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The simplest way I can think to describe it is that a group of institutional investors (hedge funds) used large amounts of borrowed money to bet that that GameStops share price would decrease over a s

It cracks me up that Robinhood and other retail services stopped the buying of these stocks. I'm shocked that they could try to manipulate the market this way to benefit hedge funds they have been lin

Disclaimer: I am not a financial advisor, just a Redditor and observer. I own no stocks outside of my retirement accounts and still want to put my head through the wall about not buying AMD at $2.50 a

8 hours ago, EDT501 said:

The simplest way I can think to describe it is that a group of institutional investors (hedge funds) used large amounts of borrow money to bet that that GameStops share price would decrease over a set period of time. However, interest in GameStop shares actually increased, largely due to hype from an internet community known as r/wallstreetbets. Large numbers of smaller retail investors (individuals) began to buy the stock driving up the price. As the price increase, the creditors of the institutional investors began to demand their money back and the hedge funds had to start buying back shares as well, further driving up the price. Because these types of derivative transactions are usually highly levered (funded with debt based on the underlying asset) the gains/losses are magnified. This resulted in the price spiraling upwards out of control. 
 

The whole situation is wild, even to someone with a pretty robust understanding of derivative markets. Just goes to show that many of the “common” highly-levered alternative investment strategies are essentially gambling and that the market doesn’t always reflect true company fundamentals, especially in the short term. 
 

Now if only I’d just listened to the bro on Reddit who was bullish on GME in mid-December (yeah, I saw it back then) and bought a bunch of puts, I’d be trying to figure out if I wanted Coore/Crenshaw or Doak to do my private golf club. On the other hand a whole bunch of people who are piling onto to the trend or going to find out that eventually the market corrects and could lose everything they put in and more.

 

Disclaimer: I am not a financial advisor, just a Redditor and observer. I own no stocks outside of my retirement accounts and still want to put my head through the wall about not buying AMD at $2.50 a share back in 2009. 

 

The GME situation is somewhat unique in that these retail traders observed that the hedge funds collectively had a short position over 100%, or in other words, more shares had been borrowed than existed. If individuals or competitor funds start buying and holding, those with the "loaned" stock are left holding the bag, paying interest the whole time, and will have massive losses when the contracts come due. It's overlooked (of course) on the CNBC's and Fox Business channels of the world that major funds and a few mega-investors also have bought up huge positions in the stock, but it's a better storyline for them to lambast a bunch of bros memeing about it on Reddit. 

 

A couple of the subreddit's posters were following this stock all the way back in freaking July- one dude has made 48 million off his trades. 

 

Even with the massive spike in the stock price, we're talking about one company here with a market value that is almost infinitesimally small compared to the money that gets traded every day on the markets. But it's an interesting story and might help people to understand partially how the markets went so crazy in 2008. 

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Contracts close tomorrow, I'm very mildly invested in this.

 

Should be popcorn worthy

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The story is a bit more complicated than that. the DTCC is a clearing house that manages most of the brokerages, including Robinhood. Because of the volatility attached to GME and several other meme stocks, the DTCC increased their deposit requirements from brokerages. Robinhood and others didn't have the cash on hand to meet the deposit requirements the DTCC required for fulfill the full volume of trade demand from their customers. Robinhood took on an additional $1b in cash from their investors yesterday to try and fulfill margin requirements. The whole thing is a s***-show, and I don't doubt that there is some level of back-door collusion going on to protect institutional investors from the whims of the internet, but I think in Robinhood's case it is at least slightly less nefarious than many on the internet would have you believe. 

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The visuals of it are suspect because they selected certain stocks while allowing institutional investors to continue buy and sell movements. Individual users could only sell those selected stocks and today, can only buy limited numbers. They are 100% allowing "friends" to play the catch up game. Here is the email which essentially shows they are protecting certain hedge managers that have shorted and utilized derivatives in these select stocks. Either allow full trading or don't. I believe, like others have said, this should end up in jail time. When has "market conditions" ever justified the limiting of buying and selling stocks by a middleman. That is just wrong. 

Robinhood logo
An update on market conditions
Hi,
It’s been a tough day, and we’re grateful to you for being a Robinhood customer. In light of the extraordinary market conditions this week, we temporarily limited buying for certain securities this morning. Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed. 
This was a temporary decision made to best continue serving you, and was not an easy one to make. We know it’s led to frustration and confusion, and wanted to provide some clarity.
As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.
To be clear, this decision was not made on the direction of any market maker we route to or other market participants.
The past year in particular has shown us that the financial markets are for everyone—not just institutional investors and hedge funds. We’ve seen a new generation enter the market, and they’re sparking conversations about what it means to be an investor. We stand in support of you, our customers. Democratizing finance for all means giving more people access, not less.
We’ll keep monitoring market conditions and will update this Help Center article with the latest changes. We also published a blog post regarding today’s events.
Thank you again for being a Robinhood customer. We’re so grateful for your support.
Sincerely,
The Robinhood Team
Edited by cardia10
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On 1/28/2021 at 12:43 AM, EDT501 said:

The simplest way I can think to describe it is that a group of institutional investors (hedge funds) used large amounts of borrowed money to bet that that GameStops share price would decrease over a set period of time. However, interest in GameStop shares actually increased, largely due to hype from an internet community known as r/wallstreetbets. Large numbers of smaller retail investors (individuals) began to buy the stock driving up the price. As the price increased, the creditors of the institutional investors began to demand their money back and the hedge funds had to start buying back shares as well, further driving up the price. Because these types of derivative transactions are usually highly levered (funded with debt based on the underlying asset) the gains/losses are magnified. This resulted in the price spiraling upwards out of control. 
 

The whole situation is wild, even to someone with a pretty robust understanding of derivative markets. Just goes to show that many of the “common” highly-levered alternative investment strategies are essentially gambling and that the market doesn’t always reflect true company fundamentals, especially in the short term. 
 

Now if only I’d just listened to the bro on Reddit who was bullish on GME in mid-December (yeah, I saw it back then) and bought a bunch of puts, I’d be trying to figure out if I wanted Coore/Crenshaw or Doak to do my private golf club. On the other hand a whole bunch of people who are piling onto to the trend or going to find out that eventually the market corrects and could lose everything they put in and more.

 

You'd want to purchase calls.  Calls bullish.  Puts bearish.  


I bought GME at $38 last week and sold some at $400 yesterday.  Wish I bought a whole lot more of it.  

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18 minutes ago, blaird said:

I want to get in on the dogecoin but have no clue how to buy, store, etc...

Create a Kraken account. Has been easiest for me. I've piddled with it for about 5 years. Will never make much, but it is fun. Only play with money you 100% don't care to lose as that is a very high percentage. 

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10 minutes ago, cardia10 said:

Create a Kraken account. Has been easiest for me. I've piddled with it for about 5 years. Will never make much, but it is fun.

And can just buy and sell it through that? I am so new to this and really have no clue what I am doing with it haha. Just went to Kraken and its overloaded at the moment...says "experiencing too much traffic"

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Just now, blaird said:

And can just buy and sell it through that? I am so new to this and really have no clue what I am doing with it haha. Just went to Kraken and its overloaded at the moment...says "experiencing too much traffic"

Honestly, I've never found an "easy" way. Coinbase is the easiest, but is limited in the coins you can buy. Is also US based so they close and open trading whenever they please. I keep junk coins in Kraken but it isn't very user friendly really, but I have found it gives me the most access to coins pretty easily. Will take a few days to link an account for funding though.

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4 minutes ago, cardia10 said:

Honestly, I've never found an "easy" way. Coinbase is the easiest, but is limited in the coins you can buy. Is also US based so they close and open trading whenever they please. I keep junk coins in Kraken but it isn't very user friendly really, but I have found it gives me the most access to coins pretty easily. Will take a few days to link an account for funding though.

Thanks for pointing me in the right direction...ill google around and mess around with it on my own and see what I can figure out. 

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robinhood has disabled crypto trading for the time being. have to agree w earlier post.... robinhood was planning an ipo but i can't imagine that will happen anytime soon. they'd be target number 1 for upset reddit investors. 

 

i don't see many topics that everyone agrees on...but its tough to find anyone who feels sorry for the hedge funds who were leveraging shorts and effectively gambling others pensions. tough for those who lost out, but let this be a lesson for the pros. good to see the little guy win, but as another said, eventually the price will correct and late buyers will get burnt. 

 

 

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2 hours ago, FairwaysToHeaven said:

robinhood has disabled crypto trading for the time being. have to agree w earlier post.... robinhood was planning an ipo but i can't imagine that will happen anytime soon. they'd be target number 1 for upset reddit investors. 

 

i don't see many topics that everyone agrees on...but its tough to find anyone who feels sorry for the hedge funds who were leveraging shorts and effectively gambling others pensions. tough for those who lost out, but let this be a lesson for the pros. good to see the little guy win, but as another said, eventually the price will correct and late buyers will get burnt. 

 

 

Robinhood is open for crypto. I just bought some DOGE a couple hours ago.  

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I have been hearing get off robinhood. They cannot control their buy/sells and are under someone elses control. (i.e., limits on buys by the hour). I wouldn't touch them with a 10 foot pole, right now. 

 

For those new, remember this come tax time in 2022... please read up cap gains taxes, including/especially crypto. When you sell, you owe taxes on it (or can claim as losses). 

https://cryptotrader.tax/blog/how-to-handle-your-bitcoin-and-crypto-losses-for-tax-purposes

 

This is not financial advice. Just a guy on the internet on a golf forum saying if you're going to play the game, know the rules.

 

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