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Feb 11, 2021 at 22:15 comment added Bob Baerker It's important to differentiate paper gains versus money made. Paper gain on physical shares from $20 to $500 is $480 times the outstanding shares or $33 billion. That doesn't mean that the $33 billion was realized gains but it sure does mean that lots of people made lots of money on the up move (those that sold). And dropping $450 from the $500 peak is the mirror image (longs lost, shorts won). None of this includes the additional 140% (at its peak) of shorting because that's a zero sum game (whatever the shorters lost on the up move, someone else made). I have no retail/inst. stats.
Feb 11, 2021 at 21:38 comment added supercat @BobBaerker: I'm sure people who bought the stock for under $50/share and sold it for $200+ made a lot of money off of people who bought it for $200+. Do you have any figures that would separate out how retail investors who bought retail shares at over $200 did? If some shareholders made $33B of which $6B came from MC, where did the other $27B come from if not from other people who bought at over $200/share.
Feb 11, 2021 at 18:55 comment added Bob Baerker You can fabricate any set of what you believe to be realistic circumstances for yourself as well as offer your opinion of what expected losses would be if one bought at $200 but the cold hard fact is that the one day rise from $250 to $500 generated over $17 billion for physical share owners. The synthetic longs also gained $250 but that came out of the pockets of shorters. The run up from $20 to $500 generated over $33 billion for the physical share owners of which $5-6 billion came out of the pocket of Melvin Capital. Expected loss of 50 cents on the dollar? LOLOL. Try billions of gains
Feb 11, 2021 at 18:28 comment added supercat ...might expect to be able to have enough advantage over other market participants to have a net positive expectation, but unless someone has a large identifiable advantage over other market participants, buying into a bubble market will on average be a severely losing play.
Feb 11, 2021 at 18:21 comment added supercat @BobBaerker: There would be no realistic set of circumstances by which those buying at prices over $200 could expect to on aggregate avoid losing more than 50 cents on the dollar. Even if one optimistically estimated that the price would bottom out at $100 rather than $50, a sale of a share at $200 guarantees a net loss of $100, whether the person who bought it at $200 loses $100, or whether that person sells it for $300 earning a $100 profit while the $300 purchaser loses $200. Someone who can monitor the order book in real time and respond instantly to changes therein...
Feb 11, 2021 at 18:15 comment added Bob Baerker @eps - Good point. RH makes a lot of money from payment for order flow so they're likely to be sympathetic. However, whether sympathetic translated into affecting RH's decision making is one of those things that is rarely discovered unless some fool left a paper trail and the SEC finds it. Otherwise, there will be the truth as well as wad of conspiracy theories put out there by the disgruntled. Re point #2, some of this may have been reasoned decision making and some of it just speculative herd mentality. Neither really matters as long as you made money :->)
Feb 11, 2021 at 18:07 comment added eps I think another thing that is missed is that there were also people buying small amounts of shares not because they thought they were going to make money, but simply because they thought people doing that collectively would cause significant damage to the hedge funds. How many knowingly were sacrificing some dollars vs thinking they were going to get rich is a good question. But from reading twitter there were definitely at least some who were knowingly burning cash to make a point.
Feb 11, 2021 at 18:00 comment added eps @BobBaerker It makes me wonder if Robinhood was in any way sympathetic to the hedge fund when they restricted GME trading or if it was completely about their capital requirement and liquidity yeah that's a great question. like I said, RH has every incentive to act nice to these sorts of funds in general because their business model depends on it. so even if there isn't a direct connection (which the podcast points out) it should def raise some eyebrows.
Feb 11, 2021 at 17:57 comment added Bob Baerker @supercat - Again, you're lost in the details. You buy shares if you think it's going higher or if you're covering a short. The multitude of reasons for making either of those 2 decisions is the process not the action. FWIW, 1/28 was the only day that GME traded at $200. So on the way from $483 to $112 it was bad if going long and good if covering a higher short sell. And when it then rose from $112 to $325, buying at $200 was a good idea. Also, when GME was trading 60 to 200 million shares a day (1/22 to 1/28), no one was going to destabilize the market, especially a Robinhood trader.
Feb 11, 2021 at 17:37 comment added supercat @BobBaerker: I slightly oversimplified, but the only reasons I can think of that a person would have have sought to buy GME shares at $200 would be: (1) the person was a sucker, (2) the person hoped to entice and fleece other suckers, (3) the person was willing to throw out large amounts of money to destabilize the market, or (4) the person needed to resolve a short. I don't think people in group #4 would be trying to purchase retail shares from RH. Are there any reasons I'm missing?
Feb 10, 2021 at 22:26 comment added Bob Baerker @supercat - That's correct. I stated (not implied) that Robinhood MIGHT HAVE BEEN sympathetic to the hedge funds given the connection b/t the two Citadels. MIGHT is a conditional verb suggesting the possibility unlike your declarative conclusion that in reality it was protecting just about everyone from those hoping to fleece suckers. That's merely your dogmatic opinion.
Feb 10, 2021 at 21:11 comment added supercat @BobBaerker: Your suggestion that RH might have been "sympathetic to the hedge funds" sounded like you were implying that RH was acting to protect hedge funds at the expense of retail investors, when in reality it was protecting just about everyone from those hoping to fleece suckers for ever-increasing amounts.
Feb 10, 2021 at 21:02 comment added Bob Baerker @supercat - While I agree with your assessment, it's secondary to Robinhood's undercapitalization which required a $3.4 billion cash infusion in order to continue operations due to the GME short squeeze. And given recent fines settled with the SEC, I doubt that RH's primary consideration is their suckers.
Feb 10, 2021 at 20:57 comment added supercat @BobBaerker: Regardless of the reasons for RH's actions, they served to prevent a lot of suckers from getting fleeced in ways that would have further destabilized the market, and guard the interests of those who were acting to stabilize it.
Feb 10, 2021 at 16:30 comment added Bob Baerker Citadel Securities is a Market Maker and there's a hedge fund named Citadel. I just read that they used to be under the same LLC but had a Chinese Wall between them and now they're (supposedly) completely separate LLCs. It makes me wonder if Robinhood was in any way sympathetic to the hedge fund when they restricted GME trading or if it was completely about their capital requirement and liquidity.
Feb 10, 2021 at 16:24 comment added Ross Millikan If you place a limit order it will not be filled above the limit price. You can(could in the past?) also place an all-or-none order which requires you get the entire order filled. I think you can do both, so here you would get no stock at all.
Feb 10, 2021 at 15:54 comment added supercat @RossMillikan: I'm trying to understand the nature of collateral requirements. If the effect of the scenario I described would be that the order would get cancelled, then the participants would face no risk, but if ten shares would get purchased then the person placing the market order would face a risk beyond the purchase price, and the broker would face a counter-party risk if the purchaser defaults, and collateral would seem necessary to cover those risks. Do the latter risks apply, or would the purchase simply be cancelled so as to nullify them?
Feb 10, 2021 at 5:42 comment added Ross Millikan @supercat: that is a different question. It should not be asked in a comment.
Feb 9, 2021 at 23:40 comment added supercat If one opens a brokerage account with $1000 and places a market order for 10 shares of AcmeCo at a time when the ask price is $90, but only one share is available at that price and no other shares are available for less than $150, would one risk being stuck having to pay a bill for an extra $440 or $500, or would the order be partially fulfilled, or what?
Feb 9, 2021 at 22:45 history edited eps CC BY-SA 4.0
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Feb 9, 2021 at 22:39 history answered eps CC BY-SA 4.0