It’s fun to actually delve deeper than the headlines on this one.<p>The main driver of this trade on WSB is a user “deepfuckingvalues”. As of September 2019 they were posting GME holdings of 1,000 Jan 21 calls at $8, a position they built up since June 2019. [1]<p>The user then posted monthly updates ever since.<p>By May 2020 they had 2,500 call option contracts and had a net loss of $10k. By August 2020 they had lost $60k on $145k. Then it all started turning around.<p>They were an activist investor that actively rallied the Board to do buybacks and pushed overall interest in a GME turnaround.<p>As usual, by the time the mass media picks up on something it looks to the outside world like something that just magically happened like a rocketship taking off in just the last week.<p>In reality this was over a year in the making by a devoted user of WSB who gained a following over many months of persistence in the face of mounting losses. It was in fact the perfect WSB story. Initially every comment is begging them to sell, and then mocking their losses, and then reveling in their pain... and still they held and posted YOLO month after month.<p>As of their last update on the 26th their account value is $23mm.<p>[1] - <a href="https://www.reddit.com/u/DeepFuckingValue/" rel="nofollow">https://www.reddit.com/u/DeepFuckingValue/</a>
I track /r/wallstreetbets chatter as a sideproject.<p><a href="https://topstonks.com/stocks/gme" rel="nofollow">https://topstonks.com/stocks/gme</a><p>The chatter levels are through the roof today. Even more than when the market dropped in April due to the coronavirus.
Money Stuff had some good coverage of the GameStop / r/wallstreetbets shenanigans over the past couple of days:<p>Monday: <a href="https://www.bloomberg.com/news/newsletters/2021-01-25/money-stuff-the-game-never-stops" rel="nofollow">https://www.bloomberg.com/news/newsletters/2021-01-25/money-...</a><p>Yesterday: <a href="https://www.bloomberg.com/opinion/articles/2021-01-26/will-wallstreetbets-face-sec-scrutiny-after-gamestop-rally" rel="nofollow">https://www.bloomberg.com/opinion/articles/2021-01-26/will-w...</a><p>Update: here's today's issue: <a href="https://www.bloomberg.com/opinion/articles/2021-01-27/reddit-driven-surge-puts-gamestop-and-ryan-cohen-in-a-weird-spot" rel="nofollow">https://www.bloomberg.com/opinion/articles/2021-01-27/reddit...</a>
There is no rational reason to ever short this. The funds that are shorting this deserve to be liquidated for being so foolish. At best you can only double your money with thirsting , unless you keep adding to your short. Losses however are unlimited. Too many people think that they can make a fortune shorting, like in 2008. But the reason why a movie was made about those guys is because success at shorting is so rare and difficult that when someone does it successfully , it is big deal. No one makes movies about people who buy and hold stocks.
Totally random outage I'm sure. From what I am interpreting, the people who have most to lose on this are the banks and brokerages who needed to buy the GameStop stock to cover their positions after selling the options to all these retail traders.<p>There are regulatory "circuit breaker" conditions but I wonder if this was a more informal one. The internet hive mind wasn't in their risk models and I would wonder if there was risk of this event causing a cascading blow-up effect.
Robinhood frequently goes down during busy trade windows. It's bad enough that I warn people against using them if they intend to do any kind of active trading.
Somebody, somewhere, is going to get paid a lot of money when they figure out how to stabilize this inefficiency.<p>If there is a way to insure traditional shorts and the option-sellers against the losses they incur in this sort of situation, those actors are now going to be willing to pay at least a small amount to ensure smooth operation of the markets.<p>The transients right now (especially their emergent origins!) are interesting in the abstract, but generally antithetical to the efficient flow of capital.
This seems like a classic pump-and-dump scheme to me. The twist is that instead of claiming that the target company is going to start doing way better, they're claiming that the upside comes from hedge funds over-shorting the stock.<p>The people who are going to make a lot off this are the people who sell before the stock crashes. If those people were also suggesting others buy the stock on reddit, they may be criminally liable for securities fraud.
It is hard to fathom how much money ppl are making with options on this. I have never seen anything like this. It is like everyone is becoming multi millionaires on walsltreetbets. Like the fakebook IPO or What's App acquisition, when a bunch of people suddenly became millionaires. It is probably keep going up. This is the stuff dreams are made of, the stuff of legends. People think it cannot happen but then it does.