GameStop and Predatory Trading | Markus' Academy | Ep. 54

July 11 · 1 hr 15 min · 72.6 MB

0:00-1:15:39

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Follow the link for the full summary:

https://markusacademy.substack.com/p/gamestop-and-predatory-trading

Link to sign up for the webinar series:

https://markusacademy.substack.com/

On February 18, 2021, Lasse Pedersen joined Markus’ Academy for a talk on GameStop and Predatory Trading. Pedersen is a Professor of Finance at the Copenhagen Business School and a principal at AQR Capital Management.

Download the slides here.

Highlights:

Predatory trading is trading that induces and/or exploits the need of other investors to reduce their positions.
During Gamestop, retail buyers pushed up the price which led to a short squeeze by hedge funds.
People who bought were not just retail investors discussing the stock on Reddit but also others.
Robinhood restricted trading due to difficulty meeting their margin requirements.
Payment for order flow is the idea that Robinhood is paid money by market makers, such as Citadel, to execute their trades.
Shortsellers had to liquidate their position because they could not sustain the losses as the price continued up.
Learned that demand moves prices, demand can be irrational, there are shorting complications and predatory trading, and the power of social media and IT.