GME, Hedge Funds, Citadel and Reddit

[GG1]

3 minutes ago, Ann said:

Settlement days T+1, T+2, T+3 for those wondering .

 

There are questions to be asked, especially if stocks and/or options were sold out beneath people (as claimed by many) without the chance to settle.   
 

 

The first question to be asked should be, "Did you read the terms of the brokerage account agreement you signed?"

[Ann]

1 minute ago, GG1 said:

 

The first question to be asked should be, "Did you read the terms of the brokerage account agreement you signed?"

That's a good point.  I am sure Schwab says they can sell your stock without your permission in their TOS and no one noticed. 
 

[snafu]

4 hours ago, GG1 said:

 

Was linked yesterday, but apparently nobody wants to believe that it was the DTCC rules, or that Robinhood almost collapsed two days ago because they couldn't meet their margin requirements.

 

Question that you don't really have to answer:

When a Hedge fund guy sees the stock shooting to the roof, would he or she buy some and try to sell it when the price goes up in order to recoup some losses?  If the answer is no, then ignore the next questions:  From the Hedge fund point of view, wouldn't the Robin Hood restriction in purchasing Game Stop shares hurt them as much as the retail investors?  

 

 

[GG1]

2 minutes ago, Ann said:

That's a good point.  I am sure Schwab says they can sell your stock without your permission in their TOS and no one noticed. 
 

 

If you open up a margin account and trade on margin, you bet your arse that Schwab would close out the positions if the stock dropped 40% in 2 hours.

 

Now, if you want to go after Robinhood for defaulting to margin accounts at the outset (as Tom suggests) then it's a different issue.

Edited January 29, 2021 by GG1

[GG1]

2 minutes ago, snafu said:

 

Question that you don't really have to answer:

When a Hedge fund guy sees the stock shooting to the roof, would he or she buy some and try to sell it when the price goes up in order to recoup some losses?  If the answer is no, then ignore the next questions:  From the Hedge fund point of view, wouldn't the Robin Hood restriction in purchasing Game Stop shares hurt them as much as the retail investors?  

 

 

 

It depends on who clears the trades for the Hedge fund guy.  There are different margin requirements for firms that are better capitalized and are able to settle the trades.  People keep ignoring that Robinhood almost went bankrupt as a result of this fiasco and needed an emergency infusion of $1 bn

[Ann]

6 minutes ago, GG1 said:

 

If you open up a margin account and trade on margin, you bet your arse that Schwab would close out the positions if the stock dropped 40% in 2 hours.

 

Now, if you want to go after Robinhood for defaulting to margin accounts at the outset (as Tom suggests) then it's a different issue.

The margin calls are one thing. I have read some of the firms sold the stock without permission. Now, like so many things we read online, I have no idea if that is true. Usually I would invoke the 48 hour rule, but things appear murkier now, not clearer.  
 

[GG1]

Just now, Ann said:

The margin calls are one thing. I have read some of the firms sold the actual stock without permission. Now, like all things we read online, I have no idea if that is true. Usually I would invoke the 48 hour rule, but things appear murkier now, not clearer.  
 

 

What do you think a margin call is?   They either pull cash out of your account or sell your holdings until the margin is back in line.

[snafu]

2 minutes ago, GG1 said:

 

It depends on who clears the trades for the Hedge fund guy.  There are different margin requirements for firms that are better capitalized and are able to settle the trades.  People keep ignoring that Robinhood almost went bankrupt as a result of this fiasco and needed an emergency infusion of $1 bn

 

That AOC Congressional hearing is going to be something to watch.

 

 

[Ann]

Just now, GG1 said:

 

What do you think a margin call is?   They either pull cash out of your account or sell your holdings until the margin is back in line.

le sigh

If the stock was paid for with cash, and it was sold without permission (no margin calls on the account at all)

[Dubs]

1 hour ago, Meazza said:

 

What exactly? The Hedge Fund revolution?

 

Hedge Funds are like restaurants.  They fall like flies every 2-3 years.  I know because I used to work with hedge funds and prime brokerages.

 

Idiots burning their life savings to bring down a hedge fund only to be stuck with no money at the end since they have no exit strategy is not a revolution for me, it's just idiots with too much time on their hands.

 

You sound exactly like BLM protestors burning down minority owned businesses to get back at the man not realizing who they are really hurting.  It's amazing to see how blind you have all become.

 

Cheers.

 

At this point, we don't know who made/lost how much money and how much of that was an impact on their lives.  We don't know each individual investors motivation.  Trying to group the entire retail investor group as a monolith would be a very inaccurate approach.  Just as using the people who get crushed as an example of why retail as a group needs to stay in the play pen.  And since when do we need to protect people against bad investments?  If someone wants to put their life savings into GME at $300 because someone on Reddit said so, so be it.  Welcome to the world, hope you enjoy the learning experience.

 

It does seem like you are missing the broader discussion.  There is a widespread, and growing, anger with the institutions in this country and the world.  Media, Academia, Tech, Government, and Wall Street.  Each time we see one of these instances, the institutions seek to dismiss, divide and conquer.  This is another example of it.  Dismissing everyone who hopped on the train as stupid shows a shocking misunderstanding of the environment we are in now and a massive amount of hubris, considering we have no idea what the average investment by a "retail" investor was, who is losing money, etc...

 

And trust me, I am not advocating that this is a good idea.  I don't talk about my personal life on here, but I've been in the industry for 20 years, it doesn't take that level of experience to know that this is not going to end well for many people.

[Nouseforaname]

On 1/28/2021 at 11:58 AM, Meazza said:

 

Exactly and sorry for my friends here at Billsfans but none of you aside from @GG1 and @DcTom know &#%$ all about the stock market and how this works.

Sorry @Alaska Darin forgot you as well lol

[GG1]

9 minutes ago, Ann said:

le sigh

If the stock was paid for with cash, and it was sold without permission (no margin calls on the account at all)

 

Obviously these stocks were not all paid in cash.   This is why investors should pass a test before they wade into something they don't understand

 

• Robinhood told users on Thursday, hours before the market open, to raise their cash buffers on several widely held stocks because they could face an account deficit.
• The trading platform said that to "help protect" customers from increased volatility before the US election, from Friday onward it would increase the minimum amount a user must hold in their account.
• "If you hold any of the affected stocks on margin, your buying power may decrease or your account may be in a deficit after these changes go into effect," Robinhood said.
• "If you do not resolve the margin call, we may need to sell off some or all of your stock to cover the call," it said.

[snafu]

10 minutes ago, Dubs part Dub said:

If someone wants to put their life savings into GME at $300 because someone on Reddit said so, so be it.  Welcome to the world, hope you enjoy the learning experience.

 

Reminds me of:  "Come on 22, 22, 22!!!"

 

 

[Foxx]

https://twitter.com/Timcast/status/1355191875368591360

 

[Foxx]

A trial balloon for the narrative.

https://twitter.com/pghowie3/status/1354915156199944194

 

[GG1]

12 minutes ago, Foxx said:

A trial balloon for the narrative.

https://twitter.com/pghowie3/status/1354915156199944194

 

 

What the F?   The 140% short position is far more detrimental to the company than the reddit action.

[Dubs]

5 minutes ago, GG1 said:

 

What the F?   The 140% short position is far more detrimental to the company than the reddit action.

 

exactly.  but they can't come out against the hedge funds.  could impact future employment opportunities, or future campaign contributions, or getting dirty looks on the cocktail circuit.

 

Everything is a narrative.  Everything is a binary.

 

The reality is: the hedge funds got caught with their pants down, got embarrassed, lost a ton of money.  Also, retail investors that were late to the game and didn't understand what they were getting into lost a lot of money.  A subset of people made a killing.  Now it's just about crafting a narrative.

 

 

[GG1]

2 minutes ago, Dubs part Dub said:

 

The reality is: the hedge funds got caught with their pants down, got embarrassed, lost a ton of money.  Also, retail investors that were late to the game and didn't understand what they were getting into lost a lot of money.  A subset of people made a killing.

 

This is precisely what happened.  End of story.  People need to move on.

[Ann]

40 minutes ago, GG1 said:

 

Obviously these stocks were not all paid in cash.   This is why investors should pass a test before they wade into something they don't understand

 

• Robinhood told users on Thursday, hours before the market open, to raise their cash buffers on several widely held stocks because they could face an account deficit.
• The trading platform said that to "help protect" customers from increased volatility before the US election, from Friday onward it would increase the minimum amount a user must hold in their account.
• "If you hold any of the affected stocks on margin, your buying power may decrease or your account may be in a deficit after these changes go into effect," Robinhood said.
• "If you do not resolve the margin call, we may need to sell off some or all of your stock to cover the call," it said.

I do not recall ever using the word "all."  

 

[GG1]

1 minute ago, Ann said:

I do not recall ever using the word "all."  

 

 

That's the point.  If there was even a fraction of stock bought on margin, the broker has the right to liquidate anything in the account to bring the margin in line.

 

My quotes from above were from an October story, where Robinhood was already getting concerned about its customers maxing out their margin accounts.   

 

Unsophisticated investors and margin accounts are a toxic mix, as Robinhood found out.    Serves them right for being stupid by defaulting rubes into dangerous accounts. 

 

But that doesn't mean they did anything illegal in liquidating margined positions yesterday.