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.