I think the media coverage of this is leaving out a lot of detail. There are hedge funds on both sides of this trades so it isn't as black and white--wall street vs main street as the media makes it out to be.
When all is said and done a lot of hedge funds that shorted will lose money on the short squeeze. A lot of main street traders will make some money off these hedge funds, but a lot of hedge funds piled into the long side and will make money as well.
A lot of redditors that came late to the game will be left with nobody to sell to once all of the shorts are closed. These redditors will lose a ton of money and I think that is why Robinhood was trying to close the buy side. They don't want retail investors to be the last one in and the last one out on this trade.
I agree with you that they probably should have just left this alone and let the regulators deal with this. I just think they are worried about some reddit traders killing themselves after they lose all their money. This is a lose - lose situation for Robinhood.
I had a position in WPG which is a REIT and you buy REITS to hold onto them for a long time so that you can collect monthly rents and hope that there is a recovery in shopping centers. A week ago my position was at a -10% and this week it was at a +40%. I got lucky and made money, but I didn't buy WPG to be a speculator and manipulate markets. I bought it because it was cheap and it would recover one day with the vaccine.
I am just a regular trader that buys really safe stuff and holds onto them for a long time. I exited this position and just moved my money to Verizon which yields only half the dividends of a typical high yield REIT, but I don't want to be in a REIT that is being price manipulated because there is a lot of downside risk.
This market manipulation is bad for everybody and its going to lead people like me who play the long game to retreat toward safety to reduce volatility. I guess if I were just in index funds then the rest of the stocks in the index would dilute a lot of this single stock manipulation.
I do agree with you that Robinhood should just leave it alone and let it play out even if it could hurt their investors. Let the regulators deal with this. Sometimes you just got let people get burnt. Brokers are not suppose to take a sides. They are supposed to be indifferent. There is a class action lawsuit against Robinhood starting now.
I really don't think Robinhood is trying to purposely hurt their customer to protect hedge funds. Robinhood the story character stole from the rich and gave to the poor not the other way around. They are just trying to do what they think is right, but they are fucked either way. Excuse my language lol. Great article!
Posted Using LeoFinance Beta
Thanks for another perspective. I've no idea what's going on to be honest but I appreciate reading a different view that many aren't considering.
!ENGAGE 100
Posted Using LeoFinance Beta
WTG on that REIT trade. Well done!
I hope you're right and there wasn't a more nefarious side to all this. You make a great point to with the people that took the long side of the hedge.
I somewhat agree with you about the reddit traders but think most people knew the risks of this trade entering. I even sent out a warning tweet about "dumb money" losing when the bottoms fall out of these trades and they would have eventually. Someone would have been stuck holding the bag. It was absolutely inevitable in this situation.
I don't think Robinhood or any other platform involved tried to hurt their customers intentionally, but I am soooooo suspect of the way they left the sell side open like that and closed the buy side. Honestly, had they just halted all trading or set a cool off period I probably would have been OK with that. Leaving the sell side open is where I take serious issue.
Like you said, lawsuits have been filed and we'll have to see what the regulators say about all this. I think we're going to be hearing quite a bit about this over the next week or so. This was another history making event 😆
Thanks for this terrific comment.
!ENGAGE
Posted Using LeoFinance Beta
I don't think a full halt is a good idea either because the hedge funds can trade directly on the market through their own brokers and then Robinhood people will be stuck holding shares with no way to sell or buy because of the full halt.
I did read that the NASDAQ is considering halts. That kind of halt would be fair cause then it would be a halt to both the hedge fund and retail people.
If I had to put the options in order of best to worst it would be:
Posted Using LeoFinance Beta
ENGAGEtokens.