The Great Hedge Fund Hunt of 2021

[Spock]

Most fun news story for years.

The Gamestop thing.

I just bought 1 share of Gamestop for the fun of being part of it.

The joy of watching this thing play out has already made the $220 I paid for the share worth it.

[bazodee]

I thought about doing the same {but didn't}, but the share price was $330 when I was considering it.

[Spock]

Among many others, one fun thing about this is that the fancy quant driven AI/Algorithmic trading strategies could not have predicted this.

I have a mental picture of an Algorithm just throwing its hands up in the air and saying "I don't what the fuck to do."

[Bob Juch]

Most fun news story for years.

The Gamestop thing.

I just bought 1 share of Gamestop for the fun of being part of it.

The joy of watching this thing play out has already made the $220 I paid for the share worth it.

I'm having fun watching the Bitcoin holders wring their hands over the price is $30,000 or $40,000 when I paid $0.06 each for mine.

[silverscreenselect]

Among many others, one fun thing about this is that the fancy quant driven AI/Algorithmic trading strategies could not have predicted this.

I have a mental picture of an Algorithm just throwing its hands up in the air and saying "I don't what the fuck to do."

The hedge funds will adjust their algorithms to take this sort of behavior into account. I've got no sympathy for them; they've been using often shady tactics for years to drive troubled companies under so they can make money off short sales. But they will figure it out.

The people who made (and kept) serious money off Gamestop are just doing what successful con artists have done for centuries. They know the strategy; they just didn't have a platform powerful enough to reach enough people to make it work before now.

When all the dust finally clears, I wonder how many of these small-time investors are going to walk away from this with real profits.

[Spock]

Among many others, one fun thing about this is that the fancy quant driven AI/Algorithmic trading strategies could not have predicted this.

I have a mental picture of an Algorithm just throwing its hands up in the air and saying "I don't what the fuck to do."

The hedge funds will adjust their algorithms to take this sort of behavior into account. I've got no sympathy for them; they've been using often shady tactics for years to drive troubled companies under so they can make money off short sales. But they will figure it out.

The people who made (and kept) serious money off Gamestop are just doing what successful con artists have done for centuries. They know the strategy; they just didn't have a platform powerful enough to reach enough people to make it work before now.

When all the dust finally clears, I wonder how many of these small-time investors are going to walk away from this with real profits.

One of my son's teachers bought 100 shares at $20. He sold yesterday for about $25,000.

Nobody is buying GameStop at $300 to make money. They are doing it for fun (or to hunt hedge funds) with the full knowledge that they might lose their money.

As Iowahawk said yesterday "you know, maybe it's not the small investors who need to educate themselves about market risks"

When you have hedge funds blowing themselves up over bad bets on shorting a failing mall-based retailer, maybe they are not as smart as you think they are.

What is the first thing they teach you in Finance 101.

1) When you buy a stock, the most you can lose is your investment.

2) When you short a stock, your potential loss is unlimited.

Looks like your brilliant hedge fund people always forget about number 2.

I haven't looked back much on it, but the Wall Street Bets guys have done something similar in the past on Hertz and another company.

Obviously, on a smaller scale, but apparently the Hedge fund(s) that blew up this week didn't fit that into their algorithms.

[silverscreenselect]

When you have hedge funds blowing themselves up over bad bets on shorting a failing mall-based retailer, maybe they are not as smart as you think they are.

If Game Stop is going under (which it very well may, despite the buying frenzy), then the decision to short the stock made sense. And if it made sense to short the stock at $10 a share, then it makes a heck of a lot more sense to short it at $300 a share. And if you think that the shorts are going to cave in at some point it makes sense to buy now on that theory. I do know that at some point in the not-too-distant future, Game Stop will be back in single digits because the company itself hasn't made a dime off all the transactions. (The publicity has probably led to looky-loos visiting their stores and possibly making a few impulse buys.)

I do know that:

1) Hedge funds are inherently risky. Some make big money and some go under. The better run ones will ride this out the way they ride out every losing proposition they run into.
2) Pump and dump schemes have been around forever. What hasn't been around forever is the ability to massively organize buyers in a concerted effort as is happening now.
3) Hedge funds will adjust their algorithms and strategies, sooner rather than later.
4) At some point the exchanges are going to step in the way they did with the computerized trading to limit massive swings that aren't based on the inherent value of a stock.
5) I could have a lot more fun with $300 than buying a share of Game Stop stock and seeing what happens.
6) A lot of small investors aren't satisfying themselves with buying the stock but are investing in options as well. And that reminds me of the old saying: "If you look around the table and you can't tell who the sucker is, it's you."

[Vandal]

Recently seen on Wall Street:

Spoiler

[Spock]

Gotta Love the Biden White House response to a question about this which was "We have the first female treasury secretary." (who, BTW, made major bank off of speaking fees to the Hedge Funds involved.)

https://www.dailywire.com/news/jen-psak ... -secretary


>>>"“Is the White House concerned about the stock market activity we’re seeing around GameStop and now some other stocks as well?” one reporter asked Psaki. “Have there been any conversations with the SEC about how to proceed?”

“Well, I’m also happy to repeat that we have the first female Treasury secretary and a team that’s surrounding her and often questions about markets,” Psaki replied."<<<

[silverscreenselect]

Gotta Love the Biden White House response to a question about this which was "We have the first female treasury secretary." (who, BTW, made major bank off of speaking fees to the Hedge Funds involved.)

https://www.dailywire.com/news/jen-psak ... -secretary


>>>"“Is the White House concerned about the stock market activity we’re seeing around GameStop and now some other stocks as well?” one reporter asked Psaki. “Have there been any conversations with the SEC about how to proceed?”

“Well, I’m also happy to repeat that we have the first female Treasury secretary and a team that’s surrounding her and often questions about markets,” Psaki replied."<<<

You conveniently omitted the rest of Psaki's response, which was "but our team is, of course, our economic team, including Secretary Yellen and others, are monitoring the situation.” Which, translated into political English is that Yellen and Biden haven't yet provided Psaki with specific information about what their response is going to be because in all likelihood, they're still waiting a couple of days to see how all this plays out.

Which is a far cry from the usual Trump response which was to call the reporter stupid for asking the question.

[Bob Juch]

Gotta Love the Biden White House response to a question about this which was "We have the first female treasury secretary." (who, BTW, made major bank off of speaking fees to the Hedge Funds involved.)

https://www.dailywire.com/news/jen-psak ... -secretary


>>>"“Is the White House concerned about the stock market activity we’re seeing around GameStop and now some other stocks as well?” one reporter asked Psaki. “Have there been any conversations with the SEC about how to proceed?”

“Well, I’m also happy to repeat that we have the first female Treasury secretary and a team that’s surrounding her and often questions about markets,” Psaki replied."<<<

You conveniently omitted the rest of Psaki's response, which was "but our team is, of course, our economic team, including Secretary Yellen and others, are monitoring the situation.” Which, translated into political English is that Yellen and Biden haven't yet provided Psaki with specific information about what their response is going to be because in all likelihood, they're still waiting a couple of days to see how all this plays out.

Which is a far cry from the usual Trump response which was to call the reporter stupid for asking the question.

We now know where Spock gets his misinformation.

[SpacemanSpiff]

What is the first thing they teach you in Finance 101.

1) When you buy a stock, the most you can lose is your investment.

2) When you short a stock, your potential loss is unlimited.

Looks like your brilliant hedge fund people always forget about number 2.

Or maybe they are full of number 2.

[Spock]

When you have hedge funds blowing themselves up over bad bets on shorting a failing mall-based retailer, maybe they are not as smart as you think they are.

If Game Stop is going under (which it very well may, despite the buying frenzy), then the decision to short the stock made sense. And if it made sense to short the stock at $10 a share, then it makes a heck of a lot more sense to short it at $300 a share. And if you think that the shorts are going to cave in at some point it makes sense to buy now on that theory. I do know that at some point in the not-too-distant future, Game Stop will be back in single digits because the company itself hasn't made a dime off all the transactions. (The publicity has probably led to looky-loos visiting their stores and possibly making a few impulse buys.)

I do know that:

1) Hedge funds are inherently risky. Some make big money and some go under. The better run ones will ride this out the way they ride out every losing proposition they run into.
2) Pump and dump schemes have been around forever. What hasn't been around forever is the ability to massively organize buyers in a concerted effort as is happening now.
3) Hedge funds will adjust their algorithms and strategies, sooner rather than later.
4) At some point the exchanges are going to step in the way they did with the computerized trading to limit massive swings that aren't based on the inherent value of a stock.
5) I could have a lot more fun with $300 than buying a share of Game Stop stock and seeing what happens.
6) A lot of small investors aren't satisfying themselves with buying the stock but are investing in options as well. And that reminds me of the old saying: "If you look around the table and you can't tell who the sucker is, it's you."

SSS>>>"6) A lot of small investors aren't satisfying themselves with buying the stock but are investing in options as well. And that reminds me of the old saying: "If you look around the table and you can't tell who the sucker is, it's you."<<<

Oh, those big, bad, scary options. Big deal. If you buy a Put or a Call, your potential loss is limited to the cost of the option; which to my understanding are understandingly expensive in Gamestop right now.

OTOH-If you sell a Put-your potential loss is from the Strike Price down to Zero with some of your losses offset by whatever you got for selling the Put. So your downside is limited.

If you sell a Call; your potential loss is unlimited as the stock price rises. However, I don't think many of the small investors are selling Gamestop Calls right now

[silverscreenselect]

If you buy a Put or a Call, your potential loss is limited to the cost of the option; which to my understanding are understandingly expensive in Gamestop right now.

I do know how options work.

If you make a bet at the race track, your potential loss is limited to the cost of the bet. A bunch of bettors still go home every day broke.

[Ritterskoop]

It sounds to me as if there are only a small number of people truly affected by this:

some few thousand Redditors who live in their moms' basements, who monkeyed with the market to poke the rich hedge fund types with a pointy stick

and the half a dozen billionaire rich hedge funds types who lost bigly.

I never liked the concept of selling short anyway; it seems to have made a game out of what was originally a way to own a small piece of a company you supported. And not a good game, at that.

[silverscreenselect]

Someone who knows about this sort of thing:

[Spock]

Re-Options

I guarantee you one thing.

If the stock market blows up over bad options losses on GameStop, it won't be the small individual investor who made those bets.

It will be on hedge funds and other Wall Street types.

There is speculation (pun intended) that Robin Hood (the company, not the people who invest there) might be another "John Corzine-MF Global" situation in that they might not be segregating customer funds and doing a lot a lot of funky things.

[Bob Juch]

Re-Options

I guarantee you one thing.

If the stock market blows up over bad options losses on GameStop, it won't be the small individual investor who made those bets.

It will be on hedge funds and other Wall Street types.

There is speculation (pun intended) that Robin Hood (the company, not the people who invest there) might be another "John Corzine-MF Global" situation in that they might not be segregating customer funds and doing a lot a lot of funky things.

Options have nothing to do with GameStop, it's naked short sales.

Robinhood just got $1 billion more from its investors.

Robinhood, one of the largest online brokerages, has grappled with an extraordinarily high volume of trading this week as individual investors have piled into stocks like GameStop. That activity has put a strain on Robinhood, which has to pay customers who are owed money from trades while posting additional cash to its clearing facility to insulate its trading partners from potential losses.

https://www.nytimes.com/2021/01/29/tech ... ising.html

[Spock]

BobJ>>>"Options have nothing to do with GameStop, it's naked short sales."<<<

You might be wrong on that. The "Short Squeeze" aspect of this is pretty self-explanatory, but I have seen numerous references to a "Gamma Squeeze" aspect as well.

I didn't know what that was, but apparently, those magnificent bastards living in their mothers' basements magnified their impact with a Gamma squeeze which involves the options.

They bought a lot of low strike price calls at a cheap price with the call seller's risk being unlimited. Most likely, the call sellers are hedge fund and other Wall Street types.

[silverscreenselect]

They bought a lot of low strike price calls at a cheap price with the call seller's risk being unlimited. Most likely, the call sellers are hedge fund and other Wall Street types.

Someone who sells a call of a stock they own does not have unlimited risk. Selling a naked call, on the other hand, does have a high risk. My guess is that the people who sold the calls originally are the ones behind the big stock runup. They bought the stock slowly and quietly, lit the fire, and then cashed in their chips when the price skyrocketed. Jordan Bellfort feels the way I do, that this is a pump-and-dump that will be very difficult to prove.

[Bob Juch]

BobJ>>>"Options have nothing to do with GameStop, it's naked short sales."<<<

You might be wrong on that. The "Short Squeeze" aspect of this is pretty self-explanatory, but I have seen numerous references to a "Gamma Squeeze" aspect as well.

I didn't know what that was, but apparently, those magnificent bastards living in their mothers' basements magnified their impact with a Gamma squeeze which involves the options.

They bought a lot of low strike price calls at a cheap price with the call seller's risk being unlimited. Most likely, the call sellers are hedge fund and other Wall Street types.

Please give a link to a citation.

[Spock]

BobJ>>>"Options have nothing to do with GameStop, it's naked short sales."<<<

You might be wrong on that. The "Short Squeeze" aspect of this is pretty self-explanatory, but I have seen numerous references to a "Gamma Squeeze" aspect as well.

I didn't know what that was, but apparently, those magnificent bastards living in their mothers' basements magnified their impact with a Gamma squeeze which involves the options.


They bought a lot of low strike price calls at a cheap price with the call seller's risk being unlimited. Most likely, the call sellers are hedge fund and other Wall Street types.

Please give a link to a citation.

FYI, for future use, there is a computer program called Google, available at

Google.com

All you have to do is type in (in this case) "Gamma Squeeze GameStop" into the textbox which is the box below "GOOGLE" in the center of the page and it will bring lots of stories about it to your attention in milliseconds.

Here is one of the first ones I found titled "Gamestop's Gargantuan Gamma Squeeze" at a website called Motley Fool.

But knock yourself out. Once you learn how to use Google, you will find lots of stories on the topic. But here is the fun part. Google also works for other things as well. You can search for any topic that interests you.

https://www.fool.com/investing/2021/01/ ... a-squeeze/

[Bob Juch]

BobJ>>>"Options have nothing to do with GameStop, it's naked short sales."<<<

You might be wrong on that. The "Short Squeeze" aspect of this is pretty self-explanatory, but I have seen numerous references to a "Gamma Squeeze" aspect as well.

I didn't know what that was, but apparently, those magnificent bastards living in their mothers' basements magnified their impact with a Gamma squeeze which involves the options.


They bought a lot of low strike price calls at a cheap price with the call seller's risk being unlimited. Most likely, the call sellers are hedge fund and other Wall Street types.

Please give a link to a citation.

FYI, for future use, there is a computer program called Google, available at

Google.com

All you have to do is type in (in this case) "Gamma Squeeze GameStop" into the textbox which is the box below "GOOGLE" in the center of the page and it will bring lots of stories about it to your attention in milliseconds.

Here is one of the first ones I found titled "Gamestop's Gargantuan Gamma Squeeze" at a website called Motley Fool.

But knock yourself out. Once you learn how to use Google, you will find lots of stories on the topic. But here is the fun part. Google also works for other things as well. You can search for any topic that interests you.

https://www.fool.com/investing/2021/01/ ... a-squeeze/

Don't be a condescending asshole.

There are not plenty of articles on GameStop options. The Robinhood trading has been almost solely regular sales.

[Spock]

SSS>>>"If you make a bet at the race track, your potential loss is limited to the cost of the bet. A bunch of bettors still go home every day broke."<<<

1932 called. It wants its gambling reference back.

[Spock]

SSS>>>"If you make a bet at the race track, your potential loss is limited to the cost of the bet. A bunch of bettors still go home every day broke."<<<

1932 called. It wants its gambling reference back.

BobJ>>>Don't be a condescending asshole.

There are not plenty of articles on GameStop options. The Robinhood trading has been almost solely regular sales<<<<

Takes one to know one.

Please cite a link that this pump and dump is almost solely "regular sales" and that a Gamma squeeze played little part.