The number of sea shanties being sung about GameStop is a larger positive integer than I would have expected in 2019https://www.reddit.com/r/wallstreetbets/comments/mc7t74/gme_sea_shanty_tendies_in_the_ocean_aping_the_dip/ …
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The GameStop frenzy feels like a cultural seed crystal for something Gamergate-like, although far less toxic so far than that was. But the deep emotional roots of childhood video games combine with young adults confronting 2021 elite failure in what are clearly fascinating ways.
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Anyway, shed a tear for the degenerates on WallStreetBets who just wanted to gamble away their mortgages trading stock options in peace, and instead found their forum taken over by a nascent religious cult eight million strong
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More generally, the fact that civilians are now trading options (a tail that can very easily wag the dog when volatility gets high) is going to blow everything up soon. Probably the only safe investment is ten-year Pinboard subscriptions.pic.twitter.com/UDy6noembG
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Isn't it better to have speculators in options than to have them in stocks moving prices based on whims?
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Replying to @USympathizer @hradzka
Options speculation can have enormous leverage and cascading feedback effects, even for comparatively small amounts of money invested, if the price starts to swing around crazily. It's much more destabilizing than stonk speculation
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But options are rarely exercised. What other way might an option affect the price of the underlying stock? Shorting is another case where puts would be better IMO.
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Replying to @USympathizer @hradzka
When you buy options from a market maker, the counterparty buys some underlying shares to hedge the risk. For far out of the money options, this is a tiny fraction. But if the price swings closer to the strike price, they have to buy more and more, which in turn affects price
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The basic risk in this process is that options (a cheap bet on a block of 100 shares) have lots of built-in leverage, that just owning the stock doesn't. It means in extreme events the options can automatically move prices in a feedback loop
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These kinds of squeezes are well understood, but what's new here is a market where SO MANY options are being traded and used basically for gambling. This is a new level of systemic risk we haven't had before
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What's the worst that could happen?
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