GameStop + Robinhood + Reddit

[JSH]

Originally Posted by Fat Charlie

Yeah, but the fortunes lost by shorting Gamestop are a story for the ages.

What I don't get is why anyone is still putting money into it. Now that the hedge funds have taken their losses, what good can come from spending $300 for a $6 stock? In the beginning, the best you could say was that you were throwing money at it for entertainment. Now it's more like I put my kids' college money into Gamestop and all I got was this lousy tee shirt.

Greed and not wanting to miss out. People don't want to cash out because the stock was going up and up and up and people want that last dollar. Today will be the test. At the end of the day GameStop was down 44%.

The crazy thing is that people were buying on margin to do this. Nothing like borrowing money to buy a $6 stock at $300 a share. That way you can lose more than all the money you have.

Personally I see GameStop as a more extreme version of Tesla and has a very similar pattern. Retail investors wanting to stick it to the Wall Street "elites" that are shorting the stock.

[JSH]

Originally Posted by ME_Andy

I would like to see us get back to the old days. Only buying and selling stock. No options, no derivatives.

Me too. I don't see any upside to options, derivatives or high frequency trading.

Buy a stock if you like the stock and sell it if you don't. There is no reason to allow people to bet on if a stock will go up or down without actually buying the stock.

[Fat Charlie]

I'm a big fan of stocks, of owning shares in a company or in a mutual fund. I'm fine with speculation too.

But the last paragraph of this article has a very important bit of information:

Notably, as of Dec. 31, 2020, the short interest as a percentage of the float for GameStop was 260%.

So for every GameStop share out there, 2.6 shares were sold short. What kind of a system, what kind of government-regulated system, lets there be 2.6 shares sold short for every one share that actually exists? There's something fundamentally wrong there, especially when people are loudly asking if what the individuals on Reddit are doing is illegal market manipulation.

The Redditors bought real shares of stock that actually existed, they didn't "borrow" and sell 2.6 times more shares than there really are. If there was ever an illegal manipulation of the market, I think selling more shares than exist in order to drive down their price should be first on the list.

[ME_Andy]

That's exactly how I feel, FC.

[freebeard]

Having more shorts than shares extant is the elephant in the room. It's like having more votes than voters.

Originally Posted by JSH

Personally I see GameStop as a more extreme version of Tesla and has a very similar pattern.

Guess who agrees? Elon Musk.

u can’t sell houses u don’t own u can’t sell cars u don’t own but u *can* sell stock u don’t own!? this is bs – shorting is a scam legal only for vestigial reasons

[JSH]

Originally Posted by Fat Charlie

I'm a big fan of stocks, of owning shares in a company or in a mutual fund. I'm fine with speculation too.

But the last paragraph of this article has a very important bit of information:


So for every GameStop share out there, 2.6 shares were sold short. What kind of a system, what kind of government-regulated system, lets there be 2.6 shares sold short for every one share that actually exists? There's something fundamentally wrong there, especially when people are loudly asking if what the individuals on Reddit are doing is illegal market manipulation.

The Redditors bought real shares of stock that actually existed, they didn't "borrow" and sell 2.6 times more shares than there really are. If there was ever an illegal manipulation of the market, I think selling more shares than exist in order to drive down their price should be first on the list.

Some bought real shares and some bought options. Options work both ways - long or short. Robinhood allows individuals to buy options either with cash or on margin.

https://learn.robinhood.com/articles...-is-an-option/

[JSH]

Originally Posted by freebeard

Having more shorts than shares extant is the elephant in the room. It's like having more votes than voters.

While I'm not a fan of options and derivatives it absolutely makes sense that you can have more short positions than actual shares because they are based on borrowed shares.

When you short a shock you borrow the shares, sell them, with a contractual agreement to replace those shares within a specific time. However, the person you sold the shares to can also loan them to someone else, who loans them to someone else....

No different than me loaning Frank $10, Frank loans it to Jack, and Jack loans it to Sam. There are twice as money dollars loaned than actually exist.

Originally Posted by freebeard

Guess who agrees? Elon Musk.

I've never heard Musk come out against people that take a long position in Tesla - just those that take the short position.

[freebeard]

Don't know that much about Tesla's woes. The push-back on his comment was he sells cars he hasn't built yet.

The other thing sounds like a human centipede.

[ME_Andy]

I'm curious if anybody can even think of a single good reason to have options and derivatives.

[freebeard]

Not I.

www.fark.com/comments/11135804/Robin-Hood-selling-peoples-stonks-for-their-own-good

I only made it through the first page of 560 comments, this is prolly the most pertinent quote, from a Scott Galloway article.

In contrast to rivals such as Charles Schwab that encourage investing, Robinhood gamifies trading. Gambling addiction doesn't depend on green felt and free drinks; today, boredom and a smartphone is enough.

Why would they do that? At Robinhood, users aren't customers, they're products. More specifically, their trades are the product, which Robinhood sells to market makers.