Some crazy stuff going on in the markets today. The stock GME has been rallying very hard last couple of weeks, having an epic short squeeze with 140% of the float being short (and how do we get to a stock being 140% short float in the first place?). 🤦🏻♂️
An Epic Short Squeeze
Some hedge funds & institutions were apparently short very large positions in this stock and the “Reddit Army” as the news media is now calling it (basically a large amount of retail traders) allegedly got together, continued to buy the stock and refused to sell, generating a high demand for the shares with low supply. Combined with the float being 140% short… BOOM, an epic short squeeze ensues.
The stock went as high as just under $500 this morning before coming down a bit. And then in one of the most insane things I’ve ever seen in my trading career, Robinhood actually STOPPED allowing new purchases on GME, AMC, and some other similar “meme” stocks altogether. You could sell, but could not buy. They also force-liquidated some people’s positions as per some screenshots shared around the internet.
Where is the FREE MARKET?
Some other brokers like E*TRADE, TD Ameritrade, Interactive Brokers, and WeBull followed suit. This shows how scared ‘big money’ must’ve been if it got to this point.
A stock is never “too high” in its price. Ever. If a company is overvalued or not, that is a separate discussion. But share price on a day to day basis is a function of supply and demands. If there are more buyers than sellers, the price goes up. It’s as simple as that.
For what it’s worth — GameStop’s market cap could even end up being more than Apple’s market cap of $2 trillion. If that’s what the market decides, then that’s what the share price is. If the market participants decide that GME is worth $100,000 per share and they’re not selling until it gets to that price, then that is what the market has decided. Who are these brokers to dictate if retail traders & investors should be allowed to purchase any given security or not? All the meanwhile, the same institutes (whose interests these brokers are serving by doing this) can trade away on these same securities. This is happening in the United States of America ladies and gentlemen, the land of the free.
It’s funny/sad that retail investors blow up their accounts essentially on a daily basis, yes due to poor risk management but also literally combined with the manipulation that these same exact institutions (i.e. ‘big money’) do in the market. No one bats an eye when Joe Smalls from Arkansas blows up his account and has to go asking friends and family to buy food and pay rent next month.
And a couple of funds who also had very poor risk management and were over-leveraged out the wazoo got in some trouble (allegedly) because of retail traders ONCE, and the whole world starts falling apart. Markets start tanking and trading is actually SHUT DOWN on these high flier stocks. Shut down at least on the buying side. In other words, price is allowed to go down via selling, no problem. But it must not be allowed to go up via buying. Again, this is happening in the United States of America, ladies and gentlemen.
I find this above described situation to be truly disturbing. This is not a good precedent. If this can happen today, then what’s to say what could happen tomorrow? The whole thing with trading is to anticipate what other market participants may be about to do and then plan a trade entry and exit accordingly. But how is one supposed to do that if the participants aren’t allowed to PARTICIPATE?
This needs to be clearly and unequivocally condemned by anyone who wants our markets to remain free. ‘Big money’ already does enough to hustle retail traders day in and day out, now they can control which stocks we can buy and which we cannot, in the middle of a trading day?
Lawmakers and the Department of Justice need to get involved. There has been some traction with some politicians and other popular figures posting about this on social media and pointing out the situation’s disturbing nature — so that’s good. But they need to deliver a very clear message to all brokers/institutions/etc involved in this scheme that the US markets will not be manipulated in this manner.
Markets have been manipulated in many ways since their inception, and it’s highly unlikely that will ever change, but at least we as retail traders have free access to them like anyone else. If we have money to buy a stock, whether one share or a million shares, we can buy them. What happened today was absolutely unacceptable.
Tweet these brokers, tweet/write to your politicians, file a complaint with the SEC, contact any one of the law firms filing lawsuits against these companies and ask them how you can take part in the case — and make whatever other (legal) noise you can. We have to stand up with everything we got so this is the first and last time something like this happens in the US markets.