Your Portfolio (16 Viewers)

Things are moving all over the place because of it.

I have absolutely no idea what's going on haha

Greggs said:

99% of Gamestop shares were owned by shorts (People who borrow shares in the hope a company fails) The people of Reddit have decided to attack these shorts by all grouping together and buying in - taking the price up and burning the shorts. Its beautifully ironic. They'll make a movie about this

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So now those who have borrowed the shorts will have to pay for them at their new crazy price?

Mr Panda said:

Can't claim that I fully understand still mind!

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Shorting is agreeing to borrow shares (usually at a nominal rent) for x period, with a promise to give back those shares at a date in the future, and then selling those shares on the conviction that they will go down in price. So, I commit to paying back at a later date x10 shares at £10 each, in the belief that I can sell them now for a hundred quid and buy them back at £5 each at a later date.

If this is done on a particularly large scale, as the hedge funds have done, selling becomes a self-fulfilling prophecy. The shorter sells the shares, say at £10 each. If there are a lot of shorters or a few holding very large short positions, as in this case, B see this so sells, C sees this and sells, and so on. As more shares are sold the price comes down. The shorter can now step in and buy x10 shares back, say at £5 each, give the shares back, and pocket £50.

But the hedge funds got greedy. With another £100 stake they could now borrow x20 shares at £5 each, sell these, SP goes down, buy back the 20 shares, pocket the difference. With each repeat of the cycle, the number of shares the shorter can afford to borrow increases exponentially.

The downside risk for the shorter is that if the price rises over the period that they hold the borrowed shares then they could end up having to pay back more than they sold them for.

The important piece of the jigsaw is that at any one time there are only so many of a company's shares in circulation, and which depends on the number of current buyers and sellers. It's referred to as the 'free-float' i.e. freely available shares.

In this case, the shorters got greedy in their short positions. The number of shares borrowed exceeded the number of readily available shares - which at some point, remember, they need to buy back.

So if they all tried to buy back at the same time there would be a liquidity squeeze - few shares, many buyers.

Somebody noticed that the number of short positions held (i.e. number of shares that would need to be bought back) far exceeded the free float. If then, somebody steps in and buys shares en mass, the effect is to further limit the number of freely available shares to the market, including to the shorter who needs to buy back shares at a given date. The SP begins to rise not only through the actions of those going 'long' but also because the shorters are now scrambling to buy back shares at a price below which they paid for them.

The SP rises keep rising to the point where all short positions are being engulfed - those shares borrowed at £10 each now cost £15 each. You now have not only buyers coming in to go 'long' but you have multiple short positions being 'closed out', with shorters effectively eating themselves in the process. Another self-fulfilling prophecy, only upwards.

One of the points made in the video is that shorting is a risky business - as indeed is any spread betting. If you buy shares, rather than borrow them with a promise to repay, your only downside is the amount you have invested, say £100. If the SP goes to 0p, you have lost £100. With shorting and all spread betting the downside is in theory infinite. You may borrow x10 shares at £10, but if they go up to £1000 over the period then you have to buy back x 10 shares costing £10000 in total etc.

Now, whilst shorting is carried out by small-time individuals as well as the wealthy and big institutions, when you or I borrow shares or spread bet short we are allowed only a small margin of risk before effectively we need to either put more money in our account (say, an extra 20 quid because those x10 shares we need to give back are now worth £120) or 'close' our 'position', say with £20 loss. However, it appears that to support shorting on the scale witnessed with the likes of GameStop and Blackberry, the hedge funds were allowed to carry very large margin calls, potentially exposing these to big losses, which is a regulatory risk

One hedge fund, Melvin Capital Management, reportedly had to be bailed out with more than $2bn to cover losses on some shares, including Gamestop, while another short-seller, Citron Research, has also withdrawn from the fray.

Greggs said:

Markets are brutal today. Must tell yourselves not to get emotional! Saying that - i'm tempted to sell all my holdings and buy shit loads of lego.

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Stocks in Lego or actual Lego?

Guy at work just telling me how the trainer market works and how his brother paid his way through Uni buying and selling trainers. Mental.

I have no luck with this shit.

I’ve:

- thrown out a laptop with 20-25 BTC on because “Bitcoin won’t ever be anything”
- Thrown out copies of PS1 games now worth over £500 each
- Sold old consoles for peanuts or given them away only for them to be worth hundreds a few years later
- Turned down a chance to buy into a business that’s quadrupled in size in two years because I didn’t think it was going anywhere.

Basically whatever I keep ends up being worthless and whatever I throw away is worth a fortune. I’ve just accepted investing isn’t for me now.

Greggs said:

unfortunately you can't buy Lego shares. But it's actually a good idea to buy and hold sets of lego. Have a read

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Got a massive box in the loft from when my son was little you can sell it by the kilo but not for much.
If it had been kept in its sets in the original boxes they'd be worth a fortune but unfortunately we didn't bother!

So I should keep holding on to all my old City match programmes from the 60s and 70s then? When would be a good time to sell?

shmmeee said:

- thrown out a laptop with 20-25 BTC on because “Bitcoin won’t ever be anything”

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I'm sorry, you did what?

SBT said:

I'm sorry, you did what?

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Did it when it first came out as a geeky “lol look at this fun thing” thing. When you could mine on a simple laptop and get a coin every few days or whatever.

Stopped after a while and threw the laptop out a couple of months later without a thought. Of course a year or two later...

And yes, I did consider going down the tip and digging through.

Bejesus Shmmee, not sure how I'd get over that one. I suppose you also have to factor in that you might have sold it on a much lower high than now (well, that's me - buy low, sell not quite so low...)

dubed said:

Bejesus Shmmee, not sure how I'd get over that one. I suppose you also have to factor in that you might have sold it on a much lower high than now (well, that's me - buy low, sell not quite so low...)

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Oh I’d have sold out at £1000 almost certainly. Then I’d be on here with an even worse story

Are the events surrounding GME having an effect on the whole market?

I've only noticed since that's been happening that all my funds are going down last couple of days. I'm not making any decisions as a result and I'm in it for the long haul...but is the wallstreetbets thing hitting other areas?

Mr Panda said:

Are the events surrounding GME having an effect on the whole market?

I've only noticed since that's been happening that all my funds are going down last couple of days. I'm not making any decisions as a result and I'm in it for the long haul...but is the wallstreetbets thing hitting other areas?

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Seems that way:

Been down the last 2 days, and hit sharply yesterday, and back up today. For me, I'm going to call time on my funds and stick to the odd opportunity on shares (which are quicker to sell, and to sell at the right price, than funds!). Just a bit concerned about what Feb will bring. Big sell-offs are always preceded by non-sequential large day drops over a short period, so will be watching on the side for now. I've always made my real gains from short term trading anyhow.

Just about every share I've been looking at has gone up 20% even since mid-Dec. And now it looks like the really big herd is turning up, so got me nervous.

I know folks have been calling crash ever since the last one, but jermery is to be listened too, even if not acted upon.




Waiting for the Last Dance

Much prefer it when Margot Robbie explains shorting whilst in the bath tbh.

So what I'd like to know is what platforms they use to borrow the shares and how much do they have to pay?

dubed said:

Shorting is agreeing to borrow shares (usually at a nominal rent) for x period, with a promise to give back those shares at a date in the future, and then selling those shares on the conviction that they will go down in price. So, I commit to paying back at a later date x10 shares at £10 each, in the belief that I can sell them now for a hundred quid and buy them back at £5 each at a later date.

If this is done on a particularly large scale, as the hedge funds have done, selling becomes a self-fulfilling prophecy. The shorter sells the shares, say at £10 each. If there are a lot of shorters or a few holding very large short positions, as in this case, B see this so sells, C sees this and sells, and so on. As more shares are sold the price comes down. The shorter can now step in and buy x10 shares back, say at £5 each, give the shares back, and pocket £50.

But the hedge funds got greedy. With another £100 stake they could now borrow x20 shares at £5 each, sell these, SP goes down, buy back the 20 shares, pocket the difference. With each repeat of the cycle, the number of shares the shorter can afford to borrow increases exponentially.

The downside risk for the shorter is that if the price rises over the period that they hold the borrowed shares then they could end up having to pay back more than they sold them for.

The important piece of the jigsaw is that at any one time there are only so many of a company's shares in circulation, and which depends on the number of current buyers and sellers. It's referred to as the 'free-float' i.e. freely available shares.

In this case, the shorters got greedy in their short positions. The number of shares borrowed exceeded the number of readily available shares - which at some point, remember, they need to buy back.

So if they all tried to buy back at the same time there would be a liquidity squeeze - few shares, many buyers.

Somebody noticed that the number of short positions held (i.e. number of shares that would need to be bought back) far exceeded the free float. If then, somebody steps in and buys shares en mass, the effect is to further limit the number of freely available shares to the market, including to the shorter who needs to buy back shares at a given date. The SP begins to rise not only through the actions of those going 'long' but also because the shorters are now scrambling to buy back shares at a price below which they paid for them.

The SP rises keep rising to the point where all short positions are being engulfed - those shares borrowed at £10 each now cost £15 each. You now have not only buyers coming in to go 'long' but you have multiple short positions being 'closed out', with shorters effectively eating themselves in the process. Another self-fulfilling prophecy, only upwards.

One of the points made in the video is that shorting is a risky business - as indeed is any spread betting. If you buy shares, rather than borrow them with a promise to repay, your only downside is the amount you have invested, say £100. If the SP goes to 0p, you have lost £100. With shorting and all spread betting the downside is in theory infinite. You may borrow x10 shares at £10, but if they go up to £1000 over the period then you have to buy back x 10 shares costing £10000 in total etc.

Now, whilst shorting is carried out by small-time individuals as well as the wealthy and big institutions, when you or I borrow shares or spread bet short we are allowed only a small margin of risk before effectively we need to either put more money in our account (say, an extra 20 quid because those x10 shares we need to give back are now worth £120) or 'close' our 'position', say with £20 loss. However, it appears that to support shorting on the scale witnessed with the likes of GameStop and Blackberry, the hedge funds were allowed to carry very large margin calls, potentially exposing these to big losses, which is a regulatory risk

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great explanation dubed (clearer than the reports !)

ps anyone interested in shorting Betting on Zero (Netflix) is worth a watch. Fundamentally disagree with it, although quite liked it done to Herbalife as there is at least a (pretence of) moral angle to it. Also been said before but The Big Short film (also on Netflix I think), great film.

Edit - just seen purplebins comment ! Agreed !!

dubed said:

One hedge fund, Melvin Capital Management, reportedly had to be bailed out with more than $2bn to cover losses on some shares, including Gamestop, while another short-seller, Citron Research, has also withdrawn from the fray.

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This is on Reddit at ‘Wall Street Bets’. They saw the firm stacking lots of cash on shorting GameStop and so decided to beat them at their own game. More power to them I say and it’s a disgrace that a bailout is being spoken about for a company that got beat on the stock market by internet trolls. They were after all trying to profit from driving a real company out of business.

Funny there is always a bail out for the hawkish capitalists when they fuck up.

wingy said:

So what I'd like to know is what platforms they use to borrow the shares and how much do they have to pay?

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There are two main ways to short. One is spread betting, in which there is no actual transaction in shares, simply a bet (but possibly may involve covering actions by the platform in the shares market - I don't know), or by actually undertaking shorting in the true sense of the word, which is to buy a contract for difference (CFD) through a broker. I've tried spread betting but never used CFDs so don't know the cost.

Two large UK platforms for spread betting and CFDs are IG index and CMC


Personally, neither are for me!

Brighton Sky Blue said:

This is on Reddit at ‘Wall Street Bets’. They saw the firm stacking lots of cash on shorting GameStop and so decided to beat them at their own game. More power to them I say and it’s a disgrace that a bailout is being spoken about for a company that got beat on the stock market by internet trolls. They were after all trying to profit from driving a real company out of business.

Funny there is always a bail out for the hawkish capitalists when they fuck up.

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As usual, the cheif winners weren't little guys - sure, some may have made small double digits, but most of them are just johnny come lately pump and dump sheep.

It looks possibly like it wasn't some back street punters who hit on the idea: instead, they became aware of the activity being played out by the large players. And whilst I am not at all saying that in this case there was boiler room activity, this sort of thing is believed to occur in markets.

From today's telegraph -

Investors sit on huge gains from GameStop

Value of Activist investor Ryan Cohen's stake in GameStop worth about $2.2bn after a rollercoaster day for the shares

Fund managers are sitting on huge gains even after the Reddit-fuelled bubble in GameStop shares appeared to pop.

As the stock took a rollercoaster ride on Thursday, dropping by nearly two thirds in one point, some managers had cashed out and others were still up by thousands of percentage points.

Ryan Cohen, the founder of Chewy.com and an activist shareholder in GameStop, watched as the value of his holding slumped by roughly a third as trading stabilised.

His 13pc stake in GameStop bought for just $76m in December, had been worth about $3bn at the start of trading on Thursday but was down to about $2.25bn by mid-afternoon.

While retail investors have gleefully acquired shares in the struggling videogames retailer, sending its shares soaring, traditional fund managers have also ridden the wave to huge gains.

According to its latest US filings, one UK quant fund, Quadrature Capital, bought 130,000 GameStop shares last year when they were worth less than $10.
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Its shares would have been worth about $32m in afternoon trading on Thursday. The fund did not respond to a request for comment on whether it still held the position.
Tyndall Investment Management, a fund founded by former Jupiter fund manager Alex Odd, snapped up 80,000 shares in total in December and early January. It sold its final shares on January 26.

Felix Wintle, manager of its North American fund, said: “We believed the bear case was complacent. The stock was sold 144pc short, but you had an activist shareholder with a strong track record in Ryan Cohen and a whole new management team - proof the business still had validity. We hoped it might hit $100 in three years, but it did it in about three weeks.”

Meanwhile, David Harding’s Winton Group owned about 20,000 shares in GameStop, according to a quarterly filing. Winton declined to comment on its market positions.

GameStop’s biggest shareholders including Fidelity, BlackRock and Vanguard, all stand to make huge gains even after the massive pullback in trading on Thursday that saw GameStop shares plunge 65pc.

Other substantial holders include Norway’s central bank and Michael J Burry.
Meanwhile, other fund managers have secured trades granting them huge returns on shares and options held in companies pumped by retail investors on the Reddit forum WallStreetBets.

They include Silverlake, a major creditor of Odeon owner AMC, which owned a $600m convertible bond that would flip when its share price reached more than $13, according to the Financial Times.

New York fund Mudrick Capital swapped $100m in debt for shares that are now worth $273m.

The incredible surge in GameStop’s share price was fuelled by an assault by amateur online traders determined to squeeze out shortellers in the stock. The buying frenzy was egged on by users of the internet forum WallStreetBets amid claims of market manipulation on both sides.

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From another Telegraph article today

Neil Wilson at markets.com said that the saga was "going to end in tears – these things always, always do".

"It just smells bad and looks like manipulation that relies on the greater fool theory for anyone to make money," he said.

"Not a good look and it’s being justified with high mindedness like ‘democratisation’ of markets. Pump and dump is all it looks like to me."

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and the FT today

The Reddit army of day traders has handed gains worth hundreds of millions of dollars to two big-name creditors of struggling cinema operator AMC Entertainment, after the investment firms swapped risky debt for equity that has skyrocketed in value. The stock price of AMC, the world’s largest cinema operator, soared 300 per cent to $19.90 on Wednesday, as individual investors drove up the price of the stock. That exceeded the trigger price on $600m of convertible bonds held by Silver Lake Group. The firm has now swapped the debt — which paid interest of 2.95 per cent — into AMC stock at a price of $13.51, according to regulatory filings.

Is it true some people had their shares sold when the app went down, coz the price went down and it was “margin call”? And couldn’t put money in to keep it going,

I guess we won't know until Robinhood are pressed further on the matter. But if that's the case, the law suits now being prepared by folks are going to fly. Maybe time to short Robinhood? (Ah, it's not publicly listed, so you'd need to short any publicly traded investment company behind it )

Tenev were allowing folks to sell, simply not buy.

More telegraph

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Dogecoin, a digital currency that started out as a joke, has soared 369pc in the past 24 hours as Reddit investors pour into the digital asset.

The crypto now has a total value of $6.69bn with each "Doge coin" valued at $0.052223 (£0.037810) as of 8.48am, according to figures from CoinDesk. Doge briefly spiked over 800pc to $0.40 at around 3.25am before crashing heavily into negative territory.

Created in 2013, the Dogecoin currency was based around the popular Doge meme, which featured a picture of a Shiba Inu. Its recent resurgence is believed to have begun after members of the subreddit r/SatoshiStreetBets began posting about getting it up to a $1 valuation, inspired by the recent Redditor-led charge on GameStop stock.

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Time to head for the exits....

Been looking into getting into trading for some time now. But with Exams and work being intense recently haven't had the time. It seems like a pretty crazy time to start now though haha. Maybe I'll give it a miss