Yet another day of passion (and incredulity) a Wall Street. Securities involved in speculation (GameStop, Blackberry, Blockbuster, Amc the main ones) began to rise again dramatically after i violent drops of yesterday. A situation that jeopardizes the resilience of speculative funds that have instead focused on the fall of these same shares. At the moment the losses for the bears are estimated at approx 20 billion dollars.
The stocks are back on track after the online trading platform Robinhood ,from which many of the purchases depart, removed the limits on operations which he had introduced yesterday, sparking waves of protests among users which also led to the launch of a class action. The platform managed to pick up a billion dollars, to meet the requests of the regulatory authorities who requested more guarantees. Meanwhile the pains of the Melvin background, the one who has paid the highest price for this situation for now. Melvin has decided today to also close many of its downward speculations on European markets, in particular on the pharmaceutical company Evotec and the battery manufacturer Varta, towards which the legions of small traders.
The battle is at the root of the declines they are accusing the Wall Street indices. Funds usually invest both in stocks of large companies by betting on their upside, and in small stocks by betting on downs. If these stocks rise, they are forced to sell the other shares to cover the losses e therefore they weigh on the whole list. The authorities are on edge for a phenomenon that could deeply shake the markets for a long time. The SEC, which monitors the US markets, reiterated that it was observing the evolution of the situation.
Brief summary of previous episodes – Many small traders have managed to reach an agreement thanks to social media such as reddit or TikTok to coordinate their stock purchases. The securities chosen are those of companies headed towards a decline that seems inexorable, like the GameStop video game rental and retail chain, the equivalent for DVDs Blockbuster or the mobile phone manufacturer Blackberry. Because? Because there are big downside speculations on these stocks by big funds. Betting on whether the price of these shares is bound to go down, go down, go down. The more technical details you can read them who e who. The “little ones”, however, began to do exactly the opposite, that is, buy the same shares pushing its price upwards. For those who have speculated this mechanism downwards it’s hellish, if prolonged it forces the speculator to run for cover by buying back the same securities and ending up doing so the game of his opponents. The pressure from small traders has been so strong that some hedge funds were forced to throw in the towel, and take billionaire losses. The battle takes place with named weapons “Options”, financial products that amplify the firepower (and risks) of those who invest. For this reason, in these days the stocks involved have been the protagonists of upward or downward movements of 30-40% -50% in a few minutes.
