3 min
WallStreetBets vs Melvin Capital The James Bachini Podcast
-
- Technology
✅ Please like, subscribe & comment if you enjoyed - it helps a lot!
Link to FTX where you can still buy GME:
https://ftx.com/#a=StartHere
Will Wallstreetbets bankrupt Melvin Capital with Gamestop?
This is one of the greatest business stories I've ever witnessed.
For those who don't know Wallstreetbets is a subreddit which is dedicated to proudly “treating the stock market as a casino”.
Now last year one user, we'll call him DFValue found out that a lot of hedge funds had short sold Gamestop, a struggling retailer of video games.
The short interest was huge, over 100% which means more shares had been sold in the company through derivatives than actually exist. He buys a large amount of call options and starts posting about it on /r/wallstreetbets.
A series of events including a new board member and a pivot towards building their online presence created some momentum. The stock was trading below $5 in August and starts to rise to around $18 at the beginning of 2021.
As the share price starts to go up the hedge funds that shorted it start to lose money. Then things go from bad to worse for the hedge funds. Wallstreetbets users start piling in buying stocks and call options adding fuel to the fire.
One particularly exposed hedge fund, Melvin Capital had previously boasted about shorting Tesla, Elon pipes up with a single tweet gamestonks and everything goes into ludicrous mode.
The problem is that they sold so much stock there isn't enough sellers for them to buy it back at a reasonable price quick enough to cover their position.
The share price goes through the roof and is trading at over $100.
Melvin Capital has now lost more money on paper than it has. The worlds largest market maker Citadel provides a billion dollar bailout which doesn't last long. Citadel also has large influence on the brokers where they purchase order-flow.
Today Robinhood, Interactive Brokers and Ameritrade all block the purchase of Gamestop shares. They are still allowing users to sell them and close positions but not purchase. You can imagine how the wallstreetbets users reacted, many of whom use Robinhood.
Some of the biggest Wallstreet firms are opening themselves up to litigation with what is blatant unethical market manipulation. The fall out from this and knock on effects could be the most devastating since the fall of Lehman brothers in 2008.
Tomorrow a large amount of call options expire and there isn't enough liquidity. Short interest is still over 100% and the stock is flying. The big question is will Wallstreetbets users and anyone else that's jumped on the trend sell and at what price?
So I did what any spectator would do in this situation, picked up some popcorn & YOLO'd in. At this point it's not a financial investment it's a donation to the cause. There's zero chance I'm going to make any financial gains but at least I'll be able to tell my Grand kids about this one day.
I went on FTX (link in the description) and opened up a small margin position on GME/USD. I know I'll never profit from it because... I'm not f*****g selling. It can get liquidated as and when the wallstreetbets users see fit.
I love a good underdog story and this has brightened up a cold wintery lockdown. To those taking on Wall Street, good luck to you.
✅ Please like, subscribe & comment if you enjoyed - it helps a lot!
Link to FTX where you can still buy GME:
https://ftx.com/#a=StartHere
Will Wallstreetbets bankrupt Melvin Capital with Gamestop?
This is one of the greatest business stories I've ever witnessed.
For those who don't know Wallstreetbets is a subreddit which is dedicated to proudly “treating the stock market as a casino”.
Now last year one user, we'll call him DFValue found out that a lot of hedge funds had short sold Gamestop, a struggling retailer of video games.
The short interest was huge, over 100% which means more shares had been sold in the company through derivatives than actually exist. He buys a large amount of call options and starts posting about it on /r/wallstreetbets.
A series of events including a new board member and a pivot towards building their online presence created some momentum. The stock was trading below $5 in August and starts to rise to around $18 at the beginning of 2021.
As the share price starts to go up the hedge funds that shorted it start to lose money. Then things go from bad to worse for the hedge funds. Wallstreetbets users start piling in buying stocks and call options adding fuel to the fire.
One particularly exposed hedge fund, Melvin Capital had previously boasted about shorting Tesla, Elon pipes up with a single tweet gamestonks and everything goes into ludicrous mode.
The problem is that they sold so much stock there isn't enough sellers for them to buy it back at a reasonable price quick enough to cover their position.
The share price goes through the roof and is trading at over $100.
Melvin Capital has now lost more money on paper than it has. The worlds largest market maker Citadel provides a billion dollar bailout which doesn't last long. Citadel also has large influence on the brokers where they purchase order-flow.
Today Robinhood, Interactive Brokers and Ameritrade all block the purchase of Gamestop shares. They are still allowing users to sell them and close positions but not purchase. You can imagine how the wallstreetbets users reacted, many of whom use Robinhood.
Some of the biggest Wallstreet firms are opening themselves up to litigation with what is blatant unethical market manipulation. The fall out from this and knock on effects could be the most devastating since the fall of Lehman brothers in 2008.
Tomorrow a large amount of call options expire and there isn't enough liquidity. Short interest is still over 100% and the stock is flying. The big question is will Wallstreetbets users and anyone else that's jumped on the trend sell and at what price?
So I did what any spectator would do in this situation, picked up some popcorn & YOLO'd in. At this point it's not a financial investment it's a donation to the cause. There's zero chance I'm going to make any financial gains but at least I'll be able to tell my Grand kids about this one day.
I went on FTX (link in the description) and opened up a small margin position on GME/USD. I know I'll never profit from it because... I'm not f*****g selling. It can get liquidated as and when the wallstreetbets users see fit.
I love a good underdog story and this has brightened up a cold wintery lockdown. To those taking on Wall Street, good luck to you.
3 min