FTSE & DOW slide because of Reddit users!

benbay001

Type_45 said:

webjaved said:

Type_45 said:

My S&S ISA has indeed taken a hit today. And thats before FTSE has been affected.
Gamers on Reddit have shorted the market.
Check your balances!

There is no need to panic.

I've sold everything!

If as you say, its just Reddit users causing the lower prices and nothing else then what a fantastic buying opportunity for you!

Albermarle

HappyHarry said:

Type_45 said:

My S&S ISA has indeed taken a hit today. And thats before FTSE has been affected.
Gamers on Reddit have shorted the market.
Check your balances!

Err - no, that's not right.
Reddit users have purchased a significant number of Gamestop shares, putting the squeeze on those who have shorted those shares. This mainly affects hedge funds, and has no significant broader implications to the markets.

The markets are more likely to be down a little today due to problems coming to light with the vaccine rollout in the developed world.

According to the BBC report it is having some effect:
A number of funds sold off share positions to pay for losses from shorting GameStop, contributing to a slide of more than 2% in Wall Street’s main indexes.

steampowered

Type_45 said:

Gamers on Reddit have shorted the market.

No, people on reddit have not "shorted" the market.

In fact, the opposite - they simply bought Gamestop / Nokia / Blackberry shares or derivatives, which had increased the price and caused difficulties for those who were engaging in excessive shorting speculation and have been caught with their pants down. If I'm not mistaken, more shares in Gamestop had been shorted than there are shares in Gamestop. 

About time if you ask me. Beating the shorts at their own game. Good on the reddit gang. 

norsefox

Deleted_User said:

Utter nonsense, a few people on Reddit investing a few million dollars is literally drops in a puddle compared to funds like BlackRock with trillions in assets. What they are doing is screwing with an unethical practice (shorting) by raising the stock price forcing hedge funds to either stop shorting or take a (small) financial hit. More power to them I say, someone riding the train buying GME at $5 which is now worth $150 and making a profit (saw one guy spent $3m when the share was around $20, and now it's worth $20m) is playing the market just as the funds do. Your ISA dropped because of the hedge funds behaviour not because a handful of people beat the market temporarily.

Just a minor correction. It's not a (small) financial hit.  For Melvin Capital it required a £2.5bn external bailout.
This is what happens when you short 130%+ of the available stock float.
GME closed last night at $350 and is trading $420 in the pre-market.  20% of the current short options expire on Friday.  I'd recommend everyone stays far away from it, but the fireworks are yet to come this week.
For context, the short sellers had reduced the stock to $3-$4 in early-mid 2020.  Obviously some will try and ride it out, but the 'squeeze' here could make the 2008 VW incident look like a molehill in comparison.

[Deleted User]

norsefox said:

Deleted_User said:

Utter nonsense, a few people on Reddit investing a few million dollars is literally drops in a puddle compared to funds like BlackRock with trillions in assets. What they are doing is screwing with an unethical practice (shorting) by raising the stock price forcing hedge funds to either stop shorting or take a (small) financial hit. More power to them I say, someone riding the train buying GME at $5 which is now worth $150 and making a profit (saw one guy spent $3m when the share was around $20, and now it's worth $20m) is playing the market just as the funds do. Your ISA dropped because of the hedge funds behaviour not because a handful of people beat the market temporarily.

Just a minor correction. It's not a (small) financial hit.  For Melvin Capital it required a £2.5bn external bailout.
This is what happens when you short 130%+ of the available stock float.
GME closed last night at $350 and is trading $420 in the pre-market.  20% of the current short options expire on Friday.  I'd recommend everyone stays far away from it, but the fireworks are yet to come this week.
For context, the short sellers had reduced the stock to $3-$4 in early-mid 2020.  Obviously some will try and ride it out, but the 'squeeze' here could make the 2008 VW incident look like a molehill in comparison.

I call it small in the scheme of things because hedge funds are taking the risk to gain billions and will have made plenty of money - the founder of Melvin Capital was paid $300m in 2017... Plus I have no sympathy for investors who want to drive a company down to make money.
My reading of Melvin Capital is that they had an investment from Citadel and Point72 (call it a bailout if you like) who bought non-controlling revenue shares and the losses are not known.

dunstonh

Media coverage of this has been typically poor and as always, they like to sensationalist.  For the vast majority of the world's retail investors, nothing has happened that is any different to normal.    

norsefox

Deleted_User said:

norsefox said:

Deleted_User said:

Utter nonsense, a few people on Reddit investing a few million dollars is literally drops in a puddle compared to funds like BlackRock with trillions in assets. What they are doing is screwing with an unethical practice (shorting) by raising the stock price forcing hedge funds to either stop shorting or take a (small) financial hit. More power to them I say, someone riding the train buying GME at $5 which is now worth $150 and making a profit (saw one guy spent $3m when the share was around $20, and now it's worth $20m) is playing the market just as the funds do. Your ISA dropped because of the hedge funds behaviour not because a handful of people beat the market temporarily.

Just a minor correction. It's not a (small) financial hit.  For Melvin Capital it required a £2.5bn external bailout.
This is what happens when you short 130%+ of the available stock float.
GME closed last night at $350 and is trading $420 in the pre-market.  20% of the current short options expire on Friday.  I'd recommend everyone stays far away from it, but the fireworks are yet to come this week.
For context, the short sellers had reduced the stock to $3-$4 in early-mid 2020.  Obviously some will try and ride it out, but the 'squeeze' here could make the 2008 VW incident look like a molehill in comparison.

I call it small in the scheme of things because hedge funds are taking the risk to gain billions and will have made plenty of money - the founder of Melvin Capital was paid $300m in 2017... Plus I have no sympathy for investors who want to drive a company down to make money.
My reading of Melvin Capital is that they had an investment from Citadel and Point72 (call it a bailout if you like) who bought non-controlling revenue shares and the losses are not known.

Oh I have zero sympathy for Melvin either.  As Cramer said "imagine the greed where driving a company down to $3 was not enough".
The coverage has been notably poor.  The lead up to this has been visible for a number of weeks, but even the finance media has been poor in its coverage.
The Grauniad et al seem to have finally picked up on it, but are still quoting Monday's share prices and have utterly missed the cause of the event.
This has the potential to be a serious watershed moment and it's being reported as if the short-sellers simply undervalued the business.

AlanP_2

John Authers from Bloomberg has been discussing this in some of his recent articles and he made the interesting observation that those people using shorting pre the 2008 crash are regarded as "heroes" and have had a film made about them (https://en.wikipedia.org/wiki/The_Big_Short_(film))

Now, those doing the shorting are the bad guys. He puts this down to the fact that in the 2008 scenario the perception was that "Wall Street" was being stiffed, and they are this time as well just from the opposite side. The moral being that "Wall Street" are the bad guys in many people's minds and it isn't shorting they are "protesting" against but the oevrall inter-generational inequality / haves & havenots, perceived unfairness. In some ways that is similar the the Trump rhetoric we have seen over last few years and how some people, who felt they were being lefty behind, got behind that.

HCIMbtw

Deleted_User said:

Utter nonsense, a few people on Reddit investing a few million dollars is literally drops in a puddle compared to funds like BlackRock with trillions in assets. What they are doing is screwing with an unethical practice (shorting) by raising the stock price forcing hedge funds to either stop shorting or take a (small) financial hit. More power to them I say, someone riding the train buying GME at $5 which is now worth $150 and making a profit (saw one guy spent $3m when the share was around $20, and now it's worth $20m) is playing the market just as the funds do. Your ISA dropped because of the hedge funds behaviour not because a handful of people beat the market temporarily.

A few people on reddit is currently >4m people on one of the main forums.. and the money is not a drop in the ocean, indivudal investors with 10s of millions.. and some larger private investors are also involved.. 

I do not think it is understating it to say this particularly case will change the future of investing 

HCIMbtw

steampowered said:

Type_45 said:

Gamers on Reddit have shorted the market.

No, people on reddit have not "shorted" the market.

In fact, the opposite - they simply bought Gamestop / Nokia / Blackberry shares or derivatives, which had increased the price and caused difficulties for those who were engaging in excessive shorting speculation and have been caught with their pants down. If I'm not mistaken, more shares in Gamestop had been shorted than there are shares in Gamestop. 

About time if you ask me. Beating the shorts at their own game. Good on the reddit gang. 

This is basically it.. and because the shorts need to be paid the shareholders (private retail investors) will become price setters.. 
Its a question of whether the share holders can hold their nerve, at what price they set sell options..