This isn't true. The institutions with Short Exposure are connected to the institutions who buy Robinhood data and perform high frequency trading on those orders. Citadel and Melvin can BUY GME themselves to mitigate the risks. It is likely that a substantial amount of GME is being held by the institutions who had short exposure. It's basic risk mitigation.
The high frequency traders who have the Robinhood data are making money on every Buy GME order and will make money on every sell when this bubble collapses.
It is wrong to present this as a populist uprising.
This is an incredible fluctuation, a hilarious anomaly, but it is nothing more than that. It will have no lasting impact.
I firmly believe that the hedge funds that held GME short positions have bought into GME to mitigate their exposure. They likely bought in algorithmically using robinhood data and are making money off of retail right now.
My message to the people here: /r/wallstreetbets is not a gameshark. You are still playing their game. You are still playing a rigged game and you are still losing.
Melvin buying GME is not "mitigating," it's closing the short position. If you close your short position high, you got screwed and you lost money. They did close it recently... At a massive loss.
"I firmly believe that the hedge funds that held GME short positions have bought into GME to mitigate their exposure. They likely bought in algorithmically using robinhood data and are making money off of retail right now."
How... Would "making money off of retail" in a pernicious sense be possible right now? If a retail trader on WSB bought in at $20, and sold at $200, they got 1000% ROI on their trades. Do you think that a bank secretly snuck in greater than 1000% ROI? The WSB trader got 1000% ROI, but the bank got 2000% ROI on the set of trades? The stock would have to be trading at $600 and the bank secretly pocketed $400 for that to happen.
Sure, the HFT front-run orders. But they are constantly buying and selling the shares they trade, they're not just buying. They don't get the buy-and-hold wins that the slow retail traders got off of a rally like this. HFT make money by providing liquidity, not by buying and holding GME.
Also, just as a technicality, Melvin is not a high frequency trader. They are not the same people front-running Robinhood orders. Melvin lost big time.
"My message to the people here: ... you are still losing"
My message to the people here: if you got >1000% ROI, you won. Don't let randos on HN make you feel bad.
(Close your position though.)
Citadel is the main internalizer for Robinhood.
I don’t think it changes much about your post but the connection between HFT and Melvin is public and directly financially relevant.
I would also be fairly surprised if Citadel made, say, 1000% ROI on their total GME trades this week. Giant bull runs are fine for HFT, sure; everyone wins when stonks go up (except for shorts, who lose big time). But giant bull runs are generally better for buy-and-hold investors than for HFT, because the buy-and-hold investors weren't doing all the useless intermediate buying and selling that the HFTs were. If a stock goes up and to the right, the best (retrospective) move is to have invested all of your position early, not to have constantly invested a bit of it over time as it went up like HFTs do. Basically: GME's performance favored avid WSB investors who got in early, much more than it favored HFTs front-running Robinhood for pennies on every trade. To quote Matt Levine, "you don't need special evil HFT powers to see" GME going up, it was happening for weeks [1]. You didn't need HFT powers to see WSB posts about the squeeze, or about short interest being 130% of the float. If you were an avid WSB user, and you got in early, you really did take Melvin for a ride. Sure, Citadel did well too — but your returns would still probably blow theirs out of the water.
IMO, WSB won the biggest.
(I do worry about the retail traders who bought in late due to the hype; this rally doesn't seem sustainable.)
1: https://twitter.com/matt_levine/status/1354131836323196928
-- They would have to do this at great cost and loss (rumor mill has it at current loss of $4B). If you believe the reports in the media Melvin has had to go ask for money from other institutions. Thus bigger fish would now be involved as they are putting money out to Melvin.
> The high frequency traders who have the Robinhood data are making money on every Buy GME order and will make money on every sell when this bubble collapses.
-- Agreed i said as much in my comment that people will make money on it - some retail some institutionals.
> It is wrong to present this as a populist uprising.
-- Disagree. This is a trade that at its core is a sentiment of disenfranchisement, anger at wall street short sellers, financial establishment - and of course with the hope of making money.
> This is an incredible fluctuation, a hilarious anomaly, but it is nothing more than that. It will have no lasting impact.
- Agree - most likely - it will however make wallstreet institutional short sellers think more carefully about their positions. There will be impacts but doubtful anything transcendent on the markets. If anything SEC will investigate Wallstreetbets traders as opposed to doing anything to Wall street (which has been having carte blanche under the last administration's effort to neuter the SEC).
> I firmly believe that the hedge funds that held GME short positions have bought into GME to mitigate their exposure. They likely bought in algorithmically using robinhood data and are making money off of retail right now.
-- Might be, however the losses they took at the beginning on their position were pretty steep to jump right back into the pool.
> My message to the people here: /r/wallstreetbets is not a gameshark. You are still playing their game. You are still playing a rigged game and you are still losing.
-- I don't think anyone has allusions that the tables have turned. This is more like the chance for this one time give a giant F U to wallstreet who has been perceived to be making money off the backs of the population without any care at all from retail investors.
"We don't know how bad things we could get if we are wrong" means you're doing something you shouldn't be.
I am just pushing back at the narrative that this is a "win" for the little guy and a "loss" for wall street.
Retail investors putting money into the market _at all_ is a net win for wall street _every time_ imo.
This is what I think to myself everytime I see one of those Acorn ads.
The game is rigged against you, but you're still better off if you play.
I understand your sentiment but that's a pretty overbroad assessment. There are obviously non-pro traders people killing it, and a lot more than a blip, tons of people have bought and sold out of their positions, average schmoes. There will be a ton of bagholders and losers, and expired options "Loss Porn". But to say that EVERYONE is a loser in a rigged game is too bold a statement. Maybe, Most will be losers in the rigged game.
To some extent, sure, but bear in mind the total short exposure was 140% of the total GME shares.
What happens when one tries to cash out this kind of position? Does he or she actually walk away with $31M?
Edit: He just updating his daily position. Cashed out 13M, has 35M still riding in shares and options.
[1] https://old.reddit.com/r/wallstreetbets/comments/l6ekdz/gme_...
It's very easy for retail investors to look at points in time and see stellar results. Unless they cash out some of that, before things start to drop, their massive position vanishes as quickly as it arrived.
Presumably they'd want to split the sell offer into smaller portions to avoid indicating a turn in the market which might cause a fall in price before they realise [as big a] profit on their position?
Like trying to get out of a place when you see things heading south (ie a calamity approaching). If you run for the door then everyone will see you and the people close to the door might block your exit as they seek to escape. If you cautiously walk, avoid being direct, etc., you've more chance to get out.
Often large positions as a single order are used to create buy or sell walls that can influence sentiment and algorithms to move the price in a way that they desire.
There's only so much volume available as a result of the short positions. WSB et al are putting in money on a long hold. As a result that drives up the price. Yeah gamma's are in for sure making money. There are some people who have made multiple millions. One individual sitting at $31M currently on a $50k investment.
Some retail will lose, but wall street institutional short sellers are getting hit hard right now. For them to win this they need to keep putting more money into the fire which pulls in bigger and bigger fish. At some point large institutional investors aren't willing to bail out the short sellers.
It is also a strong argument that wall street isn't as intelligent or in control as they like to promote.
General public doesn't understand the trade or the sentiment behind it.