Traders came together on discussion forum, Reddit, to beat the big hedge funds at their own game. This is not something new though, as is evident in the wide range of topics these forum members discuss. From discussing new casinos which obviously come with new-to-market bonuses, promos, special offers, etc, right up to how to act on info that may have been leaked from the desks of the biggest hedge funds, these guys appear to hold a lot more power than what the market might think.
The thread, which began on Tuesday night, has become the equivalent of a trading floor battle, racking up more than 30,000 page views by Wednesday morning. Traders are using bots to produce trades that generate more than the hedge fund firms’ short positions.
As one trader in the thread wrote: “I don’t work for an HF and probably won’t until I retire. No interest.”
One trader who asked not to be named said traders can charge “millions” to execute these trades.
In some markets short selling is illegal. But some traders are using “packaged” algorithms that allow them to “cook the books” by selling products like options that have already been marked as sold at a higher price. The people mentioned in this story either did not respond or declined to comment.
It’s the kind of activity that doesn’t sit well with large companies who are essentially losing out on money they say they’re owed by hedge funds.
“It creates an artificial sense of confidence in the market,” says Craig Menter, chairman of the investment banking at Wade G Wiedemer & Company.
Hedge funds have been working hard to scale down their short positions in recent months as the market continues to swing wildly.
Banks and brokerages say hedge funds have reduced their short positions in some sectors, but some traders are still sitting on massive amounts of contracts.
The sudden high turnover in some of the high-priced trades of some of the biggest funds has led some analysts to think there might be some major theft going on.
So far, most traders in the thread seem to be playing the big players, rather than small mom-and-pops. One trader told Business Insider on Wednesday that he has been trading this way for months.
Regardless, some traders want to take on the big funds directly — with no middlemen, no regulators, and no cop. “Maybe a few hundred or few thousand dollars. I know that sounds petty to a lot of people but that’s what’s fueling this sort of revolt,” a trader wrote. “It’s a head-to-head battle with big players who are benefiting from an overinflated and manipulated stock market while not seeing it.”
But it’s not like traders are going to find success.
“This isn’t going to get any easier as the sessions go on and players begin to strategize,” wrote one trader in the thread.
There’s still some time left to jump on the bandwagon, but all signs point to a frenzy of big profits to be had over the next few days.