Anybody Buying Yet? Where’s the Bottom?

SAJ-99 said:
The moderators on that board earn their keep. It makes the posts here that Big Fin has given people the boot for look like love letters. The vitriol there is almost unbearable, and building apparently.
Click to expand...
Sounds like the wild west with a whole new pack of young gun "investors". Time to look into investing in farm land like Farmer Bill is now doing.😉
 
Hard to follow all of this but I was reading that Robinhood is owned by Citadel and Citadel had to fund Melvin capital with $2B the other day due to their short position in GME. Now Robinhood is not allowing buying of GME. And all of the business news outlets are saying that Reddit is manipulating the market? What a joke.

Found this article from last summer describing how Citadel is profiting from the Robinhood trading. The increased volatility they have created has led to wider spreads and allowing more profit. They don't give a shit about the markets. Not sure how the vast majority of the hedge funds can be viewed as anything other than leeches.
www.ft.com

Zero-fee trading helps Citadel Securities cash in on retail boom

Higher volumes and wider spreads have driven outsized returns for market makers
www.ft.com www.ft.com


I'm not going to pretend to understand all of this and I'll stick to having the 99.9% of my funds in index funds. Based on the articles the last few years with quotes from supposed "market makers" saying that index funds are a systemic risk it makes me feel even better about my choice.
 
westbranch said:
Hard to follow all of this but I was reading that Robinhood is owned by Citadel and Citadel had to fund Melvin capital with $2B the other day due to their short position in GME. Now Robinhood is not allowing buying of GME. And all of the business news outlets are saying that Reddit is manipulating the market? What a joke.

Found this article from last summer describing how Citadel is profiting from the Robinhood trading. The increased volatility they have created has led to wider spreads and allowing more profit. They don't give a shit about the markets. Not sure how the vast majority of the hedge funds can be viewed as anything other than leeches.
www.ft.com

Zero-fee trading helps Citadel Securities cash in on retail boom

Higher volumes and wider spreads have driven outsized returns for market makers
www.ft.com www.ft.com


I'm not going to pretend to understand all of this and I'll stick to having the 99.9% of my funds in index funds. Based on the articles the last few years with quotes from supposed "market makers" saying that index funds are a systemic risk it makes me feel even better about my choice.
Click to expand...
Maybe I can help clarify. Citadel doesn't own RH. Citadel has two arms, separated by regulatory rules: Citadel the asset management group (HF for our definition) and Citadel Securities, which is an option and stock market maker (depending on your age, think the guys standing on the floor buying and selling for customer orders). Citadel HF doesn't (or shouldn't) have anything to do with this current situation.

RH is a different company that offers an app giving small retail traders the ability to open an account for very little money and have free trades. RH makes money two ways 1) selling trade order flow, mostly to Citadel. So an example, a person does a trade, RH sells the trade to Citadel Securities who executes the trade and makes $0.01 to $0.005/share (bid-ask spread) and gives back some of that money to RH. Second way, is lending the securities (Sec lending) they hold for clients to traders who want to short and need to borrow (yes, the irony here is almost laughable).
I will leave it there to keep from getting too complicated, because there are a lot of other connected pieces, but that is the gist of it.

I'm not a fan of RH's decision to not allow trading in some securities, but I have to admit that they can see a much larger picture that I can. The biggest problem for them is that a client holds a $200 strike call expiring tomorrow. The stock closes at $250 and that client needs $25,000 to buy those 100 shares the option was worth, but they may not have that amount in their account. The broker assumes the responsibility. The option can just disappear and piss off the client or might be auto-exercised the broker needs sell securities on Monday to cover the client's shortfall. It might open Monday at $100 given the craziness we have seen. The broker assumes that risk so they are trying to make sure clients can cover themselves.
 
BigHornRam said:
Populist movement has now infested the Investment world. Damn deplorables!
Click to expand...
Capitalists will be capitalists, whether they're manipulating the markets, issuing terrible mortgages, or running copper mines in MT and buying politicians. Greed is the constant. If you can scheme your way to more money someone will do it.
 
Amazing... GME. I swing/day traded this repeatedly not more than a year ago (maybe longer?) when their stock was plunging. If I recall, it was down under $10. CEO left or was ousted, confusion on their earnings calls, etc. Made some $... where the hell was my crystal ball? What an amazing ride that would've been!

Game Stop... of all the crumbling brick & mortar stores to have such a wild ride. This is the true story of market manipulation! Heh... wow!
 
SAJ-99 said:
Maybe I can help clarify. Citadel doesn't own RH. Citadel has two arms, separated by regulatory rules: Citadel the asset management group (HF for our definition) and Citadel Securities, which is an option and stock market maker (depending on your age, think the guys standing on the floor buying and selling for customer orders). Citadel HF doesn't (or shouldn't) have anything to do with this current situation.

RH is a different company that offers an app giving small retail traders the ability to open an account for very little money and have free trades. RH makes money two ways 1) selling trade order flow, mostly to Citadel. So an example, a person does a trade, RH sells the trade to Citadel Securities who executes the trade and makes $0.01 to $0.005/share (bid-ask spread) and gives back some of that money to RH. Second way, is lending the securities (Sec lending) they hold for clients to traders who want to short and need to borrow (yes, the irony here is almost laughable).
I will leave it there to keep from getting too complicated, because there are a lot of other connected pieces, but that is the gist of it.

I'm not a fan of RH's decision to not allow trading in some securities, but I have to admit that they can see a much larger picture that I can. The biggest problem for them is that a client holds a $200 strike call expiring tomorrow. The stock closes at $250 and that client needs $25,000 to buy those 100 shares the option was worth, but they may not have that amount in their account. The broker assumes the responsibility. The option can just disappear and piss off the client or might be auto-exercised the broker needs sell securities on Monday to cover the client's shortfall. It might open Monday at $100 given the craziness we have seen. The broker assumes that risk so they are trying to make sure clients can cover themselves.
Click to expand...

That makes more sense on the ownership. Lots of articles out there that seem to be rushed with minimal research. Still seems to be structured in a way that leads to incentives between RH, the HF, and the Securities company. RH doesn't need to get a phone call from someone at Citadel to stop letting their traders buy GME. Don't ask a barber if you need a hair cut or whatever people like to say.
 
westbranch said:
That makes more sense on the ownership. Lots of articles out there that seem to be rushed with minimal research. Still seems to be structured in a way that leads to incentives between RH, the HF, and the Securities company. RH doesn't need to get a phone call from someone at Citadel to stop letting their traders buy GME. Don't ask a barber if you need a hair cut or whatever people like to say.
Click to expand...
I agree. The HF shouldn't know anything. There should be a compliance wall in place that prevents that information from crossing. The SEC is pretty big on that. If it did and they got caught the fine would be multiples of whatever they made. The media drives me crazy too. We have to remember that we can't see the whole picture, and they can. I would bet that RH didn't suspend trading in any security without consulting the SEC first. The SEC consulted with RH, Citadel and numerous other market players to figure out what is going on. There probably isn't systemic risk, but there could be risk to certain businesses like RH.

Part of me says if a guy wants to go into a casino and bet everything he owns on black, then so be it. But if he borrowed that money from the local bank and is betting it all on black and losing would put the bank out of business, then there is a problem. A bit of an extreme example, but it makes the point. Leverage is great, until it isn't.
 
SAJ-99 said:
Maybe I can help clarify. Citadel doesn't own RH. Citadel has two arms, separated by regulatory rules: Citadel the asset management group (HF for our definition) and Citadel Securities, which is an option and stock market maker (depending on your age, think the guys standing on the floor buying and selling for customer orders). Citadel HF doesn't (or shouldn't) have anything to do with this current situation.

RH is a different company that offers an app giving small retail traders the ability to open an account for very little money and have free trades. RH makes money two ways 1) selling trade order flow, mostly to Citadel. So an example, a person does a trade, RH sells the trade to Citadel Securities who executes the trade and makes $0.01 to $0.005/share (bid-ask spread) and gives back some of that money to RH. Second way, is lending the securities (Sec lending) they hold for clients to traders who want to short and need to borrow (yes, the irony here is almost laughable).
I will leave it there to keep from getting too complicated, because there are a lot of other connected pieces, but that is the gist of it.

I'm not a fan of RH's decision to not allow trading in some securities, but I have to admit that they can see a much larger picture that I can. The biggest problem for them is that a client holds a $200 strike call expiring tomorrow. The stock closes at $250 and that client needs $25,000 to buy those 100 shares the option was worth, but they may not have that amount in their account. The broker assumes the responsibility. The option can just disappear and piss off the client or might be auto-exercised the broker needs sell securities on Monday to cover the client's shortfall. It might open Monday at $100 given the craziness we have seen. The broker assumes that risk so they are trying to make sure clients can cover themselves.
Click to expand...
I understand restricting margin trading, but didn’t they also prevent outright buying of the stock? I don’t get the justification for that (though admittedly I haven’t looked for it).
 
stk said:
I understand restricting margin trading, but didn’t they also prevent outright buying of the stock? I don’t get the justification for that (though admittedly I haven’t looked for it).
Click to expand...
I agree. That one is hard to figure out. We have to remember that the broker is responsible for the clients positions to other counterparts. It is impossible to know how the clients are positioned and I know the increase in volatility probably increase the amount of money RH needed to deposit as capital with regulators. But I agree the action seems odd. The narrative will be RH is helping Wall Street and screwing the little guy. My response is basically "Yep, that's the business model." Clients don't pay any fees and the subscription agreement allows RH to freeze trading whenever they want. What kind of protections did they expect for that price?
 
So how does a 22 year old take out a 2nd mortgage on his parents home? Bank needs to take the hit on this one, and the "kid" needs a good spanking.

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