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Could be all sorts of things. The simple fact is that market makers are being protected against long tail risk while retail investors are being denied long term
by dalbasal 6y ago
Could be all sorts of things. The simple fact is that market makers are being protected against long tail risk while retail investors are being denied long term returns... the very thing they are being paid to do. That's what these put contracts are: long tail risk. They sold an option. Limited risk for long tail risk...
What you are saying amounts to "when long tail stuff happens," order flow agreements, credit lines and clearing agreements that break down."
This, very directly insulates them (Citadel, other contract originators, RH) from the actual risk they are supposedly being paid for. It's also ostensibly the reason why retail investors can't have access to the same vehicles as financial firms. Retail investors can't reliably back that long term risk. Here is yet another example of loss limits for insiders.
No one is saying that you are not right. You are. The contractual complex does melt down at this point. The rage is people who think this is not ok.
- kryogen1c 6y ago> retail investors are being denied long term returns excuse me? what part of inflating GME to $400 is a deserved long term return? this is effectively a pump and dump scheme, whether or not most of the participants think so. once the squeeze stops, no ones buying GME over $100 and everyone left holding shares better have bought two weeks ago or theyre gonna lose money.
- dalbasal 6y agoI never said "deserved long term return." I'm saying that a hedge funds made bets, deals, ultimately with these WSB crazies. That position represents risks that they are being shielded from. Most of these people aren't holding any stocks. They're buying derivatives, so they technically have no stocks to dump. They will likely bet like crazy on the downward part too.
- cma 6y agoBut if Robinhood has some preexisting deal where they have to loan out X% of long shares to shorters, why should they have to take on the risk of defunct shorters if it is within their rights to just stop allowing trades in the symbol, without any goal of overall price manipulation?
- deleted 6y ago[deleted]