Being frozen out implies you’re not able to liquidate your position.
There were other brokers who had no restrictions in trading these names. The ones who put up restrictions were simply undercapitalized.
As for IG, they have to hedge their risk so if all its customers are going long, it has to offset this net exposure and and go long the underlying. Since it’s putting up buying restrictions, it’s either 1) can’t find enough shares or 2) ithey can but the funding cost is too expensive for their biz model. It’s probably the latter.
Not really M8, Frozen out implies, you cant get in.
Never seen IG stop all trades. They occasionally partially fill. As for being undercapitalised, IG is the number one broker in the number 1 trading hub in the world. I think we both know what happened here.
Vlad the Stock Impaler has already stated multiple times (specifically r.e. Robinhood) that it was a liquidity issue. They received billions in Citadel injections. The shorts were caught off guard, the brokers were caught off guard, and retail pounced.
The shorts made their money back. (Bailed out)
Robinhood got their injections. (Bailed out)
Liquidity providers KILLED it in fees. (Bailed out)
And retail lost all their money. (Walked right into the trap. No bailout).
While some may find recent current events upsetting, this isn’t anything new.
Retail traders will always be at a disadvantage. Are financial markets rigged in some shape or form? Absolutely. You see banks getting away with “wrist slaps” by just having to pay some fine after being found guilty whether it’s Barclays, Citigroup, JP Morgan, MUFG and RBS rigging the FX market or JPMorgan rigging the commodity markets.
You can complain about your broker, complain that you don’t like the rules, or that the game is rigged but it’s a waste of energy and time.
All you can do is be aware of what you’re getting into and accept it. Nobody is forcing you to compete in this rigged game but if you choose to play, then “man up”.
When you enter the “waters”, it’s full of huge sharks that are out to take your money. You just have to do your best to take money from them instead and lose less money than you take. It’s as simple as that.
It’s not necessarily true that all shorts made their money back. There were several hedge funds (and probably more than we know of) that lost billions:
Cohen’s Point72 Asset Management declined 10% to 15% so far this month, while Sundheim’s D1 Capital Partners, one of last year’s top-performing funds, is down about 20%. Melvin Capital, Plotkin’s firm, had lost 30% through Friday.
And it’s not just the big names: Jack Woodruff’s $2.8 billion Candlestick Capital has fallen 10 to 15% in January on its short wagers, while the $3.5 billion Maplelane Capital lost about 33% through Tuesday in part because of a short position on GameStop, according to investors. By end of day Wednesday, Maplelane was down 45%.
According to Business Insider, losses were estimated to be about $19 billion.
Regarding Robinhood getting bailed out, that’s not entirely true as well.
They did receive cash infusions of $3.4 billion but you have to look at the details of the financing:
The first $2.4 billion tranche will convert into equity at a $30 billion valuation – or a 30% discount to the IPO, whichever is lower, according to people with knowledge of the terms. A subsequent $1 billion infusion converts at the lower of the 30% IPO discount, or a $33 billion valuation
Robinhood had to give up equity in exchange and on unfavorable terms. It’s the VCs who came out on top from this deal.
Feel so bad for everyone on WSB. I can’t even start to read those posts. Reminds me so much of crypto in 2017. At least BTC had its return but some of those altcoins…
I’d say some of the brokers are very mindful of Jan 2015 when the SNB removed the peg - especially those that focus on retail on-line.
Alpari and FXCM were considered large operators - statement from Alpari back then:
.“This has resulted in the majority of clients sustaining losses which exceeded their account equity. Where a client cannot cover this loss, it is passed on to us. This has forced Alpari (UK) Limited to confirm that it has entered into insolvency.”
One of the posters on WSB while urging to hold reminded that price never goes in a straight line - in this case it had - upwards and in a very short time.
Exactly…I started watching the drama unfold when GME was in the high teens. When it broke above $50 my jaw dropped. Early last week, I thought it could get to $500 and then $1000. But when all the brokers shut down trading, that was the nail in the coffin and the unwind began. It’s disgusting how many celebs/influencers pumped this up too, just to leave retail on the hook. SAD.
Right and now it’s below $50. And those retail traders holding still think they’re sticking it to them hedge funds (who also rode this entire thing along with them). Sigh.
Exactly. It’s sad across the board for too many reasons to list. Price may be a bit sticky around $50- only b/c their upcoming earnings should surprise and they’ve taken on a lot of new Sr. leaders that will drive growth. However, I wouldn’t touch this stock w/ a 6 ft. pole- there is no reason to, at all.
Yeah I fell for NOK lol. I was able to quickly get in and out of NAKD though but yes, currently a NOK bagholder. Thankfully it was a tiny tiny amount. So I may just hold haha.
Don’t feel sorry for them @ponponwei - those kids knew Exactly what they were doing !
ANd the exposure of “Robinhood” which we have been watching for some time elsewhere - is a real lesson to those who believe in the spirit of Altruism - which the namesake engenders -
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. Here’s a little ditty from my youth which seems quite appropriate to this situation !
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Anyone else enter a position in GME? Very interesting last few weeks of price action-- GME showing continued relative strength against the SPY…albeit flat, but, still not down.
If $132 gets taken out next stop is $180. I bought some call spreads (usually never buy options, only sell- but, implied volatilities have been crazy and my position is pretty theta/vega neutral and only 3 SPY deltas) that B.E. @ $144 next Fri (Mar 12). Max profit is @ $155.
