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Post by epaul on Jan 30, 2021 12:04:47 GMT -5
There is something here that too many are missing. Short-selling hedge funds are predators that use borrowed money they don't have collateral for to sell gobs of stocks they don't own in hopes of crashing a company's stock price. They can run a company into the ground without ever investing a dime of their own money. It is the dirtiest game on Wall Street.
True, their prey is vulnerable at the time they strike, but "vulnerable at the time" does not equal "is doomed to or is deserving of death", the troubles may be passing or curable, as in the likely case of the AMC theater chain whose bleeding was caused by the pandemic, but hedgefund sharks care only for the scent of blood not the prospect that the wounded can cure and survive.
Under the normal rules of the dirty shortsell game, GameStop and AMC would have both bleed out by now and the short-selling hedge funds would have pocketed a nice chunk of dirty money without investing a nickel of their own. But, Reddit warriors formed and threw a wrench into the hedgefunds' dirty little game. Thousands of computer nerds bought into a plan to buy small amounts of stock and then refuse to sell, not even for a quick profit. For the Short-Sell game doesn't work if the hedge funds don't succeed in panicking the rest of the target company's shareholders into also selling.
And if enough refuse to sell, refuse to be panicked by the short sellers' game, the game the short sellers were playing takes a wicked turn on them. All those gobs of stocks they had committed to buy in the future at the super low price they had planned on manipulating into being were going up instead of down. The reverse happened, now they are going to have to buy those stocks in the future with real money they probably don't have and they will be faced with borrow or bankrupt.
This Gamestock tale is the story of a bunch of small fry investors organizing online and foiling the blood plans of some Wall Street sharks. There are thousands of small fries throwing in a hundred bucks here or a pile of pooled fifties there and then just sitting on GameStock. If enough don't sell, the sharks will bleed out instead of GameStock. The sharks are on the clock and when the buzzer goes off in month or three, they have to cough up the bucks and pay the price. These small fry Redditt investors, on the other hand, can sit on their investment till the cows fly to the moon. And if they stay online organized, they can have their cake and eat it too.
I see a beautiful story here and I sure the hell know who I am rooting for. (and if there were an easy way for me to throw in a fifty for the cause, I would do so in a second). I see some dirty bloodsucking hedgefunds being screwed over bigtime by a bunch of small fries. If it all goes south for the small fries, most will have only lost, relatively speaking, pocket change. If it works, a dirty manipulative game played by a few hedgefund sharks will no longer be such an easy play... and Wall Street may never be the same.
POWER TO THE PEOPLE!
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Post by Deleted on Jan 30, 2021 12:04:51 GMT -5
What about Blockbuster? Can we buy Blockbuster Video stock?
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Post by epaul on Jan 30, 2021 12:13:42 GMT -5
Todd still has some, but it will cost you.
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Post by Deleted on Jan 30, 2021 14:24:24 GMT -5
I missed the whole buggy whip bubble....
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Post by millring on Jan 31, 2021 11:09:49 GMT -5
A Layman's Terms Explanation of What's Happening with This Whole Reddit Stock Market Situation
Let's try to sum up the recent stock market madness in one sentence. A group of amateur investors saw an opportunity to make a lot of money if they all invested in GameStop, at the expense of a hedge fund that was betting GameStop's stock would go down . . . and now, billions of dollars later, hedge funds are crying to Congress to change the laws so they keep their power on Wall Street.
Here's your plain English summary of what's happening, even if you don't really know the stock market or investing.
1. There's a stock term called "shorting." That's where you're predicting the price of a stock will go down, instead of up. If it does, you get to pocket the difference. So if you short a stock when it's $10 and get out when it's $7, you make $3.
2. BUT . . . if you short a stock and it goes up, you have to cover the difference. So if that $10 stock goes to $15 and you decide you can't wait for it to potentially go down again, you need to buy the stock back and cover the $5.
3. Now onto Reddit. There's a group on there called Wall Street Bets, where amateur investors share stock tips and talk about their day trading successes and failures. And they usually do it through lots of memes and emojis.
4. A few weeks ago, someone on Reddit noticed a hedge fund called Melvin Capital had taken a HUGE short position on the video game store chain GameStop. But there were some indications that GameStop WASN'T in that bad of shape.
5. So . . . the group on Wall Street Bets all decided to buy GameStop stock, driving the price up, and really screwing over that hedge fund that had shorted it. Because now, the hedge fund would have to cover the difference.
6. And it was QUITE a difference. As this GameStop thing really got a lot of momentum and the stock price skyrocketed, the hedge fund wound up losing more than $13.1 BILLION on their short position . . . which was more than their fund was worth.
7. As you might imagine, very serious professional investors and hedge funds were REALLY upset that a group of random people on the Internet managed to make THAT big of an impact on the market.
8. One billionaire hedge fund owner had an interview on CNBC where he called it a, quote, "way of attacking wealthy people and I think it's inappropriate."
9. So they started throwing their weight against it. They want new legislation that would make it illegal to do what the Wall Street Bets group did . . . which, I guess, is just talking about stocks on the Internet?
10. Of course, everyone can see through that: Major banks and hedge funds have done all sorts of horrible things manipulating the stock market, and received bailouts when things backfired, like in 2008. THAT'S never provoked real legislation.
Also, even now, two other hedge funds stepped in and propped up Melvin Capital with billions after they got crushed in this GameStop deal.
11. And that's not all. The Wall Street Bets group started buying OTHER stock that the hedge funds were shorting, like AMC Theaters and Nokia, and several apps like the popular trading app Robinhood BANNED them from buying those stocks.
12. That was interpreted as a direct attack on regular, or "retail," investors . . . especially since hedge funds could still trade those stocks while regular people were banned.
13. Strangely enough, both parties in Congress are calling B.S. on the hedge fund and elite investors' reaction to this. But will that strong bipartisan sentiment hold up, especially with trillions of dollars and the richest people in the country involved?
14. So what happens next? GameStop and the other "meme stocks" lost a lot of value yesterday as the apps banned amateur investors from trading it. Congress will most likely get involved in this in some way.
But will this lead to a permanent shift in the way the stock market works, with collections of amateur investors teaming up? Or will the Wall Street powers find a way to stop it?
All historical evidence points to the latter . . . but times are certainly changing.
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Post by epaul on Jan 31, 2021 13:54:30 GMT -5
As long as the small fry GameStop investors are banned from trading the stock, that not only means they can't buy, it also means they can't sell. And if they can't sell what they have, that should put a pretty clear stop on how far GameStop stock can fall. If the small frys could buy enough stock to make the Gamestop go up, that should mean, if they hold, they probably have enough leverage to keep the stock from falling beyond a too high for the hedge funds level.
If no one buys or sells, a stock does not go up or down, it stays where it is.
I have no idea how much stock leverage the small frys have, but I'm guessing it's enough to put a pretty solid floor under GameStop, a floor well above the level needed to put the screws to the hedge funds on the other side of the deal. I don't expect the hedge funds or Wall Street are going to support a ban for long. The only way for them to win is for trading to resume and enough of the small fry to bail on GameStop and not be replaced by other buyers.
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Post by epaul on Jan 31, 2021 14:08:51 GMT -5
I'm going to have to look into this Wall Street Bets group. Join up and do a little posting.
"Hey guys, do you know Cargill is shorting beans even though China is buying and Brazil is out? They are pulling wool. We could drive beans to the mid-20s. And if any weather issues show this spring, whether wet or dry, it's to the moon, Baby!
Start buying July calls on Chicago beans. They're only trading at 17 cent premium. That's crazy. Buy July wheat and corn as well. If beans go up it'll spill over to corn and wheat. Cargill will get a bloody nose and we'll all get big boats!
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Post by david on Feb 1, 2021 2:20:24 GMT -5
A Layman's Terms Explanation of What's Happening with This Whole Reddit Stock Market Situation Let's try to sum up the recent stock market madness in one sentence. A group of amateur investors saw an opportunity to make a lot of money if they all invested in GameStop, at the expense of a hedge fund that was betting GameStop's stock would go down . . . and now, billions of dollars later, hedge funds are crying to Congress to change the laws so they keep their power on Wall Street. Here's your plain English summary of what's happening, even if you don't really know the stock market or investing. 1. There's a stock term called "shorting." That's where you're predicting the price of a stock will go down, instead of up. If it does, you get to pocket the difference. So if you short a stock when it's $10 and get out when it's $7, you make $3. 2. BUT . . . if you short a stock and it goes up, you have to cover the difference. So if that $10 stock goes to $15 and you decide you can't wait for it to potentially go down again, you need to buy the stock back and cover the $5. 3. Now onto Reddit. There's a group on there called Wall Street Bets, where amateur investors share stock tips and talk about their day trading successes and failures. And they usually do it through lots of memes and emojis. 4. A few weeks ago, someone on Reddit noticed a hedge fund called Melvin Capital had taken a HUGE short position on the video game store chain GameStop. But there were some indications that GameStop WASN'T in that bad of shape. 5. So . . . the group on Wall Street Bets all decided to buy GameStop stock, driving the price up, and really screwing over that hedge fund that had shorted it. Because now, the hedge fund would have to cover the difference. 6. And it was QUITE a difference. As this GameStop thing really got a lot of momentum and the stock price skyrocketed, the hedge fund wound up losing more than $13.1 BILLION on their short position . . . which was more than their fund was worth. 7. As you might imagine, very serious professional investors and hedge funds were REALLY upset that a group of random people on the Internet managed to make THAT big of an impact on the market. 8. One billionaire hedge fund owner had an interview on CNBC where he called it a, quote, "way of attacking wealthy people and I think it's inappropriate." 9. So they started throwing their weight against it. They want new legislation that would make it illegal to do what the Wall Street Bets group did . . . which, I guess, is just talking about stocks on the Internet? 10. Of course, everyone can see through that: Major banks and hedge funds have done all sorts of horrible things manipulating the stock market, and received bailouts when things backfired, like in 2008. THAT'S never provoked real legislation. Also, even now, two other hedge funds stepped in and propped up Melvin Capital with billions after they got crushed in this GameStop deal. 11. And that's not all. The Wall Street Bets group started buying OTHER stock that the hedge funds were shorting, like AMC Theaters and Nokia, and several apps like the popular trading app Robinhood BANNED them from buying those stocks. 12. That was interpreted as a direct attack on regular, or "retail," investors . . . especially since hedge funds could still trade those stocks while regular people were banned. 13. Strangely enough, both parties in Congress are calling B.S. on the hedge fund and elite investors' reaction to this. But will that strong bipartisan sentiment hold up, especially with trillions of dollars and the richest people in the country involved? 14. So what happens next? GameStop and the other "meme stocks" lost a lot of value yesterday as the apps banned amateur investors from trading it. Congress will most likely get involved in this in some way. But will this lead to a permanent shift in the way the stock market works, with collections of amateur investors teaming up? Or will the Wall Street powers find a way to stop it? All historical evidence points to the latter . . . but times are certainly changing. I think this is a good summary John. Unfortunately, I anticipate that lobbyists for the short-selling hedgefunders will prevail and our re-election money hungry electorate will reward them with legislation that prevents future harm to hedgefunders, even though the hedgefunders were likely the loudest complainers about government control after 2008.
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Post by xyrn on Feb 1, 2021 3:43:16 GMT -5
Ship; sailed.
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Post by Marshall on Feb 1, 2021 9:38:22 GMT -5
What confuses me is, does somebody (Hedge fund) actually buy stock? Or is this just like Las Vegas betting on the Super Bowl? I suspect the everyman traders actually buy stock driving up the price. But do the Hedge funds actually buy the stock?
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Post by brucemacneill on Feb 1, 2021 9:59:46 GMT -5
What confuses me is, does somebody (Hedge fund) actually buy stock? Or is this just like Las Vegas betting on the Super Bowl? I suspect the everyman traders actually buy stock driving up the price. But do the Hedge funds actually buy the stock? Where's Jeff when we need him because of his knowledge of options trading. As I think I understand it, hedge funds buy options on stock using money borrowed using other stock as collateral. The options are for a future date when they expect the stocks to be at a lower price than they are today. If they're right, they get to buy the stocks at the lower price, and pay off the loan with a profit. I'm sure it is more complicated than that. If of course the optioned stock goes up they're still required to but it but they lose money on the transaction. These Robinhood investors made the cheap stocks go up. That kind of organized action on a stock not based on the actual value of the stock is called "Pump and Dump", falsely inflating the stock price and then selling at the higher price to make a profit. It's illegal but they'd have to figure out who actually started the pump. The smaller investors who started buying at higher and higher prices are probably off the hook because they're just dumb. They'll just have to take the loss when they try to sell, nobody's buying and they lose. Now we have to see if Robinhood gets charged or some Robinhood user who started the organized pump gets charged. Dumb investors are going to get hurt. Hedge funds work on the perceived value of a company and get in when they think they see a down coming for the stock price. It's illegal for them to pump and dump same as these Robinhood users.
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Post by John B on Feb 1, 2021 10:07:29 GMT -5
What confuses me is, does somebody (Hedge fund) actually buy stock? Or is this just like Las Vegas betting on the Super Bowl? I suspect the everyman traders actually buy stock driving up the price. But do the Hedge funds actually buy the stock? Yes. A short seller "borrows" stock which he then sells. He then has to acquire shares to replace the borrowed ones. If he borrows shares and sells them at $70, and the price drops to $50 when he repays them, he made $20. If the price goes to $100, he loses $30.
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Post by epaul on Feb 1, 2021 12:23:13 GMT -5
You can buy a stock or commodity outright. Then you own it. Or you can make a contract to buy or sell a stock or commodity at a specified future date (futures market), then you will either buy or sell a stock or commodity at that specified contract price. Or you can buy an "option" to buy or sell a stock or commodity at a given price.
If you buy an option, you do not own the stock (or commodity). What you do own is the right to purchase (a call) or sell (a put) that stock or commodity at the price it was when your purchased the option. Important: You have the right to buy or sell that stock/commodity, you do not have the obligation.
If you purchased an option in Feb. to buy a stock at $200 on May 1st (strike date) but that stock is only worth $50 when that strike date in May arrives, you can decline your option to buy that $50 stock for $200. (Why would you do other?} On the other hand, if that $200 stock you purchased an option to buy for $200 come May is worth $400 when May arrives, you would exercise your option to buy that stock at $200 dollar price. You can then either sell it for the current $400 price or hold on to it in hopes of making even more money.
It is the same deal, only in reverse, if you purchase an option to sell a stock at a given price in the future (a put). If that $200 dollar stock you purchased the option to sell at $200 come May is worth $400 when May arrives, you will decline your option. Why sell a stock at $200 when it is currently worth $400. However, if that stock is only worth $50 come May, then you will exercise your option and buy enough $50 stocks to fill that $200 a share sell contract that was written in Feb.
What is the cost to you? The cost is the price the owner of the original buy or sell contract in Feb. charges you for that right to have the option to buy or sell that contract.
Example: In Feb, person A owns a contract to sell person B 5,000 bushels of wheat at $5.00 a bushel.
(person B may be General Mills or person B may just be a speculator who plans on selling his way out of the deal, for profit or loss, before he actually has to take delivery of 5,000 bushels of wheat. Person A may be a farmer or may just be a speculator who doesn't have any wheat and will have to buy or sell his way out of the deal before the deliver date occurs... or rent a truck and go buy some wheat to sell).
Back to person A. Person A believes that while wheat is likely to go up by May, it isn't likely to go up by more than twenty cents, so he offers an call option to buy his $5 May wheat contract for twenty cents a bushel. He can offer a put option on the same wheat if he believes it is unlikely to go down by twenty cents (giving himself a bit of a cushion, regardless of what happens, he gets the option sale price, and if it stays within his twenty cent trading window, it is all gravy).
Person C now enters the game. Person C thinks that wheat will go up. He sees that he can purchase an option to buy a May delivery wheat contract at $5 a bushel, but it will cost him twenty cents a bushel (plus a brokerage fee) to do so. If wheat goes up by more than twenty cents by May, he will be "in the money" as he owns a profitable contract he can execute himself or sell to someone else. If wheat doesn't go up by at least twenty cents, he is "out of the money" and he lets the option expire, his only loss being the price he paid for the option in the first place.
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Post by epaul on Feb 1, 2021 12:38:36 GMT -5
I have made money and lost money buying commodity futures. The safe way is deal with options, but the price for an option is usually pegged pretty close to the trading window, so the chances of making much is limited unless there is a really unexpected big move (speculate on orange futures in hopes a big freeze wipes out all of Florida's oranges). Buying a futures contract outright is the way to either make big or lose your shirt. Usually, neither happens, but you sleep a lot better with an option than you do with an futures contract.
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Post by majorminor on Feb 1, 2021 12:56:41 GMT -5
Are the peons standing strong or shopping for ATV's and above ground pools?
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Post by Marshall on Feb 1, 2021 13:08:27 GMT -5
But all of this means nothing for GameStop. They sold shares to get capital to expand their business. Their business model either works or it doesn't. Their stock price is supposed to represent some multiple of their profitability. If this phony hocus-pocus gambling ramps its value up or down it doesn't change a thing about the viability of the company.
I just think it's so bizarre.
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Post by epaul on Feb 1, 2021 13:09:47 GMT -5
There are several angles to approach this deal from and all have merit.
And the Reddit guerillas have several motives. Yes, speculating and making money is one of them. But, I think there are more than a few who put in a dollar amount they willing to toss into the wind just to do unto the hedge fund what the hedge fund was trying to do to GameStop. There is a raise hell with a crooked system element to this.
My well concealed view is that Hedge Funds have screwed many (me once), and I would love to see the tables turned on them. And if there were an easy and accessible way for me to join the cause, I would gladly throw in a fifty, not in hopes of profit, but revenge.
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Post by james on Feb 1, 2021 16:40:35 GMT -5
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Post by epaul on Feb 1, 2021 17:14:01 GMT -5
Hmm....
Ok.
I've decided to put my $50 in a mason jar and bury it in the backyard.
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Post by epaul on Feb 1, 2021 17:14:26 GMT -5
I hope I can find a spot that isn't frozen.
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