Reddit Traders #WallStreetBets freaking out Wall Street

The Reddit message board that’s breaking the internet by sending Wall Street into a frenzy was briefly taken private by its moderators on Wednesday, adding further confusion to a wild day.

“We are experiencing technical difficulties based on unprecedented scale as a result of the newfound interest,” said a message on the WallStreetBets subreddit, adding that enforcement of the forum’s rules and Reddit’s content policy became increasingly difficult. “WSB will be back,” the moderators added.
The subreddit exploded onto the investment scene earlier this week when aggressive touting of GameStop’s stock by several of its members sent the video game retailer’s shares soaring more than 400% this week. The actions appear to have helped fuel a so-called short squeeze in GameStop (GME) stock, where investors who had used options to bet against the stock needed to cover those bets by buying shares.
WallStreetBets has since turned its attention to other stocks, with movie theater chain AMC (AMC) spiking more than 300% on Wednesday.
In a post soon after making WallStreetBets public again Wednesday evening, the moderators outlined their struggle to manage the group’s surging popularity.
“We have grown to the kind of size we only dreamed of in the time it takes to get a bad nights sleep,” they said. “We’ve got so many comments and submissions that we can’t possibly even read them all, let alone act on them as moderators.”
The moderators also said several Twitter accounts were trying to impersonate them.
“@wsbmod is the only Twitter handle whose statements are directly from some part of the team.”
While it was private, a subreddit called WallStreetBetsnew, meanwhile, gained more than 100,000 followers in around 30 minutes on Wednesday evening. That subreddit was established in March last year. On it, users urged their peers not to panic. Others encouraged buying even more stocks in revenge for the outage.
“REVENGE BUY TOMORROW! THEY SHOOK THE WRONG TREE! LETS GET IT GOING TOMORROW MORNING BOYS,” one user posted.
Reddit told CNN Business that the moderators of WallStreetBets chose to take the forum private, and the company was not involved in the decision.
Reddit Traders #WallStreetBets Unrestricted Discussion

The subreddit, describing itself through the tagline “Like 4chan found a Bloomberg terminal“,[2] is known for its aggressive trading strategies, which primarily revolve around highly speculative, leveraged options trading. Members of the subreddit are often young retail traders and investors who ignore fundamental investment practices and risk management techniques, so their activity is considered gambling. The growing popularity of no-commission brokers and mobile online trading has potentially contributed to the growth of such trading trends. Members of the communities often see high-risk day trading as an opportunity to quickly improve their financial conditions and obtain additional income. Some of the members tend to use borrowed capital, like student loans, to bet on certain “meme stocks” that show popularity within the community.[1][3][4][5][6]

The subreddit is also known for its profane and juvenile nature, with members often referring themselves as “autists” and “degenerates”.[5][7]

GameStop short squeeze

On January 22, 2021, users of r/WallStreetBets initiated a short squeeze on GameStop, pushing their stock prices up significantly. This occurred shortly after a comment from Citron Research predicting the value of the stock would decrease.[15] The stock price increased more than 600% by January 26, and its high volatility caused trading to be halted multiple times.[16][17]

On January 24, 2021, a moderator of r/WallStreetBets wrote in a post stating: “There is NO organized effort by those [of] us who moderate this community to promote, advise or recommend any stock. It is against our policy to do so and we feel it is crucial to allow members to be able to share their ideas amongst each other with autonomy.”[18]

After the GameStop stock closed up 92.7% on Tuesday, January 26, 2021, business magnate Elon Musk tweeted out a link to the r/WallStreetBets subreddit.[19]

On January 27, 2021, r/WallStreetBets users triggered a short squeeze on AMC, a company in a similar position to GameStop.[20]

References

  1. Jump up to:a b c Davidson, Jake (October 25, 2018). “Meet the Bros Behind /r/WallStreetBets, Who Lose Hundreds of Thousands of Dollars in a Day—And Brag About It”Money. Retrieved March 16, 2020.
  2. ^ Kochkodin, Kochkodin (October 17, 2019). “A Guy on Reddit Turns $766 Into $107,758 on Two Options Trades”Bloomberg. Retrieved 23 January 2021.
  3. ^ Weisenthal, Joe; Alloway, Tracy (March 5, 2020). “How a Profane Subreddit Moved the Market (Podcast)”Odd Lots (Bloomberg). Retrieved March 16, 2020.
  4. ^ Kiberd, Roisin (December 11, 2017). “You Probably Shouldn’t Bet Your Savings on Reddit’s ‘WallstreetbetsVice. Retrieved March 16, 2020.
  5. Jump up to:a b Kawa, Luke (February 26, 2020). “Reddit’s Profane, Greedy Traders Are Shaking Up the Stock Market”Bloomberg. Retrieved March 25, 2020.
  6. ^ Anthony, KS (March 2, 2020). “Irrational Exuberance: An Interview With WallStreetBets Founder Jaime Rogozinski”SumZero. Retrieved March 25, 2020.
  7. ^ Regan, Michael; Flanagan, Cristin; Balji, Divya (26 January 2021). “Reddit’s Rocket-Ship Stock Picks Like BlackBerry Soar Again”Bloomberg. Retrieved 28 January 2021.
  8. ^ Morse, Jack (January 27, 2021). “Discord bans WallStreetBets server for ‘hateful and discriminatory contentMashable. Retrieved January 27, 2021.
  9. ^ Peters, Jay (January 27, 2021). “r/WallStreetBets has been made privateThe Verge. Retrieved January 27, 2021.
  10. ^ GmbH, finanzen net. “The jig is up: Robinhood says it’s closed the ‘infinite leverage’ loophole that allowed users to build positions worth millions”markets.businessinsider.com. Retrieved 2021-01-27.
  11. ^ Langlois, Shawn. “Trader says he has ‘no money at risk,’ then promptly loses almost 2,000%”MarketWatch. Retrieved 2020-05-29.
  12. ^ GmbH, finanzen net. “Robinhood’s ‘infinite money’ glitch shows the dangers of turning investing into a game, expert says | Markets Insider”markets.businessinsider.com. Retrieved 2020-05-29.
  13. ^ “wsb yolo”.[dead link]
  14. ^ “Robinhood has a ‘free money cheat’ that allowed one user to grow $4,000 into $1 million through ‘infinite leverageBusiness Insider. 2019.
  15. ^ Lyons, Kim (January 22, 2021). “GameStop stock halts trading after Reddit drama”The Verge. Retrieved January 25, 2021.
  16. ^ Li, Yun (26 January 2021). “GameStop jumps another 90% above $140, but short sellers aren’t backing down”CNBC. Retrieved 27 January 2021.
  17. ^ Kilgore, Tomi. “GameStop’s stock rockets again in volatile trading, while company has not released news or commented”MarketWatch. Retrieved 27 January 2021.
  18. ^ “How’d you guys manage to win so big it made these old guys drown in their tears?”Reddit. January 24, 2021. Retrieved January 25, 2021.
  19. ^ Bursztynsky, Jessica (2021-01-26). “GameStop jumps after hours as Elon Musk tweets out Reddit board that’s hyping stock”CNBC. Retrieved 2021-01-27.
  20. ^ Warren, Tom (January 27, 2021). “Reddit’s GameStop traders turn their attention to AMC stock”The Verge. Retrieved January 27,2021.