Business & Finance The GameStop Short Stock Sensation

Bear Ribs said:
I don't quite get why Robinhood ran out of cash and thus couldn't allow people to buy GME stock, but somehow still had cash on hand to buy all the other stocks in the exchange. I'd think if you're out of cash, that means you no longer have cash. Money isn't selective about what it's spent on, the fact that they are only out of money for specific stocks but have the cash for others makes me doubt the whole "out of money" narrative.
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This whole thing has taught me one thing: I'm really fucking dumb.

Lol.

Seriously. As this was going on I was reading statements from robinhood on the changes they were making and I didn't even know what that crap means.

So now I'm making it a goal to learn this crap
 
Billionaire Hedge Fund manager and Owner of the New York Mets Steve Cohen is the latest helpless victim of the vicious alt tech stock market manipulating White Supremicists. 😢

www.usatoday.com

New York Mets owner Steve Cohen's Twitter account no longer active

New York Mets owner Steve Cohen's company, Point72 Asset Management, lost money in GameStop stock surge. He gave no reason for his Twitter exit.
www.usatoday.com
 
Bear Ribs said:
I don't quite get why Robinhood ran out of cash and thus couldn't allow people to buy GME stock, but somehow still had cash on hand to buy all the other stocks in the exchange. I'd think if you're out of cash, that means you no longer have cash. Money isn't selective about what it's spent on, the fact that they are only out of money for specific stocks but have the cash for others makes me doubt the whole "out of money" narrative.
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Money isn't selective about what it's spent on, but the collateral ratio requirement from DTCC is different from stock to stock based on their volatility stats, which means the same amount of collateral will not be sufficient guarantee for the same amount of sales of different stocks.

Rocinante said:
This whole thing has taught me one thing: I'm really fucking dumb.
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Nah, this is rather complicated minutiae of the internal operations of a very complex finance operation. One of the huge parts of what has made Robin Hood successful is they've streamlined it out so most of those details get handled automagically by them and the retail customer doesn't have to worry about it.
 
ShadowArxxy said:
Money isn't selective about what it's spent on, but the collateral ratio requirement from DTCC is different from stock to stock based on their volatility stats, which means the same amount of collateral will not be sufficient guarantee for the same amount of sales of different stocks.
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So... collateral dollars become selective, and can be spent on the purchase of McDonald's stock but not GameStop? Unless for some reason they maintain a separate and inmiscible pool of collateral for each stock, this just adds an extra remove, but doesn't explain why they can't trade GME yet still have sufficient collateral for all the other stocks.
 
Bear Ribs said:
So... collateral dollars become selective, and can be spent on the purchase of McDonald's stock but not GameStop? Unless for some reason they maintain a separate and inmiscible pool of collateral for each stock, this just adds an extra remove, but doesn't explain why they can't trade GME yet still have sufficient collateral for all the other stocks.
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You know that is a thing. Like if they do not have the capital to cover stock how is it they only stopped buying of those few ones? Gamestop was the highest prices one the stopped buys on but like S&P, Amazon and the like still have way higher prices. Every if the coverage percentage for gamestop is way higher its not like they had NO capital?
 
Bear Ribs said:
So... collateral dollars become selective, and can be spent on the purchase of McDonald's stock but not GameStop? Unless for some reason they maintain a separate and inmiscible pool of collateral for each stock, this just adds an extra remove, but doesn't explain why they can't trade GME yet still have sufficient collateral for all the other stocks.
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The collateral ratio required is a function of the price and volatility of the stock, both of which have skyrocketed for GME. It's not some new rule that they invented just for this situation, it's a general thing.

(Think of it this way: it's basically a fractional banking system twice over, where Robin Hood provides collateral assets on behalf of its users that is considerably in excess of what the users have actually put up, but that collateral is then leveraged for buying power through DTCC, which will allow another fractional advantage, but that is at a variable rate based on their risk, which is a function of price and volatility. They're allowed to dictate that because it's *their* money actually covering the sale, not the collateral much less the user funds.)
 
ShadowArxxy said:
The collateral ratio required is a function of the price and volatility of the stock, both of which have skyrocketed for GME. It's not some new rule that they invented just for this situation, it's a general thing.

(Think of it this way: it's basically a fractional banking system twice over, where Robin Hood provides collateral assets on behalf of its users that is considerably in excess of what the users have actually put up, but that collateral is then leveraged for buying power through DTCC, which will allow another fractional advantage, but that is at a variable rate based on their risk, which is a function of price and volatility. They're allowed to dictate that because it's *their* money actually covering the sale, not the collateral much less the user funds.)
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That doesn't really answer why they have enough collateral for every other stock on the market simultaneously but the collateral somehow isn't there for Gamestop (and a couple others, I know). And of course it just kicks the can to who decided to raise the collateral requirements so much.

Further somehow this collateral rule doesn't prevent Robinhood customers from selling their stock (and there's reports Robinhood is even selling it without the owner's permission), only buying. How come they have enough collateral to sell it but not buy it? Does collateral consist of some kind of diode dollars that can only flow in one direction?
 
Huh? It's reasonably self-evident that you don't need any collateral to sell what's already in your hand, only to make leveraged buys.

It's like buying a house. You need to take out a loan unless you're rich enough to buy it with cash, and the amount of down payment and interest rate you have to pay are going to vary based on your financial state. But you don't need to take out a loan to *sell*.
 
ShadowArxxy said:
Huh? It's reasonably self-evident that you don't need any collateral to sell what's already in your hand, only to make leveraged buys.

It's like buying a house. You need to take out a loan unless you're rich enough to buy it with cash, and the amount of down payment and interest rate you have to pay are going to vary based on your financial state. But you don't need to take out a loan to *sell*.
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False comparison, and ignoring the point entirely. I don't need a loan to sell my house, but whoever is buying my house needs a loan to make the purchase. Further even cash-up-front traders can't buy on Robinhood so the comparison falls flat on it's face.

I can't buy Gamestop on Robinhood because collateral, but somebody is able to buy because it can be sold on Robinhood. How is that somebody is able to bypass these uber-restrictive collateral requirements, and how come it's being selective about which somebody is allowed to do so? If it was "Gamestop can't be traded at all" you'd have a reasonable point but the fact that it's selective with these Diode Dollars that can only flow in one direction that makes things so incredibly suspicious.

And that still ignores the fact that they have sufficient collateral for the entire rest of the stock market and somehow the well runs dry very specifically for small timers buying Gamestop with their selective diode dollars. Does the collateral for Gamestop really require more money than the entire rest of the stock market combined?
 
Bear Ribs said:
Further somehow this collateral rule doesn't prevent Robinhood customers from selling their stock (and there's reports Robinhood is even selling it without the owner's permission), only buying. How come they have enough collateral to sell it but not buy it? Does collateral consist of some kind of diode dollars that can only flow in one direction?
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Selling the stock means that you've gotten rid of risk and turned it into something safe (cash). Buying stock is what is risky.
Bear Ribs said:
I can't buy Gamestop on Robinhood because collateral, but somebody is able to buy because it can be sold on Robinhood. How is that somebody is able to bypass these uber-restrictive collateral requirements, and how come it's being selective about which somebody is allowed to do so? If it was "Gamestop can't be traded at all" you'd have a reasonable point but the fact that it's selective with these Diode Dollars that can only flow in one direction that makes things so incredibly suspicious.
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It's sold to someone off of Robinhood. Robinhood isn't some closed loop where sales only happen inside robinhood. As a matter of fact, Robinhood wouldn't work if it was, as it is a no commission platform. The way Robinhood works is by bundling buys and sells and selling the info in advance to Wall Street, and this info is only useful if it affects the rest of the market. There's nothing really wrong about this if you plan to buy and hold for a long while, but it is a problem for people trying to day trade.

This bundling (and other things) causes Robinhood to need a middleman, which needs the collateral. But if you buy using the normal methods (with commisions), there's no middleman, so no problem.
 
Abhorsen said:
Selling the stock means that you've gotten rid of risk and turned it into something safe (cash). Buying stock is what is risky.
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The risk is being assumed by the person buying the stock, not Robinhood. Further this doesn't explain why Robinhood can sell to Citadel but not to some random Redditor. Except of course that Citadel is the one paying Robinhood, and also the owners of the company that will lose if the stock price doesn't drop, and has already been fined $700,000 for market manipulation using Robinhood in June of last year.

It's sold to someone off of Robinhood. Robinhood isn't some closed loop where sales only happen inside robinhood. As a matter of fact, Robinhood wouldn't work if it was, as it is a no commission platform. The way Robinhood works is by bundling buys and sells and selling the info in advance to Wall Street, and this info is only useful if it affects the rest of the market. There's nothing really wrong about this if you plan to buy and hold for a long while, but it is a problem for people trying to day trade.

This bundling (and other things) causes Robinhood to need a middleman, which needs the collateral. But if you buy using the normal methods (with commisions), there's no middleman, so no problem.
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Mysteriously, there is enough collateral for the entire rest of the stock market but not specifically a handful of meme stocks that will cost their biggest sponsor, Citadel. All these "explanations" I'm getting keep ignoring that fact. Can you establish that Gamestop requires more total collateral than the entire rest of the stock market combined?

Also, Robinhood has blacklisted the meme stocks from appearing in searches and has been hiding their activity. Do they also require collateral to have the stock appear in a search page?
 
Oh thank God...

www.reuters.com

Melvin Capital ends month with over $8 billion in assets after investors added cash: source

Melvin Capital, the hedge fund at the center of the GameStop drama, lost 53% in January but received commitments for fresh cash from investors in the last days of the month, a source familiar with the fund said on Sunday.
www.reuters.com www.reuters.com

Billionaires were somehow able to scrape up enough cash to make sure their fellow billionaires at Melvin Capital were okay in this trying time.
 
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Reddit should have gotten into the whole screw wallstreet thing a long time ago.
 
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