Doge coin community must be a clean trade. No place for those gamblers making fear, creating groups to do pumps to make ppl afraid and take their money lets not let them in this community.
Encourage newbies to periodically profit take. Also take profit yourself.
Don’t blame the system if you buy the ATH and other people take profit.
You won’t time the top perfectly, try to aim within 10-20% of the top.
Don’t get emotionally attached to the stock. The stock doesn’t even know who you are.
If you buy in because a stock did the same thing 3 days in a row, don’t get mad if it doesn’t do the thing a 4th time.
If you don’t have an exit strategy for your FOMO position, you are guaranteed to lose money. If you did not get in on the ground floor, your profitability window at the top is much tighter.
If you wouldn’t enter a stock/option at the current price, you shouldn’t be holding at the current price.
Edit: You can be a degenerate gambler and still do all of this. Now go MAKE money you special ed dropout. EDIT2: I am getting messages accusing me of being a hedge fund shill. I shouldn't have to defend that I'm a real person who shitposts on this sub. This post is not intended to tell you to sell your position in any stock. Just calling out some bad things I've been seeing since a certain mall-based specialty retailer took over discussions in this sub.
AITA for gambling half of my kids' college funds (and winning)?
Okay, I know that the title sounds horrible, but hear me out. About a week ago, a group of friends and I took a trip to Vegas. (And for the record, we all got COVID tested before we went out. I'm looking for a judgement on this specific thing, not on me taking a vacation.) The casinos have just opened up recently, and my friends and I have always enjoyed a little bit of gambling, so we decided to check one out. I usually have a specific fund dedicated to gambling so I don't use up any of our savings, but most of that fund ended up being put towards rent during quarantine, since my GF got laid off of work. Now, here's where I think I might be the asshole. It had been over a year since I had gambled last, and I really wanted to gamble. Any other gamblers out there reading this post will get it. I didn't want to take away from the house fund or from our grocery fund, so I decided that taking money from my kids' college funds would be the best option. One of them is 14 and the other is 11, so there was still plenty of time for me to get the money back before they actually go off to college. And I ended up winning! I kept all of the money that I gambled, and I ended up making a profit of about a quarter of the fund. I called my GF and excitedly told her the news, but she asked where I had gotten the original money from. I told her, and she freaked. Out. She screamed at me, told me that she was going to tell the kids how immature I was, and hung up on me. I know that it was a little bit irresponsible, but I don't really see the issue. If I had lost the money, it might be a different story, but I won, so I don't get why there's a problem. Now my kids have even more money to put into their college fund, and I got to gamble like I wanted to. It's been three days since that conversation, and she hasn't responded to any of my calls. I'm getting really sick of reaching out to her when I don't think I did anything wrong, but my flight home is soon, and I don't want her to bitch about me not apologizing when I get home. But do I even have anything to apologize for? So, reddit: AITA? Edit: I don't think you guys get it. I only gambled about 30k, and now me and my family are all better off because of it. Don't you guys understand that I won? I accept my judgement, but I disagree.
How is it going my homies I made this post on investing a few days ago explaining all of the QAnon fantasies and why the top could already be behind us. Some people listened, processed information and asked questions. Some called me a person working for Melvin and hedge funds. It’s all in the past, but if you got burned on GME or other meme stocks, here are few things you should learn about the markets and trading these bubbles.
Set a price at which you will exit and take profit. Don’t look at what happens next, and never rebuy if the price continues growing. Likewise, set a stop loss at which you will exit no matter what.
Never, and I mean never put in more than you can afford to lose, or even lose sleep over. I have a pretty decent portfolio, and I only put in 0.5% of it in the play. I don’t give a shit about that money, but I still took profit and got a 250% ROI. Easiest cash I’ve ever made, easier than blowing a fat dude in the back alley behind a strip bar. Anyway.
If you hear about shit on the news. It’s probably not a good time to enter. There is a reason why some early people made money on the play. They understood mechanics of what was driving the increase in price. Many of them didn’t even expect a short squeeze, they just like the fundamentals. Likewise, if your 80 year old grannie (say hi to her from me) calls you and asks you about this magical company called GameStonk, sell that shit right away.
Always double and triple check information posted on forums and don’t take it for a truth even if it has a lot of upvotes. The amount of misinformation I saw on WSB over the past week with 100 thousand upvotes makes me want to vomit.
Stock trading is not a team activity. It’s not us vs them. It’s a fucking free for all, and people will drop their bags on you if they see their unrealized gain turn into an unrealized loss. You want to make money? Do your research, and be the first one on the train. Don’t jump on the train when it is speeding and going off the rails.
If you don’t understand how something works, learn about it. Again, the amount of conspiracy theories that I read about ladder attacks and this grand illuminati conspiracy is driving me nuts. Always use the Occam’s razor, meaning if there is a simple explanation to the situation, it is probably right. There is no need to build out this conspiracy theory for something you don’t understand, it does not help anyone.
You will get FOMO and you will get confirmation bias. Everybody does, but learning how to battle it is crucial. Look, my dad was a fucking casino gambler in his 30s playing blackjack and losing money, and I have the same traits. Does it mean I need to be the same? No, and I always remember my genes when trading. It is not an excuse to use when you lose money.
Realize that situations like this are extremely rare, and if you expect to make 300% gain in 3 days, I have some bad fucking news for you, markets don’t work like this.
Finance gets complicated real fast. Yes, on the surface it’s just buying and selling. I have been studying this shit for 5 years, and I still don’t know a lot of things. There are reasons why even some of the smartest people still lose money. Shit, Newton was burned on a South Sea bubble. Yes, that guy who discovered gravity lost money just any of us.
One bad trade does not define you. As long as you learn, and don’t repeat the same shit again, you are golden. There are plenty of ways to make money on the markets, be it value investing, selling options or setting up butterfly spreads.
Bitcoin and speculative stock investing are dark mirrors of each other and the whole system is rotten.
Hey guys. Not entirely sure if this is the right place for this post, but here goes. Since the GameStop short squeeze and the Elon Musk Bitcoin pump happened, there's been a lot on my mind about both Bitcoin and regular stocks and I need to get this off my chest. One thing above all has really been bothering me and I couldn't put it into words until recently: how rotten the whole system is and how it allows a minority to earn enough money to never need to work again. Whether it's Bitcoin or speculative stocks, it works out very similarly. People throw money and hope they get lucky, no better than any gambling. When they win, it's not because they were smarter or did some great service to society. They only had to install an app on their phone, go through some KYC and throw money at their crypto or stock of choice. Money is a currency used to determine how much access to society's resources someone has. The more money you have, the more resources you can access. This can be better apartments, lambos, yachts, mansions, whatever. The winners of crypto or stocks are just gamblers, they get a disproportionately high share of society's resources without creating anything of value. And then there's people like me. I work a day job, working hard every day and trying to improve my skills, hoping to get recognized and achieve some measure of success in life, yet I get a pittance while all these gamblers win big. To be clear here, I'm not salty because I didn't invest money or lost it. I don't believe in either speculative stock investing or crypto "investing". I realize that speculative investments have a far higher chance to lose money, and losing money can really hurt you and your life prospects. With both Bitcoin and speculative stock investing, what happens in practice isn't very different. They're glorified casinos and the winners are set for life, and it really grinds my gears because they didn't do anything to earn it, while I'm sitting at a desk day in and day out, working hard yet barely getting anything out of it. But what's even worse is that the winners' wealth is created through exploitative means. For someone to win money in the casinos, someone else has to lose. Usually a lot of someones. And the losers? They can be drastically affected by their loss. It's even more sad when you realize that most of them were suckered into playing the game with false promises: "Bitcoin/Gamestop is guaranteed to moon! Invest now and you'll never need to work again!" and so on. Then when things fail and the hysteria ends, a lot of people are left holding the bag. Some turn to substance abuse, others commit suicie, yet others double down and throw more money at the casino in the vain hopes that they'll win the next time. And even if speculative investments had a 50% or higher chance of making you a winner, what would that mean for our society? I'm no economist, but I'm pretty sure that our society would start running low on resources as people buy more luxuries they couldn't afford before and this would result in price inflation. Which in the long-term, would nullify the winners' wealth and make everyone else worse off. It's all so upsetting, and very sad what our society really values. Sorry if this was too long or rambly, but I really needed to get this off my chest. Let me know what you think in the comments. Edit: This might not have been clear to some, but I'm not a Bitcoin supporter. I know how it works and why it's terrible. Edit 2: Well, my free day of shitposting is ending, so I'm wrapping up this thread. Thank you all so much for your responses! There were many interesting discussions, even with coiners. I might respond more tomorrow, but not as much as today.
Gamestonk. Gamestop. GME. My thoughts are on Reddit, under my u/martinshkreli & subreddit martinshkreli. Those are authentic and discuss why GME is one of the most unprecedented events in market history. Here, I'm going to discuss the populist attitude that is creeping into this odd situation and add some thoughts on short-selling in general. Let's cover my own unique angle on the concept of a 'short squeeze'. Most would define it as an erratic upward change in price driven by short-covering. I believe short-squeezes defined this way are usually a fictitious idee fixe that aggregates a number of discrete market behaviors and dynamics into a convenient and pithy moniker. The image of python-like buyer constricting some hapless speculator into a higher stock price is evocative but misleading. Many knew me as a short-selling specialist on Wall Street, focused on 'binary events' of biotech stocks. I think I've seen it all: I was once short more than 75% of a company's shares outstanding (I do not recommend this). I bought 75% of a company on the open market, etc. Short-sellers are governed by the same market dynamics as longs. They get nervous when positions go against them and consider exiting. Like longs, they can double down if they wish. The only difference is that, of course, short positions grow when stocks rise. And they can rise infinitely, while long positions fall asymptotically to zero. But both get, theoretically and assuming no fundamental changes have occurred, more attractive as they move against the trader. Short sellers have to pay borrow fees to longs (typically tiny, but sometimes massive). They have to locate stock to short, again usually easy, but sometimes difficult. Both are perilous when those rare adverse times arise. Why? Despite the possibility of a growing cost of renting stock, the ultimate fear of a short-seller is a "buy-in". It is nightmarish and has only happened to me once or twice, excluding options-related activity. A buy-in occurs when a broker decides to forcibly exit the short position on behalf of the trader because the broker and trader cannot secure the 'locate' which is supposed to underlie the short sale. The buy-in order is typically violently disruptive: a market order for the whole position near the closing hours of the market! The SEC published a list of stocks at risk of buy-in: the fail to deliver list. My point is that a 'short squeeze' can only practically affect the trader for two reasons. The first is that the trader digs in, doubles down and doesn't exit as his position grows. That's bad trading, and will eventually blow the trader up. But, if the stock is a 'good short', that short will be replaced by more traders with stronger hands/a better entry price/smaller position. What's more is the average investor can't tell if this is happening! The second is the buy-in. I haven't heard GME shorts being bought in, but again, how would you know, other than the grapevine? My point is most of the disruptive, exciting trading here is simply long speculators banging away at the stock. New longs are sometimes attracted to rising prices, speculating they'll increase further: that's called momentum. Those buyers are typically offset by the existing longs who are excited to exit at higher prices. But, if there is a large short position in the stock, a speculator may feel that those covering (buying to get out) short-sellers will provide additional fuel to the momentum. That's sometimes the case, but higher prices should lead to more supply from both long and short sellers. My feeling is the actions of large long holders probably have more influence on the stock price than shorts who dart in and out, and typically in smaller size. Remember that shorts who capitulate are often just replaced by new shorts who are attracted at the new lunar prices. In essence, 'short squeezes' become a self-fulfilling prophecy as new long investors pile in trying to 'squeeze' this sometimes phantom of a short seller, and existing long investors may hold off selling for the same reason. With some Popperian skepticism you will easily see that the same dynamic can exist without the short boogeyman, or with a short boogeyman of any size. Speaking of which, where is Chanos and his slavish groupie, Carson Block? Speculative momentum can occur for any reason. Let's not forget that the 'trapping shorty' strategy is an awkward idea for a few reasons. Short sellers are often sophisticated market participants who are betting on the decline of a stock. You usually don't want these type of traders sniffing around your favorite longs: I recall writing a 'short report' on a stock to watch it fall 50% that day. If you do a study of stock returns of highly shorted stocks, they are pretty awful. The reason there is 'no arbitrage' is the borrow rate. But even if you got this poor short to capitulate and squeeze, the amount of buyers who are now holding stock at absurdly high prices put way more energy (and money) into the stock than the short seller's white towel ever could. A sledgehammer killed the fly: now what? Alternatively, are you the host or the parasite? On populism. I don't really think most investors or speculators should go into any investment thinking that there is 'an enemy'. Concentrated (big) investments (bets) give rise to emotional behavior, typically the enemy in trading and investing as it clouds rational thinking. It's a lot better to be Socratic with your 'opponent' and understand what they're thinking. If your position were to be half the size it currently is, would you be as emotionally interested? Try it! You'll lower your risk and feel better. Some of the behavior going on at WSB sounds more jihadist than speculative. The idea that there are some investors who are 'good' and others who are 'bad', or that there is an 'establishment' is BS. Everyone has the same goal: I have a pile of money, I'm trying to make it bigger, fuck your pile--I don't care about it. Anything other goal is contrived, foolish and won't help you win. You can't 'fight the rich' by trying to become one of them. Don't you see the irony? A related thought experiment: what if this trade continued to work really well? And another, and another? Then some WSBers are billionaires. Aren't they the new 'enemy/establishment?' Who do you think hedge fund managers are? They're typically the anti-establishment. Things have changed a bit, but the most successful HFMs are actually the WSBers of the past. These are guys who didn't fit in well at i-banks, often got kicked out for having big mouths or not wearing the right ties, or just wanting to wear jeans at work and not fill out TPS reports. When they started their firms, people like Soros, Icahn, Steinhardt, Robertson, Cohen, Griffin, Loeb (who has posted anonymously on boards), Samberg, even Cramer were fish out of water and had very tiny amounts of capital, often begging for investors. The need for an enemy. To sustain increasingly insane behavior, it isn't uncommon to use a straw man or a scapegoat. Oppressive regimes used this technique in the past, and the media uses it today. Retail investors don't have much power individually. With your $5k RH account, you can't day trade or even qualify for margin. It's pitiful. So, it's understandably quite exciting to finally feel like a 'player' that you read about. To be a part of 'something'. The problem is the media is goading you to be somewhere between a lemming and a life-agnostic but impotent jihadist. Blowing yourself up won't impress anyone, and there is no afterlife here, other than a minimum wage career and mom's sofa. GME and shorting in general is small potatos in the scheme of the Wall St. machine. Don't worry about getting 'even' with the rich. That's jousting at a windmill that will waste your energy. No one here, hopefully, wants to be a lemming. Those willing to 'die on this hill' have to realize something: Wall Street doesn't care about its speculators. The new traders who vanquish the old simply replace them. Nothing changes. When LTCM blew up, or Amaranth, Visium, Galleon, or anyone else, it is 'out with the old and in with the new'. So, perhaps WSB can blow up 1 hedge fund or maybe 5, but so what? Eventually, the tables will turn and it will blow up. The leveraged, fast-money trading markets are a violent place and the only people who care one whit are the brokers charging fees (directly or indirectly). They only care to make sure the sorry carcasses can pay their bills. They know there will always be another speculator lined up, ready to shove his money into the lotto machine. There is no pride here. There is no credit for being a good solider. You either survive or you don't. Your job is to survive and thrive. Becoming a lemming will guarantee failure as per the statistical truism of gambler's ruin (enjoy the proof in measure theory). With enough time, anyone playing a game with <50% success rate (equal payouts), will lose all their money. Get that number above 50%. Add the Kelly Criterion to your trading strategy. You might ask, "(that's all well and good OR we'll agree to disagree) but, Mr. Shrek, isn't this a good trading strategy? (ganging up on shorted stocks)?" As long as you're not a lemming/jihadist (willing to walk over the cliff, whether or not you have a "cause"), and you ignore a somewhat slimy ethical/market manipulation question, I don't see anything wrong with it. There are better ways to make money, since you're asking. Stoking (or worse, participating in) a buying frenzy that is akin to a forced musical chairs game is a little crazy. Once a stock is absurdly valued, you're just hoping the sell-off doesn't happen while you're holding it. If you have enough lemmings or jihadists 'helping you', that's a good thing. They will hold your bag--someone needs to. Of course, if you've found the "next" Microsoft or Apple, no one needs to hold any bags. But, no company can increase its objective (aka fair) value quickly enough for this... phenomenon? situation? absurdity?... to make it reasonable. Those things take years, go slow and steady, and this frenzied buying/"short squeeze" phenomenon won't let value play a factor. That's why WSB GME longs have shifted theses from "well, Gamestop was/is cheap" to "the gaming cycle" to "Ryan Cohen will save us" to "...jihad?!" Each member of the herd has its own financial parameters, too. Some may have $500, some $50,000,000 or more. Some may be willing to lose their entire stake (and even more) on an out-of-the-money or levered trade. Some are not. Some were in the latter and somehow end up in the former. Some are in one column at one price and another column at another--some are switched from column to column by force. Today's lemmings/jihadists are tomorrow's sellers. When you're hanging off the mountain, pay attention to the guy holding the rope. Loosely 'coordinated' buying can certainly affect stocks. Heavily shorted stocks and small cap stocks are the kind that require less capital than typical to 'move' a stock. The irony here is when putting on a position, the trader's goal is typically NOT to move the stock with his actions! I still think GME is wildly overvalued, but that doesn't exactly mean I'm 'bearish'. One funny idea here is reflexivity: GME stockholders may become serious GME customers and the company's fundamentals improve that way! Excluding some such miracle, eventually GME stock will trade at <50 again. I still think it will trade at 1,000 or more BEFORE that happens, and that the decline process will take a long, long time (several years). Keep in mind, anything can change. GME can do serial secondaries that destroy its stock. Management's job is to create value for their shareholders--but perhaps they will avoid pissing them off. There's a strange loop! Finally, the stock could be halted by the SEC or completely banned by brokers. Don't overdo it. Watch the borrow rate. Keep your positions at less than 25% of your capital--live to play another day. Disclosure: I've never traded GME stock and do not intend to. (From martin, posted by mo)
Only Hold Coins You'd Happily Hold in a Bear Market (feat. How I Turned 40k+ LINK Into Zero)
Warren Buffett famously said that you should only buy something you'd be perfectly happy to hold if the market shut down for 10 years. Now I know we all had a great week, but I think many of you, especially the newcomers, need a reality check when it comes to some of these coins that are pumping. Like many of you, I was here throughout the bull market of 2017. I bought 3 Bitcoins that summer for about 6k, and found out about a lot of other cool projects going down in crypto. I dabbled in a few alts, OmiseGo, AntShares (now NEO), district0x, just to name a few. As the year went on, I made bolder and riskier moves, and by early January of 2018, I had a portfolio of about 100k, about half of which consisted of about 42k LINK, and an assortment of mid-major coins like Ether, Icon, OmiseGo, Golem, etc. For all of these coins, I had done semi-extensive research; I knew almost exactly what these coins were for, what they were trying to solve, who was behind them, and why they clicked. I'm not here to shill those coins (I don't hold any of them in a meaningful capacity right now). I'm just saying I knew what they were. Then I made possibly the worst financial decision of my life. I got too anxious. My portfolio wasn't rising as quickly as it was back in the summer, so I got impatient and started looking into so-called "moonshots", the "next (insert successful alt)". Within days my portfolio was heavy on coins like OysterPearl, Bounty0x, Publica, WaltonChain, and so on. Then you all know what happened. Three of these are now dead projects. WaltonChain, which is the only coin that's still on any relevant exchange, has never really recovered even during this market, and is widely considered scam-ish. I still made some money off crypto, but not even close to what I would've made, had I stuck to what I knew and believed in. I know some of you think you'll never make the mistake of buying into shitcoin fever. But shitcoins all look like gold until they're not. And we all feel like ingenious early investors until we're in a bear market, holding onto random coins that we're not 100% sure what they do. I know some of you think you'll just cash out at that point and walk away. But that's like a Vegas gambler thinking they'll walk away from the table while they're ahead. They never do and you won't either. But if you're going to stay on the table, bet on projects that you at least understand and believe in long-term. When you invest in alts, ask yourself:
Why does this coin need to exist? What problem is it trying to solve, and how?
What are its competitors, and what makes it strongeweaker than them?
Who is behind the project? Are they industry experts, or shady businessmen and/or random college students?
What is its community like? Are there meaningful discussions on the project and tech, or does its official Subreddit/TwitteTelegram account read like a bunch of moonboi hype?
Would you hold onto these coins through a long bear market? After looking at the historical charts of zombie coins from the last bull market, can you at least semi-confidently explain to people why your coin won't end up like that?
I believe in crypto and its potential, both as a technological gamechanger, and a speculative asset. That's why we're all here. But while we are, let's all be smart about our money. tl;dr: Don't chase pumps and shitty moonshots; invest smart. Also, while we're here, it might be fun to share some nostalgic dead projects. For me it's $BNTY.
DDDD - How r/wallstreetbets Created a Financial Weapon of Mass Destruction
Inspired by the recent events in wallstreetbets causing $GME, $BB, and $BBRY, among other historically highly shorted stocks to surge just to spite some rich people in wall street, I've decided to come out of retirement from wallstreetbets and publish a new edition of DDDD (Data-Driven DD) covering the exact mechanics that made this possible. I’ll also introduce those of you that are unfamiliar how wallstreetbet’s favorite gambling device, stock options, actually work and how they can be used by this subreddit as a weapon of mass destruction against hedge funds like Melvin - all dumbed down to a fifth grade reading level so that the average person in this subreddit will mostly understand what I’m talking about. Disclaimer - This is not financial advice, and a lot of the content below is my personal opinion. In fact, the numbers, facts, or explanations presented below could be wrong and be made up. Don't buy random options because some person on the internet says so. Do your own research and come to your own conclusions on what you should do with your own money, and how levered you want to be based on your personal risk tolerance.
Shorting
How It Works Most traditional (i.e. boomer) investors usually try to make money by going long - i.e. “buy low and sell high”; this is when you buy a stock thinking it will go up in the future (bullish). Shorting is the opposite of this, you “sell high and buy low”, thinking the stock will go down in the future (bearish). This is usually done through the broker, where the prospective short seller would “borrow” the shares from them, and they would need to pay back these shares in some future date by “covering their shorts” - or buying back the exact same quantity of shares they owe the broker. For example, imagine that there were only 10 Surprised Pikachu Pokemon cards in the world. Because nobody wants to deal with taking physical possession of these cards and risk losing their Pokemon card in their laundry or something, everyone pays a Pokemon card dealer a small fee to store it for them. Through their dealer, you can buy and sell these Pokemon cards as well. A 🌈🐻 realizes that maybe Pokemon cards are dumb and borrows 2 Surprised Pikachu cards (who has a prearranged agreement with some institutional Pokemon card hoarder to loan them out for interest) and sell them for $420 each, thinking that they're actually work $100 at most, and plans to buy the Pokemon cards back at that price to repay his Pokemon card loan (i.e. covering their shorts) - this is a short sale. Since no one actually wants to physically hold these Pokemon cards, these cards physically stay with the dealer who could then lend out these exact same Pokemon card if the buyer also has an agreement to allow them to do so. This means that you can actually have people owing more than the total number of Surprised Pikachu Pokemon cards in existence (i.e. short interest > 100%). Replace “Surprised Pikachu Pokemon card” with stocks and “Pokemon card dealer” with “broker” and you have a short sale of shares. Interestingly enough, this also applies 80% to how banks work as well. Short Squeezes So when does a short seller need to cover their shorts? Well, either when a) The short seller wants to, either to take profit or to stop a loss, b) Their broker forces them to through a margin call, or c) The broker forces them to as the broker has recalled their loan, usually for a hard to borrow stock - they get “bought in”. Today, we’ll focus on C) because this is how short squeezes happen. So, what does a broker recalling their loan mean? Well, to go back to the Pokemon card example, imagine that the dealer only has 6 Surprised Pikachu Pokemon cards that he’s legally allowed to loan out. Some more 🌈🐻 short sells all the 6 remaining Pokemon cards until the dealer has no more available on hand. So what happens when someone wants to buy a Surprised Pikachu Pokemon Card and doesn’t want the dealer to lend out their cards? He’ll have to force one of those 🌈🐻 to buy back the card that they owe them so the dealer can give it to the prospective buyer. But who can the 🌈🐻 buy back the card from? The dealer. But the dealer doesn’t have any cards to sell, so they need to force another 🌈🐻 to cover so that the former 🌈🐻 can cover their shorts. This vicious cycle repeats and leads towards a sudden surge in demand for Surprised Pikachu Pokemon cards and a spike in prices for it - a short squeeze. The Institutional Factor One thing alluded above was that shares can only be borrowed from *some* share holders, but not all. So who exactly can and does a broker typically borrow these shares from? These are usually margin accounts of either institutional and sometimes (although much less frequently) retail investors. Usually, when an entity signs a margin agreement, which allows them to borrow either cash or shares from the broker, they give permission to the broker to also lend out their shares in the process, and thereby also give up their voting rights - in case you’ve ever wondered who actually the share *actually* belonged to in shareholders meetings. Since almost every institution except Warren Buffet uses margin to a certain extent, and not that many retail investors do, especially given that retirement accounts are forbidden to use margin, and it’s much easier to “find” one big source of TSLA shares from one big institution with a margin account rather than find thousands of smaller margin retail accounts who hold TSLA shares, so most of the time, these shares are being borrowed from an institution (i.e. pension fund, hedge fund). This means that shares that are almost disproportionately held by retail investors are much harder to short because they’re harder to borrow from the broker, and retail-heavy stocks like HTZ, GME, NIO, and NKLA, which virtually no institutions actually hold, will demand high interest rates when shorting and the sellers can much more easily be forced to cover during a short squeeze.
Stock Options
What are Stock Options A stock option is a contract between the writer and whoever holds it that gives the option holder the right to buy (call option) or sell (put option) 100 shares of the underlying stock on or before the expiry date at a specified strike price. So for example, buying a GME 1/29 $1000c gives whoever the holder of this contract is the option to buy from the writer of this contract 100 shares of GME at $1000 / share on or before 1/29. Obviously if GME is lower than $1000 before that date, the holder would be an idiot to exercise this option to buy GME shares for more than their current market value, so they expire worthless. This effectively provides the option holder an immense amount of leverage, and provides the opportunity for them to 10x or even 100x their original investment if the underlying asset moves the right way - for example because a subreddit declares war on a hedge fund and pumps up a stock to make them go bankrupt, while limiting their losses to the cost of the option. The option writer will in return receive a premium for the option, potentially risking an infinite amount of money, but with a high likelihood of making a small profit. These writers would either be
Theta gang - who are looking to generate a tidy income source from those option premiums and pray that the stock doesn’t move in the wrong direction too much
A market maker - who writes the contract when they see an arbitrage opportunity between the market value of an option and the theoretical value of it, and hedging their contract they wrote by buying / shorting the underlying assets so they effectively don’t actually take a position in the market.
We’ll go over how 2) works and how this mechanism can be used as a financial nuclear bomb, but first you need to learn some greek. The Greeks The greeks in finance is a set of factors that can affect the price of a stock option / group of options Delta - Change of the option price as the stock price changes Gamma - Change in Delta as the stock price changes Vega - Change in the option price as volatility of the stock changes Theta - The decay in the option price as the expiration date gets nearer Rho - Change of the option price as the interest rate changes; Most people ignore this Looking at the greeks of the gambling tickets you buy is very useful to analyzing the ways you can make or lose money on them. Think TSLA will go up a modest amount? Buy a high-Delta call. Think GME is going to 🚀🚀🚀 1000% more? Look for a high Gamma call so your Delta gains accelerate as GME 🚀🌕. Do you feel like a vampire and want to have a steady income source from degenerate wallstreetbet gamblers on a stock you think will go flat (relative to historical volatility) over the next few months? Join theta gang and sell a high-Theta and high-Vega option! Market Makers The Black-Scholes model is a fancy mathematical model that describes a “perfect price” (a lot of caveats here) for a stock option. This is done by showing how every option written can theoretically be perfectly hedged by a series of purchases or short sells on the underlying stock. This means that theoretically, if there is a large gap between the theoretical price from Black Scholes and the actual price for an option, there is an “arbitrage” opportunity - this is where market makers come in. Market makers are companies that provide liquidity to a market by offering to be counterparty to trades. This is especially useful in stock options, where a single ticker can have thousands of options, and there might be someone who wants to buy a GME 1/29 $1000c but no one is actually actively selling it. However, this option might be listed anyways and Citadel will sell you the call if anyone tries to buy it and then immediately hedge it. In fact, when you buy an option chances are you’re not actually buying it from its previous owner selling an option they already own, but from a market maker like Citadel (who is responsible for over 99% of all options volume in 3000 stocks). So what happens when someone buys an option from a market maker? Since the market maker typically can’t (and probably don’t want to) take a position, meaning taking a directional bet if a stock goes up or down, they’ll immediately hedge the option they just conjured out of thin air by buying or shorting the equivalent number of shares such that the Delta of those shares is the same as the Delta of the option they wrote to remain Delta-neutral, so if the stock goes up or down their position value doesn’t change - this is called Delta hedging. Furthermore, as the stock price moves up (calls) or down (puts), they’ll need to buy or sell even more of those shares to remain Delta neutral since the Delta will change due to the option’s Gamma - this is called Gamma hedging.
Putting It All Together - How options can be used as weapons of mass destruction against short sellers
Now we have the tools to understand how these two financial concepts put together can make billion-dollar hedge funds go bankrupt. Through Delta and Gamma hedging of market makers, buyers can have the effect of buying shares dozens of times the value they actually spent buying their option; a XYZ 4/20 690c can cost only $100 in premiums but causes the market maker to buy $2000 in the underlying stock to hedge against it. If you get enough retail investors to do this, they'll have the impact of billion-dollar whales on the market despite their small stimulus-check-funded portfolios. Now, you do this on a stock that is heavily shorted, and with very little institutions actually holding real shares of these - making it harder for brokers to find shares to borrow, and you have yourself a weapon of mass financial destruction capable of making billions of Melvin’s money disappear in a single day and potentially have GME 🚀🚀🚀 to a trillion dollar market cap. HowwallstreetbetsControls the Stock Market The one thing that’s interesting about all of this is wallstreebet’s unique position in being able to facilitate this weapon of mass financial destruction because
Most rich people or institutions too risk adverse to buy large amounts of out of the money options (unless you're Chamath or Elon)
This can only really happen on stocks that very few institutions (i.e. rich people) actually own, meaning it needs to be held / bought on mass by retail investors
In any other scenario where 1 and 2 happen to be true, this would be classified as market manipulation and be immediately shut down by the SEC
My Positions wallstreetbets veterans may recognize me as the 🌈🐻 who wrote those long-ass 2000 word essays about how the stock market is in a bubble and loaded up on VIX calls last time you heard from me. Although I still stand by my thesis and stocks like GME, TSLA, and NKLA is just proof that we've reached the euphoria phase of it, I learned my lesson that I'm idiot trying to short it (for exactly the reasons described above) and got the fuck out of my position when VIX shot up back in Sept. Most of my "real money" has since been moved to gold and crypto, but because I'm a degenerate gambler, I still have a bit of money playing with /ES and a calls onhighly-shorted stockswith meme-stock potential (i.e. vast majority held by retail investors). Now that I'm busy with work again, I probably won't be posting as frequently as I have had in the past, but you'll see me around from time to time :).
Illegal Tactics and DTCC/Prime Broker Complicity In Naked Shorting & Retail Shutdown of GME (DTCC/Prime Brokers decision makers need to be questioned at the 2/18 GameStop Congress hearing)
TLDR: GameStop’s Congress hearing is on Feb 18th, they need to investigate the Prime Brokers and DTCC for their complicity in enabling naked shorting within GME and by extension, potential collusion to shut down trading on Jan 28th, the day the short squeeze was going to kick off. (stick to the end for an analysis of some illegal tactics short side hedge funds have been using) Thesis: On the day the retail market for GME shut down on 1/28 (the day the short squeeze would’ve happened had there been no market intervention), DTCC (clearing house monopoly) shut down retail buying in order to protect itself and Prime Brokers (which privately own the DTCC) from being exposed to the consequences of being party to illegal activity. I believe Prime Brokers and DTCC need to be called to the GameStop hearing on February 18th to be questioned for their complicity in enabling illegal naked shorting of the GME stock, as well as potential collusion to shut out retail buyers on 1/28. In my previous post (which I recommend reading for some context) I explored the subject of rampant illegal naked shorting in GME, and how Prime Brokers (consisting of banks like Goldman, Morgan, etc) and DTCC would be complicit in the naked shorting. This in turn raises the thought experiment that they would be incentivized to do anything possible to prevent the short squeeze from happening on 1/28 because had the short squeeze happened, the shorts would go bankrupt and their Prime Brokers who lent them their naked shorted shares would need to cover the shares. This would not only represent a humongous capital expense for Prime Brokers, the culpability of Prime Brokers (and that of the DTCC) in this situation would also have likely been exposed as well. A quick primer on what a Prime Broker is: Prime Brokers are essentially the service side of the short- selling business. They lend out securities and cash, you can think of them as the “house” in a casino: They provide a gambler with markers to play and to manage his winnings. According to Matt Taibi, “Under the original concept, if a hedge fund that wanted to short a stock they would first need to “locate” the stock with his Prime Broker but as time passed, Prime Brokers increasingly allowed their hedge-fund customers to use automated systems and “locate” the stock themselves, and what this does is enable short-sellers to sell stock without delivering and thereby perform naked shorts with counterfeit shares. (source: https://web.archive.org/web/20210213125246/https://www.rollingstone.com/feature/wall-streets-naked-swindle-194908/). (I highly recommend you read Matt Taibi’s article on naked shorting and how it was used to take down Bear Stearns and Lehman Brothers. There are so many parallels with GME it’s hard to miss. It’s amazing to consider that 12 years after this article was published and brought to public awareness, the problem of naked shorting still exists as a systemic issue.) Prime Brokers have a long history of being associated with naked shorting. To highlight a few examples, Prime Brokers like Merill Lynch and Goldman have long been implicated for naked shorting Overstock.com (https://www.rollingstone.com/politics/politics-news/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-244035/, https://www.forbes.com/2007/02/02/naked-short-suit-overstock-biz-cx_lm_0202naked.html?sh=271400d1763f). Another example is when Goldman’s Prime Brokerage was implicated by the SEC in 2016 and got away with a small fine of 16 million (Source: https://www.sec.gov/news/pressrelease/2016-9.html). An example that very recently came in the news is a story where CIBC, BOA, UBS and TD Bank Prime Brokerages are accused of facilitating naked short selling and using counterfeit stock to attack and bring the stock price of a company from $34.77 to $1.83 (Source: https://www.securitiesfinancetimes.com/securitieslendingnews/industryarticle.php?article_id=224548). The DTCC also has a very long history of being associated with naked shorting. The Wall Street Journal noted that 1% of the DTCC’s volume end in failure to deliver which “have put DTCC in the middle of a long-running fight over whether unscrupulous investors are driving down hundreds of small companies' share prices… DTCC has turned a blind eye to the naked-shorting problem. ” (Source: https://www.wsj.com/articles/SB118359867562957720). The DTCC has also had numerous complaints submitted to the SEC for enabling naked shorting (source: https://www.sec.gov/rules/proposed/s72303/decosta122203.htm) and have been sued tens or hundreds of times for assisting naked shorts (source: https://smithonstocks.com/part-3-in-series-on-illegal-naked-shortings-role-in-stock-manipulation-prime-brokers-and-the-dtcc-have-a-troubling-monopoly-on-clearing-and-settling-stock-trades/ and http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html and https://www.wsj.com/articles/SB118359867562957720) On 1/28 Robinhood received a letter from the DTCC at 4 am requiring them to halt trading or come up with 3 billion dollars, which Robinhood did not have, and therefore with one swoop of the pen the DTCC shut down buy side momentum but strangely allowed selling. Retail investors were shut out of the market and as any student of microeconomics would know, by shutting buy but only allowing sell, the price is bound to fall. Meanwhile while hedge funds were able to keep trading not only in the market but also crosstrade in the dark pools (“private” stock markets that retail is shut out of, more on this later), and use this crucial lifeline given to them by the DTCC to prevent the squeeze from happening that day. With retail abruptly being shut out from buy (even cash accounts were shut out, which didn’t make sense) and only allowed to sell, almost everyone could smell manipulation was afoot (which triggered the Congress hearing) and the most of the blame was pointed at Robinhood. Personally and in hindsight, I believe Robinhood was just a willing scapegoat. When we think about who had the most to lose if a short squeeze occurred, I’ll narrow it down to three entities, Shorts and their stakeholders (ie Citadel), Prime Brokers and the DTCC. It’s important to remember that the actual impetus that triggered the shutdown of the market for retail investors came from the DTCC. Working backwards, if you consider that GME was rampantly naked shorted and DTCC and Prime Brokers would have to be complicit in it, I believe the DTCC, Primer Brokers and possibly Citadel (who provides 40% of Robinhood’s revenue) brazenly manipulated the market on 1/28 by shutting down purchasing for retail buyers to prevent the squeeze from being squoze on that day as doing so would be catastrophic for all aforementioned parties involved. I believe that on the upcoming Gamestop Congress hearings the Financial Services Committee needs to call on decision makers of DTCC and Prime Brokers explore their role and complicity in the shut out of retail buyers that day as well as being enablers of naked shorting in GME. An interesting thought experiment: On 1/28 when the price was 450+ and shorts were likely under 100, if we assume prime brokers allowed naked shorting in GME, then when the squeeze was about to happen (or happening), if Prime Brokers had margin had called the shorts, they would presumably also also gone down because shorts would not be able to pay in that event and the brokers would be holding the bag. By that logic, they have every incentive in this case to NOT to margin call and instead the most logical option would probably would have been to make a backroom deal, which is what I personally think most likely happened. If you’ve read up to this point, you might be thinking what can I do about this? I am aware that there a lot of cynicism that we can’t do anything, that there will be no justice for retail investors who were harmed this situation, and that institutions and people in power will prevent anything from being done. I feel this sometimes too, but remember: A single voice can be drowned out, but if we all speak together then we will make our voice heard. Ape Strong Together. With the hearing coming up on February 18th, I highly recommend you email and tweet the representatives involved in the hearing, as well as your own district representatives, and urge them to read into the factors presented in this post and call the DTCC and Prime Brokers to the hearingl. They need to be questioned on why GME has so many counterfeit shares, failed to deliver, their complicity in naked shorting, and investigated for their role in the retail shut down of 1/28. Below are 4 members of congress I recommend both tweeting and emailing Alexandria Ocasio-Cortez https://twitter.com/AOC, email: [[email protected]](mailto:[email protected]) Al Green https://twitter.com/repalgreen, email: [[email protected]](mailto:[email protected]) Maxine Waters https://twitter.com/maxinewaters, email: [[email protected]](mailto:[email protected]) Nancy Pelosi Email: https://twitter.com/SpeakerPelosi email: [[email protected]](mailto:[email protected]). And you can find other members of Financial Services Committee here to reach out to: https://financialservices.house.gov/about/committee-membership.htm What follows should probably be a separate post, but I will take the opportunity to summarize some of the illegal tactics that shorts have been identified to be using in their war with retail investors. Note that this may not be an exhaustive list and there may be newer tactics deployed in the future. Retail investors might not have the same tricks, resources and willingness to break the law for profit as hedgies do, but my hope and belief is that if we pool our knowledge and analysis, we will figure out their game and effectively adapt. Feel free to forward the list below to any representatives and lawmakers if you concur that these tactics were used: Rampant Naked Shorting - With the extremely high number of Fail to Delivers (FTID) , short interest being as high as 226% recently, and institutions alone holding a staggering 177% of the total float (likely due in large part to counterfeit shares), signs strongly point to GME being rampant with naked shorts and counterfeit shares. I believe the original goal of shorts was to drive GME to bankruptcy with these naked shorts, using the laddering of naked shorts (aka short ladder attack), executed with the help of counterfeit stock which is a classic and reliable method of driving down the stock price. I believe the GME stock has seen relentlessly aggressive short attacks, especially on the week of Monday February 1st, which drove the stock price down and triggered panic selling. Ladder Attacks with the help of Dark Pools - Another identified method of ladder attacks was identified to come from crosstrading with darkpools (the stock market has its own private stock exchange where institutions can trade…). Essentially darkpools are private stock markets retail investors do not have access to, where short side funds can purchase securities “off market” and then sell “on-market”, with the effect of creating a lot more downward pressure on the market without the upward pressure from buying. Illegally masking shorts with synthetic longs. Another tactic shorts are suspected of using in GME is the use of illegally using options to evade short positions in violation of Reg SHO which SEC describes in this risk alert and which I elaborate in this post. Essentially it’s the use of using options to create synthetic longs to illegally and artificially cover and prolong short positions and at same time obscuring the true short interest %. If you consider that it would be far more profitable for shorts to not cover at high prices but instead ladder attack the price and wait for retail investors to lose interest and close their shorts at as low of a price as possible, then you can see why this strategy would be very effective. Using way out-of-money call options to obscure true short interest. You may have heard about the 43 million worth of 800 dollar calls purchased when the price was 100 and found it odd. Later it was identified as a tactic to cheaply purchase synthetic call options (since at 800 its way out of money) to obscure their short positions (with the added benefit of hedging at 800 if a squeeze does happen) One thing I want to note, particularly to legislators at the GameStop hearing: Retail investors were not incited to pump GME. Retail investors spotted a unique Short Squeeze opportunity created by the greed of short side hedge funds, whereby GameStop was being abusively naked shorted with the goal of bringing it to bankruptcy, and hedge funds were so greedy about it that they shorted the company with a short interest of 226% of float, meaning A LOT of counterfeit shares were being used to short the company. Retail investors saw this as an opportunity to short squeeze the hedge fund shorters, which is a legal and legitimate investment strategy. The short squeeze would have happened had everyone played fair, but instead, financial institutions who were culpable to the naked shorting intervened and shut down retail buying, hurting the retail investors and successfully manipulating the market. The investment itself was in my opinion a sound decision based on the short squeeze, but in hindsight retail investors did not seriously consider the risk of the market would be blatantly and publicly manipulated and that the market would be rigged against them. If this post was useful (and I hope it was! Gave up my Friday night to write this for you Apes), please upvote for visibility and share it far and wide. The GameStop hearings could be a first step and hope towards legislative change, and it’s extremely important that the right story is told at those hearings (and by the right story I mean the real truth of what happened.) I hope the truly culpable parties are investigated and brought to justice. Again, I know many of us feel cynical that anything meaning will be done towards finding justice against the lawbreakers in this case, but if you feel even an ounce of injustice or empathy at how retail investors were unfairly harmed in the course of investing in GME, I strongly urge you to contact a legislator associated with the GameStop hearings and bring this to their attention so they can review this case with more complete information. In addition I recommend you to contact the SEC and any journalist you know or via journalist tip lines. It’s not going to be easy but the more awareness we raise the higher the likelihood our voices will be heard and positive change will be made. As we navigate the rocky waters ahead, I’ll gift you with a favorite quote of mine: The only difference between a nightmare and a dream is how big your balls are. 🚀🚀🚀 Disclaimer: I am not an investment advisor, I just like the stock. Ps. If you’ve read to the end, I’ll leave you with a few more thoughts and reminders: - If I were to distill life into one thing, it would be to never lose hope. - Remember that if you’ve lost money in any way shape or form, don’t be depressed, money can always be made back and the important thing is to maintain a good attitude. - Only invest what you can afford to lose. - Perhaps the most important factor in good investing is patience. If you’d like to read more about counterfeiting stocks this is a good place to start http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html
A break down of the bull case for Ethereum and how it relates to Bitcoin
There is a general understanding among ETH investors that the enhancements from ETH 2.0, EIP-1559 and L2 solutions will result in a sustainable monetary policy with near 0% issuance and the potential for Ether to become a deflationary asset. What is even more interesting is that the net return of ETH as a SoV becomes superior to BTC the moment that issuance is lower than the staking yield. In other words, even if BTC had already ceased issuance, it offers no mechanism to provide yield to long term holders with a negligible risk exposure as ETH does. There is an execution risk that Ethereum will not deliver on what is currently planned, but if it does then what I have explained will become a reality. You cannot separate BTC/ETH's payment rails from their respective monetary policies. As you are probably aware, issuance is just a subsidy, and without it the network will need to operate as a profitable business with a cash-flow that is entirely dependent on network fees. We are observing a situation that is causing a degradation of the utility of the Bitcoin network. What I mean by that is that the incentive for users to transact directly on the network is being diminished because of the tokenization into ETH and by the introduction of custodians (like Paypal) and traditional banking services who will soon be entering this space. If these trends continue, I suspect that the only activity that will end-up happening on-chain will be done by whales sporadically transacting to hodle and the occasional settlement from institutions. Bitcoin seems fast and frictionless, but that is because you are comparing it to something in the physical world. In digital terms Bitcoin emulates the friction of operation that is found with gold: it is difficult and expensive to move it, securing it yourself is not trivial, and it does not make for a great medium of exchange. I don't think this will be a good dynamic to generate enough transaction fees. That is of course my subjective interpretation of it, but regarding this particular situation it is nearly impossible to make objective assertions at this point. It is possible to assert that, in the digital world, the expectation of frictionless money would entail near instant transactions with negligible cost and without the relative risk/paranoia of dealing with nuclear waste and having a hacker watching your every move waiting for you to make a mistake to snatch it away. Digital money would also need to interact with other digital assets, preferably defined and operated within the same ecosystem. Ethereum is steaming ahead on all ends. Ethereum is fostering a digital economy (this is a very important part of understanding the value of Ethereum, but I will not be exploring it in this post) with DeFi at its center. It is currently generating about three times as much trx fee revenue as Bitcoin. L2 solutions are going live as we speak, and it appears that they will be much more practical and provide better UX when compared to the Lightning Network. This will help to amplify L1 block space value and push revenue even higher. That will be followed by EIP-1559, which will burn transaction fees. Mining is currently excessively profitable and the hash rate cannot keep up. This means the financial incentive can be reduced and by burning trx fees we achieve the equivalent of an issuance reduction, while stabilizing mining revenue. Eventually the transition to PoS will dramatically cut the operational cost of the network. That means that Ethereum as a business will become more profitable and less reliant on the issuance subsidy. Finally, we will see the introduction of sharding which will scale L1 by up to 1,000 times, compounding the effect of L2 solutions and making it feasible for the network to operate as a platform for new use cases. A solution to the hackenuclear waste security situation is being explored via social recovery wallets. It is still in the early stages of research and design, but it is important to realize that the Ethereum community recognizes it as a problem and is working on a solution. There is a lot more that can be said about the BTC vs ETH debate and I am working on a full write up that explores each individual element in more detail. Regardless, it is important to pay attention to this trend: the smartest people in this space are shifting their point of view and realizing Ethereum's potential. Raoul Pal is a seasoned investor, extremely bright and open minded. He started with Bitcoin, but it did not take him long to understand the value proposition of Ethereum. Lyn Alden is a brilliant investor and mental powerhouse who initially did not think investing in Ethereum could be justified, but she is also starting to shift her view and now understands that it has a justifiable risk/reward ratio to be included in a portfolio (although she is not personally invested in Ethereum). She has plenty of negative things to say about it, however it appears that she recognizes this is not a black and white situation. I have a feeling she will be revising her analysis on Ethereum again in the future with a more optimist view, but maybe that is just wishful thinking. The crypto space has a few analogies that have been used to describe technical/economic mechanisms that are somewhat tricky to understand: mining, Ethereum's gas, and the analogy between ether and oil. Crypto "mining" is not like real world mining. It's purpose is not to extract resources, but it is rather a decentralized mechanism to process transactions. Newly minted BTC tokens are not "mined", they are minted by the protocol and awarded to operators. Furthermore, it is impossible to change the total mining output of the network... adding/removing miners does not affect the mining output. If you are new to crypto, you can read a more detailed explanation of mining here. ETH's "gas" is not like fuel (it cannot even be stored). It is just a computational metric that is more akin to the distance a car must travel, but not what actually makes it move. The fuel is electricity and it must be paid for with ether. When you transact you are also paying for the "car" which is the use of all active mining hardware/validators for a fraction of a second. And ether is just money. If you put too much weight on these simplified analogies, you will not understand the economic actuality behind them. This is a source confusion in the crypto space, and it is used to support false narratives. From an economic perspective, ether is money. Once you understand this, you will know that the narrative that BTC and ETH are not competing because they are different things is analogous to saying fax machines do not compete with the internet. The beautiful thing about ether is that it is actually not "just money". It is a mixture of a scarce monetized commodity, money, bond and tech stock.
Monetized Commodity: Ether is becoming more scarce and will continue to do so with the transition to proof-of-stake and EIP-1559. Ethereum does not have a supply cap, but it does have a roadmap for a sustainable security model and if it achieves a positive cashflow then it will not only eliminate issuance, it can become deflationary. An argument can be made about potential issues with Bitcoin's sustainability in the long run.
Currency: Ether is used as a unit of account and medium of exchange to pay for every activity in Ethereum. It is also used in the same way for venture capital related to ICOs, and Ether is also used as collateral in the DEFI space and new monetary uses will continue to emerge. It is an immature form of money, just like Bitcoin is an immature form of gold. Some people prefer to say that Ether is just a utility token. However, a utility token is just a narrowly scoped form of money. Not only is Ether's scope within its digital economy growing, by next year users will be able to pay millions of merchants with Ether through Paypal. We have never seen the adoption of a new form of money grow organically. New forms of money have always been imposed by authorities. What would the organic growth of money look like? It would look like Ether.
Ethereum's digital economy: Ethereum has limitless use cases and it is already generating economic activity with real world usefulness. Ether's value will benefit from acting as the native monetary asset for Ethereum. As Ethereum's economic activity grows, the velocity and/or value of ether must also increase.
Bond: With proof-of-stake you need to lock up Ether to receive a yield in return. It is similar to how bonds work.
Tech Stock: Ethereum provides a service. That service is paid with ether. The network is controlled by holding ether that is staked. The more valuable the service provided by Ethereum becomes, the more users will be willing to pay for transactions and the more valuable the protocol and the Ether token become. Cloud based services is the entire business model of many companies. The network will be entirely operated by stakers who happen to be the recipients of transaction fees. It is not exactly the same as holding a stock, but there are a lot of parallels.
Full reserve banking model: This is a bit of a stretch, but it is a potential end-game for Ethereum. It can serve as the base infrastructure and reserve asset for a full reserve banking system. In a nutshell: a consortium of banking companies can be formed to standardize a framework to hold and stake Ether under custody in exchange for wrapped Ether. Customers deposit Ether, banks exchange it for wETH and stake the original ETH. Resting balances of wEther on customer accounts can receive a cut of the staking rewards. Banks get their profit model, customers get to spend wrapped Ether with traditional banking services and potentially receive a share of the staking yield. Customers could also have access to a yield curve based on variable reserve requirements. This would allow banks to create money (which is actually good for the economy when it is done with moderation), but for the first time ever customers would have the choice of how much risk exposure they are comfortable with. This dynamic could help to establish a form of democratic check and balances system that discourages moral hazard. Ether could become a godsend to banks in the land of negative yields. It's a pipe dream, but not entirely impossible. Don't forget that the US OCC has essentially given banks the green light to take the first steps in this direction (US banks have been approved to use the Ethereum blockchain for their operations AND they can become validators... yup this happened).
EDIT 1: Adding an analogy to explain why ether is money: Let’s say I have a car with a 14-gallon fuel tank and I want to take it on a road trip. The car is not aware of the price of gasoline, and it would not travel any farther if the price of gas would double the next day. That’s because the intrinsic utility of oil has nothing to do with its monetary value. The car needs gas because of its particular physical properties and how the ICE is designed to utilize it. If I want to drive from point A to point B and it takes a full tank to get there, it will take that full tank no matter what happens to the monetary properties of gas/oil. This is fundamentally different from how Ethereum uses ether. Ethereum (the network) is not trying to be money, but it utilizes ether exclusively for its monetary properties and not because it can be magically burned by an imaginary engine of sorts. It costs money to participate in the network as a miner, and their engagement is financially incentivized with ether. Block space is a scarce resource, therefore participants who wish to transact use ether to bid for it. These interactions are utilizing ether as a monetary medium of exchange. In the long run, as the price of ether goes up, the ether denomination of gas prices goes down. That happens because no one is using ether as gas/oil, and it is actually being used as money. In the short run you may see the opposite occurring because of the dynamic between the portion of block space demand that is inelastic and the demand for ether. EDIT 2: Revisiting key concepts to explain how they will become price catalysts.
Wide adoption of L2 solutions: these will amplify the base layer block space value while encouraging further network adoption by a significant reduction of fees. A successful integration with DeFi protocols will dismiss the "Ethereum killers" theory and consolidate market confidence.
EIP-1559: reduce excessive financial incentives to miners by burning transaction fees. This will also discourage miners from attempting to artificially raise fees via spam.
Sharding: scale L1 bandwidth, compounding the effect of L2 solutions, further consolidating Ethereum's dominance in the DeFi space, making it feasible to introduce new use cases and eventually increase trx fee revenue.
The switch from PoW to PoS: discontinuing PoW will eliminate the operating costs related to mining and will allow for a reduction of issuance. Money that was previously allocated to buying mining equipment will be redirected to the acquisition of Ether. Staking Ether will remove it from circulation for extended periods of time. Operating cost will be negligible, allowing validators to withhold most of the Ether revenue. This will be the greatest bull market catalyst in the history of cryptocurrencies and it will eclipse the effect ofBTC halvenings.
Bitcoin maximalists will be nay-saying all the way through and past a market cap flip. Do not get caught up in their narrative. If you are not sure, then it is better to rebalance your portfolio proportionally to market caps. If none of these things happen and Ethereum turns out to be a failure, then you would only have reduced your gains by 20%. Otherwise, ETH will be making you mountains of money. EDIT 3:Ethereum killers Ethereum killers remind me a lot of Tesla killers, but a lot worse. People need to understand that cryptocurrency platforms targeting financial Dapps are fighting the equivalent force of a black-hole when it comes to Ethereum’s network effect and user retention in this space. Bigger players, with bigger money, are entering this market and they will not settle for anything other than the top dog. This pattern reinforces Ethereum's position as the premium financial system, which ends up attracting even bigger players and resulting in the black-hole effect. To make matters even more complicated, financial apps are more valuable when they are surrounded by a rich and diverse variety of digital assets and other natively defined Dapps. There is not much you can do with your money in a ghost town. It is VERY difficult to build this type of environment up because the platform and dapps must also have established full trust from their user base. This is not to say there is no space for other networks to grow, but just don’t get your hopes high that they will be taking Ethereum’s stronghold as a financial system. There are other use cases that do not require the amount of decentralization and security offered by Ethereum, and the networks that can focus on these are the ones who will be able to coexist with in the long-run. Gaming, ERP interoperability and supply chain are good examples of such use cases. Remember that alternatives with cheap transactions have existed for a while and they have barely touched ETH's dominance (EOS, NEO, VET, QTUM, IOTA, LSK, STRAT, ARK and dare I say... TRON). EDIT 4: Refuting critiques about dynamic monetary policy If an argument can be made that the financial incentives to operators (miners/stakers) are excessive or insufficient then an argument can be for the implementation and execution of a dynamic monetary policy. I don't think an arbitrarily picked issuance schedule determined during the genesis of a new highly complex system is likely to be efficient through its lifecycle. Bitcoin's monetary policy provides the certainty of stability and protection from abuse, but it sacrifices the possibility of efficiency and jeopardizes longevity. It would be like if a captain of a ship would point it in the direction of its final destination, set the throttle, then fall back to his cabin for a nice bottle of chianti and hope that the ship would arrive safely. There would be no one at the helm to navigate the seas, no one to make sure it stayed on route, no one to avoid the storms or to take advantage of currents. In my opinion it is a pretty bad approach to something as critical as monetary policy. With respect to Ethereum's dynamic monetary policy: I don't see any evidence to suggest developers have been enriching their pockets by keeping issuance at the levels they are. Developers are stakeholders and the Ethereum fund holds a lot of ether - debasing ether is against their self interest. There is a great misunderstanding that the one's who are adjusting issuance are the recipients of the new tokens. Is there any documented case of this happening? EDIT 5: Addressing Bitcoin's immutable monetary policy The idea that Bitcoin's monetary policy cannot be changed is a myth. It is a false narrative that takes for granted that the issuance subsidy will no longer be necessary at some point, but there is no way to objectively assert this. There is no divine power preventing the monetary policy from being changed. If the security model for Bitcoin was jeopardized because of insufficient cash flow to miners, then Bitcoin's monetary policy would be the first thing on the chop board to go in order to remedy the situation. EDIT 6: Five years ago naysayers were screaming about how everything that is being done TODAY in the Ethereum network would never work. Now they are calling Ethereum a scam, or that is is a platform for degenerate gamblers, or that the fees are too high and therefore it is useless, or that it can't scale, or that something else better is just around the corner to take its place.... you know... basically all the things that traditional bankers have to say about Bitcoin, maxis are saying about Ethereum. EDIT 7: The greater the impact a new technology can have on society, the more difficult it is to comprehend its potential. Ethereum has the potential to have a dramatic impact on human civilization. It could take decades for it to be fully realized, but it would change the world in ways that we cannot possibly imagine today. If it happens, the moon will be just a pit-stop. EDIT 8: Thank you so much for all the awards! Ethereans understand this stuff, and I could feel the frustration in the air every time someone said that Ethereum is not money, or that ETH and BTC are completely different things, or all the other bs attacks that are in great part founded on a lack of understanding of how BTC and ETH actually work. I would love to hear what guys like Raoul Pal, Pomp, Michael Saylor and Fernando Ulrich (for my Brazilian friends) would have to say about some of the things that have been written here. If you know a way to get their attention, then please do it. EDIT 9: Clarification about Lyn Alden's opinion of Ethereum EDIT 10: I am still working on a much more ambitious write up. It is focused on economic aspects of money, monetary systems and global asset markets. I still have not incorporated any of the information written here, but I eventually will merge it together. One of the main new ideas that I am exploring is challenging the notion that money has no intrinsic value and that scarcity is the most important attribute of money. I think I make a compelling argument to demonstrate that facilitating economic activity is more important, and how Ethereum has a big edge over Bitcoin in this regard. Here is the link to the WIP doc. TLDR: Ethereum is not stopping at the moon... it is not stopping on Mars... it is going straight out of the Milky Way galaxy in search for alien life... but you should own some BTC just in case the spaceship malfunctions during launch.
Ok Tards, Like the rest of you, I bandwagoned GME hard and became part of the cult. Lucky for me, I've been losing money here for years and got that panic urge to do my own DD the other day. Having gone through literally thousands of posts, I've realized most of you are folding tinfoil into hats and turning relatively mundane things into full-blown conspiracies. For real y'all are becoming Flat Earthers. Here's what I mean.
Short Ladder Attacks - Not a real thing. Someone here made this term up.
Synthetic Shares - Very cool and very legal. Synthetic shares were created by the Shorts buying calls to hedge their bets. Lets say you short 100 shares of a stock at $5 and buy 1 $5 call. Despite not actually possessing any shares, you are still technically "long" 100 shares. These are called Synthetic Shares. This could have thrown off Short Interest numbers, but it also makes it easier for Shorts to recoveget shares/make margin calls.
Twitter Viking - I would bet you my car this guy is fake. Everything about this feels like a persona created to appeal to 25-30yo dudes. An altruistic Powerlifter Billionaire who also wrote all of the commonly used trading algorithms? Sounds like Dan Bilzerian's fantasy LinkedIn.
You can Sell, but not Buy - This was shady as fuck. The Brokerages fucked up with how they handled this. Unlikely to be a conspiracy though, just small brokers leveraged to the tits during a retail feeding frenzy. That's the issue with instant deposits - they didn't have the liquidity to keep fronting you autists until your money cleared.
"But they need our shares!" - Not any time soon, unless the stock goes back to ~$250 independent of a squeeze. Yeah, Melvin and Citron got screwed. They lost money. But they do this for a living, so they just reentered their positions at the top (or bought puts for April). They will end 2021 with a net gain on this.
"But the Squeeze never Squoze! It's only a matter of time!" - Maybe, maybe not. There still might be a squeeze, but it will not be the MOASS you're creaming yourselves over. SI is somewhere between 50% and 70%. High, but not the 140% of last month.
"But VW! 2008! $1000/share!!!" - First of all, GME gained more by percent than VW. Second, that was an Institutional Investor locking up the shares. The rules are different at the BigBoi table. They can see and do things we simply can't.
Please do your own research. FFS even gamblers learn the rules of the games they play. Disclosure: I no longer have a stake in GME. I exited with a small profit. This is not financial advice, I was dropped on my head as a child.
How I turned $1k into 300k in 2017's bull market (very long).
First, English is my second language so please forgive my poorly organized, horribly formatted and super long story. Also I never shared this story before and wasn't really planning to, but I told it to one of my now close friend who is a crypto nerd like me and he said it was inspiring and that I should share it so here goes. It's 2014 I am working a minimum wage job at a labels factory, I boxed the finished labels. 6 months later, I am promoted and I am head of the quality assurance department (happened super fast and everyone was amazed that it happened including myself :P ). I got a raise and life was good.One day the owner decided to hire a "team leader" basically a tier 2 boss. An authoritarian racist c*nt that hates my guts. We get in an argument, I turn my back on him and walk away and he ends up physically assaulting me for it. I threaten to sue and they fire me because of it. I complain to the EEOC, because I can't afford a lawsuit. We mediate and like an idiot I settled for 5k they offered me. I Payed my lawyer $400, Bought us a new furnace because ours was old and had broke down. I replace the kitchen sink, paint the house and did some other minor repairs. All said and done, and after working for nearly 2 years at that company I am unemployed, depressed and have nothing to show for it, Well except for a $1000 I have left from the settlement that I wanted to preserve and invest in something instead of spending it. I spend a couple month of freelancing and hustling trying to find a new source of income. And one day I am on some random forum trying to find a solution to a problem I have with my code (I have 13+ years of programming experience C++, C#, Asm and reverse engineering) I read the word Bitcoin for the first time ever. And the person talking about it made it sound like it's the next big thing and that it's going to do wonders for apps and payment systems. Other replies to that same post were talking about how it will make them all rich. I got curious, And on September, 2015, I google Bitcoin for the first time ever and I end up on Coinbase. I bought $5 worth of Bitcoin for shit's and giggles. Forgot about it for ~3 months. Then came back and sold it in October for $5.10. So I made 10 cents profit after coinbase's outrageous fees. And I thought to myself, This is great, I just made 2% with minimal effort. Greed kicked in and I started my quest to learn as much as I can about BTC. For the skeptics: https://preview.redd.it/jrz4ptp5z4b61.png?width=797&format=png&auto=webp&s=d91bfe7e49827ba274cfbb9fca57dc419bdd9e2f Edit: More proof for those that think I am a lair, full of shit and made all this up: LTC trades since 2017 https://preview.redd.it/znrn5tgmp6b61.png?width=2698&format=png&auto=webp&s=9132a624df041e57060b163e31e5cc5747875e0f 2015 trades are no imported from the coinbase account in this SS Next thing I know I am on Coinbase Pro (Gdax at the time) and was instantly hypnotized by the insane volatility and price swings. I immediately start buying and selling, Without any knowledge about trading whatsoever. I made some money then then lost more than I made and now I have ~$820 left and I realized I am not going to beat the market like this. My orders were being front ran by bots (didn't know they were bots at the time) because they keep burying my limit orders whenever I post them and I don't get filled. Also fees for market orders were exceeding my profit so I end up losing instead of making money. Thinking like a programmer (a problem solver really) I thought to myself there has to be a way for me to do the front running. I do some googling. Learn about the exchange API. I fired up Visual Studio, downloaded some files/libraries and spent a few weeks creating a prototype that would speed things up and give me an edge. At first I used C# and it looked like crap but it performed well, And with the ability to place orders as fast as possible (and free limit orders). My balance started growing. Slowly but surely I kept improving the prototype over the years and it evolved into a fully functional trading platform. I eventually used Directx to recreate the order books locally (this part happened much later 2019-ish) because the exchange kept freezing and crashing when I needed it the most and low and behold, I had out done myself and created a fine trading platform Here is the post were I first showed it to the world. Here is a video of it in action too: https://streamable.com/3jl30l One click insta buy/sell and everything was pre-calculated for me. All I had to do was pre-set the # of lots I wish to flip in each trade and click either the buy or sell buttons. Within a few weeks of the first prototype I was up from $800 to 8k scalping BTC's volatile market and I was ecstatic, I was over the moon, pun intended. However, The market was slowing down and it is now boring and I am not making any $$ and I was never happy that I could only trade BTC and LTC on Coinbase and was scared to trade anywhere else for fear of losing my money with all the hacks and scams that were happening almost everyday. But then I learn about a coin called Lisk. And the Lisk zealots managed to convert me and I end up joining them and opened a Bittrex account lol. By now I had spent 3k in life expenses and I have 5k left so I move it to Bittrex, And add Bittrex to my trading platform and go all in on Lisk at $3. I was convinced it is going to the moon and will make me rich. I go to my wife and beg her to borrow some money from her dad for me or max out a credit card or whatever the fuck she can do to get me a few more thousand dollars so that I could add more to my LSK position because I have no credit score history and no one would lend me, She was terrified and refused to help me. I didn't get a single dime. (Hindsight, I am glad she didn't :P) So there I was, Angry at my wife (I was wrong I know) determined to prove her wrong and show her that this will work and that I am not going to lose so I am trading like a degenerate gambler with my entire stack. Looking like a zombi from malnutrition and lack of sleep, But I pull through and grow that 5k into ~24k within roughly 1.5 months. Phew, I DID IT, I shout. looking at my wife. I FUCKING DID IT. I TOLD I CAN DO IT but you never believed in me. And my head grew bigger and bigger to the point were it wouldn't fit through the door any more. Meanwhile LTC is pumping like a mother fucker but I had no idea because I am not paying attention to anything else but my cash cow LISK. Now that LISK is slowing down (Re-branding delayed) and hype was dead. I sell it all. Transfer the cash back to Gdax and join the LTC frenzy. By now it's December 2017, And shit was Insane, It was lit, Everything was on steroids and $ signs everywhere. I was going all in on every trade (Spot trading) and with every trade and my account kept growing. First it was growing hundreds, Then LTC went parabolic and it was thousands of $$ with every click of the mouse. Every click of the buy/sell buttons I made or lost a few thousand $$. Never holding on to a position loser or winner. I catch the wicks (which were huge) and would flip it in seconds just to go back to fiat for fear of getting whipsawed and losing it all. By now I had grown my 24k into 100k within like 3 days at the markets peak (LTC at like $150+). The joy I felt, The happiness, The pride :) I was victorious and those 3 days were like a crazy epic dream. So now I am gloating and teasing my wife telling her how I did it all by myself and shit and thanking her for all the help she didn't offer. meanwhile, LTC is still pumping like crazy. But I was content, I had just broken the 100k mark and was ready to celebrate. but of-course life is never sunshine and rainbows. To my dismay, My wife asks. What about TAXES? I am like what taxes? I already payed the fees! (I am a foreigner so i knew nothing about taxes in the US of A) She said you have to pay capital gain taxes on this, It's like 30%. My face turned pale and my heart skipped a beat, I jump out of bed, go online and research capital gain taxes. And I realized she was right, I am going to end up paying at least 25% to 32% of my money in taxes. I felt like I wanted to cry and all the joy and happiness I had felt was gone (Hindsight I should have been happy even after taxes :P). But I decided to push forward and make the 32% that I have to pay in taxes to get to the 100k mark after taxes while the market is hot. so I cancelled the moon party and went back upstairs, Started the computer and started trading again. So now I am back at it, Still killing it making more and more money. This continues for a day or 2 more and by the time the crypto party was over and when LTC started the big crash from $400 to $150 I was all back in cash and I had made a grand total of 310k+ and 105k+ trades in about 6 months, Most trades were made in Dec 2017 and Jan 2018 on BTC, LTC and LSK combined. I at first protested paying taxes for weeks, No for months, because it seemed unfair to me. But the April 15th deadline drew ever closer. And our CPA scared me str8 telling me about all the fees and fines I would have to pay if I delay paying the IRS so I reluctantly agreed and paid all of my taxes to uncle Sam. It was a massive chunk of money to give away all at once and it made me sick to the stomach. And that my friends is the long-short version of the story of how I turned a $1000 into $300k. I hope to one day be able to tell a story of how I turned whatever I have left of the 300k now into a million $ or even better into a multi million dollar fortune :) I know some people did like 1000x better than me, But for my story, I am proud of what I had achieved so far and I thought it would be cool to share the story and to hear other peoples success stories. I still am still doing great in this bull market and trading crypto has been my full time job ever since I got fired from my job at the labels factory. I have grown a lot since. btw I thought about sending the owner of the factory that fired me a letter thanking him for firing me because it was the best thing that ever happened to me but I never did :P If you have made it this far. Thank you from the bottom of my heart, And wish you and everyone else the best of luck and riches beyond your wildest dreams. TL;DR: I turned a $1000 I got from a EEOC settlement into $300k+ scalping LSK and LTC back in 2017 bull market. Leave a downvote and a "delete" comment if you think I should delete this :)
Thank you for teaching me about making big money, wallstreetbets.
Through the start of 2020 I started Investing with 8k. Got it up to 10k. Then with options back to 5k, and now to 50k this year due to cheapass tlry leaps and bcoin investments. I was and I still am that same retard from day 1. I just got lucky, and I did learn some things about timing when to go in on option plays Anyways this post is about how I actually learned what a tax free savings account is, a retirement account is, and about different investments. Aka STONKs, Options, ETFs like ARKG, and yah fuck the rest of the low money shit like mutual funds and index funds. Who the fuck wants 2-10% a year of returns during this eurphoric bull run? I wanted to consider myself financially illerate. I didn't know shit about accounting, how to do taxes or how to build wealth. I started trading because I thought I could make some side money. I am also a lazy MF and had a okay job that paid 17/hr. But I was pretty much depressed. Now I consider myself a well informed retarded gambler. The stock market has literally changed my life for the better, and has completely changed my outlook on money and how the system is there to teach people to work, not to be wealthy. My fellow autist, you a smarter then most people who don't know jackshit about how much money you can make on the markets. Most people just give there money to the banks or just do passive investing(I have no issues with this, but missing out on great opportunities is super retarded). To everyone who wrote dds and gave advice, thank you. I don't care if it was bad, because I learned a fuck ton because you autist think differently. I am ready to share as much helpful info back! TLDR: Love you guys full homo and STONKS and options = 🚀🚀🚀
Illegal Tactics and DTCC/Prime Broker Complicity In Naked Shorting & Retail Shutdown of GME (DTCC/Prime Brokers decision makers need to be questioned at the 2/18 GameStop Congress hearing)
TLDR: GameStop’s Congress hearing is on Feb 18th, they need to investigate the Prime Brokers and DTCC for their complicity in enabling naked shorting within GME and by extension, potential collusion to shut down trading on Jan 28th, the day the short squeeze was going to kick off. (stick to the end for an analysis of some illegal tactics short side hedge funds have been using) Thesis: On the day the retail market for GME shut down on 1/28 (the day the short squeeze would’ve happened had there been no market intervention), DTCC (clearing house monopoly) shut down retail buying in order to protect itself and Prime Brokers (which privately own the DTCC) from being exposed to the consequences of being party to illegal activity. I believe Prime Brokers and DTCC need to be called to the GameStop hearing on February 18th to be questioned for their complicity in enabling illegal naked shorting of the GME stock, as well as potential collusion to shut out retail buyers on 1/28. In my previous post (which I recommend reading for some context) I explored the subject of rampant illegal naked shorting in GME, and how Prime Brokers (consisting of banks like Goldman, Morgan, etc) and DTCC would be complicit in the naked shorting. This in turn raises the thought experiment that they would be incentivized to do anything possible to prevent the short squeeze from happening on 1/28 because had the short squeeze happened, the shorts would go bankrupt and their Prime Brokers who lent them their naked shorted shares would need to cover the shares. This would not only represent a humongous capital expense for Prime Brokers, the culpability of Prime Brokers (and that of the DTCC) in this situation would also have likely been exposed as well. A quick primer on what a Prime Broker is: Prime Brokers are essentially the service side of the short- selling business. They lend out securities and cash, you can think of them as the “house” in a casino: They provide a gambler with markers to play and to manage his winnings. According to Matt Taibi, “Under the original concept, if a hedge fund that wanted to short a stock they would first need to “locate” the stock with his Prime Broker but as time passed, Prime Brokers increasingly allowed their hedge-fund customers to use automated systems and “locate” the stock themselves, and what this does is enable short-sellers to sell stock without delivering and thereby perform naked shorts with counterfeit shares. (source: https://web.archive.org/web/20210213125246/https://www.rollingstone.com/feature/wall-streets-naked-swindle-194908/). (I highly recommend you read Matt Taibi’s article on naked shorting and how it was used to take down Bear Stearns and Lehman Brothers. There are so many parallels with GME it’s hard to miss. It’s amazing to consider that 12 years after this article was published and brought to public awareness, the problem of naked shorting still exists as a systemic issue.) Prime Brokers have a long history of being associated with naked shorting. To highlight a few examples, Prime Brokers like Merill Lynch and Goldman have long been implicated for naked shorting Overstock.com (https://www.rollingstone.com/politics/politics-news/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-244035/, https://www.forbes.com/2007/02/02/naked-short-suit-overstock-biz-cx_lm_0202naked.html?sh=271400d1763f). Another example is when Goldman’s Prime Brokerage was implicated by the SEC in 2016 and got away with a small fine of 16 million (Source: https://www.sec.gov/news/pressrelease/2016-9.html). An example that very recently came in the news is a story where CIBC, BOA, UBS and TD Bank Prime Brokerages are accused of facilitating naked short selling and using counterfeit stock to attack and bring the stock price of a company from $34.77 to $1.83 (Source: https://www.securitiesfinancetimes.com/securitieslendingnews/industryarticle.php?article_id=224548). The DTCC also has a very long history of being associated with naked shorting. The Wall Street Journal noted that 1% of the DTCC’s volume end in failure to deliver which “have put DTCC in the middle of a long-running fight over whether unscrupulous investors are driving down hundreds of small companies' share prices… DTCC has turned a blind eye to the naked-shorting problem. ” (Source: https://www.wsj.com/articles/SB118359867562957720). The DTCC has also had numerous complaints submitted to the SEC for enabling naked shorting (source: https://www.sec.gov/rules/proposed/s72303/decosta122203.htm) and have been sued tens or hundreds of times for assisting naked shorts (source: https://smithonstocks.com/part-3-in-series-on-illegal-naked-shortings-role-in-stock-manipulation-prime-brokers-and-the-dtcc-have-a-troubling-monopoly-on-clearing-and-settling-stock-trades/ and http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html and https://www.wsj.com/articles/SB118359867562957720) On 1/28 Robinhood received a letter from the DTCC at 4 am requiring them to halt trading or come up with 3 billion dollars, which Robinhood did not have, and therefore with one swoop of the pen the DTCC shut down buy side momentum but strangely allowed selling. Retail investors were shut out of the market and as any student of microeconomics would know, by shutting buy but only allowing sell, the price is bound to fall. Meanwhile while hedge funds were able to keep trading not only in the market but also crosstrade in the dark pools (“private” stock markets that retail is shut out of, more on this later), and use this crucial lifeline given to them by the DTCC to prevent the squeeze from happening that day. With retail abruptly being shut out from buy (even cash accounts were shut out, which didn’t make sense) and only allowed to sell, almost everyone could smell manipulation was afoot (which triggered the Congress hearing) and the most of the blame was pointed at Robinhood. Personally and in hindsight, I believe Robinhood was just a willing scapegoat. When we think about who had the most to lose if a short squeeze occurred, I’ll narrow it down to three entities, Shorts and their stakeholders (ie Citadel), Prime Brokers and the DTCC. It’s important to remember that the actual impetus that triggered the shutdown of the market for retail investors came from the DTCC. Working backwards, if you consider that GME was rampantly naked shorted and DTCC and Prime Brokers would have to be complicit in it, I believe the DTCC, Primer Brokers and possibly Citadel (who provides 40% of Robinhood’s revenue) brazenly manipulated the market on 1/28 by shutting down purchasing for retail buyers to prevent the squeeze from being squoze on that day as doing so would be catastrophic for all aforementioned parties involved. I believe that on the upcoming Gamestop Congress hearings the Financial Services Committee needs to call on decision makers of DTCC and Prime Brokers explore their role and complicity in the shut out of retail buyers that day as well as being enablers of naked shorting in GME. An interesting thought experiment: On 1/28 when the price was 450+ and shorts were likely under 100, if we assume prime brokers allowed naked shorting in GME, then when the squeeze was about to happen (or happening), if Prime Brokers had margin had called the shorts, they would presumably also also gone down because shorts would not be able to pay in that event and the brokers would be holding the bag. By that logic, they have every incentive in this case to NOT to margin call and instead the most logical option would probably would have been to make a backroom deal, which is what I personally think most likely happened. If you’ve read up to this point, you might be thinking what can I do about this? I am aware that there a lot of cynicism that we can’t do anything, that there will be no justice for retail investors who were harmed this situation, and that institutions and people in power will prevent anything from being done. I feel this sometimes too, but remember: A single voice can be drowned out, but if we all speak together then we will make our voice heard. Ape Strong Together. With the hearing coming up on February 18th, I highly recommend you email and tweet the representatives involved in the hearing, as well as your own district representatives, and urge them to read into the factors presented in this post and call the DTCC and Prime Brokers to the hearingl. They need to be questioned on why GME has so many counterfeit shares, failed to deliver, their complicity in naked shorting, and investigated for their role in the retail shut down of 1/28. Below are 4 members of congress I recommend both tweeting and emailing Alexandria Ocasio-Cortez https://twitter.com/AOC, email: [[email protected]](mailto:[email protected]) Al Green https://twitter.com/repalgreen, email: [[email protected]](mailto:[email protected]) Maxine Waters https://twitter.com/maxinewaters, email: [[email protected]](mailto:[email protected]) Nancy Pelosi Email: https://twitter.com/SpeakerPelosi email: [[email protected]](mailto:[email protected]). And you can find other members of Financial Services Committee here to reach out to: https://financialservices.house.gov/about/committee-membership.htm If there's one thing I took away from this its that we can't wait for other people to do the right thing, we each need to individually step up to ensure it happens What follows should probably be a separate post, but I will take the opportunity to summarize some of the illegal tactics that shorts have been identified to be using in their war with retail investors. Note that this may not be an exhaustive list and there may be newer tactics deployed in the future. Retail investors might not have the same tricks, resources and willingness to break the law for profit as hedgies do, but my hope and belief is that if we pool our knowledge and analysis, we will figure out their game and effectively adapt. Feel free to forward the list below to any representatives and lawmakers if you concur that these tactics were used: Rampant Naked Shorting - With the extremely high number of Fail to Delivers (FTID) , short interest being as high as 226% recently, and institutions alone holding a staggering 177% of the total float (likely due in large part to counterfeit shares), signs strongly point to GME being rampant with naked shorts and counterfeit shares. I believe the original goal of shorts was to drive GME to bankruptcy with these naked shorts, using the laddering of naked shorts (aka short ladder attack), executed with the help of counterfeit stock which is a classic and reliable method of driving down the stock price. I believe the GME stock has seen relentlessly aggressive short attacks, especially on the week of Monday February 1st, which drove the stock price down and triggered panic selling. Ladder Attacks with the help of Dark Pools - Another identified method of ladder attacks was identified to come from crosstrading with darkpools (the stock market has its own private stock exchange where institutions can trade…). Essentially darkpools are private stock markets retail investors do not have access to, where short side funds can purchase securities “off market” and then sell “on-market”, with the effect of creating a lot more downward pressure on the market without the upward pressure from buying. Illegally masking shorts with synthetic longs. Another tactic shorts are suspected of using in GME is the use of illegally using options to evade short positions in violation of Reg SHO which SEC describes in this risk alert and which I elaborate in this post. Essentially it’s the use of using options to create synthetic longs to illegally and artificially cover and prolong short positions and at same time obscuring the true short interest %. If you consider that it would be far more profitable for shorts to not cover at high prices but instead ladder attack the price and wait for retail investors to lose interest and close their shorts at as low of a price as possible, then you can see why this strategy would be very effective. Using way out-of-money call options to obscure true short interest. You may have heard about the 43 million worth of 800 dollar calls purchased when the price was 100 and found it odd. Later it was identified as a tactic to cheaply purchase synthetic call options (since at 800 its way out of money) to obscure their short positions (with the added benefit of hedging at 800 if a squeeze does happen) One thing I want to note, particularly to legislators at the GameStop hearing: Retail investors were not incited to pump GME. Retail investors spotted a unique Short Squeeze opportunity created by the greed of short side hedge funds, whereby GameStop was being abusively naked shorted with the goal of bringing it to bankruptcy, and hedge funds were so greedy about it that they shorted the company with a short interest of 226% of float, meaning A LOT of counterfeit shares were being used to short the company. Retail investors saw this as an opportunity to short squeeze the hedge fund shorters, which is a legal and legitimate investment strategy. The short squeeze would have happened had everyone played fair, but instead, financial institutions who were culpable to the naked shorting intervened and shut down retail buying, hurting the retail investors and successfully manipulating the market. The investment itself was in my opinion a sound decision based on the short squeeze, but in hindsight retail investors did not seriously consider the risk of the market would be blatantly and publicly manipulated and that the market would be rigged against them. If this post was useful (and I hope it was! Gave up my Friday night to write this for you Apes), please upvote for visibility and share it far and wide. The GameStop hearings could be a first step and hope towards legislative change, and it’s extremely important that the right story is told at those hearings (and by the right story I mean the real truth of what happened.) I hope the truly culpable parties are investigated and brought to justice. Again, I know many of us feel cynical that anything meaning will be done towards finding justice against the lawbreakers in this case, but if you feel even an ounce of injustice or empathy at how retail investors were unfairly harmed in the course of investing in GME, I strongly urge you to contact a legislator associated with the GameStop hearings and bring this to their attention so they can review this case with more complete information. In addition I recommend you to contact the SEC and any journalist you know or via journalist tip lines. It’s not going to be easy but the more awareness we raise the higher the likelihood our voices will be heard and positive change will be made. As we navigate the rocky waters ahead, I’ll gift you with a favorite quote of mine: The only difference between a nightmare and a dream is how big your balls are. 🚀🚀🚀 Disclaimer: I am not an investment advisor, I just like the stock. Ps. If you’ve read to the end, I’ll leave you with a few more thoughts and reminders: - If I were to distill life into one thing, it would be to never lose hope. - Remember that if you’ve lost money in any way shape or form, don’t be depressed, money can always be made back and the important thing is to maintain a good attitude. - Only invest what you can afford to lose. - Perhaps the most important factor in good investing is patience. If you’d like to read more about counterfeiting stocks this is a good place to start http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html
A Gambler's Guide to GME. How to use Expected Value to Help Make Decisions.
I am not a financial advisor. This is not financial advice. If you are gambling with money that you need to survive, you are acting irresponsibly. I am doing this ONLY with the speculative part of my position (which is all of it, but still true) and this post is referring to that speculative portion. The expected value (EV) is the anticipated value for an investment or speculation at some point in the future. You calculate all the positive outcomes multiplied by their likelihood of occurrence with the negative outcomes multiplied by their likelihood of occurrence and you will have your perceived expected value. If the number is negative, you are better off getting out and cutting losses. Gamblers win by making positive EV decisions, even if sometimes you have the nuts on the turn and then a fish flops a flush on the river. Expected Value (EV) = ((Total Negative Outcomes)*(Likelihood of Occurrence)+(Total Positive Outcomes)*(Likelihood of Occurrence))
If EV>0 HOLD! DO NOT FOLD! I might consider buying more with funds that I can stand to lose.
If EV=0 Grey Area. You aren't really making a big mistake no matter what you do.
If EV<0 Accept that you lost, time to cut losses and fold. If you are honestly here by your appraisal of the situation, sell. Yes, I said it.
With this speculative portion, the amount that you have already put in is a sunk cost, if you paid $420 a share or $5 a share, that amount is gone. We will only look at the price that it is today. For simplicity, let's say it's $60 right now. So let's say I think that the lowest this stock can go is $30, due to favorable coverage and impressions among zoomers and millenials, who are the primary demographic, along with news of the new internet-savvy hires, the Chewy guy and all that. So negative outcome of $60 to $30 represents a 50% drop. What's my target price? Let's say its $1000, representing a gain from our example's current price of 1,566.67%. Likelihood that it hit's $30 before $1,000, idk, let's say I estimate a 95% chance of that happening first. EV =(-50% loss from current level)(95% likelihood)+(1,566.67% gain)(5% likelihood) EV=(-.5)(.95)+(15.6667)(.05) EV=((-0.475)+(0.7833))=0.3833 (Expected EV is positive from our assumptions, I should HOLD!) And the fabled $69,420? I'm not gonna write out the math on this, but it turns out that the perceived breakeven EV is with a 99.96% chance to fail versus 0.04% chance to succeed at this level. If I thought that the chance of this succeeding was greater than 0.04%, not 4%, 0.04%, I should at least HOLD my position. “SO YOU'RE TELLING ME THERE'S A CHANCE!” “YEEAHHH!” -Lloyd Christmas Now someone might tell me that my assumptions are wrong; that the drop is more or less likely than I presented or could be more (or less). That's fair. I might be wrong, but this is what I am looking at and the way I am looking at it. Do your own DD. (edit: bolded this for all the retards that wanna fixate on the assumptions in my example. I used what I feel is a pessimistic likelihood for effect.) Anyway, hope this puts things into perspective. The Hedge Funds want you to fold your hand at the lowest point possible, because that is positive EV for them. If you can afford to gamble (er, this is the stock market, so um, let's say speculate), these are things to think a bout. TLDR: Based on assumptions of worst case scenarios and their estimated likelihood, along side current prices & target goals, you can make math-based decisions on whether you should sell or hold.
“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” - Sun Tzu We're in a war with the hedge funds and with wallstreet and basically the root of corruption in America with our GME short squeeze proxy war, and if you autists want to win this war, you need to know the enemy, and know yourself.Firstly, education is KEY, so if you're new, you DEFINITELY need to go learn at least what a short squeeze is and a short ladder attack is. What the enemy is doing:
Make it cheaper for them to cover their more costly short positions.
Price manipulation will fail ultimately because while they are able to drive prices lower with their short attacks, when they eventually have to cover their short positions and buy, they will again drive prices up due to purchases of almost none existing stock (cuz we be holding), sending prices up as high as before they shorted or even higher. All the while hedge funds will continue to eat fees and interest on their short positions, making this cycle not doable indefinitely.https://www.reddit.com/wallstreetbets/comments/la7bhj/gme_mms_have_until_tomorrow_22_to_buy_shares_it/
Media manipulation
Most if not all American main stream media is clearly serving corporate and wallstreet interests, simply by the false narratives they are reporting.https://www.reddit.com/wallstreetbets/comments/la1022/hmmm/They are not to be trusted and if seen, can dishearten and shake the will of those who don't have diamond hands. Best to avoid if you are a paper handed bitch. Some examples of false narratives are:
Reddit is made up of alt-rights, or idiots, or gamblers, etc. -> We're not idiots, because we're the ones who were able to grab wallstreet by the nutsack. We're retards and autists who love the stock and the company. That is all.
Reddit is moving on to silver. -> SILVER CANNOT BE SQUEEZED!!!!! With a market cap of more than $1.5 Trillion, there is NO WAY for retail investors to be able to make a dent in that. The only possible short squeeze play is GME because it's a small cap company with a market cap of only $250 million as of July 2020, so it is definitely doable for a bunch of retards on WSB to affect the price of a small cap company stock. Literally all the posts on reddit promoting SLVR are from bot accounts that have sus creation dates and karma and post counts. Plus, Citadel owns a giant amount of silver so silver prices going up higher is gonna benefit them and give them more fuel to fight this GME war. You're shooting yourself int eh foot if you buy SLVR. https://www.reddit.com/wallstreetbets/comments/la1xhf/guess_who_owns_tonnes_of_slv_options_fuck_citadel/
"XXX IS THE NEXT GME" -> This is also a false narrative. NOTHING can be the next GME, because NOTHING is shorted as much as GME, which is STILL over 100% shorted. GME IS A ONCE IN A LIFETIME OPPORTUNITY GAIN FOR US, AND LOSS FOR THEM!
Breaking the law: Some if not all of the things posted above are pretty much border line illegal, but there has been clear signs of breaking the law and market manipulation, IE: freeze buying of select stocks and only allow for selling. They can spin it however they want, but as far as I know, it has been unprecedented for a majority of brokerages to simultaneously alter the way a stock can be traded with cash. And if the situation is desparate enough, they'll break the law again and again if it ends up costing them less than to just let the price get to $69.420. Expect them to fight dirty until the bitter end.
Social Media Manipulation: Hedge Funds now employ bots to spread doubt and misinformation in order to weaken your hands. Some places they target is WSB itself, other stock trading subreddits, facebook, and on sites / apps like Webull and Yahoo Finance. Don't believe in random comments. Always believe in WSB posts with huge amounts of likes (top posts are vetted by the 8 mil users here / by mods too to make sure they're factual)https://www.reddit.com/wallstreetbets/comments/lafh4d/in_case_you_needed_proof_that_there_are_imposters/
Their Current Strategy: Wallstreet calls us "dumb money", because they think we are unsophisticated and just chase after a quick buck, and we have short attention spans. They'll try and continue to manipulate the price so that the stock will trade sideways, or continuous short ladder attacks, trying to scare paper hands into selling, and bore diamond hands into selling as well. They will also try to tempt us with other "NEXT GME" type plays and may even artificially raise prices of a stock or two (IE: SILVER) to try and get people to hop off the GME rocket. They'll use media to continue to push narratives that the GME short squeeze is over, short positions are covered, and redditors have moved onto something else. If this fails, then they may simulate a "SQUEEZE" by suddenly letting the price go up to $700 or $800, then unleash a short ladder attack unlike which we have ever seen, to simulate the sell off, so idiot retards will be scared into thinking they missed the top, so they will all sell. But if people just look at the volume, they'll know it's all a ruse.
What we're doing, our advantage, and why the enemy can't win.
Enemy loses money everyday, we don't: It costs the hedge funds billions to continue to fight this war of attrition becauase they continue to eat insanely high fees and interest on their short positions because the cost of borrowing remains high because the short interest are remaining high. Melvin down over 50% just this month alone. You think they can hold on much longer and keep eating fees?https://www.reddit.com/wallstreetbets/comments/labq1a/this_is_so_satisfying_to_look_at/Meanwhile we don't have to pay anything for holding our stocks. We can literally just hold and not have a short squeeze and just from the cost of borrowing alone the hedge funds will run out of money, so that's why there will come a time where it's cheaper for them to cover their positions rather than just keep on bleeding until they die out. I don't think they can hold out for another month of trading sideways with no progress. I believe in Feb we will see some major action. It could even start as early as tomorrow, because that's the last day shorts have to cover their 1/29 puts that expired.
We're getting smarter: Everyday we get new DD on WSB and more and more people are reading these DD's and understand how to diamond hands, and can now filter out fake news from mainstream media. We've just hit 8 mil subs; our subs are going exponential. We've recovered from the RH fiasco and we're primed and loaded on other brokerages like Fidelity. We are more ready than EVER to continue this war and this fight.
An Ape's Move this week: Again, not financial advice, but hypothetically if there was an autistic ape, the autistic ape would buy the dips, ESPECIALLY at this insane discount price of around $100. The autistic ape knows that basically it is paying $100 for a ticket to ride the GME train past $1k, easily 10x their bananas. Those apes who bought in at $300 will only get to 3x their bananas at the end of the month. The autistic apes will also understand that this is not a 1 day thing, but the events leading up to the squeeze can take weeks. But the autistic ape will ask itself, is it willing to wait a few weeks to at least 3x their bananas? Most apes will answer yes. But the ape knows if they buy it, they should be prepared to see red in their banana tracker for a month. But those red number are just fake numbers generated by HFT short ladder attacks, and not due to other apes actually selling their bananas, because apes together STRONK.
TL;DR = 💎🙌 🐵 = 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🚀 🌙PS: You only lose if you sell. Stock stays down for a month, then rockets up in March = no loss, only historical profits for retail investors.
The very best professional gamblers are right about 55% of the time. This is what it takes to be successful enough to turn this into a career. A success rate of this percentage means that a person would have to place 300 bets a year of $2200 per bet to make about $34,000. Gamblers make money by targeting games that rely less on luck and those that allow them to take on other players rather than “the house” (meaning the casino). Then these gamblers hone their skills until they can win these games consistently enough to make money. The $45 calculations show that even decent counters can make good money. The keys, though, include keeping an accurate count amidst casino distractions and blending in with normal players. Daily Fantasy Sports. DFS is the newest game that offers skilled gamblers an opportunity to make money. This was the time when a new generation of professional gamblers made a significant amount of money. Also, this generation is still very much active. Different from many people’s opinion, we can see that this is a really hard thing to do. Since we are talking about gambling, we are not talking about a steady income job. How Bookmakers Make Money. One of the fundamental, appealing aspects of sports betting is that it’s possible to consistently make a profit. You need to know what you are doing and apply the right strategies, but it can be done. However, most bettors lose money in the long run. There are several reasons why this is the case, one of While this house advantage varies for each game, ultimately it helps ensure that over time the casino won't lose money against gamblers. For people who are really good at Blackjack, the advantage DFS is the newest game that offers skilled gamblers an opportunity to make money. Daily fantasy sees you pay an entry fee to enter contests and compete against other players. The goal is to create lineups that score the most points and rank the highest in tournaments. Online casinos entice gamblers to sign up and make a deposit by offering bonuses on their deposits. This is smart marketing because it gives gamblers more to play with and most gamblers lose anyway. But smart gamblers know how to take advantage of online bonus offers and use them to make a profit. Compulsive gamblers need to be able to continue their addictive behavior. In order to do that, they either have to have a complicit or codependent partner, or they have to convince whomever they need to in order to continue to gain access to cash. Friends will eventually see through the lies and refuse to lend any more money to the gambler. Traditional bookmakers don’t like value bettors because value bettors make money. So most professional gamblers will instead use a marketplace based sports betting exchange such as Betfair. In a betting exchange, you are betting against other punters and Betfair just takes a commission of the winnings.
