The Wall Street Bets Subreddit is Poison to the Intelligent Investor

Degradation of data points, mathematics, and statistical measurement

Source: JJ Jordon on Unsplash.

R/WallStreetBets has become a centralized location for knowledge about the stock market. This is especially true for the new wave of young traders learning about derivatives and volatility and short interest and really every little thing in between.

Any given day you check, there are swarms of posts, ranging from $300,000 options bets to stories of gargantuan gain. With over 1.3 million members, it has become a topic of discussion for major news networks as well. In the current pandemic, these retail traders were thought to be responsible for inflating Hertz and Chesapeake energy right before they officially declared bankruptcy.

When Chesapeake Energy was gearing up for bankruptcy on June 8th, 2020, the stock drove up to over $80 a share from $10.

Source: CHKAQ. Chart courtesy of stockcharts.com.

This pump was thought to be driven by a slew of retail traders that have no fundamental understanding of the entities within the market. Following the pump, Chesapeake fell right back down to its levels beforehand. Then, it fell…