Meet the ‘Degen’ Traders Fueling the Latest Meme-Stock Mania

Jun 7, 2024

Observations & Insight

Gary Gensler, the chair of the Securities and Exchange Commission (SEC), recently delivered remarks commemorating the 90th anniversary of the SEC’s establishment through the Securities Exchange Act of 1934. While his speech focused on the SEC’s history and role in regulating financial markets, an unexpected connection emerged with Taylor Swift’s ongoing Eras Tour.

In his speech titled “Eras Tour of The Securities and Exchange Commission,” Gensler highlighted the SEC’s evolution over nine decades, from its inception during the Great Depression to its current mandate of maintaining fair, orderly, and efficient markets. He emphasized the agency’s core principles of transparency, accountability, and investor protection, which have guided its actions through various market cycles and technological advancements.

Gensler’s remarks underscored the SEC’s commitment to adapting to changing times while upholding its fundamental mission. As he stated, “The SEC has evolved over the decades, but our principles have remained constant: protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.”

While Gensler’s speech primarily focused on the SEC’s regulatory role, an intriguing parallel emerged with Taylor Swift’s Eras Tour. The tour, which celebrates Swift’s musical eras and discography, has captivated audiences worldwide and shattered numerous records.

Just as the SEC has navigated different eras in its history, Swift’s tour represents a journey through her artistic evolution, showcasing her growth and adaptability as an artist. Both the SEC and Swift have demonstrated resilience, innovation, and a commitment to their respective crafts, resonating with their dedicated followers – investors and fans alike.

The juxtaposition of the SEC’s 90th anniversary and Taylor Swift’s Eras Tour highlights the importance of embracing change while staying true to core values and principles. Both entities have faced challenges, criticisms, and the need to evolve, yet they have managed to remain relevant and impactful in their respective domains.

As Gensler emphasized, the SEC’s principles of transparency, accountability, and investor protection have remained constant, even as the agency has adapted to new market realities and technological advancements. Similarly, Swift’s artistic integrity and connection with her fans, including my daughter Kat and wife Cheryl, have been unwavering, even as she has explored different musical genres and embraced new creative directions.

While the SEC’s regulatory role and Taylor Swift’s musical artistry may seem worlds apart, their shared ability to navigate different eras while maintaining their core values and relevance is noteworthy. As the SEC celebrates its 90th anniversary and Taylor Swift continues to captivate audiences worldwide, both serve as reminders of the importance of adaptability, resilience, and a steadfast commitment to one’s principles – qualities that transcend industries and disciplines. ~JJL


Webull Sees Growth in Retail Options Trading, Plans Further Expansion

Arianne Adams, chief strategy officer at the online brokerage Webull, highlighted the company’s focus on expanding access to derivatives trading, particularly for retail investors, in an interview with John Lothian News for the JLN Industry Leader video series sponsored by the OCC at the Options Industry Conference.

Watch the video »

Lead Stories

Meet the ‘Degen’ Traders Fueling the Latest Meme-Stock Mania; Short for ‘degenerates,’ their risky style of trading has come roaring back in recent weeks. ‘It’s still better than a lottery ticket.’
Hannah Miao and Gunjan Banerji – The Wall Street Journal
Degenerates are swarming the stock market. A risky style of trading is roaring back in popularity, driven by amateur traders who call themselves “degens” and pile into long-shot trades that proudly have nothing to do with conventional ways of assessing investments. Some are flinging cash at specific stocks or cryptocurrencies just to be part of a movement. Others are sticking around for the jokes and memes.

***** Have meme stock traders ever met any open outcry futures traders from the 1990s? Degenerates? Huh!~JJL

RoaringKitty a GameStop Billionaire by Friday? Crypto Traders Are Placing 50% Odds
Shaurya Malwa – Coindesk
Market watchers are widely backing retail stock trader Keith Gill to clear a billion dollars on his GameStop (GME) stock positions by Friday in what could become one of the biggest meme-stock trading success stories. Gill, popularly known by his X account @TheRoaringKitty and Reddit account “DeepF*ckingValue” aliases – he doesn’t use an asterisk on the platform – flashed a $583 million position in a Reddit post on Thursday, showing $382 million in profit across options and equity positions. GME stock added 47% to $46 yesterday and surged to $61 in after-hours trading.

Roaring Kitty livestream: Keith Gill explains why he’s still a believer in GameStop and Ryan Cohen
James Rogers – MarketWatch
Influential trader and analyst Keith Gill, also known as Roaring Kitty, described himself on Friday as still a “believer” in GameStop Corp. during his first YouTube livestream in three years.
The Roaring Kitty video stream has generated plenty of buzz. GameStop shares were halted twice for volatility on Thursday on news of the livestream, and further trading halts were instituted on Friday. Subscribers to the YouTube channel jumped from 714,000 Thursday to 835,000 by Friday morning.

GameStop Shares Halted Ahead of Roaring Kitty’s Livestream—Again
Gunjan Banerji – The Wall Street Journal
GameStop shares were down more than 20% ahead of Roaring Kitty’s widely-anticipated livestream, with volatility so extreme that the shares were halted twice in recent trading.

GameStop Drops Surprise Earnings Report Into Renewed Hubbub Around Its Stock; Keith Gill, known as ‘Roaring Kitty,’ reiterated support for the company and its CEO in a livestream Friday
Denny Jacob and Sarah E. Needleman – The Wall Street Journal
GameStop unexpectedly released first-quarter results and announced a share-sale plan Friday as the recent re-emergence of meme-stock influencer “Roaring Kitty” reignites interest in the stock.
The videogame retailer, which was expected to report its quarterly results on Tuesday, narrowed its loss while sales dropped more than 40%—results that were in line with preliminary figures released last month.

Bitcoin ETFs Witness 18 Straight Days Of Inflows, Options Traders Eye $100,000
Ronaldo Marquez – NewsBTC
US spot Bitcoin ETFs have experienced a noteworthy streak of net inflows for 18 consecutive days, contributing to the upward momentum of the leading cryptocurrency as it inches closer to its all-time high levels set in March.
According to Bloomberg data, these ETFs, managed by some of the world’s largest financial institutions, have attracted net subscriptions of $15.6 billion since their launch on January 11, bringing total assets under management to a substantial $62.3 billion.

Convertible-Bond Craze Revives Favored China Trade for Funds; Delta hedging requires buying if shares fall, selling when up; Alibaba’s volatility is at the lowest in almost two months
Jeanny Yu and Charlotte Yang – Bloomberg
A rush by Chinese tech companies into convertible bond offerings is reviving a profitable trade for some arbitrage funds, a move that would also reduce volatility of their shares.
The arbitrage trade — a strategy that includes shorting the underlying stock after purchasing the convertible bond — requires funds to buy more shares if they fall or sell them if they rise in what’s known as “delta hedging.” That would reduce any wild swings, an important factor for the Hang Seng Tech Index given its recent slide into technical correction.

The European election, volatility and the US: Why does it all matter?
The European elections are upon us, and this is the ideal moment to reflect on upcoming macro events this year, as investors could be in for more volatility going forward.
“Elections matter for markets,” says Holger Schmieding, Chief Economist at Berenberg Bank. “They can change the course of economic and fiscal policies. Even more so, they can reduce or exacerbate geopolitical risks. Ahead of any election, uncertainty about the outcome can make investors cautious.” These potential changes have the power to trigger volatility events.


The European Advantage: Debunking Myths Surrounding US Listings
The decision on where to list is a strategic one. U.S. markets are sometimes wrongly depicted as a credible listing option for European companies. A closer look at the figures shows quite the contrary.

Now is the time to consider European style equity options
Listed equity options are mostly American style. This factor comes into play with institutions with an option portfolio and no desire to have these positions exercised. For example, having a short call turn into a short position in the underlying or having a short put assigned, resulting in a long position in the underlying equity. Concerns around this potential issue have increased with the increase in structured products incorporating option selling into their investment approach. Eurex has a solution for this with European style equity options, which allow portfolio managers to short options without the risk of early assignment.

SGX Group reports market statistics for May 2024
SGX Group
SDAV jumps to one-year high as retail participation grows; Record derivatives open interest as participants manage increased risk exposure across Asia’s economic landscape. Singapore Exchange (SGX Group) today released its market statistics for May 2024. Open interest (OI) across key equity, foreign exchange (FX) and commodity derivatives rose to record highs as market participants leaned on SGX Group to manage portfolio risk efficiently, amid China’s introduction of fiscal stimulus measures and India’s general elections. Derivatives traded volume rose 17% year-on-year (y-o-y) in May to 23.9 million contracts, while daily average volume (DDAV) climbed 16% y-o-y to 1.1 million contracts. Securities daily average value (SDAV) increased 22% y-o-y to S$1.3 billion – the highest in a year – as total market turnover value gained 16% y-o-y to S$26.7 billion.

TMX Group Consolidated Trading Statistics – May 2024
TMX Group
TMX Group Limited today announced May 2024 trading statistics for its marketplaces – Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange (Alpha), including Alpha-X & Alpha DRK, and Montréal Exchange (MX).

Regulation & Enforcement

There are risks lurking in the world of private capital; A recent court ruling against SEC reforms of the sector is an unfortunate blow to transparency and fairness
Gillian Tett – Financial Times
New Orleans is (in)famous for being a party town that seems to inhabit a parallel universe – what happens on Bourbon Street usually stays there, however wild. Not so, however, in America’s fast-expanding private capital world. On Wednesday, the New Orleans-based Fifth Circuit US Court of Appeals ruled in favour of six private equity and hedge fund groups to toss out a transparency rule introduced last year by Securities and Exchange Commission. This had required private equity, hedge fund and real estate groups to start issuing quarterly performance and fee reports, perform annual audits, and to stop giving some investors preferential treatment over redemptions and special access to portfolio holdings.


Trading Technologies’ TT platform named Best Listed Derivatives Trading Solution at TradingTech Insight USA Awards 2024
Trading Technologies
Trading Technologies International, Inc. (TT), a global capital markets technology platform provider, announced that its TT platform has just won the award for Best Listed Derivatives Solution at the TradingTech Insight USA Awards 2024 after winning the same category in March at the TradingTech Insight Europe Awards. The awards were announced at a reception in New York last night following the TradingTech Insight USA Briefing. TradingTech Insight is a publication of A-Team Group, whose editors work in collaboration with an Advisory Board to select the shortlists in each award category. Members of the capital markets community vote to determine the winners. This is the third consecutive annual win for the TT platform in the USA awards; it captured the most votes last year for Best Solution for Futures Trading and in 2022 for Best Sell-Side Execution Management System (EMS).


3 experts speculate on the most profitable exit strategies and pitfalls of the options contracts turbocharging the Reddit account’s GameStop holding by 376%
Laila Maidan – Business Insider
It’s meme stock season again, thanks to a Twitter post and a Reddit screenshot. Apparently, that’s all it takes to move hundreds of millions of dollars these days.
At the center of this season, all eyes are on a massive stake in GameStop’s (GME) stock held by the Reddit user “DeepFuckingValue,” presumed to be Keith Gill. On June 2, the account posted positions in GameStop showing 5 million shares purchased for $21.24, for a total of almost $116 million; 120,000 options contracts purchased at an average price of $5.68, for a total of nearly $66 million; and a cash position of $29 million. Altogether, the account sat at a whopping $211 million, a steep increase since the Reddit account last posted on April 16, 2021, showing a $34.5 million position.

Bitcoin Options Traders Set Sights on a Fresh All-Time High; Options traders bet on Bitcoin breaking $75,000 this month; Strike prices of calls are concentrated around higher ranges
David Pan – Bloomberg
Options traders are raising bets that Bitcoin will reach a record high by the end of the month with optimism for US interest rate cuts and inflows into exchange-traded funds rising.
Bitcoin call options with a strike price of $75,000 across all expirations have the most open interest, which is the number of outstanding contracts. That is followed by $100,000 and $80,000 strike prices, respectively, according to data compiled by the largest crypto options exchange Deribit. Call options give buyers the right to purchase the underlying asset at a fixed price within a set time.

Protecting Against A June Volatility Spike
Gavin McMaster – Barchart via The Globe and Mail
Market volatility has dropped slightly in recent weeks as measured by the CBOE Volatility (VIX) Index. VIX is a real-time index that represents the market expectation for near-term volatility in the S&P500 index.
Investors and traders have long used VIX as a measure of the level of risk, fear or stress in the market. Yesterday, the VIX index closed below 12 for the first time since December last year.


Nvidia’s Stock Split: What Investors Should Know
Asa Fitch – The Wall Street Journal
If you own Nvidia shares, you’ll soon have a lot more.
Nvidia is splitting its stock 10-for-1 for investors who owned the stock as of the close of trading Thursday. Those shareholders will get nine additional shares for every share they own after the market closes on Friday. Trading on a split-adjusted basis will start on Monday.
The split decision came after last month’s blockbuster earnings report. Nvidia said it wanted to “make stock ownership more accessible to employees and investors.”

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Crisis memory, geopolitics and the risks of financial contagion

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