4 ms·

Unless they are trying to move markets, which they do all the time. I mean, the entire WSB subreddit is basically dedicated to this.

IgorPartola 6y ago
I’ve been watching WSB with interest for a bit. This has not been what they’ve been about until January of this year. Before it was basically a place where the one eyed were leading the blind: someone would post their research on a particular play, like buying TSLA options for a particular date at a particular price because they think the phase of the moon and the mood of the CEO will line up to give the stock price a bump, and then everyone putting their 401k savings all into that play because it sounded plausible. Sometimes it would pay off, often it resulted in people losing lots of money. The “specialness” of the community came from when people posted “loss porn” aka screenshots of their accounts with huge losses, people would basically be really encouraging towards the poster. It was a sort of sign of respect that you risked it all and lost. Actually buying stock and not just options is brand new to that group, and they have nearly doubled in size since January so it seems to be going through serious transitions. Now they are doing what they can to put the thumb on the scale to squeeze hedge funds out of their GME positions. The crux of it is whether enough shorts have been made to make this possible and the rumor de jour is that hedge funds misreport their positions. Whether this is true or not, well if you look at WSB posts they’ll say it’s obviously true. I am not convinced personally. To be clear, WSB to me appears to be doing absolutely nothing illegal or wrong to manipulate the market. The only coordinated effort is to buy GME and AMC and not sell the stock unless it seriously goes up in value (current posts think it’ll go to $10k-100k). They suspect hedge funds are performing ladder attacks to lower the price, so every time the price dips the advice is to buy more. I don’t see how simply buying stock at market price is market manipulation except that it does have an effect on the volume of a particular stock.
- eru 6y ago
  What's a ladder attack?
  - IgorPartola 6y ago
    Not an expert at all but the way WSB explains it, it’s where hedge funds trade GME back and forth between each other, gradually lowering the price with each trade. It’s a coordinated effort toy manipulate the market and is illegal. According to WSB the SEC either doesn’t care or fines hedge funds so little for stuff like this that it’s worth it to them to do it anyways (as well as selling naked short and under reporting short interest). As I said, I have been watching what WSB is doing for entertainment value so all of this is suspect.
    - refurb 6y ago
      How do they sell a public stock back and forth between each other? How could one fund put shares up at a given price (especially one below the current bid price) and ensure their partner fund is matched as the buyer? Wouldn’t a market maker need to collude as well? Not saying it’s not true, I genuinely curious as to the mechanics.
      - aparsons 6y ago
        Presumably, fund A places a limit buy at price - $n and fund B places a limit sell at price - $n - $0.1
        refurb 6y ago
        But what about all the other bids and asks in the book? If you’re trying to drive the price down, there will be buy orders at higher prices your sell order will be matched with first.
        refurb 6y ago
        Apparently it was happening in the over the counter markets. No idea how that would work but the lack of oversight may make it easier.
    - clipradiowallet 6y ago
- cirgue 6y ago
  > January of this year I think this has been going on longer, but the players are different now. It looks like it used to be a forum for smaller players and well capitalized individuals to pump small volume options positions, because you can make a few k off of retail investors following your bait in a tiny pocket of the market. Now it’s something that bigger investors noticed and are now participating in.
- altcognito 6y ago
  WSB is an "extreme" example. I think it happens ALL the time in very common places (including HN). Some types of market manipulation are truly a bad thing. I'm sure someone engaging in some of the more egregious cases could rationalize their behavior as "it's just guerilla marketing, everybody does that". That's not wholly wrong -- the intent is really more important than the action in these cases. Were people buying GME because they legit thought the fundamentals of the company were good now or were they riding a bubble? I'm already too far down the river though, because now we could argue about whether there is something fundamentally wrong about speculating on pricing alone.
  - IgorPartola 6y ago
    From what I can tell, currently WSB is riding the bubble. Or rather their thesis is that a short squeeze will happen. In some conversations they try to justify that the company will actually turn itself around using the capital raised from selling the new generation of consoles, but quickly the conversation turns to the prospect of the squeeze. In other words, most people who are buying GME from WSB advice aren't there to hold the stock long term because they think it'll grow 2-5% per year because of the company doing well. They are in it to overnight have it grow by 10,000% or some such because "when the squeeze happens every single investor can name their price for the shares they own because hedge funds will need to buy every share available". I am not a financial expert, but to me this seems extremely bogus. I am not certain where exactly the math is wrong, but it seems like a hedge fund can just buy the shares from the people they borrowed from, and those people will be willing to sell because the price had risen a bit. WSB on the other hand has no strategy beyond "a squeeze will happen". There is no agreed up on price at which to sell, which will lead to some people going right past, say, $10k/share price point holding out for $100k/share, and then the price falling back down to earth while they are left holding the bag, having bought in at $300/share or whatever.
    - choeger 6y ago
      > but it seems like a hedge fund can just buy the shares from the people they borrowed from That's not how it works. A short position is basically the contract to deliver a stock regardless of its price at that point, so neither the short holder nor the party that gave them the stock in the first place actually hold that stock anymore. Now I don't know this exactly and I am not an expert, but I wouldn't be surprised if short positions can exist absolutely independently from the existence of any actual stock. In principle, there can be agreements that only deal with the price of the stock. And something that can exist in principle probably also exists in the financial markets. So whether or not an actual short squeeze will occur depends on the technicalities of the short positions.

IgorPartola 6y ago

I’ve been watching WSB with interest for a bit. This has not been what they’ve been about until January of this year. Before it was basically a place where the one eyed were leading the blind: someone would post their research on a particular play, like buying TSLA options for a particular date at a particular price because they think the phase of the moon and the mood of the CEO will line up to give the stock price a bump, and then everyone putting their 401k savings all into that play because it sounded plausible. Sometimes it would pay off, often it resulted in people losing lots of money. The “specialness” of the community came from when people posted “loss porn” aka screenshots of their accounts with huge losses, people would basically be really encouraging towards the poster. It was a sort of sign of respect that you risked it all and lost. Actually buying stock and not just options is brand new to that group, and they have nearly doubled in size since January so it seems to be going through serious transitions. Now they are doing what they can to put the thumb on the scale to squeeze hedge funds out of their GME positions. The crux of it is whether enough shorts have been made to make this possible and the rumor de jour is that hedge funds misreport their positions. Whether this is true or not, well if you look at WSB posts they’ll say it’s obviously true. I am not convinced personally. To be clear, WSB to me appears to be doing absolutely nothing illegal or wrong to manipulate the market. The only coordinated effort is to buy GME and AMC and not sell the stock unless it seriously goes up in value (current posts think it’ll go to $10k-100k). They suspect hedge funds are performing ladder attacks to lower the price, so every time the price dips the advice is to buy more. I don’t see how simply buying stock at market price is market manipulation except that it does have an effect on the volume of a particular stock.

eru 6y ago
What's a ladder attack?
- IgorPartola 6y ago
  Not an expert at all but the way WSB explains it, it’s where hedge funds trade GME back and forth between each other, gradually lowering the price with each trade. It’s a coordinated effort toy manipulate the market and is illegal. According to WSB the SEC either doesn’t care or fines hedge funds so little for stuff like this that it’s worth it to them to do it anyways (as well as selling naked short and under reporting short interest). As I said, I have been watching what WSB is doing for entertainment value so all of this is suspect.
  - refurb 6y ago
    How do they sell a public stock back and forth between each other? How could one fund put shares up at a given price (especially one below the current bid price) and ensure their partner fund is matched as the buyer? Wouldn’t a market maker need to collude as well? Not saying it’s not true, I genuinely curious as to the mechanics.
    - aparsons 6y ago
      Presumably, fund A places a limit buy at price - $n and fund B places a limit sell at price - $n - $0.1
      - refurb 6y ago
        But what about all the other bids and asks in the book? If you’re trying to drive the price down, there will be buy orders at higher prices your sell order will be matched with first.
        refurb 6y ago
        Apparently it was happening in the over the counter markets. No idea how that would work but the lack of oversight may make it easier.
  - clipradiowallet 6y ago
cirgue 6y ago
> January of this year I think this has been going on longer, but the players are different now. It looks like it used to be a forum for smaller players and well capitalized individuals to pump small volume options positions, because you can make a few k off of retail investors following your bait in a tiny pocket of the market. Now it’s something that bigger investors noticed and are now participating in.
altcognito 6y ago
WSB is an "extreme" example. I think it happens ALL the time in very common places (including HN). Some types of market manipulation are truly a bad thing. I'm sure someone engaging in some of the more egregious cases could rationalize their behavior as "it's just guerilla marketing, everybody does that". That's not wholly wrong -- the intent is really more important than the action in these cases. Were people buying GME because they legit thought the fundamentals of the company were good now or were they riding a bubble? I'm already too far down the river though, because now we could argue about whether there is something fundamentally wrong about speculating on pricing alone.
- IgorPartola 6y ago
  From what I can tell, currently WSB is riding the bubble. Or rather their thesis is that a short squeeze will happen. In some conversations they try to justify that the company will actually turn itself around using the capital raised from selling the new generation of consoles, but quickly the conversation turns to the prospect of the squeeze. In other words, most people who are buying GME from WSB advice aren't there to hold the stock long term because they think it'll grow 2-5% per year because of the company doing well. They are in it to overnight have it grow by 10,000% or some such because "when the squeeze happens every single investor can name their price for the shares they own because hedge funds will need to buy every share available". I am not a financial expert, but to me this seems extremely bogus. I am not certain where exactly the math is wrong, but it seems like a hedge fund can just buy the shares from the people they borrowed from, and those people will be willing to sell because the price had risen a bit. WSB on the other hand has no strategy beyond "a squeeze will happen". There is no agreed up on price at which to sell, which will lead to some people going right past, say, $10k/share price point holding out for $100k/share, and then the price falling back down to earth while they are left holding the bag, having bought in at $300/share or whatever.
  - choeger 6y ago
    > but it seems like a hedge fund can just buy the shares from the people they borrowed from That's not how it works. A short position is basically the contract to deliver a stock regardless of its price at that point, so neither the short holder nor the party that gave them the stock in the first place actually hold that stock anymore. Now I don't know this exactly and I am not an expert, but I wouldn't be surprised if short positions can exist absolutely independently from the existence of any actual stock. In principle, there can be agreements that only deal with the price of the stock. And something that can exist in principle probably also exists in the financial markets. So whether or not an actual short squeeze will occur depends on the technicalities of the short positions.