Now that the robinhood story is coming out, the explanation is much more mundane than people desired.
Buying shares help
- Thread starter johnjoeefc
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Yep. All parties besides the retail buyers of the GME stock purchasing in cash are completely over leveraged.
The Hedge Funds can't afford to pay the clearing house. The brokerages can't cover the cash out to the retail buyers when they sell. They typically only hold about 2% of total trading value to pay out and have to wait for the clearing house to pay out for anything above that. Since the funds can't pay what they will owe and the clearing house doesn't have enough cash to cover the pay out and neither do the brokerages then they are all in trouble when the retail customers want their cash profits.
Mundane but it really shows how fragile the system they have built for themselves is.
I understand the issue is more volume/liquidity than capitalization; same as your bank has the assets to cover all deposits, but not enough liquid assets to cover a bank run. since there's no FDIC backstop for brokers, robinhood had to pull down credit to complete pending transactions with the huge volume seen this week. so less a "the man is trying to get you" and more a "if everyone logs on to LARPquest at once, the server gets killed and lag ruins your digital cosplayfest."
TheSouthernBlue
Player Valuation: £500k
I get this isn’t a trading advice thread, but if you want to make extra money over the next month it would be worth jumping on and placing short positions on some of the stocks.
I bricked it last night and this afternoon seeing the pre markets and loaded up extra funds to cover the high on opening to avoid margin call, since then stocks have dropped through the floor and the returns have been good. The run on the markets looks to be all but over, now the stocks will return to normalish levels over the next month so someone’s got to earn the money whilst they drop.
I bricked it last night and this afternoon seeing the pre markets and loaded up extra funds to cover the high on opening to avoid margin call, since then stocks have dropped through the floor and the returns have been good. The run on the markets looks to be all but over, now the stocks will return to normalish levels over the next month so someone’s got to earn the money whilst they drop.
wainy
Player Valuation: £35m
If I send you some money can you do it for me?
TheSouthernBlue
Player Valuation: £500k
In all serious I couldn’t do that. If you’ve got T212 (I know it’s awful but hey ho) jump on and play with Demo mode. Use CFD mode and click the quantity you wish to play with, click Sell to short or buy to buy the position. It’s quite risky using CFD’s but it makes the most in the shortest possible time.
Blueclouds
Player Valuation: £35m
What the point when the trading apps stop you selling and buying.
in all seriousness, this is really bad advice and exactly the problem with the current situation; place a trade on your own volition and not the urging of another because you have a chance to make some money.
TheSouthernBlue
Player Valuation: £500k
I respect your opinion on the matter, and agree it would be wrong to urge someone to buy/sell a particular share. The request of this thread was to merely give advice on shares.
What I do has no bearing on the cost of a share as far as I am aware, I just place a contract for the difference in the two prices so theoretically not touching the share. What I am stating is common sense that these artificially inflated shares will need to drop to sustainable levels as they’re worthless come the end of next month. The Reddit Pyramid cannot be sustained, it will 100% fall without numerous new members topping up the pyramid. How far it falls is anyone’s guess.
It was the same with Oil in April last year, in 45 minutes a <£300 short position gained slightly more than £14k. The Oil run was partial luck, partial judgement realising there was nowhere or nobody to use oil at the time.
Trading is just a hobby, some people have the lottery, some have the weekend £5 acca.
I don’t disagree with your reasoning, but I think when the autopsy is performed there will be a huge number of retail investors caught up in this madness. There is always a trade to be made, but each trader has to assume his or her own risk.
I'm not too savvy with these things so my terminology may be all over the place but I've played around with CFD's with some pocket money and through blind luck made a good chunk before subsequently losing a good chunk of that very quickly! I finished up overall but it seemed very stacked against small investors and taught me that actually buying shares and holding an actual asset is a much more preferable form of gambling for me.
What happens though if loads of people now decide to short the Reddit Pyramid on these CFD platforms with leverage given it's gonna crash? Is the margin just gonna be stretched to a ridiculous level to make it impossible for anyone but the huge players to profit? Or are these platforms just going to pull up the drawbridge and refuse to accept positions?
From my largely ignorant view it all seems blatantly unfair and destroys any illusion of credibility and the everyman accessible spiel they've been selling for the last couple of years these supposedly regulated companies have.
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