Investment & Investing

I've got so much work to do but I'm just sat refreshing AH prices and scrolling through WSB/Twitter... There's no hope come 2:30pm, is there?

Hive Mind Question: While talking sensible:

Does anyone on here have a recommendation on intermediate courses on trading?

I find a lot is about beginners or its by someone trying to push their system onto you.

Anyone have any links to online courses? I am finding this quite fun and would like to make more sensible moves rather than wild punts.

My lockdown trading education has mostly taken place on twitter and reddit. Feels like that's where a lot of smart analysis takes place / ideas are shared. Plus the community is actually fun and not boring...

This lass shares tips and forecasts almost every day, and has an amazing track record:

https://mobile.twitter.com/ShardiB2

This guy knows a lot about crypto and shares his trades:

https://mobile.twitter.com/scottmelker

The person shorting has to pay a borrowing cost to the owner of the share. This is variable (based on lots of things) but it's around 30% per annum for GME right now (and that's against the current stock price, not the price the share was when it was borrowed). This is paid until the share is returned to the original owner.

The cost of carry is lessened by the interest on the cash paid for the security sold. (In theory, there is a relative parity between the repo rate and the cash interest rate, depending on risk etc...)

We don't know the tenor / maturity of the repos that Melvin bought to cover their short position - if they bought long maturities, they're not going to be paying a coupon on the current price, but the purchase price.

If they are buying rolling short-term repos, then they are, as you say, paying a massive amount away.

The lender / repo seller, however, can make margin calls - I'm guessing this is what Blackrock has done. They can see the price shooting up, and their credit risk guys are shouting out that Melvin is breaking limits, and need to cover the debt.

This is where Citadel comes in with a financing deal that helps themselves to a chunk of Melvin's portfolio (for cheaps) and an interest in stopping other people making their new portfolio tank any further (through blatant market manipulation and other dirty dealings).

whoever sold that call option is in deep deep shit

Whoever sold that very out of the money call option (hence the cheapness of it) would have hedged themselves properly, both in the underlying at the time, and the volatility as soon as it started to look a bit funky, over a year ago. Come expiry, they may have to faff about a bit to make sure that they stay delta hedged, but it's not going to be a huge concern.

Market makers got burned by the Goldmans of this world 10+ years ago when it comes to out of the money options.

(Caveat - I'm rusty af on all this stuff)

Does anyone on here have a recommendation on intermediate courses on trading?

Lesson 1.

• If you don't have a big fucking pile of cash, don't do it.
  
  

Lesson 2.

• See lesson 1.
  

Prefer to view myself as part of fucking Europe
https://www.reddit.com/r/wallstreetbets/comments/l7nces/were_in_the_endgame_now/

I've had this sitting on my 'to read' pile for a while.
Reviews are good and I like the fairly plain speaking title.

It's probably more about investment than trading necessarily though.

VERY GOOD LESSON.

This is class:

https://www.youtube.com/watch?v=enLiJfijWBI&ab_channel=LouisRossmann

I'd stay away from trading, there's just waaaay too many pitfalls.

Investing in a tracker fund is IMO the best way to take part without sweating bullets watching trading screens all day. 9/10 active investment managers cannot consistently outperform the market.

It's far too easy to get caught up in this frenzy of people seemingly making bank all over the place, the fomo hits. But GME and the current meme stock craze is an absolute anomaly and the current state of markets awash with free money is scary and won't last.

I'm sitting on my hands and waiting for a correction, far too many warning signs and parallels with dotcom boom right now.

Not financial advice, obviously.

https://www.reddit.com/r/wallstreetbets/comments/l7bpf5/30_seconds_from_triggering_market_nuclear_bomb/?utm_source=share&utm_medium=mweb

Dumbed down version:

• ⁠imagine you're Melvin Capital and you have 1 million dildos up your ass. How long will it take to get all those dildos out of your ass? If the volume of dildo removing is 1 per day, then it'll take 1 million days to remove 1 million dildos up your ass. If it's 50,000 dildos a day, then it's 20 days. • ⁠Same thing with covering short positions. How long will it take Melvin Capital and other shorters to cover their short positions? You take alllll the shorted shares, divided by the average volume of share movement per day, and you get something called "Days to Cover"

Now you know what day's to cover means, you can check many websites to see what is the days to cover for GME.

So you can see, even if Melvin Capital wants to cover their shorts, it's gonna take them DAYS, and right now it's gonna take them an entire trading week to cover their position.

So what does that mean for us?

Well, we're just waiting for the day when Melvin Capital starts covering their position. When is that day? VERY FUCKING SOON. They're are bleeding out of their ass with the insane interest rate they're paying for their position, and a lot of puts are expiring on Friday, plus a lot of ITM (in the money) calls expire Friday and can be exercised to get shares.

Friday might be the day where Melvin Capital have no choice BUT to start covering.

Now, IF this happens, then it's not gonna take Melvin Capital 1 hour to cover all their shorts, but DAYS. Meaning if Melvin capital starts covering FRIDAY, it will take them at LEAST 5 DAYS to fully cover, which means ALL of next week, the price will keep increasing and increasing! So realistically I'd say Weds or Thurs next week might be peak sell time, IF the covering starts Friday. No need to panic sell. No need to worry about a top that lasts for minutes. It will LAST FOR DAYS!!!!!

Whoever sold that very out of the money call option (hence the cheapness of it) would have hedged themselves properly, both in the underlying at the time, and the volatility as soon as it started to look a bit funky, over a year ago. Come expiry, they may have to faff about a bit to make sure that they stay delta hedged, but it's not going to be a huge concern.

Just a curious (and almost totally ignorant) bystander... can you explain this in simple terms please?

This is fun to watch and all, but surely at some point everything goes back to normal... the kids on Reddit who sunk their student loans into this loose their nerve, everyone begins to sell, the stock crashes back to normal levels, the hedge funds make all/most of their money back by shorting on the way backdown and a ton of kids caught up in the hype loose their savings?

That is fucking insane (if true).

My Friday in a nutshell too...

.

+1

DFV bought a call option to buy 500 blocks of 100 shares (so 50,000 shares in total) at $12 at any point before April 16th

How does this part work then? Can DFV just say "yeah I'll buy those shares now for $12 each, thanks!" and the other end of the transaction has to sell at that point or can the person on the other end specify the time to sell and DFV has to buy at $12 a share regardless of market price? Basically who has the power here?

Don't see how they extrapolate from a situation affecting a single stock to the entire (and separate) markets.

How does this part work then? Can DFV just say "yeah I'll buy those shares now for $12 each, thanks!" and the other end of the transaction has to sell at that point or can the person on the other end specify the time to sell and DFV has to buy at $12 a share regardless of market price? Basically who has the power here?

DFV

Can DFV just say "yeah I'll buy those shares now for $12 each, thanks!" and the other end of the transaction has to sell at that point

I believe it's this

Get it right/wrong and you can make/lose billions.

Is this describing what that massive up-tick is at 2pm GMT?

1. ⁠Today, the market opened very strong. It opened so strong that we were looking at a self-perpetuating gamma squeeze all the way up way past $570.
   
   

⁠5. At approximately 9:58 am, the stock had reached $468 in a parabolic move.

⁠6. Two minutes earlier, at 9:56 am, Robinhood tweeted that they were not allowing users to buy GME stock, but they would allow selling.

⁠7. The trend instantly halted and started a collapse downwards, before picking up a bit, especially after some retail was allowed back in.

The person selling the call option could have bought (and still be holding) 50,000 shares at $6, so they being forced to sell them to DFV at $12 wouldn't be such a bad thing, they won't need to pay out anything else, but they'd miss out on the opportunity of being able to sell them at $350+ on the open market.

The person selling the call option could have covered themselves with an equivalent call option their bought with a $13 strike price, so they'll only be on the hook for 50,000 sets of $1. Likewise that person who sold a $13 call could have bought a $14 call and they're only on the hook for $50k.

So there could be 300+ people who are going to lose $50k each in order for DFV to make his ~$15mm.

There's a million ways that it could be constructed behind the scenes, who knows. These are just a couple of trivial examples to show that it might not be just one person on the hook for $15mm.

At the end of the day though, for DFV to make that money he has to find buyers for those 50,000 shares at $350+ when he comes to sell them (and the 50,000 GME shares he owns outright). If it's the shorters that buy those shares to close their positions then it's costly, and 100k shares out of 60mm shorted is a drop in the ocean. More likely it may be retail investors buying them one or two at a time as the stock continues to climb. In which case I think a lot of retail investors are going to end up (eventually) owning a GME stock that eventually tumbles back down to under $100.

But with ~50 million shares in the float, and the amount of news that this stock has made around the world there could easily be 1+ million retail investors looking to get in, in which case the final losses will be spread very thinly over lots and lots of people.

Yes, with BUYS eventually being turned back on when it was down to ~$112.

I've no idea what the 7PM (GMT) spike from 220 to 500 and back to 220 was though.