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    Daily Advice Thread - All basic help or advice questions must be posted here. Investing

    January 31, 2021

    Daily Advice Thread - All basic help or advice questions must be posted here. Investing

    Daily Advice Thread - All basic help or advice questions must be posted here.

    Posted: 31 Jan 2021 02:00 AM PST

    If your question is "I have $10,000, what do I do?" or other "advice for my personal situation" questions, you should include relevant information, such as the following:

    • How old are you? What country do you live in?
    • Are you employed/making income? How much?
    • What are your objectives with this money? (Buy a house? Retirement savings?)
    • What is your time horizon? Do you need this money next month? Next 20yrs?
    • What is your risk tolerance? (Do you mind risking it at blackjack or do you need to know its 100% safe?)
    • What are you current holdings? (Do you already have exposure to specific funds and sectors? Any other assets?)
    • Any big debts (include interest rate) or expenses?
    • And any other relevant financial information will be useful to give you a proper answer.

    Please consider consulting our FAQ first - https://www.reddit.com/r/investing/wiki/faq And our side bar also has useful resources.

    Be aware that these answers are just opinions of Redditors and should be used as a starting point for your research. You should strongly consider seeing a registered financial rep before making any financial decisions!

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    Jim Cramer Gave an Interview in 2006 on how the Hedge Funds Manipulate the Markets

    Posted: 30 Jan 2021 06:36 PM PST

    https://www.reuters.com/article/cramer-interview-idUKN2036292620070320

    Direct link to Interview Video since the old in-article links aren't working

    "What's important when you're in that hedge fund mode, is to not do anything remotely truthful. Because the truth is so against your view, that it's important to create a new view, to create a fiction."

    "Then you call the (Wall Street) Journal and get the bozo reporter in Research in Motion and you would feed that (rival) Palm's got a killer it's going to give away. These are all the things you must do on a day like today, and if you're not doing it, maybe you shouldn't be in the game."

    "It might cost me $15 million or $20 million to knock RIM down but it would be fabulous because it would beleaguer all the moron longs who are also keying on Research in Motion."

    "A lot of times when I was short at my hedge fund ... meaning I needed (a stock) down, I would create a level of activity beforehand that could drive the futures. It's a fun game and it's a lucrative game."

    "Who cares about the fundamentals? The great thing about the market is that it has nothing to do with the actual stocks."

    - Jim Cramer, hedge fund manager from 1987-2001, Dec 2006

    Dealbook NY Times Article on Cramer's Interview

    Investopedia Article: Short and Distort Bear Market Stock Manipulation)

    Anatomy of a Short Attack

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    By popular demand: official “I hate Robinhood and want a new broker thread”

    Posted: 30 Jan 2021 07:12 AM PST

    Honestly, I didn't want to post this myself since there's probably two dozen of these posts in the queue, but all of the recent ones look like they're written by 8 year olds.

    Normally this belongs in the daily advice thread, but because of recent events and concerns over Robinhood's ability to serve customer(I been telling y'all for years) we can have a thread in it

    So here we are: recommend and discuss brokers, fees, features, mobile apps, whatever. In general I think everyone is best served by Fidelity, Schwab, or Vanguard. TD is another major player but for those unaware they are in the process of being acquired by schwab. All three of those actually have phone numbers where you can call and speak to a person about your account.

    For the younger crowd; a phone call is similar to voice to text, but instantaneous.

    Also, feel free to chat apps or whatever too,

    E: here is an overview of what happened with Robinhood. No conspiracy theories or anything included, just a technical explanation.

    Also, my comment and subsequent conversation around liquidity concerns at Robinhood

    Please note - I don't have any special insight here, this is strictly my and others interpretation of the tea leaves. Feel free to discuss, and explore other interpretations. Whatever broker choice you make is up to you, the important thing is that it is an educated choice since it's ultimately your money.

    No referral codes. Posting a referral code will result in an immediate no questions asked permanent ban

    Thanks.

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    Gamestop Big Picture: Market Mechanics

    Posted: 30 Jan 2021 11:39 PM PST

    Disclaimer: I am not a financial advisor. This entire post represents my personal views and opinions, and should not be taken as financial advice (or advice of any kind whatsoever). I encourage you to do your own research, take anything I write with a grain of salt, and hold me accountable for any mistakes you may catch. Also, full disclosure, I hold a net long position in GME, but my cost basis is very low, and I'm using money I can absolutely lose. My capital at risk and tolerance for risk generally is likely substantially different than yours.

    Rather than doing a writeup of Friday, I think the time I have at the moment would be better spent going over some conceptual market mechanics. As I mentioned in my previous post that covered some light analysis of the week, my first glance was that Friday was a low conviction, low volume day where momentum traders/and volatility arbitraging HFT algos were skirmishing, and a slightly deeper look tells me that's probably the case for almost the entire day, up to the last minutes before close.

    There was a bit of a push toward the end of the day just to extract maximum interest charge pain. Keep in mind also that on Friday many of the retail brokerages still had issues with GME, and GME price was also protected from aggressive short-side attack due to the uptick rule.

    Capital Flow, Liquid Float, and Price

    Ok, so let's go with a diagram I put together while thinking about how to best answer a ton of questions related to the mechanics behind triggering a squeeze. This is not very formal--just conceptual to help you think about the relationship between price, liquid free float, and capital required to move things around.

    Capital Flow to Price Volatility Leverage Conceptual Diagram

    As you can see in the diagram, I figured it would be conceptually clearest to model the relationship kind of like a seesaw.

    On the left you can see that people selling tends to increase liquid float, moving the fulcrum of our conceptual seesaw to the right, except in the case of selling to people who are planning to buy and hold, which moves the fulcrum to the left.

    The lower the liquid free float, or the further to the left the fulcrum goes, the greater the likely impact of any particular capital flow (net selling or buying) on share price. Importantly, as the diagrams on the right half show, it's not a linear relationship. The closer the liquid free float comes to 0%, the faster the price volatility increases... theoretically approaching infinity as liquid free float approaches 0%.

    I find it sometimes help to think of the extreme case to help clarify. On the extremely liquid side, if you have all of the tens of millions of GME shares in play, dropping $10,000 in to buy shares probably doesn't even register on the ticker. On the other extreme, if what if there was only 1 share in play? That same $10,000 instantly prices GME at $10,000 a share--if you can even get the person holding it to sell!

    Since company value is estimated mark-to-market, GME would instantly become rated one of the most (if not the most) valuable companies in the world. This is in no way true, of course, as you could not subsequently sell all the rest of the shares at that price, but as far as a whole bunch of market mechanics and market participants are concerned, they would have to treat it that way until another transaction took place to re-price the company.

    So, in the grand scheme of things, in terms of difficulty of initiating what magnitude of a squeeze, the primary factor is locking up actively traded/liquid free float. Also important to keep in mind, locking up the float is only very gradually noticeable until you get very close to locking it all down, and you reach a point where suddenly each fraction of free float being locked up has parabolically greater impact on price volatility, reaching its limit where going from 2 actively traded shares to 1 actively traded share doubles price volatility sensitivity to capital flow by just locking up a single additional share.

    So simple, right? Actually, yes. However, don't mistake simple for easy (absolutely not the same thing in this case).

    Market Games

    So, GME and other high short interest stocks are looked at in two ways by many market participants. On the one hand, you have normal investors and traders who don't really pay attention to it at all, and, if they do, they see it as a tool for price discovery that is otherwise neutral and dampens volatility (people tend to short stocks as price goes up, and cover shorts as price drops, so normal shorting activity is at least in theory supposed to help keep price stable).

    Then you have what I'll call market gamers. These are people who are willing to look through the veil of what various mechanics in the market are theoretically intended to accomplish, and just pay attention to what they actually do. There are a number of market mechanics that get really strange in extreme circumstance, and shorting is one of them, as using it to the extreme can absolutely crush a company's share price and actually harm the company badly. The counter to that is the increasing risk of a squeeze, which gets worse with extreme price volatility.

    Imagine it this way. Short interest in a stock is like the stock comes with a very strange feature--a closed wormhole portal into the brokerage account of the short position holder that, if slammed with a high enough day or week end price, blows open and sucks their account capital through, and possibly their broker's capital too, until they've patched it closed again with shares of stock they were short.

    That's not how you're supposed to look at it, but that's kind of how it actually works in practice. Most wall street types would find it appalling and wrong to think about it that way, but with Millenials and younger jumping in to the market we're talking about generations of people who grew up watching things like people doing 4 minute speed runs through games intended to take~100 hrs to complete, using nothing but the mechanics of the game in ways entirely unintended by the developers. That's kind of what GME is like, from a certain point of view--a speed run through the market, blitzing and confusing everyone watching--throwing a ton of money at hedge funds' short interest until you blow a hole in their account and suck the capital out with the force of a black hole. Of course people are getting jumpy.

    Battleground - Strategy and Tactics

    In a way, GME has turned into a battleground stock in the minds of many wall street people. Wall Street vs WSB is basically the way it's been depicted in the media, and a number of them seem to be taking it personally.

    With a battleground stock I find it helpful to think of it like a literal battleground, but with territory marked out by stock price. It helps you consider the impact on each 'side', what their motives are, and tactical and strategic implications. The reason I think this way is that once a stock becomes a battleground, the issue is no longer about price discovery--it's about proving a point or accomplishing a specific goal, which changes the dynamics of the trade.

    In my opinion, the retail strength/defensive line is at the $148 level as mentioned in my previous post analyzing the week. This is based on the majority of volume being in the runup from $30 to $148, which triggered the first squeeze.

    My guess is short-side strength hardens at the $350 level, based on that being the level at which the whale plugged the first squeeze. What this means is that you can expect some short-side people to actively short more at that level, possibly following through on momentum, as many of them want to prove a point that GME is a <$20 stock, as stated by a number of them on CNBC. $350 might seem like a low number given Friday's close, but remember that Friday trading was subject to the uptick rule, so the short effectively could not push back, and was instead fighting a rearguard action to bleed the long-side advance as much as possible, and lure them off their strength as much as possible.

    Say what? Is there a point to those analogies like that? Why yes, of course, because those analogies are very good mental models for what is going to happen in a short squeeze campaign.

    Remember, in the grand scheme of things, the goal of the long side is first and foremost to lock up liquid float. That means buying and holding shares. The question is.. how much will it cost you to move the needle on that, so to speak. the higher the price the short side can force you to pay to lock up float, the longer it'll take and the more expensive it will be. It is also like fighting far from your supply lines in that respect, in that there will be weaker hands mixed in far beyond hard support levels, such that quick pushes by the short side will shake them out, loosening float back up.

    How about on the long side? You want the short side to overextend themselves by shorting the price down on momentum, and hopefully get them to keep building up short interest at the lowest price at which they will do so. This means having to have the patience to see the price go as low as you can tolerate before you start losing your key support to despair. Why? Because it means you're buying the shares they throw at you at a lower price (costs less to move the needle on locking up liquid free float) and also that their short position is at a lower average price, lowering the price it will take to trigger a squeeze.

    The above is why, in some cases, you will see a sharp dip before the vertical move in a squeeze. You can essentially lure the short side into an ambush by falling back to lower and lower price points, which allows you to continue to lock up free float at ever cheaper prices while the short side thinks it is winning. Once you think you've accumulated enough to prevent covering without a parabolic price move, you spike the price back the other way and it's effectively game over. It can take some time to play out to its conclusion, but that is the essence of it.

    Let's make it concrete and put some numbers to it. let's say you need to lock up 10mio more shares for the squeeze (no idea, just using the number for easy math). If you can buy it all skirmishing at the $200 line, you'll pay $2bn to do it. If instead you've extended to the $300 line, you're going to pay $3bn. If you're an alpha-seeking whale, why pay 50% more to accomplish the same thing if you can get away with it? If you recall, I referenced seeing what I thought looked like this type of ticker behavior in my 3rd post.

    That being said, you might not mess around with those types of tactics at this point if you think you're already close to blowing up the next short interest holder.

    If you think you're close, then you're looking at the most efficient way to make the last tick at trading close as high as possible.

    That is very similar to the price action we saw on Friday at the end of the day, as mentioned earlier. If you think about it, if the goal is the have the price at/above a certain point at the end of the day, what is more efficient? Rush in the morning, then have to pay that higher price level for the whole day to maintain it, or wait until later in the day, as late as you think you can manage, and then push to that point at the very last tick?

    That, at least, is a very high level view of what you're trying to accomplish, but it gets very complicated in the details. If you're dueling with a good HFT algorithm, you can run into things like the price getting spiked to trigger halts to run out the clock (kind of like fouling someone in basketball), which gets harder in the final minutes of trading due to the wider LU/LD allowances, but still doable, even if you have to do it by sucking price level up (maybe to give you 5 mins to call your buddy at Blackrock to dump shares onto the ticker or something like that).

    Another thing to keep in mind. One of the reasons these things can roll on for a long time, is it might not be a one and done blowout (possibly on purpose). Think about it--if you can get people to keep piling short interest in--particularly for emotional reasons, you can ring the register as many times as they are willing to keep doing it to ultimately prove their point. Think of the Citron guy who re-shorted back in around what.. $90 or $100 I think? All because he wanted to make his point when he got blown out at the move off of $30. There are people piling back in right now. Who knows how many times they're willing to reload the short float.

    Ok, so this post is much longer than I originally intended anyway, but I think the diagram and some of the descriptions above should provide a good amount of food for thought and discussion. A number of people asked me why I said that price to squeeze was secondary at this point. If you haven't already figured out why, try to think about it, or maybe ask in comments and someone can help with a further discussion.

    A couple of final points:

    • Assuming the long-side people continue to lock up liquid float, remember that volatility can get greater in BOTH directions. This can mean that you get wiped out if you're somehow still trading GME on margin, as a quick price collapse can get you margin called even if the price quickly rebounds later.
    • Greater volatility means you should mentally prepare for big dips as well as swings to the upside. Pre-market and after hours trading don't have circuit breakers, so it could get wild during those times too.
    • Also with extreme volatility you end up possibly hitting halts more frequently. After the first frustrating day of this happening with GME I made myself a basic thinkorswim thinkscript study so I'd have a handy reference on whether it looked like this was going to happen. For those of you on ToS, use it on the 1 minute chart. Note that the LULD tolerances are different in first few minutes and toward the end of the day, so you'd have to adjust the parameters (or just keep it in mind). I use it with the step lines vs the default line. If price crosses the guard lines then you're getting close--if it crosses the circuit breaker line then you're about to be or already are getting halted. Here is the code:

    ​

    input TrailingPeriodLength = 5; input CircuitBreakerPercent = 10.0; input GuardMultiplePercent = 70.0; def trlAvg = Average(close, TrailingPeriodLength); plot trailingAverage = trlAvg; plot upperStop = trlAvg * (1 + CircuitBreakerPercent / 100); plot lowerStop = trlAvg * (1 - CircuitBreakerPercent / 100); plot upperRail = trlAvg * (1 + CircuitBreakerPercent / 100 * GuardMultiplePercent / 100); plot lowerRail = trlAvg * (1 - CircuitBreakerPercent / 100 * GuardMultiplePercent / 100);

    Also, I got a comment in another post telling me to get a job lol. Actually I have one, so I'm not sure how much I'll be able to post from Monday forward. As I've mentioned in a few comments on prior posts, I actually am not active on social media normally. I just created this account to try to help people use this probably once-in-a-lifetime event and the intense interest it's generating to help people learn to become better investors and traders. I'll try to keep posting, but maybe not as regularly, and probably shorter (which I know some of you will be happy about :)).

    Hope you all have a good rest of the weekend. Good luck in the Market on Monday

    submitted by /u/jn_ku
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    Gamestop Big Picture: Technical Recap - 1/25 - 1/29

    Posted: 30 Jan 2021 03:36 AM PST

    Disclaimer: I am not a financial advisor. This entire post represents my personal views and opinions, and should not be taken as financial advice (or advice of any kind whatsoever). I encourage you to do your own research, take anything I write with a grain of salt, and hold me accountable for any mistakes you may catch. Also, full disclosure, I hold a net long position in GME, but my cost basis is very low, and I'm using money I can absolutely lose. My capital at risk and tolerance for risk generally is likely substantially different than yours.

    Wow, what a week. All I'll say on that for now. I'll maybe do a recap of Friday at some point this weekend if I can.

    For this post, rather than a narrative recap, I'll go into some very light technical analysis on a couple of screenshots from TD Ameritrade Thinkorswim and Ortex. I don't have a lot of time to go very deep into everything I normally do, but I wanted to give the newer traders an example of how I go about coming to some of my conclusions.

    Some of the conclusions I came to in the heat of the moment in my previous posts may also not stand up to more rigorous scrutiny of the data. In my opinion, at least, it's very important to ensure that you go back and review any of your high conviction trades from time to time. Please feel free to use the charts I'll show to challenge some of the assumptions I may have made and written about while watching the live ticker tape action, social media, and other high-frequency sentiment indicators (things I might rely on for a hyper-realtime momentum monster trade like GME has been this past week). Maybe use them to challenge your own thoughts and assumptions as well.

    I realized while doing this that writing those prior articles probably cost me ~$300k in momentum trade opportunity LOL, since I used all of my free non-trading hour time to write instead of do an even more in-depth version of what I'm going to show you now. That being said, if that writing helped any of you understand what was going on, and ultimately progress on your way to becoming better traders and investors, that to me is well worth it--maybe one day you too can pay it forward!

    If any of you reading this are chart jockeys, please share some tips if you have them.

    First, the charts (links since pics aren't allowed on this sub)

    1. Ortex Short Interest Data
    2. Daily Summary of the Week
    3. 1/26/2021 Mini Squeeze Hourly
    4. 1/28/2021 to 1/29/2021 Fibonacci Retracement

    Fundamentals - Ortex Short Interest

    First, lots of questions on the prior post about Short Interest remaining on GME so I'll start with this one. Looks good to me. I think Ortex will update end of trading Friday data just before/around Monday market open. I consider this chart to convey mostly fundamental data, as the underlying value thesis behind the recent push by retail traders has at least recently been about the squeeze. This is the type of data you'd use to try to analyze data about the security being traded. Note that most pro traders would not consider short interest to be a 'fundamental ' attribute, and normally I'd agree, but I think GME and maybe some of the other high SI plays are an exception to that.

    If any of you are inclined to feel jumpy about the diving lines on the chart, make sure to look at the axis values on the left. The chart is calibrated to capture the movement over the period, so the bottom of the axes are not 0.

    A few things to note:

    1. Short interest drops substantially from 1/26 into 1/27
    2. Volume is shrinking
    3. Remaining free float on loan has gone down, but at 66% as of Thursday, is still quite high

    Overview - Daily Chart & Summary of the Week

    A few things going on here

    1. The big volume days on Friday, Monday, and Tuesday are when it seems to me that the greatest retail momentum would have occurred. The battles were pretty intense at key price points if you take a closer look at those intra-day charts.
    2. Big picture here, what it tells me is that many if not most of the retail share volume was acquired at or below $148 on huge volume. That means the core of your retail support, and the majority of shares in WSB diamond hands would have been bought probably between the $30 and $148 price range. My guess is that Only DFV the DFV early acolytes, Dr. Burry, and the institutional holders have meaningful volume below $30.
    3. Given points 1 and 2, I'd consider the $148 price level as the critical defense level of your earliest, hardest retail support. You can dive deeper into the 1/26 trading day and possibly make a case for other levels as well, but I'll roll with that for now.
    4. Ok, so maybe the Melvin guys weren't really lying. The Ortex data showing short interest drop from 1/26 to 1/27 coinciding with the massive and sudden price dislocation upward on 1/27.
    5. If new shorts entered the game it would have been near the highs, possibly selling into the forced buying of what I'll just assume was the overnight Melvin squeeze and into the early market hours on 1/28. Possibly aggressive momentum shorting on top of the Robin Hood BS, the bots, and the networking issues came together in a perfect storm with that HFT ladder attack on the vertical dive. Wow--no wonder that thing was so intense.
    6. As you can see on that downside wick on 1/28, the huge momentum briefly pierced the Retail line before being slammed back up. We'll take a closer look in the fibonacci chart.

    Analysis - Mini Squeeze Hourly

    Just a few notes. I checked and the after hours volume here was sudden, quite unusual, and pretty consistent with a forced liquidation of a substantial position. Rather than slamming it all out at once, the broker spread it out quite a bit. Some takeaways:

    1. If you wanted to take money from Melvin, this was the chance, and a lot of people (or a few whales) certainly did. The numbers in my summary were very quick mental math of the hourly volumes in overnight trading
    2. The price didn't break away as aggressively as it probably could have, which means there was some carefully calibrated pre-planning to unload a bunch of shares, laddering up to the $350 level.
    3. I am genuinely sorry to have to conclude, therefore, that the WSB bros with the $420.00 limit got scooped. Something on the order of 17 million shares worth of Melvin dollars got cashed out under them by a HFT whale with access to firehose shares at Melvin's broker all the way through overnight trading. few retail even have the ability to trade for that entire window, and certainly not on the order of 17 million shares anyway.
    4. Another important takeaway: 17 million shares is a lot, but it's nowhere near the entire original SI in GME. The Game hasn't necessarily Stopped yet (heh).

    Technical Analysis - 1/28 to 1/29 Fibonacci Retracement

    For those of you who are unfamiliar with what traders call "technical analysis", it's really just a fancy set of words to say looking at squiggly lines, bars, etc. on charts to try to figure out what's going on.

    One particularly popular tool is called a fibonacci retracement. It sounds a lot fancier than it is, but it is extremely useful, and extremely commonly used by momentum traders (which is partly why it's useful--if everyone is trading off of the same thing, it's a self-reinforcing bias in the market). There is a lot of background reading you can do on the topic--I recommend it. You'll be a better trader and even investor for it, as it tends to be useful even on longer timeframe charts. Kind of uncanny really.

    Looking at this chart I realize I probably should have plotted the 'retail line of defense' here too. Oh well, maybe next time.

    Takeaways:

    1. I figured the relevant trading range going forward was peak euphoria to peak despair in regular trading on relatively good volume. That happened to be the top to bottom move on the Robin Hood news.
    2. Using that for the fibonacci retracement, you can see how much of the trading action bounces around between the various levels before settling in scarily accurately into the 50% - 61.8% channel in after hours trading.
    3. it's quite possible that short-term equilibrium on this battleground stock is $300 to $350 until either side makes a strong push. Price was trapped in that range toward the end of normal trading on relatively good volume.
    4. Probably a bunch of momentum traders drew exactly this retracement (or something very similar) for their rest of day trading after the floor got put in near the retail line of defense. In all honesty it's hard to say if the tool works because of some fundamental reason or because everyone uses it so everyone times their momentum plays off the same playbook, making it self-reinforcing. All that matters in the end is that it works pretty consistently once you get used to working with it.
    5. Below the price graph, pay attention to the volume bars below. It's especially critical when trading momentum to understand the relationship between share volume and price, as there are patterns that are more likely to play out depending on the relationship. For example, when price is moving around a lot, is it doing so on high volume or not much volume?
    6. Traders tend to overshoot a little on each push, so even if price ultimately drops lower after an upside spike, if the volume on that drop is low compared to the upward push, that actually tells you that it's likely to go higher a little later on. There are many sites that go more in depth into this kind of thing (patterns, volume and price analysis, etc.), and it is incredibly useful to try to understand what to take away from price and volume movement as you watch it unfold live.

    Lots more going on here, but this post is getting pretty long already.

    Other Takeaways

    • The whales in the pond obviously do their homework (that's how they got to be that big, after all), and they were therefore prepared to act decisively to unload 17 million shares at the upper end of the trading range when Melvin got blown up. That's how you make big bank on big volume--do your homework.
    • My thesis in the part 2 article that the big early drop before retail pre-market was a short-side scare tactic could very well be totally wrong. You could make a case either way that it was a new short-side player diving in at a higher price point, a long-side whale making bank, or a combo of both. if you check the Ortex data against the numbers here you can probably come up with an order of magnitude educated estimate. If so, apologies to the CNBC Squawk Box crew--probably no factual inaccuracies in your reporting (though the tone did make a lot of retail panic)
    • Ironically, it might very well have been the continued unwinding of Melvin's short position that intercepted the panic drop into premarket rather than a long-side heavy hitter. LOL.
    • Thursday afternoon and Friday were low volume, low-conviction momentum sloshing around. Dueling HFT algos and momentum traders trying to scalp alpha from each other is my guess.
    • Contract expiration may cause a price dislocation into the new trading week, so I'm not sure the fibonacci retracement chart is still useful.
    • I'm sure if I go back over my previous articles and compare to the chart data more carefully I'll find all kinds of other inconsistencies with my realtime thoughts. It's key when trading, at least in my opinion, that you are willing, able, and indeed eager to go back and rethink your assumptions, no matter how much you liked them. Challenge and verify with data whenever possible. Not doing that is how Melvin got blown up, after all.
    • My worst case scenario thesis in the part 3 article may still be valid depending on the total amount of short interest loading up into GME at these newer highs. I remember hearing some fund manager talking about shorting GME at the $400 as a stabilization mechanism. Wow.. short something with the most hyper volatility of any $1bn+ stock I've ever heard of... for stability. That's not a word I'd ever associate with a WSB meme momentum rollercoaster stock.
    • An infinity squeeze is still totally on the table, as long as sufficient short interest remains. The strategy and tactics you'd use to get there may have to be different though, as price ratchets up into higher bands. I'll keep those thoughts to myself--for sure those WSB guys have a plan. They've proven to be scary effective so far after all.

    There are other things you can take away, or theses you can come up with from these and other charts you may have access to. Hopefully, for you newer traders I've given you a useful glimpse into how I might try to use readily available data to improve/challenge/refine a working thesis to ensure I'm better prepared for the days ahead. You should find the tools that seem to work best for you.

    Hope you all have a good weekend. See you on the field on Monday.

    submitted by /u/jn_ku
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    Common misconceptions about markets

    Posted: 30 Jan 2021 03:16 PM PST

    First of all, I want to start by saying that some hedge funds are shady fucks. There are a lot of things they did illegal. Here are a few examples:

    https://www.investopedia.com/articles/investing/101515/3-biggest-hedge-fund-scandals.asp

    Now I want to address some of the misconceptions that new traders have about the markets.

    1. I was not allowed to buy shares on RH they wanted to drive the price down!?

    DTCC, the clearinghouse for WeBull, RHand other brokerages, recently raised the collateral requirements for GameStop transactions to nearly 100%.

    When RH takes a buy order it goes to it's clearinghouse to exchange it's clients money for shares. The shares are immediately and conveniently transferred to the client, but the funds aren't transferred for 2 days. There's this gap between the broker and the clearinghouse for these unsettled trades that the clearinghouse will require some cash upfront (margin) for but otherwise accepts exposure for the rest.

    If the stock being bought is extremely volatile, expensive and has a huge amount of recent volume and therefore unsettled trades, the clearinghouse will eventually realize they are floating quite a lot more to the broker than they are comfortable with on the back of a very risky equity. GME fits all these characteristics. It's this point in the GME scenario where DTCC sets margin requirements to 100%. They tell their brokers, "Hey if you want to get GME stock from us, we will not accept your word that this trade will settle in two days. Instead we need the money upfront since we are already way too exposed to this one ticker from you."

    Now, if RH wants to continue filling buy orders for it's clients it needs to come up with ALL the money for each trade. RH does not have nearly enough cash on hand to handle this, hence the recent draw down from of RH's credit lines as they try to get enough liquidity to keep buying shares for their clients. Eventually the brokers just don't have enough cash, throw in the towel and stop accepting buy orders until they can settle more trades or the clearinghouses release the margin requirements for these stocks.

    The concept that RH would fuck over basically their entire user base on purpose to help a minority investor's minority investment in a hedge fund that already closed their fucking short position doesn't stand up to even the smallest amount of scrutiny. It's just a boring case of the market plumping going wild because it's not built to handle pumps of this scale.

    2. But I was allowed to sell!

    Of course you were. Selling is exiting an already created position. The liability that RH would get if you were not able to sell and the price went down would be insane. They can not stop you from selling an asset that you own. They can, however, block the purchasing of new assets through their platform.

    Updated Information:

    The DTC only requires collateral on the buying side of the trade. That is the side at risk because the buyer might have bought on margin or with funds that haven't fully settled in their brokerage account (like RH's instant deposit). There is no guarantee that the buyer actually has all the money to complete the trade until it clears 2 days later. On the sell side, however, you're sending stock to the DTC which doesn't have the same sort of questionable backing. They can accept that stock with a high level of confidence and debit the broker's clearing firm whatever the stock was to have sold for. So selling is pretty easy for a broker because they can debit you and get a reliable debit from DTC which clears the immediate credit risk for the broker. DTC is the one left holding the bag if the buyer fails to come through. [I'm not 100% sure about the next part, but I think it's right.] DTC will then keep the collateral payment as well as sell the orphaned stock at market price to recoup part of the loss and write off the rest (or they might make a profit if the stock rose in value during the clearing process). This is where another risk to DTC comes in - if the buyer defaults and the orphaned stock drops steeply in value during the settlement period (as $GME is very likely to do), then they have to rely on the collateral for most of their coverage. That's why they raised collateral for $GME. Back to the original point, Robinhood didn't shut down selling because of liability risk - but because they simply didn't need to do that. DTC was only making buys difficult to complete.

    3. But Fidelity and ThinkorSwim allowed people to buy and sell.

    Thinkorswim and Fidelity own their own clearing houses and have enough shares to satisfy the orders. Also, they do not need to pay collateral since they are a clearing house.

    4. Okay, but what about the 120% short interest, Melvin will be closing their position soon, and a short squeeze will happen.

    Melvin already closed their position. There was enough volume for them to do so.

    The short interest are just estimations. Short interest information gets released on 15th and 30th of each month. Next week we will be able to see the short positions.

    Hedge funds keep taking short positions and are much better prepared for now, because there is more money to be made on riding a stock down to 40 from 400, then from 5 to 1.

    Many hedge funds are also riding the wave up, and have long positions in GME. Blackrock, one of the biggest money managers already made insane profit, and will probably ride this on a way down.

    5. But a short squeeze will happen!

    It could, or it could not. The interest in not high to a point were they will go bankrupt or have to buy back the shares to cover. They can comfortably hold for 6-12 month as long as they don't get margin called, which I don't expect them too, tbh. The payoff makes sense, think about it this way. The interest is I think 30% yearly. Let's say you short a billion dollars worth GME. You pay annual interest of 30-40%. Hedge funds definitely have enough money to pay that 300 million a year. Now, let's say in a year a price goes down from 400 to 40. A fund will make essentially 900 million dollars minus the interest fee and etc. it is a no brainer for some bigger funds to take this position and enjoy their easy 40% profit.

    Considering many funds have insane amounts of collateral, they will not get margin called from this.

    6. But if options expire in the money they have to sell their shares!

    A lot of options expired ITM on Friday, so why did the price not go up?

    Well, how many retail investors that were holding their options actually had enough money to buy 100 shares at a strike price? Not too many.

    7. Okay, but Hedge funds are still bad and evil!

    Sure, I agree. Some are. Some hedge funds get their funding from managing pensions and endowments funds.

    8. But Citadel was manipulating the markets!

    Citadel and Citadel securities are two separate LLCs. They are only allowed to open long positions, they can not short a stock. One is a market maker that processes option orders and has no say in the markets. In fact, the more volume there is, the more money they make on the spreads. Would jot be surprised if Citadel made a lot of money on market making in the past week.

    9. But Hedge funds are insane investors with 50% annual return.

    Not necessarily true, an average hedge fund has been underperforming for the past 20 years. You probably had better returns then them just by investing in index funds. Don't get me wrong, a lot of smart people work in the funds, but their main goal is to hedge, in other words, be safe from market movements in any direction.

    TL;DR

    Hedge funds are bad, but they are not retarded (except for Melvin, who overextends on a short at $5)

    But many of the rules that came in play were written decades ago, they were not take from thin air. Because against hedge funds is good, but throwing different theories that will be easily disapproved once they file 13F will not take them down. Knowing how markets work, and being vigilant is how you make more money than hedge funds.

    submitted by /u/MichKOG
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    Sectors with the most growth potential over the next 10-20 years

    Posted: 30 Jan 2021 05:49 PM PST

    I have been looking to invest in sectors that I believe will have the greatest chance of significant growth over the next 10 to 20 years. Here is a list and a quick reason for my thinking about each sector:

    Electric vehicles/renewable energy- The future of automobiles is electric. Almost all major auto makers are producing some line of electric vehicles, not to mention TESLA and NIO as fully eclectic companies with massive growth last year.

    Marijuana- The mj industry is still just beginning compared to where it will be at in 20 years from now. More and more states will legalize allowing for huge growth especially if it is legalized on a federal level. When/if it is legalized on a federal level, I believe both the medical and recreational aspects of mj will take a bigger role creating more consumers.

    Healthcare- According to AARP, 10,000 people turn 65 everyday in the United States. Life expectancy will likely continue to lengthen creating more revenue on average per person over their life. This number will only increase in the coming years as well. Advancing healthcare technology such as stem cell research for example will continue to innovate and create new treatments and cures creating a bigger market and more growth.

    Autonomous technology- Self driving cars, robots, AI, are all growing industries. They are the way of the future. Technology is advancing at an exponential pace creating exponential growth. Self serving cars for citizens as well as self driving semi trucks are coming very soon. There are companies already testing self driving semi trucks and they will possibly wipe out the human trucking industry within the next 10 years.

    I would love to hear some other ideas you may have!

    submitted by /u/azdabber47
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    Should I get a CFA to learn more about investing?

    Posted: 30 Jan 2021 11:56 PM PST

    I have a degree in accountancy, 5 years exp in finance as an analyst. I quit to run my own business for 6 years and recently exited due to COVID.

    Started investing a few months ago.

    I know most people get CFA for professional reasons. However, I have no intention of going back to full time employment in the foreseeable future.

    It will purely be for the purpose of getting more in depth knowledge how markets work and reviewing/adding to what I have learned in uni and work. I'm hoping that it can help me analyse the market and companies more thoroughly and make better investment decisions.

    Well and maybe getting a , CFA Charter Holder beside my name would be pretty spiffy.

    Is pursuing a CFA a way to get all the knowledge I need in an organised way?

    Or should I just watch some investment courses on udemy and call it a day?

    submitted by /u/wenchanted
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    The Green Rush - Weedstocks & US Legalization

    Posted: 30 Jan 2021 07:54 AM PST

    I know this isn't about GME & AMC but...

    Last week, Chuck Schumer accounced that Marijuana Reform Bills are being merged as Congress moves to legalize:

    https://www.marijuanamoment.net/chuck-schumer-says-marijuana-reform-bills-are-being-merged-as-congress-moves-to-legalize/

    This is massive news, in fact, Stifel is calling this a Goldilocks Scenario for companies like $TLRY.

    This could potentially foreshadow the most significant catalyst in the history of the U.S. cannabis industry

    The marijuana industry is a beaten down industry with short interest through the roof. Robinhood is already proactively restricting cannabis stocks like $ACB & $SNDL for the inevitable squeeze to come.

    US Legalization is just around the corner and no one is talking about it.

    Get in before media gets ahold of this story:

    Aphria, Tilray, Canopy Growth, Green Thumb, Trulieve, Cronos, Aurora, Cresco Labs, Verano, Acreage, TerrAscend, Harvest Health & Rec, Organigram, 4Front, Columbia Care, Sundial, Curaleaf, HEXO, Planet 13, GrowGeneration, Jushi, Vireo... This list goes on

    There are also ETFs available with US exposure such as $MSOS

    Stay safe & GLTA!

    Edit: Also, it is important to deepdive the management in this industry, as it is with any other. A good management with tegrity goes a long way. I won't go into detail, but, we've seen behind some curtains(walls) and it wasn't pretty.

    Edit2: as u/Kbarbs4421 mentioned below, if you are new to the industry, then please do your DD.

    submitted by /u/seebz69
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    PSA For the weekend crowd that hasn’t been reading anything- the subreddit is currently still locked down and set to manual approval.

    Posted: 30 Jan 2021 07:01 AM PST

    Like the title says, we are still seeing an unprecedented amount of traffic and low effort posts, of the 238 posts submitted in the last 12 hours 7 have been approved - the rest openly violated one or several of our rules, or were simply people offering their take on the GME situation.

    If you make a post and think it is worth approval then message the modmail, we're also periodically looking through the queue and approving worthwhile posts.

    If your post is "what broker to use", "I'm new how do I do X", "I'm worried about robinhood", "question about hedge funds/shorting" or literally anything to do with GME outside of breaking important news or analysis worthy of an investment bank it's not getting approved. I don't care how important you think it is to warn others about losing money, or to encourage them to fight the evil capitalists.

    Please feel free to use this thread as a general discussion thread for the day. Please concentrate all GME discussion in the existing thread posted here: https://www.reddit.com/r/investing/comments/l8jwsl/gamestop_big_picture_technical_recap_125_129/?utm_source=share&utm_medium=ios_app&utm_name=iossmf

    submitted by /u/MasterCookSwag
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    Apple’s Privacy Change Will Hit Facebook’s Core Ad Business. Here’s How.

    Posted: 30 Jan 2021 08:13 AM PST

    Facebook Inc. will suffer damage to its core business when Apple Inc. implements new privacy changes, advertising industry experts say, as it becomes harder for the social-media company to gather user data and prove that ads on its platform work.

    Facebook warned this week that Apple's new feature, which is expected to roll out this quarter, will pose risks for its business, but the company hasn't detailed how it is exposed. Facebook in August pointed to a small corner of its business that facilitates ad placements on third-party sites and apps. It has also played up how the change would hit small developers.

    The core of Facebook's business, its flagship app and Instagram, would be under pressure, too. The Apple change will require mobile apps to seek users' permission before tracking their activity, restricting the flow of data Facebook gets from apps to help build profiles of its users. Those profiles allow Facebook's advertisers to target their ads efficiently.

    "The market dynamics here are going to shift heavily," said Simon Poulton, vice president of digital intelligence at WPromote, a digital-marketing agency. "If you are marketing on Facebook and the results are going down because the efficiency is going down, you are going to turn that down."

    The extent of the potential financial impact on Facebook, which generated $86 billion in revenue last year, isn't clear. The company said it expects revenue to be stable in the next two quarters. In the past year, Facebook's business has thrived despite the coronavirus pandemic and a boycott by several advertisers over hate speech on its platform.

    Eric Seufert, an analyst and marketing strategy consultant who has studied Facebook's business, said he expects the company to take a 7% revenue hit in the second quarter as marketers spend less and ad prices decline as a result of Apple's change.

    Madan Bharadwaj, chief technology officer and co-founder of Measured, a marketing measurement company, estimates that Facebook will only be able to claim credit for about 50% of the sales it currently does, as a result of the change.

    "It's going to have a huge impact on the total amount of revenue, or conversions, that Facebook can attribute to itself, which is basically the signal that all advertisers use for making investment decisions," he said. "It's going to drop their performance metrics hugely."

    Apple's Privacy Change Will Hit Facebook's Core Ad Business. Here's How.

    submitted by /u/hhh888hhhh
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    13F Reform, what can we retail investors do to help reform this?

    Posted: 30 Jan 2021 06:50 PM PST

    With all the fuss and anger going on with big Hedge Funds it would be nice if one of the tools created to help aid in transparency was a bit more effective reliable in doing so.

    General knowledge on the 13F, what it is and what's wrong with it.
    https://www.investopedia.com/terms/f/form-13f.asp

    It seems like they don't even have to report shorting which seems like a big deal, especially given the current investment climate.

    Thoughts?

    submitted by /u/Nyxtia
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    PLUG

    Posted: 30 Jan 2021 06:33 AM PST

    Looks like big banks are shorting PLUG but I think this would be a good long term investment due to the policy stance of the new administration and because of the advantages hydrogen fuel cells have over lithium batteries.

    https://www.google.com/amp/s/seekingalpha.com/amp/news/3652720-plugpower-drops-as-revealed-as-kerrisdales-new-short-idea

    What do you think?

    submitted by /u/South-Sea-1720
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    Intrinsic value of a Preferred share?

    Posted: 30 Jan 2021 09:41 PM PST

    I have a good level understanding of how securities work, but I'm unsure how to evaluate preferred shares.

    I stumbled upon a great company that offers preferred shares which are currently trading at ~14$, but their appendix states that they can, at any time, redeem the preferred shares for 25$ per share.

    Does that mean that each share is undervalued by 11$? (Not counting dividends)

    submitted by /u/Chris-t-fire
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    Tourism Industires

    Posted: 30 Jan 2021 02:17 PM PST

    What is the consensus on tourism related industries, like cruise lines, theme parks, and hotels now that COVID vaccines are rolling out around the world? Will there ever be a return to the numbers we saw pre-COVID? Most of the cruise lines are poised to start operating again, once they get the go ahead from the CDC for test cruises.

    submitted by /u/proud_texan_vet
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    Rolling OTM SPY leaps

    Posted: 30 Jan 2021 01:17 PM PST

    I made a lot of money, pure luck, with deep otm IWM LEAPS. I've read lifecycle investing and they say to buy deep Itm, half the ticker price, Spy LEAPS. But given my experience with OTM iwm LEAPS, I'm wondering if I should just roll OTM Spy leaps instead in my Roth IRA. They technically never need to go itm if you buy one three years out and just moves closer to atm halfway through and sell. Would like to know why this is a bad idea or if it's a viable plan. What's the difference between doing this vs rolling deep Itm leaps. Also buying very deep itm spy leaps would require all my yearly ira contribution, whereas I can buy 3 otm spy leaps throughout the year and spread the timing risk

    submitted by /u/TheGoodAggie
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    $CLSK DD - Microgrids to be worth $47.4bn by 2025

    Posted: 30 Jan 2021 05:08 AM PST

    Cleanspark is a microgrid clean energy software and hardware company, so incoming policy and administration are on their side. They have a relatively decent balance sheet for a small cap, and whilst they provide switchgear, their real expertise is in microgrid software. US House Lawmakers have recently introduced $1.5bn bill for clean energy microgrids and they have several contracts with government embassies.

    A microgrid is a self-sufficient energy system, within microgrids are one or more kinds of distributed energy (solar panels, wind turbines, combined heat & power, generators) that produce its power.

    Microgrids are going to become more and more essential in the coming years with increased energy demand from EV's and other appliances like heat pumps, as we shift to more sustainable. In many areas, the main electrical grid cannot cope with the current load, let alone if more consumption is yet to come, therefore, local microgrids are becoming more and more essential. The demand for clean energy for high energy usage applications is high and is going to get higher. The Microgrid market will be worth $47.4bn by 2025.

    Aside from their core business area, they acquired a Miner (they have been preparing this long before the coin went $20k+). This has generated them some "pocket money" and have greatly pushed them towards profitability, which they expect to see this year. Their mpulse and mVSO products has been proven, they are just finding more applications for it, and are releasing new contracts regularly. Earnings are expected for the 9th of February, now could potentially be a good time to hop in.

    Cleanspark had a hit piece on them mid-January. Culper Research has had terrible track record they are 0 for 8 on success of their previous short reports. For example, put a report out on BLNK in the summer, went down initially, and it then mooned to $60. Lots of "Ambulance Chaser" law firms are jumping on to this, probably paid for by the shorts if you look at the fine print of them, they are still looking for "lead plaintiffs" as guess what, they are NONE . If you do any digging on YouTube or look into the claims yourself, the are completely false and debunked easily.

    I'm in for 715 shares and various options and strikes:

    03/19/2021 30.00 C

    06/18/2021 60.00 C

    01/20/2023 60.00 C

    Do your own DD, GLTA

    LINKS:

    Cleanspark: https://www.cleanspark.com/

    Cleanspark also has association with government contracts with Marine Corps and US Embassies: https://www.prnewswire.com/news-releases/cleanspark-awarded-us-embassy-contract-301136566.html

    https://www.prnewswire.com/news-releases/cleanspark-completes-military-microgrid-offering-perpetual-100-renewable-driven-energy-security-300843448.html

    Microgrid Market worth $47.4bn by 2025 https://www.marketsandmarkets.com/PressReleases/micro-grid-electronics.asp

    US House Lawmakers Reintroduce $1.5 Billion Bill for Clean Energy Microgrids: https://microgridknowledge.com/us-house-clean-energy-microgrids/

    What is a microgrid: https://microgridknowledge.com/microgrid-defined/

    THE HIT PIECE:

    Culper Research: https://culperresearch.com/research-1 - completely anonymous and again past performance not great

    Cleanspark's response: https://www.prnewswire.com/news-releases/cleanspark-investigating-short-seller-culper-research-301212791.html

    Chairman directly responding to the claims: https://i.redd.it/pu2wjwaqedb61.png

    submitted by /u/renewablestonks
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    Index funds don't seem to grow as reliably as people say, no?

    Posted: 30 Jan 2021 02:19 AM PST

    I'm looking at the list of index funds here

    https://tradingeconomics.com/italy/stock-market

    and if you click on the various funds on the right and then click on "all" below the graph, you'll see that a lot of them have been on a general upward trajectory over the course of their existence, but almost as many of them do not have that trend at all and are either stagnant or occasionally even on a downward slope like the Italian one.

    So why is it that index funds have a reputation for slow, but reliable growth? Are they really as safe as they're made out to be? It seems you could easily have bought into one of the funds on this list in 2010 and be worse off now, sometimes drastically worse.

    submitted by /u/themainheadcase
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    Municipal Bond etfs for swing trading?

    Posted: 30 Jan 2021 05:52 PM PST

    Is there some way you can swing trade municipal bond etfs and make a small profit without a huge amount of starting capital? The returns on most municipal etfs are scant for most of them. I am looking into this because it would be tax free and with a commission free broker. Thank you

    submitted by /u/1llabesab
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    How do you calculate fundamentals if they aren't already listed?

    Posted: 30 Jan 2021 05:30 PM PST

    Using the current hot stock GME as an example, if you look it up on finviz, the PE, the PEG and the projected earnings aren't listed.. In a situation where I wanted to invest long term but such data wasn't displayed... how would I calculate that on my own?

    submitted by /u/Zooplanktonbeam5
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