By the time of writing, some 112,000 people have watched the video.įrank and his longtime fans watched the stock market crash alongside the rise of Covid-19.
YouTube/TheStockGuyĪbout a year ago, Frank had a few thousand followers. There’s no law against a group of investors taking the same position in a stock, even if they’re doing it as a massive troll.Frank is one of a growing cadre of financial streamers on Twitch and YouTube who captivate massive audiences. All of this information is being exchanged in the open, on a public forum. There have been talks about the Securities Exchange Commission coming down on WallStreetBets and other online stock forums, but the tricky part is there is no evidence of fraud or insider trading. On its face, the GameStop surge appears to be a classic pump-and-dump scheme, in which a group of people collude to hype up a stock, artificially increase its share price and then sell at a profit. So now Melvin has to buy GameStop at their new, inflated price, only to give those shares back to the original owner. Problem is, Melvin eventually has to return those GameStop shares. The real problem for Melvin is that it was also shorting GameStop, meaning it was borrowing shares of GameStop, selling them on the market and using those proceeds to make other investments. The stock obviously went up, instead, rendering those put options worthless. Melvin assumed GameStop’s stock would fall, and bought puts allowing Melvin to sell GameStop’s stocks above the market price, netting Melvin a profit. Puts assume the share price of a stock will go down and give their owners the option to sell a stock at a certain price. Melvin had $55 million worth of put options on GameStop, which are the opposite of calls. While this is great for DFV and the other WSB members who have made tens or hundreds of thousands of dollars riding the GME wave, it’s been hell for Melvin Capital. And it all started with $53,000 in options premiums. As of his latest update, DFV’s E-Trade account is worth $22.8 million, $4.4 million of which is in cash he pulled out. As DFV’s legend grew, more people on WSB got in on the action, pushing the GME price higher and higher. He entered 2021 with more than $3.1 million in GME contracts, and then shit got really crazy. By August 2020, his contracts were worth $600,000. DFV was going “YOLO,” the WSB term for doubling down, again and again, on a single, potentially life-changing longshot stock bet.ĭFV would be rewarded, handsomely, for his faith. He never wavered, even as his options fluctuated wildly in value. DFV became increasingly convinced of his GME bet as the months wore on, buying even more GME call options at various strike prices and expiration dates throughout 20. Tweet by boy, did those options end up having value. Here’s how the WallStreetBets group came to power, and how they’re wielding their collective capacity to troll the stock market-and make millions of dollars doing it. The GameStop stock rally is the handiwork of r/WallStreetBets, a Reddit community where people share news, memes and personal anecdotes about playing the stock market. As of this writing, the stock was trading for $330 per share-77 times higher than its share price of $4.28 a year ago. Reports of Melvin Capital’s financial struggles sent GameStop’s share price soaring even higher, though, to more than $100 a share on Monday, putting the hedge fund in an even more precarious financial decision. Melvin was shorting the stock, hence the need for a bailout. Just a month earlier, the stock was hovering near $15.
Hedge fund Melvin Capital needed a $2.75 billion bailout on Monday after the stock price for GameStop, the video game retailer, spiked to more than $70 a share over the weekend.
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