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Yeah, brokerages will do that if the stock takes a big drop like it did today. Oh, did you not read that part of your margin agreement? According to thread, som

• Tenoke 6y ago
  Are you sure you didn't just have a margin call up to the margin maintenance rather than get everything on margin liquidated immediately like here?
  • mikestew 6y ago
    You know, you might be right. Last time I had a margin call was a long time ago. Then again, I don't recall ever trading a stock on margin that swings 100% either direction in one day. Speaking of margin calls, a brokerage usually gives you the courtesy call saying, "either you liquidate (or give us more money to cover), or we'll do it for you", but on GME I could see skipping that call given the volatility.
• simonsaidit 6y ago
  The difference here is they prevented people from starting new positions while still allowing closing them .. effectivly being the cause of the drop.
  • stickfigure 6y ago
    > cause of the drop Not sure I understand this perspective. GME was a balloon floating around in a needle shop.
    • gruez 6y ago
      Yeah, but the wishful thinking in the other threads I've seen was that by the time it popped, all (or most) of the holders would be the short sellers, not the wsb people who pumped it up. In that sense it would be "fine".
    • simonsaidit 6y ago
      I would think thats the obvious thing to happen when supply outweigh demand
    • toolz 6y ago
      You don't understand how disallowing people to buy into a stock causes the price to drop, or you disagree that disallowing the purchase of a stock causes the price to drop? From my perspective it seems rather straight forward that if you artificially limit demand and not supply, you'll almost always see price drop.
      • stickfigure 6y ago
        It's going to pop no matter what actions RH (or anyone else takes). Who cares which needle pops it?
        • toolz 6y ago
          No, it's not going to pop no matter what, that's not how the market works - and presumably most everybody cares how it happens. Most people aren't big on artificial market manipulation.
          • alisonkisk 6y ago
            This whole kerfuffle is a blatant publically advertised mass market manipulation effort. The reddit posts are still visible. No one believed GME was worth over $40 a week ago, but now suddenly they pretend they honestly believe it's worth $300+? There's no book depth beyond the short squeeze. If Valve made a full buyout offer at $100/share, management wouldn't take it?
            • toolz 6y ago
              if buying stock as an individual based on the recommendation of other, non-insider individuals, is artificial market manipulation to you - exactly what is "regular" trading to you?
            • JackOfAII 6y ago
              (This is just a structured analysis on what is going on, not financial advice). Alright boys and girls, sit down while I tell you what on earth is happening. It's a once in a lifetime historical event.... It's insane. At least 1 hedge fund has gone bankrupt, thanks to a group of average joes on Reddit. By the end of the week, there will be a line of bankruptcies. So let's start at the beginning: First of all, stocks are pretty simple, when they go up in value, you make money, because it's worth more than you bought it for. Stock goes up- you make money. Stock goes down- you lose money. Short selling, is the opposite. Short selling makes money when the stock goes down in value. Short sellers borrow someone else's shares, and sell them, with the goal of buying them back later, and pocketing the difference as profit. So, Tim borrows Bob's shares in GME, and sell them for $10, he pays Bob $1 to do this, and promises to give all of Bob's shares back. Then, if the stock goes down to $5, Tim buys the shares back at a cheaper price. So Tim's profit is $10-$5-$1 = $4 profit. So that's where we start. A hedge fund tried to force down the price of Gamestop, and short the stock. It usually works fine. It's been done thousands of times, with no problems. So they shorted Gamestop (GME) from $20, to $10, to $4. Their greed kept compounding. They kept doing it again, and again, for months. Making billions of dollars, and almost bankrupting this company. Enter Wallstreetbets. A trading/investing subreddit. Someone noted that these hedgefunds shorted 140% of all shares available. These hedgefunds were so damn greedy, they borrowed more shares than actually existed. That's how arrogant and dumb they were. They borrowed 140% of all the available shares. It was literally impossible for them to buy them all back. So someone on Wallstreetbets realized this, and told everyone. Now, the rule with short selling is that ALL those shares that they borrow, MUST be paid back. And so we reach our main story of how the hedgefund's greed ruined them. Realizing that these hedgefunds shorted GME by a ridiculous amount, these Redditors (a bunch of regular Joes like you and me), bought every share they could get their hands on. Driving the price up as much as possible. Why? Because these hedgefunds eventually (within a few months) HAD to buy all those shares back, at whatever price they could get them. They didn't have a choice. So if they borrow a million shares, and sold them for $10. They made $10 million in immediate profit. But eventually, they HAD TO buy those million shares back. They didn't have a choice. That was the deal they made when they borrowed the shares. So these Redditors bought the shares, driving the price up, forcing these hedgefunds to buy back at crazy prices. Yeah, the hedgefund sold and made $10 million, but now they had to spend $147.98 million getting those same shares back. A HUGE FUCKING LOSS of $137.98 million. So eventually, the due date for when these hedgefunds need to return the borrowed shares comes closer. And what do they do? They double down. They short MORE. Because they're sure that they can manipulate the stock enough to get it to crash, thereby saving themselves. Fast Forward a few days, every attempt to crash the stock fails. Oh it works temporarily, but not enough for them to save themselves. Everyone knows what they're trying to do, so people keep buying the stock. And with every additional bit of media attention, more and more people are buying the stock, destroying the greedy hedgefund in the process. Eventually Melvin Capital- a multi billion dollar hedge fund, needs a bailout, because it has lost so much money shorting GME. They borrowed billions off another hedgefund. That was yesterday. The stock price was $76. Today, the stock ended up at $147.98 for every share. Up from $4. These hedgefunds are STILL shorting the stock, at 130% of available shares. That's how fucking greedy these guys are. All those millions of shares STILL have to be paid back. And that's where our story picks up. Hedgefunds are crying on CNBC, on CNN, on FoxNews. On literally every every platform they can get their hands on. They want the government to stop trading. They want this reddit forum investigated and banned. They're screaming ''market manipulation'', when in reality these hedgefunds were the ones manipulating the stock, but they got caught, and are now trying to take their ball and go home. Now, if you haven't realized it yet: With a normal investment, when buying stocks normally, the maximum you can lose is your original investment. When short selling, your losses are theoretically infinite. Because you HAVE to buy back at whatever price is available. So while these hedgefunds are on every news channel, every investing segment screaming about Reddit and Wallstreetbets, they inevitably draw attention to themselves, and what's going on. Enter the ''whales''- individual investors who can make a splash and impact the stock. Millionaires and billionaires that have a bone to pick with hedgefunds and short sellers. Elon Musk famously despises short sellers, because they tried to cripple Tesla so often. With a single tweet, Elon sent the share price skyrocketing from $147.98 to $230. And along with Elon Musk, a huge number of wealthy ''whales'' have started to jump in. Buying up HUGE amounts of stock, at crazy prices. But these investors don't care. They don't care how expensive they buy the stock for. Because they KNOW these hedgefunds MUST buy the shares back. For many of them, they don't actually care if they lose money. They just want to watch these hedgefunds burn. So what happens next? No one actually knows. The hedgefund Melvin Capital is definitely bankrupt. They've already gotten one bailout. They probably won't get a second. As time goes on, and as hedgefunds fight to buy back as many shares as possible (driving up the prices more on each other), their bill will eventually be due, and they will have to return the borrowed shares. More will likely be bankrupt. But it's not guaranteed. Does this mean you should buy GME? I'm not gonna answer this question, because you obviously shouldn't be listening to strangers on the internet when it comes to your money. There's a lot of upside to buying GME, but there's also a crazy amount of downside. Tomorrow the share could go back to $4 and you could lose everything. These shares are obscenely overvalued, and the only reason they keep going up is that people are gambling that the hedgefunds will buy them for a higher price (they likely will, but up until what point?). It's a game of chicken. When the game ends, the house of cards will crumble, and people will lose millions. This is not financial advice. This is just me trying to explain what the hell is going on right now. We're witnessing a once in a lifetime event that will undoubtedly change the markets, and how hedgefunds and other big businesses operate. The only thing I can recommend is that you grab a beer, and keep an eye on GME and enjoy the fireworks.
  • mikestew 6y ago
    You think a lack of volume from retail traders on Robinhood is the cause of the drop? To put it mildly, that's a little naive.
    • jagger27 6y ago
      Please feel free to explain what's so naive about that.
    • ivalm 6y ago
      I’m pretty sure all of the GME bubble is driven by retail, and since most retails prevented new buy orders then yeah, it affected the price action. Remember, GME is small.
    • romwell 6y ago
      > You think a lack of volume from retail traders on Robinhood is the cause of the drop? To put it mildly, that's a little naive. You think that the presence of volume from retail traders of Robinhood wasn't the cause of the increase to begin with? To put it mildly, that's delusional.
• tibbon 6y ago
  I honestly didn't read the agreements on Robinhood. Before you call me stupid or irresponsible, I'm going to say practically no one reads these agreements, and even fewer understand them. The NYT a few days ago had an opinion piece on how no one reads the TOS for things like this. A very choice line: > A 2012 Carnegie Mellon study found that the average American would have to devote 76 work days just to read over tech companies’ policies. That number would probably be much higher today. https://www.nytimes.com/2021/01/23/opinion/sunday/online-terms-of-service.html https://www.nytimes.com/2021/01/23/opinion/sunday/online-ter... When I bought my house, the attorneys sat down with me and had me read through and explained to me every single term of the purchase agreement and my mortgage, checking that I understood them. Absolutely no one has done this for Facebook, throwing a few hundred into Robinhood, etc. It's not worth it, and the terms change with such frequency that it would be outdated immediately. I don't think having such impossible terms that you "agree" to are in good faith. I'm not ignorant, I'm pretty typical, and I'm not going to spend 1/3 of my time simply sitting reading TOS.
  • Lewton 6y ago
    This is not about reading a TOS, this is about borrowing money from a brokerage and then losing them on the stock market
  • mbreese 6y ago
    > When I bought my house, the attorneys sat down with me and had me read through and explained to me every single term of the purchase agreement and my mortgage Really? Because that would make closing take forever. I mean, even after the purchase agreement and mortgage terms, there are a ton more documents to go through.
    • stronglikedan 6y ago
      They attorneys have done the same with me through all three of my closings, and yes, they do take forever, precisely for that reason.
      • mbreese 6y ago
• f430 6y ago
  Market manipulation is still market manipulation whether you write them in tiny font letters or buried under a pile of legal verbosity. Spirit of the law is always considered in situations like this when it isn't explicitly made clear (like on the splash screen) will always fall under scrutiny and rejected at the jury level. You can sign away your life but it doesn't make it legal because there are fundamental laws that pertain to human rights in the West as such are security laws. RH broke the trust and if what we are hearing is true, they may have colluded with the conflict of interest parties that took massive short positions before pressuring RH to halt trades may lead to actual jail times for the people involved. In the past the Obama administration has been soft on wallstreet but the Biden administration has signaled they are willing to play big government. Especially as politicized as the whole GME/WSB has gotten, there's zero chance they will pass up on the opportunity to win the popular support.
• southeastern 6y ago
  >Difference is, I didn't run to Reddit to display my ignorance to the world. Erm isn't the point of communities like Reddit to discuss? The implication that there's a certain class of people who are suited to stocks and a certain class that isn't is exactly why people are so impassioned about this right now.
  • deleted 6y ago
    [deleted]
• ineedasername 6y ago
  I though they would generally give you the opportunity to provide more collateral for your margin though. Or am I wrong on that?
  • mikestew 6y ago
    Used to be you had three days. I would fault no brokerage for not waiting three days for a Robinhood account holder to cough up the dough on a GME margin call. Hell, wait three hours and RH might have to come back asking for more.
• okprod 6y ago
  I think a lot of retail traders didn't read the ToS but also with this situation the notice about automatic liquidating doesn't reference margin.
• amluto 6y ago
  This isn't some little detail hidden in the TOS. This is what a margin account is. If you do not have your required maintenance margin (and that may be a complicated calculation), the broker can and will sell things for you to protect themselves. This is, frankly, common sense. If you deposit $100, buy $300 of stock, and that stock falls below $200, your account's equity will go below zero and your broker is in trouble. If this happens on a large enough scale, the market will be in trouble. The broker will try to protect itself by liquidating your position before this happens, and they may even be required to by market rules. (The actual calculation of required margin is quite complex for good reason.)
  • elihu 6y ago
    Are all of the forced GME sales in the situation you describe? (Not a rhetorical question, I'm actually wondering if it's the case.) Let's say your scenario is a little different: you deposit $100, buy $300 of stock, and the stock goes up to $600, then drops to $400. Then the broker sells your shares at $400 to "protect themselves". If that's what's going on here, that seems wrong. On the other hand, if it's as you describe that seems reasonable.
    • amluto 6y ago
      I don’t know what Robinhood is actually doing, but I think your scenario isn’t necessarily problematic. Suppose I deposit $100 and Butt $300 of stock. Now I have -$200 of cash. (The UI doesn’t necessarily show it like that, but that’s what’s in my account.). If the stock goes up to $600, I still have -$200 of cash. If the stock drops to $400, I still have -$200 of cash. If the volatility estimates change such that a rapid crash to $199 seems likely, the broker should margin call me, as a crash to $199 would send my account value negative. Contrast this with non-margin trading. If I deposit $400 and buy $300 of stock, I have $100 of cash, and the broker doesn’t particularly care what happens to the stock price, since they are taking no risk. Their clearer may impose requirements on them, but that’s a somewhat separate issue.
• Railsify 6y ago
  Are you sure this was a margin account, not sure what info in the tweet supports that.
• robntheh00d 6y ago
  The stock went south due to their halting purchases of the stock There’s context to this that do not make this a textbook margin call scenario