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Gamestop

Tony L

Tony L

Administrator
I’ve been hearing mention of this across various geek YouTube channels and now C4 News have just run the story. I’ve very limited knowledge of the stock market etc despite working in IT in a fancy That London trading bank for a couple of months (with the sadly missed Cliff Patterson). Anyway it looks like a whole bunch of geeks on a amateur stock Reddit have stuck it to a load of corporate short traders & big-ticket trust funds in what looks like a rather epic bit of market trolling. All rather amusing (Guardian), though it looks like the wheels have fallen off now. I’ll be interested to see what those here who actually understand this stuff make of it!
 
Yes the principle of short selling is you sell shares now with delivery at a later date, which in a falling market means you win. Of course when that later date comes, you have to deliver the shares. The idea is you sell now at say 100p, then when you come to deliver them you quickly buy them at 80p making a 20p profit. Reddit users spotted that there was shorting going on, so bought up all the available shares meaning a shortage. Hence the price actually rose in whats known as a short squeeze. As the delivery date approaches the shorters need to buy some shares and hence the problem arises.

Hard to do in a highly liquid stock, presume it all happened on this one due to stock availability although havent checked
 
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Tomorrow be will showdown day as some of the traded puts run out on that date.

What makes matters worse and Gamestop an ideal target is that it was not only shorted by puts (contract settled at an end date) or futures (contract settling the difference daily) but openly (aka „naked“) meaning parties just individually agreed on a short deal without bothering to market these. That led to a shortage rate of above 100% (reports say 140%). Unheard of until now. Imagine you‘de have to buy back a stock you shorted, hand it over, and buy it back again as there are none on the market anymore!

Obviously this was never meant to go this way, but thats what these geeks of reddit spotted. Well done.

A few will get rich over this, most will loose it all again soon. At some point they need to sell. Which they won‘t be able to due orderly. The first ones cash in, the rest loose.
 
topa said:
A few will get rich over this, most will loose it all again soon. At some point they need to sell. Which they won‘t be able to due orderly. The first ones cash in, the rest loose.
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In a sense the losses don’t matter and I have seen comments from participants in this 'event' that have said as much. I assume the point of this is a) to flag up the absurdity of this type of dysfunctional trading and b) to throw a spanner in the works of those that profit from it.
 
Was clever, this will probably change hedge funds moving forward as no doubt other groups will look at the shorts and bolster the price to try and duplicate.

Shorting requires balls of steel, especially with an end date so far in the future!
 
Probably not many more companies will be suitable I would guess as it will be dependent on the amount of free floating stock....
 
Robinhood getting an absolute panning for locking out retail customers from certain stocks whilst institutions allowed to carry on trading. Slowly pushing more towards decentralized digital assets which will be interesting to see explode this year.
 
There's a big assumption that it was the little guys that spotted the opportunity and made it happen....rather than one of the "big boys" who was actually the architect of it all..?
 

Here’s Louis Rossmann’s take! A fine rant (somewhat sweary, obvs). Sounds like he was in on it!

PS I’ve linked to him many times as I follow his YouTube channel; he’s a key figure in the Right To Repair movement (a highly skilled and outspoken independent Mac repair tech by trade).
 
Hard to imagine getting AOC and Ted Cruz to agree on anything, but Robinhood did it.
 
Me too. Hedge funds create nothing and profit only on the loss of others. I'd ban them all. I see no difference between a bunch of guys online and people working within a single dept as far as collusion goes.

I'm glad they've had their noses put out of joint.

Hopefully the long term losses that the reddit guys will inevitably take is acceptable. If they had any sense they'd force the company to tackle the online market and prosper.
 
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