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How r/WallStreetBets gamed the stock of GameStop
- ryandward 6y agoThis emergent behavior seems a lot like DDOS, but in the stock market.
- drawkbox 6y ago... with a dash of flash mob and viral marketing.
- nixass 6y agoWhile giving financial institutions their own medicine.
- babyshake 6y agoAre we totally sure there isn't an element of astroturfing?
- dhbanes 6y agoShort sellers participate in this all the time.
- drawkbox 6y agoIndeed. Hedge funds by nature skim from volatility. When they hold short positions they have "partners" that short and distort. Everything is astroturfing/selling pretty much nowadays. Social media is not reality, though astroturfing/distorting can become reality for better or for worse, depends on your position/tribe. What is on the surface is rarely what is the driving force underneath.
- ryandward 6y agoExactly -- reducing the barriers to market entry while increasing widespread market understanding reduces the _unique_ opportunity for arbitrage that Wall Street has enjoyed.
- washedup 6y agoThey aren't trying to kill GME though, they are boosting it, essentially saving it and shareholders from short seller pressure. I see it as a bizarre, but ultimately positive behavior. Wallstreet no longer holds all the keys.
- josefresco 6y agoHow are they saving it?
- robjan 6y agoGameStop can issue shares at the higher price and use the cash to revitalise their business. Note I'm not familiar with the company so I can't assess whether the company is salvageable.
- xnyan 6y agoThere is so much going against them it's hard to see how they can make it work. Gamestop is a mall/strip mall operation which already means they are suffering from the massive over buildout of retail that ran wild until the crash of '08. They have a huge shopping mall presence, which means even for retail they are suffering more than most due to the cratering value of mall space in the US. A large portion of their profit came from buying used game discs and reselling at a healthy markup. Digital distribution was already hurting that in a major way and COVID is only accelerating the decline of physical media. Their plan has been the same as several other desperate mall-based stores like barnes and noble: keep the core product to draw people in, but pack the shelves with cheap high-margin "lifestyle" items like t-shirts and toys. I predict in 5 years they will be a corpse that's been picked clean by venture capital, existing as nothing more than a brand that can be slapped on some online game store.
- washedup 6y agoNot "saving it" but "saving it from short seller pressure". The stock was previously heavily shorted, to the point GME was reaching bankruptcy. That is no longer the case.
- robjan 6y agoThat implies that they are the bad guys and not the people who were irresponsibly shorting the stock to such a great extent.
- hehehaha 6y agoMore like a political disinformation campaign for stocks. Same formula different goals.
- koube 6y agoInteresting to see this comparison being made on hacker news, it was also made on my economics RSS feed where Tyler Cowen[0] linked to a tweet[1] with this exact same comparison. [0]: https://marginalrevolution.com/marginalrevolution/2021/01/wednesday-assorted-links-282.html https://marginalrevolution.com/marginalrevolution/2021/01/we... [1]: https://twitter.com/zerohedge/status/1354412717231251459?s=21 https://twitter.com/zerohedge/status/1354412717231251459?s=2...
- lvs 6y agoIt's naive to imagine there aren't funds on both sides of this behavior.
- ipnon 6y agoHedge funds don't need to use NLP to gauge retail interest in certain stocks, Robinhood just sells their order books directly to the highest bidder.
- mrRandomGuy 6y agoNot sure why you're getting down voted, when the article makes clear to mention that Citadel does have the order flow information, and actually insinuates the same thing...
- TYPE_FASTER 6y agoYes. https://twitter.com/toxic/status/1353890766800621569 https://twitter.com/toxic/status/1353890766800621569
- skateris 6y agoNo Citadel can't just 'choose to front run' some RH trades. They are obligated to always execute at NBBO https://en.wikipedia.org/wiki/National_best_bid_and_offer https://en.wikipedia.org/wiki/National_best_bid_and_offer They don't need to frontrun they'll clean up just from providing liquidity with the huge volatility in the symbol. Citadel is split into Citadel Securities (the market making org which pays for orderflow) and the Citadel the hedge fund. The two halves of the business can't coordinate/share position info (or order flow info like others have implied). If they did they'd get absolutely demolished by the SEC. There is really no reason for them to do that though since they're already printing money from MMing.
- TYPE_FASTER 6y agoTIL, thank you!
- satanic_pope 6y agoSomeone educate me but why are hedge funds not limiting the loss by covering the short and closing their short position. Wouldn't that stop pumping from WSB crowd? The only exceptions I could think of is : - There isn't enough volume to cover shorts due to incessant buying spree from retail side - Lending freeze initiated by brokers on client request
- SpicyLemonZest 6y agoThe big pumping has only happened over the last few days. Hedge funds are starting to close their short positions (two of the most noted ones Melvin and Citron announced they had just this morning), and many commentators do expect that this will cause the stock to crash soon as people move on.
- kemiller2002 6y agoAm I correct in saying that if someone can forecast approximately when that will happen, they can short the stock and make money off of the mass selloff? Essentially putting the short sellers back where they started (in a sense)?
- unanswered 6y agoIf you think you can outsmart both the hedge funds and WSB, go right ahead. I for one will simply regret my lack of faith causing me to miss out on 4000% returns (so far) and move on.
- SpicyLemonZest 6y agoIn principle, but it's fundamentally challenging to forecast this kind of thing. For example, Kodak is still up almost 300% (down from like 1,000% in July) on the news of a government loan they haven't received and a pivot to pharmaceuticals manufacturing they haven't started.
- bpodgursky 6y agoNot to tinfoil this too much, but it seems pretty likely from volume that that was a lie by Melvin and Citron, with the explicit goal of tanking the stock (so they can then cover at a lower price).
- o-__-o 6y agoWallstreetbets user activity is very similar to the_donald and weekendgunnit. Personally I think hordes of chat bots are instigating this. I fully suspect reddit to come in with a heavy hand and shutdown this game. Next you will see something spin up at either wallstreetbets.win or wsb.win. The party will continue but not nearly as hard as it has been over the past week.
- haunter 6y agoWhat makes you compare WSB users to far right facists?
- mam2 6y agothe trollishness. also another hard pill to swallow but most people who voted trump were not "fascist" :roll-eyes:
- ttt0 6y agoBecause anyone who actually does damage to the system and the elites is a far right fascist.
- grillvogel 6y agoits interesting how they got that to become the prevailing narrative now
- o-__-o 6y agoThe user activity I refer to led to exactly that narrative. The user activity created the narrative.
- o-__-o 6y agoThe content is different but the intent of the comments are to incite the hive mind.
- gradys 6y agoAny evidence to back up the bot speculation? Normal social media memey exuberance seems sufficient to explain this to me.
- mam2 6y agoHard to swallow pill: wsb just merely launched a fashion. Other funds rallied to tank Melvin Capital. Retail is still not that influent. The fact that hedge fund follow wsb is.
- 99_00 6y ago>wsb just merely launched a fashion Seems like launching a fashion is a significant ability.
- mrh0057 6y agoThis narrative needs to stop. This is institutional investor shorts vs intentional investors stockholders. Retail is just along for the ride but the institutional shorts did something crazy so other large funds came in like Michael Burry’s and bought large positions. This happens every once in awhile where other institutional investors see an opportunity to take out competitors who is over leverage. So just sit back and watch for the margin calls to go out and GameStop will skyrocket to something ridiculous while the shorts try to unwind their position. Still don’t get how this mess is going to get cleaned up since it’s impossible for the shorts to cover.
- 99_00 6y agoInstitutional investor and hedge funds aren't the same thing. It's my understanding that the shorts were put on by hedge funds. As far as I know institutional investors can't short stocks.
- mrh0057 6y agoInstitutional investors are pretty much anyone who manages money on behalf of someone else. I don’t know how the restrictions work but likely has something to do with what the institution’s purpose is.
- MrStonedOne 6y agoInstitutional investor has become the term to refer to the opposite of retail investors. I don't see that changing.
- BryanBeshore 6y agoShorting a stock 140%+ is absurd. If anything, time and technology (in this case) caught up with the old game on Wall St.
- jjeaff 6y agoIt's not any one group shorting that much. It's just that the aggregate has shorted that much. And I'm not sure that it really matters that the shorts exceed the total stock available. Because it's not like everyone will have to cover their shorts at the exact same moment. An entity can buy stock to cover their shorts, then the entity that received the stock to cover the "uncovered" position would then be free to turn around and sell that stock again. The real risk would be having a super large short position for a stock that has very low volume since it would be very difficult to cover lots of shorts if there aren't many people selling stock.
- Threeve303 6y agoSince short sellers often provide liquidity to the market, if this happens at a large enough scale, it could push hedge fund shorts out of the market and then we could have a return of liquidity problems like during 2008. Though some of these short operations do target companies with the intention of taking them over at a bargain, it's fair to say that due to the pandemic and the lockdowns that a short on mall related companies is a reasonable move. I guess WSB is ultimately taking advantage of the lack of updating the short position with the emergence of a vaccine.
- xtiansimon 6y agoThis has to be a terribly naive question, but where does the information about a fund "short selling" a stock come from? Is this information just in the wind, because the fund is talking about their trades in an effort to further drive stock down and improve their buy back cost? Or, are there some kind of disclosures which must be made while they hold this position? What information was WSB community going on?