In another is this the top, and what could possibly go wrong? Reddit hosts thousands of threads on many different topics, but finance is one area that is particularly interesting, and while some finance threads encourage responsible investing there is one that does just the opposite …. WallStreetBets.
While the sensible “Investing” thread has 183,000 members, its less popular cousin “WallStreetBets” has 38,000. However among that number are young Reddit members willing to risk it all on outlandish positions in a bid to get rich quick like Martin Shkreli, writes Sally French for MarketWatch.
Reddit thread encourages risky behavior
Members of the group are called “YOLOers” after a term popularized by a Drake song. It stands for “You Only Live Once” and sums up the high appetite for risk that these young millennial traders display.
The subreddit was created by Jaime Rogozinski, who was “downvoted” on the Investing subreddit for discussing risky bets. He claims that the two forums are “kind of like archnemeses.”
To get a better idea of the kind of behavior encouraged on WallStreetBets, look no further than the identity of a famous alumni. Pharma Bro Martin Shrkeli was once an admin before he took to price gouging pharmaceuticals.
“This subreddit, they love Martin Shkreli,” said Asad Butt, a 25-year-old Pennsylvania trader who posts frequently to WallStreetBets. “He is living their dream. He got rich. He might have lied and cheated along the way, but [on the forum] that’s encouraged.”
YOLOers go for broke on big bets
Shrkreli is now in serious legal trouble but that hasn’t dented his popularity on Reddit. “People want yachts,” Butt said. “They want to be rich. The joke is we are all aspiring millionaires. Shkreli actually did it. He’s a hero.”
Many posts refer to “YOLOing” or going all in on a big bet.
“If you find anything volatile and high risk, that’s where you’ll see people flocking,” Rogozinski said. “Are we encouraging risky behavior? Yes.”
Much of the chatter has focused on the VelocityShares 3X Long Crude ETN (UWTI), which tracks futures on WTI crude oil (ETNs are unsecured debt notes, so you can lose everything if the underwriter goes bankrupt.)
WallStreetBets – UWTI a particular favorite among forum members
UWTI came in at number 5 on the most traded shares among millennials in 2015. It came nowhere near the top 10 of older investors.
Rogozinski says that it is “the 3x leveraged high-risk abstract synthetic derivative of the month for beginners right now.” Traders rarely hang on to the stock for more than a few days, and many buy and sell in just a few minutes.
It’s a volatile market which regularly sees days of double digit gains and losses. Overall UWTI is down over 90% in the past 12 months.
WallStreetBets has become a “platform for millennials like us to learn about UWTI and lose money,” Rozanski said. High appetite for risk and the search for quick profits reminds Jeff Fischer of the late 1990s, when traders would use sites like Raging Bull, Yahoo Message Boards, and Silicon Investor.
“It’s the gambler’s dilemma,” said Fischer. “As long as you’re making money, you want to keep playing. Almost everyone only stops after they’ve lost.”
While risky behavior is encouraged, members of the forum do look out for each other. Rogozinski believes that a big early win can encourage overconfidence in new traders on Reddit. “The faster you go up at the beginning, the harder you fall,” he said.
Big bets on UWTI are very risky and most traders will be losing money on it, says former WallStreetBets member F.S. Comeau. One teen Reddit trader called Jeffrey Rozanski won big, going from $900 to $55,000 in a few days, but he admits that his success was “pretty much dumb luck.”
Below is an example of a not so atypical post:
Using this live cam of two American Eagle chicks, I will be betting a portion of my portfolio on their stock selection.
To have them pick a stock, I imported all of the tickers that comprise the Nasdaq into an excel, assigned a random value to each one, and then used photoshop to calculate the angle that the rightmost bird is looking, linking this angle to a stock. The leftmost bird of the screenshot will determine the length that I hold the stock, from 1-14 days, (degree/360)*14days. If the birds are looking the same direction, that will be a short sell, and if they are looking opposite directions, that will be a buy.
Here is my analysis for today. The eagles have selected to
BUY: SQBG for 9 days.
Its time to make America great again.
Got 27k loan, most student loans, 8k prosper loan. I lost 16k from options
blew up about 6k on partying
have 7k more to get back on feet (need to make it at 23k to breakeven)
Gonna go all in on next trade, thinking to buy USO puts just before the meeting (this Friday)
Here’s the snap of my account http://i.imgur.com/RzFROAr.png
Share your thoughts, should I kill myself or should keep going until I buy a yacht. YOLO
UPDATE: seems like people are hating lel. I’ll get back to 25k within couple of months, I’ll update this post.
Better bookmark this one, there’s gonna be a big comeback.
Also if you think you have bigger balls than me then you better prove it before talking s$#t, because this YOLOer has been there, done that, and going out for me. Cheers f@gs
The user has not updated anytime recently but USO puts may have done well as oil tanked after that OPEC meeting – however, with this type of “risk management” it is only a matter of time till the user has no money left.
That won’t stop his win being the inspiration for more big, risky bets from other members of WallStreetBets, like the one below until we get a market crash.