On a mission

There has been lots of attention around wallstreetbets recently and the company Gamestop. To read more see here.

On a mission

The excitement is right out of a Dickensian novel. Speculator's guilt writ large.One user wrote:

"As soon as public trading opens I'm going to liquidate all my remaining boomer stock and buy whatever more I can of GME. This truly is once in a lifetime opportunity"

There was an interesting piece this week on Bloomberg's opinion market live blog explaining why this latest phenomena is different to the tech bubble of the naughties. Here is the thinking:

Some people think that the moves in Gamestop are not particularly noteworthy because:

  1. This has all happened before
  2. Retail investors are too small in their size to move markets.

However, the counter argument to that is:

  1. The difference between now and the tech bubble is that retail investors are more sophisticated and more leveraged.

The retail investor generally trades with leverage (and plenty of it to boot). Small retail bets can be transformed into sizeable ones. By adding these retail bets together you quickly reach high amounts.

The retail investor can trade options on the commission free platform Robinhood. The total volumes of options hit 7.47 billion contracts in 2020. That is 45% higher than in 2018. A great deal of these options are being traded by retail investors

The gamma squeeze is a phenomena where as price reaches an option's strike price dealers will have to be buy more and more of the underlying stock. This has been adding to the woes. However, in the end the rug has been pulled from the retail investor as new regulations and platforms being closed to them has stopped the rout. Hardly a 'free' market after all.