Reddit users manipulating the stock market....and they're winning

[MotorCityRadioFreak]

Should the practice of shorting be banned?

Looks like RobinHood is banning - wait for it ------ the BUYING of certain stocks. You can still sell them, but not buy.

RobinHood is a new startup stock trading app that has seen its membership skyrocket in recent days. They had this to say this morning:

In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK."

Can you do that? Can you allow only one-way trading? THAT seems like market manipulation to me. I've never heard of that kind of a restriction before.

That doesn't sound legal.

[bmw]

Looks like RobinHood is banning - wait for it ------ the BUYING of certain stocks. You can still sell them, but not buy.

Are those margin accounts or standard accounts? If they are margin accounts, it would be slightly understandable considering the exposure Robinhood would be taking if the buys were on Robinhood's dime.

It is hard to find a straight answer to this, but mainstream news outlets are reporting it as if GME (and 7 other stocks) are outright banned for purchase by any type of account holder.

[Lester The Nightfly]

Should the practice of shorting be banned?

Looks like RobinHood is banning - wait for it ------ the BUYING of certain stocks. You can still sell them, but not buy.

RobinHood is a new startup stock trading app that has seen its membership skyrocket in recent days. They had this to say this morning:

In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK."

Can you do that? Can you allow only one-way trading? THAT seems like market manipulation to me. I've never heard of that kind of a restriction before.

That doesn't sound legal.

Again, it would/should be dependent on what kind of account you're trading on. If it's a margin account/buy, you're essentially borrowing money from the brokerage firm to make the stock purchase*. If that's the case it's not totally unreasonable for the firms to mitigate their exposure. IIRC Robinhood offers right out of the gate a $5K margin, so if 100's of 1000's of newbies start snapping up GME stock on Robinhood's money and it goes south, there's going to be some significant reconciliation going on and fair to say some of those accounts will go into default.

[*EDIT: It's worth mentioning that part of the assessment of how much an account can buy on margin are your other holdings in your account. If I own 1000 shares of Buzzboard Inc. worth $1 each, then I'd likely have a $1000 I could use on margin on other buys. Essentially it's collateral. What some brokerages are doing in light of this GME event are making the margin requirements higher, the example being I'd need to own 3000 shares of Buzzboard Inc. @$1/share in order to have $1000 at my disposal on margin.]

[Lester The Nightfly]

Looks like RobinHood is banning - wait for it ------ the BUYING of certain stocks. You can still sell them, but not buy.

Are those margin accounts or standard accounts? If they are margin accounts, it would be slightly understandable considering the exposure Robinhood would be taking if the buys were on Robinhood's dime.

It is hard to find a straight answer to this, but mainstream news outlets are reporting it as if GME (and 7 other stocks) are outright banned for purchase by any type of account holder.

Hummm... as I indicated earlier, the mainstream financial news has been corrosively incompetent in their coverage of this.

[EDIT: I just saw this on Marketwatch:

"Charles Schwab, which bought TD Ameritrade but operates it as an independent retail brokerage, said that it has tightened margin requirements in some of those stocks, including GameStop.

A Schwab spokeswoman said that the platform changed its margin requirements, limiting how much an investor can borrow, on Jan. 13 and said it has placed “restrictions in place on certain transactions in GME and other securities.”

So that's very much in line with what I've been saying]

[TC Shuts Up]

What part of "Robin Hood" didn't you understand?

But now it sounds like rather than stealing from the rich and giving to the poor, it's stealing from billionaires and benefiting millionaires. Millionaires are the lowest class the billionaires are exposed to. Hence to them they are poor.

Reminds me of some friends I know. They live in a $300,000 range house. The subdivision backs up to a subdivision with $1,000,000 range houses. The kids from the higher value neighborhood picked on the kids in the lower value neighborhood. They told the daughter she was "poor". When her grandfather passed away, she inherited $5,000,000. That's kind of "karmic".

[Lester The Nightfly]

Interesting take from Esquire:
Robinhood Is a Bouncer Who Works for the Guys Who Own the Club
https://www.esquire.com/news-politics/a ... p-trading/

Right now I'm watching an interview on CNBC with the chairman of Interactive Brokers, Thomas Peterffy try and explain away why they've shut down buys on GME. He's not doing a very good job of it. A master class demonstration of on old, really rich guy scared shitless his racket could crumble and scrambling to get this disruption under control. Well worth a look if you can find the video. Reminded me a little bit of Ned Beatty's come to Jesus speech to Peter Finch's character Howard Beale in the film "Network".

[bmw]

A class-action suit was filed today alleging that "On or about January 27, 2021 Robinhood, in order to slow the growth of GME and deprived their customers of the ability to use their service, abruptly, purposefully, willfully, and knowingly pulled GME from their app. Meaning, retail investors could no longer buy or even search for GME on Robinhood’s app."

https://siasky.net/nAAJqrtv5bjE4zQ1L2VR ... O0msL8KKhA

Sure sounds like they have at least allegedly blocked ALL buying of the stock, not just on margin accounts.

[TC Talks]

RobinHood is backing off on restricting transactions. They're kind of stuck in the middle at this point; I am sure Congress is hearing from their heg fund donors about getting their ass kicked, so they will investigate RobinHood. Meanwhile, RobinHood's customers are throwing fits about clutching their trading activity.

I say this: once we talk the billionaire from Novi into giving us some money, we run up the price on Tootsie Roll Industries and buy ourselves a congressman. Hell, let's buy a Democrat and a Republican and get them to fight with each other.

[Lester The Nightfly]

Sure sounds like they have at least allegedly blocked ALL buying of the stock, not just on margin accounts.

That seems to be the case. I watched Robinhood's CEO make the rounds on CNBC, Bloomberg, etc. Sad in some ways seeing a fairly young guy on a promising track with a promising business absolutely without question tank the entire package in just minutes. Still trying to decide if he's simply in over his head or just a patsy for larger interests. Maybe both, but what is certain is when you offer for free a service that everyone else in the industry still charges commission for it bears examination who is paying the freight? It was generally accepted that Robinhood was going to offer an IPO this year but after today that seems pretty unlikely. My guess is after this the company will unceremoniously be purchased for next to nothing by a major brokerage never to be heard from again.

[TC Talks]

Robinhood was started by hedge fund operators and the hedge funds are actually their customers not the users of the app.

https://www.vice.com/en/article/qjpnz5/ ... he-product

[Lester The Nightfly]

Robinhood was started by hedge fund operators and the hedge funds are actually their customers not the users of the app.

https://www.vice.com/en/article/qjpnz5/ ... he-product

Thanks ! Great link. I suspected the mechanics were something like that. As for the other brokerages that halted buys, I'm assuming they were looking out for their hedge fund customers who are getting clobbered by these pesky retail investors.

[bmw]

Then there's this:

https://www.theverge.com/2021/1/28/2225 ... play-store

"Google salvaged Robinhood’s one-star rating by deleting nearly 100,000 negative reviews"

Google is actively removing negative reviews of the Robinhood app from the Google Play Store, the company confirmed to The Verge. After some disgruntled Robinhood users organized campaigns to give the app a one-star review on Google’s Play Store and Apple’s App Store — and succeeded in review-bombing it all the way down to a one-star rating — the company has now deleted enough reviews to bring it back up to nearly four stars.

[audiophile]

RobinHood is backing off on restricting transactions. They're kind of stuck in the middle at this point; I am sure Congress is hearing from their heg fund donors about getting their ass kicked, so they will investigate RobinHood. Meanwhile, RobinHood's customers are throwing fits about clutching their trading activity.

I say this: once we talk the billionaire from Novi into giving us some money, we run up the price on Tootsie Roll Industries and buy ourselves a congressman. Hell, let's buy a Democrat and a Republican and get them to fight with each other.

[TC Talks]

It looks like Robinhood sold shares of gamestop without users permission. It's allowed in their service agreement but wow.

Before the injection of money, Robinhood, a cheap trading platform favored by the WallSreetBets Reddit group, had even started selling its users' stock without their permission on Thursday after market volatility put the White House on alert.

In early trade, before New York markets opened, GameStop had soared by around 70 per cent to around $322 by just before 8am, while other meme-driven surges were seen in AMC - up by 41 per cent - and in clothes firm Express Inc. which was up 42 per cent

Meanwhile it looks like a lesson is being learned...

https://financialpost.com/investing/cit ... publishing

[Lester The Nightfly]

If I understand it correctly, things just got a whole lot more interesting at the market close today because 100K option contracts expired in the money. As I understand it, that means the folks who sold the options which 99% of the time never have to make good on the option, at least when it priced well above the stock price and make their money on the price of the contract.

i.e. I'll pay $2 to purchase Buzzboard Inc. stock at $100/share. If Buzzboard closes on the option date @ $95 I won't exercise the option and they pocket the $2. If Buzzboard closes @ $105/share then I'm in the money and can exercise my option to buy @ $100 and the option seller must make good on the shares In GameStops case it wasn't just a $5 jump in price, but 100's x jump. As mentioned, normally a wildly higher contract price is a bet the option seller is happy to make, but this time they got burned. Hard.

What appears to have happened today with the 100,000 contracts that expired in the money is the option sellers must now come up with 10,000,000 shares of GME over the weekend for settlement on Monday. The problem there is the availability of GME stock is already scarce and/or getting increasingly expensive with hedge funds trying to cover their short interest losses because the Reddit kids aren't selling.

If MW is tuned in, do I have this roughly correct?