GME - Game Stop Corp

[TwoCitiesCapital]

Looks like Robinhood is restricting trading for GME, BB, AMC, and NOK. That's pretty criminal in my opinion. The SEC has to allow this to play out. It's a bad look to step in to save the big guys and crush the retailers.

 

While I agree, I think they had no other choice. There are only 70 million shares in existence. Probably 50-60 million that are not in index funds or owned by the new CEO.

Half of which is probably in large positions, so you only need a million people trying to buy 100 shares or an option, and the system breaks down. With option expiration tomorrow GME could literally have gone to the moon. Big mistake that they added more strikes this week.

Right now IB does not allow opening any positions on GME or its options, long or short, not even rolling the short leg of calendar spreads. I wonder if that's legal, certainly could f*k up a lot of option strategies.

 

I tend to agree. The regulatory hammer should come down on the market makers and the current way options are traded/hedged. Not on Robinhood traders being prevented from trading in specific stocks. It was insane that they added more strikes just days before a big expiry. Maybe could have added to all the quarterly expiries and left the weekly and monthlies alone until this settled down some.

 

I don't know if it was just Robinhood either - Schwab won't let me trade out of put spreads on AAL. Trading today is bonkers all over. Some AAL puts I own are up, some are down, all are the same expiry so all should be impacted by changes in implied vol similarly. My Tesla puts that were up slightly yesterday on a 2% dip? Down significantly today on a 5% dip. Things are just chaotic now.

[Read the Footnotes]

but it is also true that there is a reasonable argument that brokers are protecting the really stupid retail investor from doing something really stupid at this point.

 

Sorry but that simply isn't a rational argument unless you consider brokerage platforms as financial advisors. People are ok with ARK pumping companies with terrible fundamentals the past four years and allowing retail investors to buy in. But all of a sudden it's about protecting free individuals from making conscious decisions with their own money. You're picking winners and losers if you intervene. I mean the head of NASDAQ said that trading should be halted so firms can reposition accordingly. That is absurd as it gets and she should immediately be removed for suggesting something like that.

Sorry, I didn't express that well.

 

I didn't mean to imply that I agree with them, or that I think that is the way things should be, but I do believe that their financial incentives are probably:

 

-volatility is great, the more volatility and trading the better

-minimize litigation risk from any customer while at the same time allowing and encouraging trading no matter how stupid (ARKK included)

 

 

[RichardGibbons]

I tried to open cash-secured options positions from two different brokers, and failed.

 

The thing is, market making is voluntary.  You can't force someone to make a market.

 

So I suspect the market makers basically said, "this is so crazy, we are no longer confident we won't lose lots of money. So, we're willing to close positions, but not open new ones.  Either stop allowing people to open positions, or we're taking our ball and going home and even the people who want to close positions won't be able to do so."

 

They could still try to keep the options market fully open without market makers, but I think the outcomes would be even more insane.

[Jurgis]

I really hope that people who have GME positions open today will sue brokers and possibly market makers for market manipulation.

 

They likely won't win or win pennies-worth settlement though.

[alpha]

with options expensive, has anyone risked just straight shorting this at this point of 300+ price?

 

I saw a Bloomberg headline this AM suggesting Citron and Melvin had both covered.

 

So at this point, what is supporting it at $380 instead of the $17 it traded at just 3-weeks ago before this orchestrated manipulation occurred? I would expect now that the thesis has played out - and now the short squeeze forced - people would dump the shares to collect the "tendies"? Why is this still going higher?

 

It looks like the wallstreetbets subreddit has gained over 1.2 million subscribers in the last 48 hours (1.9m to 3.1m). It's just a mob mentality throwing money at the wall because they see their friends making money. At some point the trend will reverse when players start realizing their gains and price will drop as fast as it went up... your guess is as good as mine when that happens but I think it's obvious it will be sooner rather than later, especially if government checks are delayed...

 

Subscribers are now over 4.7 million...

[bizaro86]

IB not allowing me to open additional GME option trades again.

[cameronfen]

but it is also true that there is a reasonable argument that brokers are protecting the really stupid retail investor from doing something really stupid at this point.

 

Sorry but that simply isn't a rational argument unless you consider brokerage platforms as financial advisors. People are ok with ARK pumping companies with terrible fundamentals the past four years and allowing retail investors to buy in. But all of a sudden it's about protecting free individuals from making conscious decisions with their own money. You're picking winners and losers if you intervene. I mean the head of NASDAQ said that trading should be halted so firms can reposition accordingly. That is absurd as it gets and she should immediately be removed for suggesting something like that.

 

Brokers don’t have a fiduciary responsibility but do have a suitability responsibility but is weaker but still opens them up to lawsuits.  Why do you think it is you have to answer a set of questions on experience in the stock market before trading on margin, penny stocks, international stocks, and options?  What the head of Nasdaq said is elitist, but I think brokers are just trying to cover their asses. 

[bizaro86]

but it is also true that there is a reasonable argument that brokers are protecting the really stupid retail investor from doing something really stupid at this point.

 

Sorry but that simply isn't a rational argument unless you consider brokerage platforms as financial advisors. People are ok with ARK pumping companies with terrible fundamentals the past four years and allowing retail investors to buy in. But all of a sudden it's about protecting free individuals from making conscious decisions with their own money. You're picking winners and losers if you intervene. I mean the head of NASDAQ said that trading should be halted so firms can reposition accordingly. That is absurd as it gets and she should immediately be removed for suggesting something like that.

 

Brokers don’t have a fiduciary responsibility but do have a suitability responsibility but is weaker but still opens them up to lawsuits.  Why do you think it is you have to answer a set of questions on experience in the stock market before trading on margin, penny stocks, international stocks, and options?  What the head of Nasdaq said is elitist, but I think brokers are just trying to cover their asses.

 

Closing down GME trades seems to me like an admission their vetting procedures are insufficient.

 

I'm frustrated, because I think there are some very nice options trades available here because of the extremely elevated IV. The market is getting disorderly, so I suspect the market makers are backing off. That's a great environment to be picking up easy gains, imo, but IB won't let me.

[Jurgis]

but it is also true that there is a reasonable argument that brokers are protecting the really stupid retail investor from doing something really stupid at this point.

 

Sorry but that simply isn't a rational argument unless you consider brokerage platforms as financial advisors. People are ok with ARK pumping companies with terrible fundamentals the past four years and allowing retail investors to buy in. But all of a sudden it's about protecting free individuals from making conscious decisions with their own money. You're picking winners and losers if you intervene. I mean the head of NASDAQ said that trading should be halted so firms can reposition accordingly. That is absurd as it gets and she should immediately be removed for suggesting something like that.

 

Brokers don’t have a fiduciary responsibility but do have a suitability responsibility but is weaker but still opens them up to lawsuits.  Why do you think it is you have to answer a set of questions on experience in the stock market before trading on margin, penny stocks, international stocks, and options?  What the head of Nasdaq said is elitist, but I think brokers are just trying to cover their asses.

 

Closing down GME trades seems to me like an admission their vetting procedures are insufficient.

 

I'm frustrated, because I think there are some very nice options trades available here because of the extremely elevated IV. The market is getting disorderly, so I suspect the market makers are backing off. That's a great environment to be picking up easy gains, imo, but IB won't let me.

 

So basically:

- stupid retail investors are screwed

- sophisticated retail investors are screwed

- market makers are happy

- institutions are happy

 

Par for the course.

[bizaro86]

Pretty much. They also probably just absolutely convinced thousands (or maybe even millions) of people that the economy is rigged against them

 

Thats probably not a good thing from a social cohesion point of view.

 

(And I identify more closely with hedge funds than I do with the wsb traders)

[KFS]

 

This (attached) is the message from Robinhood given to users. 

Not mine - this was shared elsewhere.

 

[/img]

 

[Mephistopheles]

Merrill is blocking it too. I suspect it's true of every broker.

 

If it's the MM that are refusing to trade, that's fair. But that doesn't explain why the broker itself is limiting. If the issue is the MM then there simply wouldn't be any BID if you're trying to write a put.

[Hielko]

Interactive Brokers still allows people to buy, just not on margin. But pretty questionable move from brokers to stop allowing people to buy shares. Especially for Robinhood, must be the worst thing they can do for their business. Wondering what happened behind the scenes.

[bizaro86]

Merrill is blocking it too. I suspect it's true of every broker.

 

If it's the MM that are refusing to trade, that's fair. But that doesn't explain why the broker itself is limiting. If the issue is the MM then there simply wouldn't be any BID if you're trying to write a put.

 

I completely agree with this. If the market makers don't want to take any more GME risk that's their right. They probably should have stopped sooner.

 

 

[bizaro86]

Interactive Brokers still allows people to buy, just not on margin. But pretty questionable move from brokers to stop allowing people to buy shares. Especially for Robinhood, must be the worst thing they can do for their business. Wondering what happened behind the scenes.

 

I don't think this is true of options at present. I just tried to sell a very far out of the money GME cash secured put in an account with meaningful extra cash and it wouldn't let me.

[winjitsu]

Interactive Brokers still allows people to buy, just not on margin. But pretty questionable move from brokers to stop allowing people to buy shares. Especially for Robinhood, must be the worst thing they can do for their business. Wondering what happened behind the scenes.

Woke up this morning ready to sell some puts, think that boat has sailed :(

 

Speculation from WSB: Robinhood uses Citadel for a large % their execution flow and their revenue (true) and Citadel definitely has a vested interested as a MM along with their recap of Melvin. Could MM be involved in selling new strikes, all the while telling the brokers to stop orders in the name of protecting investors?

 

Though two days ago I was chatting with a securities lawyer friend explaining the whole GME situation and he instinctively thought it was market manipulation. I wouldn't put it pass their inside and outside counsel shitting bricks (especially with an upcoming IPO). If there's one things lawyer like to do, it's kill a business in the name of reducing risk  ;)

[RadMan24]

It would appear Robinhood is no longer cool

[fareastwarriors]

It would appear Robinhood is no longer cool

 

Restricting options, upping margin,  I can understand.

 

But wholesale ban of buying stocks with straight cash is too a bridge too far for me.

[coc]

What move would be *good* for retail investors that they’re not allowed to make today on Robinhood? Buying more stock and calls at 100x intrinsic value?

 

I get the libertarian leanings here but I’m trying to understand who it benefits to allow a message board to keep pumping a stock and drawing in millions of new investors, most of whom will lose their ass.

 

I suppose not allowing them to open put contracts is  harmful. But I see very little interest in that, and no one is complaining about it. They want to keep bulling it up.

[KCLarkin]

What move would be *good* for retail investors that they’re not allowed to make today on Robinhood? Buying more stock and calls at 100x intrinsic value?

 

I get the libertarian leanings here but I’m trying to understand who it benefits to allow a message board to keep pumping a stock and drawing in millions of new investors, most of whom will lose their ass.

 

I suppose not allowing them to open put contracts is  harmful. But I see very little interest in that, and no one is complaining about it. They want to keep bulling it up.

 

The real problem is RH allowing retail investors to buy options in the first place. RH's legal exposure is likely pretty significant for encouraging unsophisticated users to gamble in these stocks.

 

RH, despite the name, is an absolute scourge:

A day earlier, the top securities regulator in Massachusetts also filed a complaint against Robinhood, accusing the start-up of riding to success by “unscrupulously” pushing unsophisticated customers into risky investments.

 

Disclosure: long IBKR

[RadMan24]

What move would be *good* for retail investors that they’re not allowed to make today on Robinhood? Buying more stock and calls at 100x intrinsic value?

 

I get the libertarian leanings here but I’m trying to understand who it benefits to allow a message board to keep pumping a stock and drawing in millions of new investors, most of whom will lose their ass.

 

I suppose not allowing them to open put contracts is  harmful. But I see very little interest in that, and no one is complaining about it. They want to keep bulling it up.

 

There's other avenues they could have went through, including several prompts letting them know they are stupid for buying this stock and they are okay with it, another asking if this is their final decision, and then a last just to make sure, before they buy the stock.

 

If the SEC isn't mandating firms ban the buying of a stock, and the Nasdaq has the market for that stock open, Robinhood is just taking the lazy route of implementing a ban.

[StubbleJumper]

What move would be *good* for retail investors that they’re not allowed to make today on Robinhood? Buying more stock and calls at 100x intrinsic value?

 

I get the libertarian leanings here but I’m trying to understand who it benefits to allow a message board to keep pumping a stock and drawing in millions of new investors, most of whom will lose their ass.

 

I suppose not allowing them to open put contracts is  harmful. But I see very little interest in that, and no one is complaining about it. They want to keep bulling it up.

 

There's other avenues they could have went through, including several prompts letting them know they are stupid for buying this stock and they are okay with it, another asking if this is their final decision, and then a last just to make sure, before they buy the stock.

 

If the SEC isn't mandating firms ban the buying of a stock, and the Nasdaq has the market for that stock open, Robinhood is just taking the lazy route of implementing a ban.

 

 

Or maybe a 20 question multiple-choice investor knowledge quiz to see the client's level of sophistication? 

 

On the Personal Finance Canada subreddit, a young guy posted a message a couple of weeks ago stating that he had made a bunch of money on options and was asking how to report the capital gains for income tax.  If you don't know the basics of how capital gains tax works, you have no business trading options.  The brokers have been extending margin accounts and options accounts to people who do not have the basic knowledge and experience to use them.  Maybe it's time for the brokers to reassess their clients.

 

 

SJ

[fareastwarriors]

What move would be *good* for retail investors that they’re not allowed to make today on Robinhood? Buying more stock and calls at 100x intrinsic value?

 

I get the libertarian leanings here but I’m trying to understand who it benefits to allow a message board to keep pumping a stock and drawing in millions of new investors, most of whom will lose their ass.

 

I suppose not allowing them to open put contracts is  harmful. But I see very little interest in that, and no one is complaining about it. They want to keep bulling it up.

 

 

So what if something is 100x intrinsic value?  Who is supposed to decide that? Robinhood? How many stocks in this market is extremely valued?

 

Again, I understand restricting options trading and changing margin requirements but buying equities with cash doesn't seem that dangerous to the system even if the stock they are buying is insanely valued.

[coc]

I agree, they shouldn’t be doing it in a ham fisted way.

 

But the meta narrative that what they’re doing is “good for the big guy and bad for the little guy” is, in the end, nonsense. The whole episode only benefits GME shareholders who got in early. Today’s buyers are going to get crushed - a few will escape with a profit but the rest won’t.

 

Like all Ponzi schemes.

[RadMan24]

What move would be *good* for retail investors that they’re not allowed to make today on Robinhood? Buying more stock and calls at 100x intrinsic value?

 

I get the libertarian leanings here but I’m trying to understand who it benefits to allow a message board to keep pumping a stock and drawing in millions of new investors, most of whom will lose their ass.

 

I suppose not allowing them to open put contracts is  harmful. But I see very little interest in that, and no one is complaining about it. They want to keep bulling it up.

 

There's other avenues they could have went through, including several prompts letting them know they are stupid for buying this stock and they are okay with it, another asking if this is their final decision, and then a last just to make sure, before they buy the stock.

 

If the SEC isn't mandating firms ban the buying of a stock, and the Nasdaq has the market for that stock open, Robinhood is just taking the lazy route of implementing a ban.

 

 

Or maybe a 20 question multiple-choice investor knowledge quiz to see the client's level of sophistication? 

 

On the Personal Finance Canada subreddit, a young guy posted a message a couple of weeks ago stating that he had made a bunch of money on options and was asking how to report the capital gains for income tax.  If you don't know the basics of how capital gains tax works, you have no business trading options.  The brokers have been extending margin accounts and options accounts to people who do not have the basic knowledge and experience to use them.  Maybe it's time for the brokers to reassess their clients.

 

 

SJ

 

True, there's some truth to that need to prevent the little guy from being the pasty. But the sophisticated hedgies also shorted over 100% of the float.