The Lemon Fool

https://www.wsj.com/articles/citadel-po ... low_a_pos1

[i]"Citadel LLC and Point72 Asset Management are investing $2.75 billion into hedge fund Melvin Capital Management, which has been hard hit by a series of short bets to start the year."[/i]

The background is of course mostly US youngsters (Robinhood traders) synchronising their actions to squeeze hedge funds who short targets. GME was first up, apparently BB are also in play, Nokia maybe to come

Younsters 1, Hedgies 0

https://www.reddit.com/r/wallstreetbets ... ame=iossmf

"When asked for a comment by the NY Post regarding the bailout Gabe Plotkin received from hedge fund giants Ken Griffen and Steven Cohen, “He was short in a market that no longer allows people to stay short,” complained one hedgie. “Today, you take a position after doing the work then some guys on Reddit use their phones to buy penny stocks and you end up with your face ripped off. It’s nuts.”"

regards, dspp

some more GameStop reportage
https://www.cnbc.com/2021/01/25/gamesto ... inues.html

shorters discover downsides !

regards, dspp

I have been following this. I do wonder if the Robinhooders can be accused of market manipulation.

Then again, that is what short sellers typically do, so maybe it is OK.

Apparently Gamestop has had a short interest at times of over 100%. Someone will have to explain to me how that is even possible, given that you have to first borrow stock in order to short it.

Lootman wrote:Someone will have to explain to me how that is even possible, given that you have to first borrow stock in order to short it.

A, executes short trade with B selling 100% of the shares
A, borrows shares from C (who owns 100%).
A settles with B.
A executes short trade with C selling 100% of the shares
A borrows shares from B (holds 100%)
A settles with C.

At this point
C is the registered owner of 100% of the shares, but thinks they own 200% and A owes them 100%
A has a short position of 200% and owes 100% to B and 100% to C
B is not registered to own shares, but thinks they own 100%, but is owed the shares by A.

Lootman wrote:I have been following this. I do wonder if the Robinhooders can be accused of market manipulation.

Then again, that is what short sellers typically do, so maybe it is OK.

Apparently Gamestop has had a short interest at times of over 100%. Someone will have to explain to me how that is even possible, given that you have to first borrow stock in order to short it.

Not all of the ways you can end up with a >100% short interest are legal, in fact some are either plain illegal or so dark grey most of us couldn't tell the difference*. A short interest of over 100% can make for a wild ride, especially when an event causes the shorts to need to find real stock. That was one of the motivations for why TSLA did their 5:1 stock split as a dividend issue, as it forced the shorts into a corner, it was a (imho) very deliberate short squeeze and it worked. A number of notable shorters were late reporting (outwith their reporting deadlines), leading to considerable speculation that they had been as a minimum very dark grey.

I see today's Guardian has picked up this GME story,

"Last April, when the company announced mass closures, GameStop’s shares (GME) could be bought for $3.25 each. On Tuesday they soared another 92% to end the day at close to $148, pumped up again by small investors hoping to ruin Wall Street [short] bets that the price would crash. It’s a [short] bet that has, so far, proved very costly for the professional financiers."

etc (well reported, worth reading)

https://www.theguardian.com/business/20 ... all-street


(* for example, using john's example,
A, executes short trade with B selling 100% of the shares
.... but what happens if A as a Market Maker who actually sold more shares than they had on their books ? This would appear to be going on sometimes ........)


- dspp

Lootman wrote:Apparently Gamestop has had a short interest at times of over 100%. Someone will have to explain to me how that is even possible, given that you have to first borrow stock in order to short it.

Naked short selling, selling shares that don't exist. Illegal in New York, but there's nothing to stop it being done on markets outside America where it isn't illegal.

Back in October 2008 there was a horrific short squeeze in Volkswagen after Porsche got control of 74% of Volkswagen (VW). With Lower Saxony owning 20% of VW, the rest of the market owned the remaining 6%. But there was a 13% short interest which meant that the short sellers were caught out having to buy back very tightly held shares.

According to Reuters VW briefly became the richest company on the planet after its shares tripled in one trading session.

https://www.reuters.com/article/us-volkswagen-idUSTRE49R3I920081028

https://www.telegraph.co.uk/finance/globalbusiness/3362913/Porsche-crashes-into-controversy-in-the-ultimate-short-squeeze.html

There's probably some fancy work being done using derivatives that is just about legal but is naked short selling in all but name. Given the financial industry's track record for "pushing the envelope" when it comes to what's legal I say that the probability of this happening is very high.

It's possible that one or more market makers have deliberately gone short, taking a much longer term position than they would normally do. They are allowed to naked short sell.

Events like Gamestop are fun to watch, but I'd never take a position.

dspp wrote:

Lootman wrote:I have been following this. I do wonder if the Robinhooders can be accused of market manipulation.

Then again, that is what short sellers typically do, so maybe it is OK.

Apparently Gamestop has had a short interest at times of over 100%. Someone will have to explain to me how that is even possible, given that you have to first borrow stock in order to short it.

Not all of the ways you can end up with a >100% short interest are legal, in fact some are either plain illegal or so dark grey most of us couldn't tell the difference*. A short interest of over 100% can make for a wild ride, especially when an event causes the shorts to need to find real stock. That was one of the motivations for why TSLA did their 5:1 stock split as a dividend issue, as it forced the shorts into a corner, it was a (imho) very deliberate short squeeze and it worked. A number of notable shorters were late reporting (outwith their reporting deadlines), leading to considerable speculation that they had been as a minimum very dark grey.

I see today's Guardian has picked up this GME story,

"Last April, when the company announced mass closures, GameStop’s shares (GME) could be bought for $3.25 each. On Tuesday they soared another 92% to end the day at close to $148, pumped up again by small investors hoping to ruin Wall Street [short] bets that the price would crash. It’s a [short] bet that has, so far, proved very costly for the professional financiers."

etc (well reported, worth reading)

https://www.theguardian.com/business/20 ... all-street


(* for example, using john's example,
A, executes short trade with B selling 100% of the shares
.... but what happens if A as a Market Maker who actually sold more shares than they had on their books ? This would appear to be going on sometimes ........)


- dspp

Well I was never a market maker in equities, just bonds, but "our books" were tiny. Quite often I would be selling >100% (sometimes >10,000%) of my "inventory". It would be an extremely rare occasion to have a long, or short, position of say 5% of a total issue.

Maybe I am missing your point, but I would imagine the normal course of business for an equity market maker would be de minimis in relation to the number of shares issued.

Think there is a bigger issue here with the distorting effect of the new, typically younger investors on trading platforms like Robinhood (US), eToro, Trading212 and the like. I briefly tried eToro for an experiment, must say I didn't like it.

It was apparent trading was speculative and short term in nature. Much of the discussion was the latest hot buys, copy Portfolios and Bitcoin. They all seemed to hold the exact same stocks, just in different combinations. Portfolios of owning Tesla, Nio, other EV, FAANG, Blackberry, Virgin Galatic, Etsy, Asos, Gamestop.

Trouble is young people who can't afford it will get sucked in and get their fingers burnt. I do think it needs regulation for investors own protection.

Adamski wrote:Think there is a bigger issue here with the distorting effect of the new, typically younger investors on trading platforms like Robinhood (US), eToro, Trading212 and the like. I briefly tried eToro for an experiment, must say I didn't like it.

It was apparent trading was speculative and short term in nature. Much of the discussion was the latest hot buys, copy Portfolios and Bitcoin. They all seemed to hold the exact same stocks, just in different combinations. Portfolios of owning Tesla, Nio, other EV, FAANG, Blackberry, Virgin Galatic, Etsy, Asos, Gamestop.

Trouble is young people who can't afford it will get sucked in and get their fingers burnt. I do think it needs regulation for investors own protection.

Does that mean us older people are OK then ? So we could all agree to go after the shorts in a squeeze,

https://highshortinterest.com/

Gosh, second on that list is Virgin Galactic, who I personally don't much rate. Should I set aside my thoughts and pile in to a potential squeeze play ? Decisions, decisions. (That one is easy)

regards, dspp

Adamski wrote:I do think it needs regulation for investors own protection.

The danger of such regulation is that it stops people more generally being allowed to buy securities. If you look at how things are with hybrid securities that is the way it tends to go. Although I personally would not bet on bitcoin I don't think preventing people from betting on it would be a good solution.

dspp wrote:Gosh, second on that list is Virgin Galactic, who I personally don't much rate. Should I set aside my thoughts and pile in to a potential squeeze play ? Decisions, decisions. (That one is easy)
regards, dspp

Yup, Virgin Galactic is up 23% today as I type!

dspp wrote:

Adamski wrote:Think there is a bigger issue here with the distorting effect of the new, typically younger investors on trading platforms like Robinhood (US), eToro, Trading212 and the like. I briefly tried eToro for an experiment, must say I didn't like it.

It was apparent trading was speculative and short term in nature. Much of the discussion was the latest hot buys, copy Portfolios and Bitcoin. They all seemed to hold the exact same stocks, just in different combinations. Portfolios of owning Tesla, Nio, other EV, FAANG, Blackberry, Virgin Galatic, Etsy, Asos, Gamestop.

Trouble is young people who can't afford it will get sucked in and get their fingers burnt. I do think it needs regulation for investors own protection.

Does that mean us older people are OK then ? So we could all agree to go after the shorts in a squeeze,

https://highshortinterest.com/

Gosh, second on that list is Virgin Galactic, who I personally don't much rate. Should I set aside my thoughts and pile in to a potential squeeze play ? Decisions, decisions. (That one is easy)

Virgin Galactic (SPCE) is up big again today, from $45 to $53 or so. Definitely also being ramped.

That said there are some fundamental stories as well, such as a potential Space ETF from Ark. And apparently a good number of advance bookings!

I am not touching any of these, although a long put option would be a cheap, low risk way of betting that this all ends badly.

Nice.

I mentioned in the musk thread that I got into SPACE as a proxy for Space-x. Thinking that if nothing else, if Space-x IPOed there would be a lot of idiots buying the wrong ticker. It always happens.

Anyway, I'm in at 18.

Now, how to plan an exit?

Saagar Enjeti: Wall Street Elites DESTROYED, Beaten By Redditors At Their Own RIGGED Game

https://youtu.be/9ToOGrUQ7ME

Clearly, it has be foreign powers !

- dspp

Crumbs! Even the BBC has picked up on this story.

https://www.bbc.co.uk/news/business-55817918

Or you could have gone for Build-a-Bear Workshop Inc up 42% yesterday (yes, an online bespoke teddy bear retailer) or Tian Ruixiang Holdings ADR, a small Chinese insurance broker traded on the NYSE, up 538% yesterday! All completely insane and probably a sign that we are at a major market top.

RockRabbit wrote:... probably a sign that we are at a major market top.

Or perhaps just a bumb along the road.

So, GameStop (which is a loss making retailer of computer games) is up another 30% this morning in US pre-trading. The market now gives it a similar capitalisation to the National Grid!

RockRabbit wrote:So, GameStop (which is a loss making retailer of computer games) is up another 30% this morning in US pre-trading. The market now gives it a similar capitalisation to the National Grid!

It is worth whatever the shorts need to pay to cover their nakedness. Maybe they shouldn't have doubled down - again & again & again

regards, dspp

This activity has had an influence on some UK shares which were previously heavily shorted but suddenly jumped in the last couple of days.

I've sold all my Pearson holding. Couldn't resist taking a healthy profit.

Maybe I should join the millennials and load up with bitcoin?

regards

Howard

(Or keep the cash and wait for a more pedestrian opportunity).