In the past few days, GameStop has become the hottest news focus in the United States. This chain of small game store companies whose stock price has fallen to only $20 left in an overnight influx of retail investors has caused the stock price to double. And behind it is the war between the united retail investors on the Reddit forum and the short-selling institutions on Wall Street.
In the online generation where digital downloads are becoming more and more popular, GameStop, as a game retail industry, has been in a difficult situation in recent years. The channels for players to buy games have gradually shifted to Amazon online channels or electronic platforms such as Steam, even in the epidemic Before the outbreak, before GameStopThere has long been news of layoffs overseas。
Then, why did the stocks of a game chain company that were beaten by the Internet suddenly soar? Many related news have been reported. If it were not for the epidemic of 2020, if it were not for the US government’s unlimited QE to make the stock market soar, if it were not for short-selling institutions to choke the villagers who hold these stocks… But the real reason may be. In fact, it was the 2008 financial tsunami, and that was the cause of everything-Xiao Xiami hated the big whale that retreated all over the storm.
As of January 29th, US time, the Dow Jones Industrial Average has fallen by 448.93 points. This is likely to be a recent correction, but one stock is still at a contrarian high, and that is the protagonist of this article-GameStop, which was shorted. The stock price of the out-of-the-box company was pulled up by retail investors, causing short-term institutions to lose money. It is like a story of retail investors against Wall Street whales.
Corrupt financial institutions and arrogant traders accidentally stimulated the hostility of millions of investors to Wall Street. Behind this “financial war” represents the corruption of the government and financial institutions has been deeply hated.
Melvin Capital and Citron Research lose Billions, WallStreetBets makes Billions, buy GME and don’t sell from r/JusticeServed
Initiator Citron Research
The cause of the incident was a short-selling institution called Citron Research. They believed that GameStop was not a stock worth investing in, so they posted on Twitter that they were short on this stock-usually this also means that they would go short directly.
Many people hate short sellers because they make profits by operating the stock price limit. However, real short sellers will tell investors their reasons for shorting through detailed reports and research, and provide investors with more transparent information reference.
In order to show the positive impact of short selling on the market, here is an important example: “Luckin Coffee” listed in the United States was exposed by the famous Muddy Waters short selling report to reveal false account transactions, which later triggered a series of disturbances, but this “short selling” “Although it is also profitable by operating stock prices to fall, it provides investors with correct information and avoids being deceived by false accounting figures.
Tomorrow am at 11:30 EST Citron will livestream the 5 reasons GameStop $ GME buyers at these levels are the suckers at this poker game. Stock back to $20 fast. We understand short interest better than you and will explain. Thank you to viewers for pos feedback on last live tweet
— Citron Research (@CitronResearch) January 19, 2021
However, when Citron Research released the short selling news this time, it did not follow up with a rigorous short report. The founders simplyTwitterIt is said that GameStop is a low-level company and laughed at retail investors who bought at a high price (at the time it was more than $20).
But this kind of behavior inexplicably ignited the anger of the villagers on the Reddit forum, a stock discussion board with 4 million people Wall Street Bets(Hereinafter referred to as WSB), decided to launch an action against these short-selling institutions, and the goal of this action is to support the retail store companies that have grown up with European and American video game houses, so that the short-selling institutions on Wall Street can shut their doors.
Attack on Wall Street Pt. 2 (Audio and normal speed version in comments) from r/wallstreetbets
What is short selling? There is a simple explanation:
You borrowed a Pikachu physical card worth 100 yuan from a friend, and told your friend that you would return it to him in one month, but you turned around and sold the Pikachu card for 100 yuan, and then told other friends about this Pikachu It’s so bad and not easy to use that the value of this Pikachu fell to 50 yuan a month later. You bought this Pikachu back for 50 yuan and returned it to the friend who originally lent you. Earned 50 yuan in time, and Pikachu’s value dropped by 50 yuan in this month-yes, Pikachu cards represent your stock.
Back to the main text, WSB is an important distribution center for retail investors in the United States. After the outbreak of the GME incident, the number of discussants soared from 4 million to 6 million, and the influence was huge. Like the PTT discussion forum in Taiwan, there are many hidden masters in WSB. Not only are there many people whose analytical skills are comparable to professional analysts, but also many people are dissatisfied with the fact that many Wall Street giants can retreat in 2008.
I have been doing interviews about this whole ordeal after posting my positions and the fact that GME has changed my life. I have been contacted by Huffington post, New York Magazine, Forbes, and a few others…. from r/wallstreetbets
Derivative financial products: purchase options (Options)
It is worth noting that the call for counterattack initiated by this group of people is not just a simple purchase of stocks, but also includes the counterattack method of buying “Options”:Stock option is an act of paying a deposit to obtain the right to purchase stocks。
Let’s take a Pikachu card as an example. I’ll pay 10 yuan to my friend first, and promise that I will buy a Pikachu card (original price of 100 yuan) in a month. If the Pikachu card rises to 130 yuan in a month, then I basically I made 20 yuan; but if the Pikachu card fell to 70 yuan, I would regret not buying it, then I would lose 10 yuan.
“Options” is a kind of derivative financial products with unequal power, and it is also an uncertain factor that causes many financial crises. Because the restrictions on buying and selling options are extremely low, even if I don’t have this stock in hand, I can still buy and sell options on this stock. ──As long as I have enough stocks to perform before the expiration date.
Generally, non-performance means that the market value of stocks has decreased. Therefore, many “market makers” will choose short stock trading options, because if the buyer loses money, the buyer will not perform the contract, so these companies can earn commissions from the trading of options.
The irony is that these transactions do not require stock ownership.GameStop itself is short-selling “shares” even more than the stocks circulating in the market.Smart WSB villagers urge retail investors to insist on not selling stocks, but also to buy “end-of-date rights” that expire within 15 days. Usually, options that expire soon pay lower premiums but higher profits (because of short time ). When these options traded together, the number of publicly traded shares higher than GameStop was 140%.
BB ????✋???? WERE IN THIS TOGETHER BOYS, HOLD TO THE MOON! ???????????????????????????????????????? from r/wallstreetbets
At the same time that GameStop’s stock price skyrocketed, in addition to short-selling institutions that need to buy stocks to close their positions, those companies that make a profit by buying and selling options also had to buy stocks to fulfill their options, which led to a further surge in stock prices. This behavior created short selling. The wonderful situation in which institutions, market makers, and retail investors jointly grab stocks has also created a chain effect known as “short squeeze” and “gamma squeeze,” which allows stock prices to rise all the way through this chain effect.
Follow-up development: Robinhood restricts retail investors from buying stocks
The crazy GME stock price rise event has not only aroused widespread media attention, but also caused shocks in the financial market. Trading software led by the well-known Robinhood began to limit the number of shares purchased by users, triggering criticism to protect the interests of Wall Street giants. It even led to a class action lawsuit against these trading software by retail investors.
However, Robinhood claims that the reason why they prohibit the purchase of stocks is because a large number of users have purchased leverage (in simple terms, borrowing and trading stocks), causing their transactions to be restricted because they exceed the maximum leverage allowed by US federal law.
The SEC claims to pay close attention to extreme price fluctuations.And will review restrictions on transactions──Although everyone knows that the incident may have passed after the review.
Why are brokerage firms like Robin Hood restricting trading in GameStop? Looks to me like a fear of too much profit going to ordinary investors. Can you explain @RobinhoodApp? https://t.co/682yG7ZiqX
– Ted Lieu (@tedlieu) January 28, 2021
This is unacceptable.
We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.
As a member of the Financial Services Cmte, I’d support a hearing if necessary. https://t.co/4Qyrolgzyt
— Alexandria Ocasio-Cortez (@AOC) January 28, 2021
CNN: The army dormant on Reddit crushed Wall Street
A CNN report stated that “the army dormant on Reddit crushed Wall Street” (Inside the Reddit army that’s crushing Wall Street) As a title, clearly describing the status of this GME incident. Following the 2008 subprime mortgage crisis, the GME incident once again exposed the flaws of these financial products.
Wall Street financial companies not only used these operational flaws to slay retail investors, but the US government also failed to perform its duties of monitoring and amending the law. People can’t help feeling that these weird options and hedging operations have a sense of “intersecting each other.”
Perhaps Citron Research never dreamed that its daily short-selling behavior would be countered inexplicably, but many people predict that there may be another financial crisis after 2008, and it may also be possible after this “attack” The US government is willing to learn from the pain and solve the problem of financial derivatives.
Threw my CPA Designation out the window and doubled down on GameStop ????????????…cause ya know…can’t stop, won’t stop…GameStop from going to the moon ???????????????????????????????? (can never have too many rockets) #GammaSqueezeMonday from r/wallstreetbets
This will also be the first major test of the new US president. Perhaps Trump will be thankful that he did not succeed in re-election, and GameStop should also take this opportunity to think about whether it can take this opportunity to transform itself and make the business worthy of itself Share price.
according toOverseas reports, This GME incident so far has caused short-selling companies such as Melvin Capital to lose billions of dollars. This is undoubtedly a counterattack victory for Reddit villagers, and for players who have experienced the GameStop game store era. In other words, this action has also become a spiritual indicator for many overseas gamers to defend their childhood memories.
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