have co-ordinated to help drive up shares in companies whose underlying performance might not have merited it, it is unclear whether they deceived anyone in doing so.

“If you are telling people to buy a company in bad faith, that is manipulation,” said John Coffee, a professor at Columbia Law School and a former legal adviser to the New York Stock Exchange. “But these people are true believers; there is nothing illegal about making wildly optimistic statements.”

 

[ska invita]

If anyone not looking at the Reddit is wondering what happened today it seems to be - from my understanding based on Reddit - that Hedge Funds are doing something called Short Ladder Attacks (hedge funds selling their limited Gamestop shares backwards and forwards between themselves) which costs them a bit but has the effect of artificially bringing the share price down for a bit.

This thread explains that really well, and crucially makes the point that the overall volume of sales is low, which means the Reddit traders are holding and not selling, despite todays fall in price. It should go back up in price once the ladder attack runs out of steam again.

In the meantime it seems the pro bankers have created a story, successfully placed in seemingly all news media that Reddit traders have moved on to Silver. This includes alleged bots posting encouragement to do so yesterday on Reddit threads.

The cumulative effect is to try and peel off nervous newbie retail traders who see Gamestock falling , push them into selling, and moving investments into Silver (which cant be squeezed).

Redditers say both the above is blatant market manipulation, and hasn't worked anyway - though those deep into GameStop shares may have incentive to believe that for their own gain. As someone who knows nothing about it it makes sense though, and even papers are reporting their side of the story towards the bottom of the endless articles.

All of which paints an interesting picture of both market and media manipulation by the banking class in seemingly plain sight. And genuine warfare tactics.

The question is how many days of this can go on before the financial pressure finally hits the Hedge Funds. Or pushes Reddit traders to sell. Some are predicting Friday as a key day, as throughout the week more ways to buy Gamestop shares without big brokers come online from other trading houses...or something.

I may have got that all wrong.

Im stuck in bed with time on my hands here so this is passing as entertainment and a little peak into another world.

 

[ska invita]

I have to admit I do find it a funny forum that wallstreetbets thing. At the mo and for the foreseeable its all about talking themselves into collectively holding the Gamestock line. Presenting facts to convince one another about a positive outcome to support their ultimately unknowable fate. This leads to someone posting serious analysis followed by:






Good luck to them, the whole thing seems kind of doomed to me tbh. I think its a modest example of "market confidence" in action, and how despite the maths these things are abstract and emotional and how on a larger scale the wellbeing of millions of people can rest on rumours and herd mentality (aside from the more important blatant corruption, deliberate greed and state complicity of course)

 

[Johnny Doe]

I'm seeing a lot of interest in this from conspiraloons, but then everything is connected to them, I guess

 

[two sheds]

Strange decision if they're now buying into silver though. A fair danger of them getting played in the future I'd have thought.

I'd be tempted to take a look at the subforum but I have no idea what most of the words mean.

 

[platinumsage]

Citadel, the market maker responsible for a lot of Robinhood's revenues are big owners of silver.

It's possible that more than half the redditors involved in any discussion could be sock puppets of hedge funds or other institutional manipulators.