OT: Reddit Kills the Stock Market
Anyone following this stuff with GME, AMC, etc. with some thoughts?
For anyone not clued in, the gist: a Subreddit called WallStreetBets decided en masse to buy up stocks that large institutional funds have placed negative bets on (e.g. put options). Stocks like Gamestop, AMC, and others that have been hit hard by the pandemic, hedge funds shorted them, and now a bunch of folks on Robinhood and other apps are pushing trades up more than any other stock (including blue chips like Microsoft, Tesla, industrials, etc.).
January 27th, 2021 at 2:00 PM ^
My 19 year old started playing with the Robinhood app last summer. He keeps up with the Reddit forum discussed above. He bought in on Gamestop a couple of weeks ago for $550 and sent me a screenshot this morning that his initial investment is now worth $5044.05.
January 27th, 2021 at 2:39 PM ^
That’s nice! This morning a friend sent me a screenshot of his account balance from the beginning of the month at $900+ and now today it’s at $20k+. Crazy stuff!
I had told him about AMC last week with their bankruptcy verge getting worked out so he grabbed some shares of that too. Didn’t even notice his PLTR stock taking off at a normal rate.
Now TDAmeritrade has a disclaimer thing where they’re not letting you buy any Puts (or probably Calls either) on either. Protecting from the freefall.
January 27th, 2021 at 3:41 PM ^
I'm excited for my son. He's just a sophomore in college and got his first job last summer. He's excellent at saving money and now he's been investing as a hobby for fun. I hope he keeps it up because I need him to buy my love.
January 27th, 2021 at 2:03 PM ^
Sure have been following it. You now have broker apps freezing AMC/GME stonks trading in order to “reduce risk to them and their customers” (hayyyy TD Ameritrade).
Crazy thing was Elon Musk giving WSB a shout out yesterday.
Crazier thing was the subject of “The Big Short” movie also taking umbrage with WSB’s shenanigans.
January 27th, 2021 at 2:13 PM ^
The less time spent on Reddit the better, just some friendly advice (actually applies to most of social media today)
January 27th, 2021 at 2:15 PM ^
This is true, it is truly a uniquely terrible (yet sadly addictive) social media site. I also feel like you can see the Redditization of this board at times (perhaps due to an influx of younger visitors?)
January 27th, 2021 at 2:18 PM ^
Well that's possible
January 27th, 2021 at 2:32 PM ^
I disagree.
Reddit is amazing if you frequent/follow the awesome subreddits.
For instance, I have a hobby for making digital art (animations, 3D renders, etc.) and many subreddits helped me along the way.
If people go there for politics, then they will likely lose themselves and become radicalized (or at least increasingly polarized).
But if you know what you want (i.e. help on building a new PC, advice on power washing tools, starting a fruit garden, etc.) and visit the correct subreddits then you'll likely find what you need.
January 27th, 2021 at 8:10 PM ^
+1
Ditto.
If you go to the front page, Reddit is a cesspool (and really just a reflection of the times we live in -- it's the people posting, not the platform's fault).
But there are a ton of awesome subs.
For example, I'm in r/aws and get fantastic advice, that one would probably have to pay Amazon proserve otherwise for.
January 27th, 2021 at 2:35 PM ^
I think its funny they did to a couple hedgefunds what hedgefunds having been doing to people for years.
The hedgefunds made an overextended bet and are paying for it, as they should. The market is working correctly.
January 27th, 2021 at 8:11 PM ^
Best post in here.
This person gets it.
January 27th, 2021 at 2:40 PM ^
My thought is that people are going to get hurt (financially). IMO, too many "stonks" are way over valued. I get pummeling over-exuberant shorts, but market valuations are absurd right now and it will be main street that ends up punished, not wall street (despite a couple hedge funds taking it on the chin).
Learn to do diligence, be very careful/thoughtful when you invest, and know what you're investing in. Proper investing is not gambling. Lots of people are gambling right now.
January 27th, 2021 at 2:46 PM ^
Exactly, the hedge fund billionaire isn't the one that is going to lose their life savings on bets like this. It's going to be people who can't afford what they're about to lose.
January 27th, 2021 at 2:45 PM ^
No love lost for any of the hedge-funds who lost money in this. I just hope everyone realizes that for all the college kids / shoe-shiners making a killing that there will be just as many of those individual investors losing way more than they can afford to lose on the way down.
I won't lie, it's tempting to think of what a return like that could do for me, but my boring Vanguard index funds have treated me well and I'll stick with them.
January 27th, 2021 at 3:08 PM ^
Always wise to remind myself that you always hear about the big investing winners and never the big investing losers. Vanguard funds are a nice place to be
January 27th, 2021 at 6:03 PM ^
I second that. Vanguard Index funds is a good way to go. First rule of trading is never use money you can't afford to lose
January 27th, 2021 at 2:49 PM ^
TD Ameritrade froze my sell order today, and couldn't sell my AMC shares that I had bought "from a meme" earlier. Finally the deal went through and still did well enough to triple my investment. I run a mix of traditional blue chip accounts (a la Dave Ramsey) with some dabbling in these high risk plays sported by various reddit and twitter follows. I wait for the stars to align and buy in. It has worked well, just not as well as others. I do not see this new wave of day traders "banding together" as a core flaw of the market.
One thing that IS fundamentally changing the market is the HUGE influx of cash investment. Many of the stimulus dollars went right into the market (mine did). As more cash pours into the market prices MUST go up. I believe this to be the source of the nonsensical 16% market gain for 2020 even in a pandemic.
So long as the money stays in the market, the tide will remain high. And I don't see that changing.
January 27th, 2021 at 2:52 PM ^
Now everyone please buy some CLOV this week.
January 27th, 2021 at 3:59 PM ^
That's a vast oversimplification.
Large hedge funds shorted 140% of the float on GME. How do they do that, you might ask?
They go to an investment bank like a Goldman Sachs and pay up to have them create synthetic puts on stocks which costs the hedgies a fair amount of money but, you know, the fix has been in forever and they've made bank on it.
Hedge fund and investment bank greed is responsible and not those who recognized what they were doing and made them pay.
Wall St. is a very smarmy game reliant on inside info and lack of transparency. The Reddit folks blew that apart. It was pretty funny watching Mike Santelli of CNBC whine on the air about why Reddit users shouldn't be able to gang up on hedge funds as they are not sophisticated enough. My son has told me the strategies as outlined on Reddit have been very solid. CNBC has been in bed with the hedgies and IB's forever and their arrogance has been revealed.
My son works on Wall St. and has made $175K by going long on GME and AMC over the past three days.
Expect a number of hedgies to go belly up in the near future as they've been short busted.
January 27th, 2021 at 4:14 PM ^
The stock is currently trading at $340
The average price target for the stock is $12.39
January 27th, 2021 at 7:50 PM ^
You're missing the point.
It doesn't matter that it's a $12 stock.
The point is there are not enough shares available for the shorts to cover. Melvin got a $2.8 B bailout last week and they've burned through that already.
If the WSB folks hold, this Friday will be a bloodbath for the fat cats.
January 27th, 2021 at 5:03 PM ^
This whole situation is crazy. I bought a $10 March put as a lotto when it was at $70. I closed out a 100% gain today when the stock was at $350. Never seen anything like it. You can win even when it goes against your bet.
January 27th, 2021 at 5:05 PM ^
PS I feel bad for the stupid money that is going to get caught holding the bag when this bursts. They don't know what they are doing and are going to end up bankrupt.
January 27th, 2021 at 7:47 PM ^
Doubling your money in 2 days buying a put on a stock that increased by 400% during that time is... suspicious. Now THAT is manipulation. There's somebody moving serious money around to make that happen. At least you got to profit from it, though, too. Good for you!
January 27th, 2021 at 7:52 PM ^
Doubling your money in 2 days buying a put on a stock that increased by 400% during that time is... suspicious
The suspicious thing is some short sellers (Left is a market manipulator himself and got kicked off the HK exchange for 5 years), shorted 140% of the stock -- NOT that some retail traders are buying all the shares they can.
January 27th, 2021 at 8:55 PM ^
The implied volatility was ~1000% when I sold, which is the reason for the price increase. But, IV will go up when the stock goes up 20x in a few days.
January 27th, 2021 at 5:07 PM ^
I guess those hedge fund boys didn't watch the terrific Eddie Murphy movie "48 Hours." The joy of it all. Those hedge fund guys, who produce no products and only move money are the assholes buying $40 million homes in Beverly Hills and condos in New York.
January 27th, 2021 at 5:54 PM ^
Trading Places, not 48 hours.
This is essentially the reverse of Trading Places. There, Duke and Duke bought commodities (on margin) based on fake insider news. After the real news was revealed, the market tanked and the Duke margin call bankrupted them.
Here, hedge funds shorted GME et al, which the redditors bought, sending the price up. If it stays up, the funds will have to BUY to cover their short positions at highly inflated prices, costing them a lot of money.
January 27th, 2021 at 5:27 PM ^
Some parallels to the stock market run up pre 1929
January 27th, 2021 at 5:45 PM ^
I am actually one of these investors. I got in at $60.
Yes, the bottomline is this....
Hedge Fund managers have over 70 million shares of SHORTED stock, that means they were/are counting on GameStop to fail and in its current state that is correct.
The development here is that Ryan Cohen bought 5.8M shares in Sept (at @ $8/share) and is now co-CEO and plans on turning GameStop from a storefront business to a eBusiness (think Netflex for gaming). This perked the interest in several people.
Back to the Hedge Fund people, the 70M represent 140% of the total shares. There are only 50 million shares available. So as some people pointed out, the Hedge Fund people had oversold their shorts on GameStop, Cohen represents hope and now for the past 2 months people have been buying up the stock driving up the price, we are now in a cycle where the hedge fund have to cover their shorts weekly and people (not just WSB) are buying up the shares because this is turning into one of the biggest shorts (VW and Blue Apron are 2 other examples). This Friday is a huge day as the next round of options have to be closed.
The funniest part about all this is that CNBC is putting all these talking heads blaming WSB for this mess while shorting a stock on a down company just seem to be 'normal practice'. Now they got caught with their hand too deep in the cookie jar, they want someone / anyone to bail them out....
THIS IS NOT FINANCIAL ADVICE..... Just the data points out there
January 27th, 2021 at 6:19 PM ^
I never really played video games.
January 27th, 2021 at 6:51 PM ^
Poor hedge funds...thoughts and prayers
January 27th, 2021 at 7:12 PM ^
They took down reddit, I don't have much but I'm holding for vengeance at this point.
January 27th, 2021 at 9:00 PM ^
WSB started a short squeeze....but they couldn't trade 70 million shares of GME or 800 million shares of AMC.
Institutions are taking sides and positions on both sides of the trade.
For GME, short interest really isn't dropping; as people bail from their bleeding short positions, new people are taking their places.
January 27th, 2021 at 10:33 PM ^
I don't understand Reddit. It's like the cloud...nobody understands the cloud. Where is this world going? I feel like I'm in the matrix.
January 28th, 2021 at 9:46 AM ^
They’re blaming WSB and not the people who shorted 140% (!!) of GME stock.
January 28th, 2021 at 2:00 PM ^
Can some of you folks come back in and give an update/synopisis on what's happening with all of this as of today (1-28)?!
January 28th, 2021 at 8:41 PM ^
How dare the little people play wall streets game!