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I hope the hedge funds who shorted the stock go out of business and don't get a bailout from the government.
by minikites 6y ago
I hope the hedge funds who shorted the stock go out of business and don't get a bailout from the government.
- Rapzid 6y agoIs there any evidence they won't just figure a way to ride this out until it crashes. It's going to crash and when that happens it's going to be the "little guy" that bought late holding the bag.
- andyzweb 6y agosomething something the market can remain irrational longer than you can stay solvent
- JumpCrisscross 6y ago> won't just figure a way to ride this out until it crashes For one, the calls look like they’re still overpriced relative to the puts. So manufacturing calls via put-call parity would be a starting point. (Spot checked the puts—they seem to break even under 100 per share out to November, so not much juice left there.) It’s also only the leveraged funds burning out. And they don’t only own GameStop shorts. So money will be made bailing them out and cramming down their existing LPs. This kind of a pyramidesque system almost guarantees that the most pain will be felt in the reversion to the mean, not flexion from it.
- 300bps 6y agoIf they had infinite money they could do this. But shorting a stock is usually done on margin and if you lose enough money on a short position you’ll get a margin call asking you to deposit more money with your broker. If you don’t do that they’ll buy to cover your position for you.
- tootie 6y agoThey already have. They closed their position and got a cash infusion from other investment firms. They will move on and be fine. Meanwhile aside from a handful of savvy players, WSB is going to leave a wake of people losing their nest eggs.
- Rapzid 6y agoAh, interesting. I guess it just got to be too much for them. I just see a wake of losers all around from. Melvin's Hedge Fund? There are people and their portfolios behind that taking a hit. Few people got in early and are seeing multiples in returns. Now they are on WSB "Now is the time to rebuy, GME to 1000$, GME to the moon!!!" because they needs loads of suckers to throw in late to keep propping the price up. But the later comers are going to lose their shirts. The whole "Robin Hood" narrative is weird. Let's call a spade a spade; a few people are going to get rich at the expense of a lot of individuals over these shenanigans.
- tootie 6y agoI was thinking the same, but GME is up 114% today. Anyone who bought on the hype chain yesterday just made a killing.
- Rapzid 6y agoIf they sold. But if everybody were selling it wouldn't go up. It's when it goes down that people lose their shirt. Too hot to make big money off ATM IMHO. 114% is nothing considering the risk.
- pwinnski 6y agoThey claim to have closed their position, but haven't had to demonstrate that. On the one hand, closing their position would have been the smart thing to do. On the other hand, claiming to have closed your position (but not having done it) would have been a smart thing to do, and cheaper if people believed it. r/WSB does not seem to believe it. I believe we should know for sure one way or the other by Saturday, but I could be wrong about that.
- TorKlingberg 6y agoI fully agree that hedge funds shouldn't get a bailout, and I don't think they will. Banks and hedge funds might both be "Wall Street" but they have very different relationships with the government. Hedge funds are not systemically important. On the other hand, I don't understand why you hope they go out of business. Have they done anything bad by shorting GameStop? If they believed the stock was overvalued, are they wrong to bet on that belief?
- addicted 6y agoBecause people don't understand the importance and even necessity of shorts. They seem to think that shorts = bad.
- fileeditview 6y agoNo because instead of counting their money after shorting they were greedy and shorted again and again which led to a ridiculous amount of shorts (140% of shares). As we can see now this was not only foolish but self-destructive. The only scenario where I see this paying off is when GameStop went bankrupt and there was no sign for this at all. People love when greed gets punished and this is what we are seeing here.
- cannabis_sam 6y agoShorts are fine, the problem is having an underregulated risk mitigation tool that’s effectively limited to the wealthy. But even disregarding that, a hedge fund’s job is literally to manage risk using more complex financial instruments. A complacent hedge fund that overextends itself don’t just need to fail, they need to burn long and hard Sadly, they usually get “bailed” out (by their buddies in their industry, not the government), like we just saw with Melvin. Which in turn creates enormous inefficiencies in our economy..
- dingaling 6y ago> Shorts are fine Why so? They're based on asymmetry of information, the shorter having more insight than the lender. And their purpose is to convert that information into money at the lender's expense; by the time he gets his shares back, they've tanked.
- RivieraKid 6y agoWhy? If they assessed GameStop's value accurately, they should be rewarded. I really don't understand this hatred of short sellers and cheering for people who are often clueless about valuation.
- michaelbuckbee 6y agoI think it's often from the sense that short sellers are "rooting for the company to fail" and while there are certainly positive market functions that short sellers provide I'm not sure that sentiment is too far off.
- 52-6F-62 6y agoIn this case, though, you have hordes of rabid sentiment mongers pooling their ideals to the end of even encouraging apparent minors to put all of their meagre savings into high-risk stocks. There's something as highly corrupt about that to me as much as anything else at play here.
- minikites 6y agoWhy is that corrupt? Wall Street does that hourly.
- 52-6F-62 6y agoThe answer is next to your question (also in the clause "as much as"). Also spoken as "an eye for an eye will leave the whole world blind"
- minikites 6y ago>Also spoken as "an eye for an eye will leave the whole world blind" I've noticed that this proverb only seems to comes up when disadvantaged people (who are already missing a metaphorical eye) strike back at the people who put them in that disadvantaged state to begin with.
- DyslexicAtheist 6y agorevenge is a dish best served cold? this is a tiny slice of justice from 2008/2009 that Occupy Wallstreet demanded and never got. The fact that they get plucked like a goose by memers on reddit and on their own professional turf is almost poetic.