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  • My Not So Short Story on GME


    Eastwood

     

      

    On 1/25/2021 at 10:18 AM, Storm the Field said:

    GME at 9:10 $88.60

    9:50 $144.42

    10:10 $88.09

    What in the hell was that all about?

     

    On 1/25/2021 at 10:38 AM, Eastwood said:

    I'll post a recap of everything when the dust settles on this. It's been an interesting ride and it has caused me some concerns over contagion in the broader market.

    I'm not a financial advisor. This is not financial advise. I don't work in finance. I do not have a degree in finance. Actually, I have a BA and I'm bad at math past Cal I. I won't apologize for the length because this post is me spiking the football and other than banter about the moves GME makes in the future, this is the last time I ever dig into the fundamentals of the GME trade.

    What we saw today was covering either due to what is called a gamma squeeze or a short squeeze. Maybe a mix of both. We won't really know until later, possibly at the end of close Wednesday when brokerages like TD update their short interest. A gamma squeeze occurs as the price moves up, crossing the thresholds of strike prices of calls that will soon be expiring. Market Makers use the Delta of an option to determine how many shares of a stock they should purchase in preparation of possibly covering the calls when they are exercised, either by the buyer of the call or upon expiring in the money. As the share price goes up, combined with the days getting closer to expiry, up goes the Delta, up goes the amount of shares the MMs buy. Last Friday, every call on the board for GME was in the money at expiry. I'll repeat: EVERY CALL ON THE BOARD WAS ITM AT EXPIRY. I don't know if that's ever happened in the history of the market. That means that if every call was exercised, 11.7 million shares would need to be transferred over to the new owners today and tomorrow. Now, as the Delta on a lot of the lower strikes were already at 1 and the shares already (hopefully for the call seller) purchased, it shouldn't be a big deal. However, the big pop happened ON Friday, not before. That caused a mad scramble in the after hours Friday, today, and possibly tomorrow for those who are gambling on the price decreasing further before they fill those calls. So, that's a gamma squeeze. Price creeps up, MMs who sell calls end up buying shares to cover, causing the price to climb higher, and then creating essentially a feedback loop spiking the price when combined with buying from retail or pops on positive news.

    What is happening, and may continue to happen, is the result of hedge funds and possibly Bank of America rampantly shorting GME over the course of a year hoping that it goes zero and they then get to pocket everything and give nothing back. The short float on December 31st was 140% and the institutional ownership was 117%. But how is such a thing possible? They borrowed shares to either 1.) sell, never intending to buy them back and return them because they were hell bent on bankrupting GME, or 2.) lent out those already borrowed shares that they never intended to give back anyway to collect the premium, creating a borrowed share of a borrowed share. They would also buy dips incrementally, amassing large positions, sell calls and buy puts with a quick expiry, then dump all of the shares they accumulated at once while simultaneously shorting to tank the price and pocket the premiums on the options they bought and sold. Then, when that wasn't enough, they sold naked shorts. They sold shares they didn't even have or even exist. They injected "synthetic shares" into the market. Synthetic, fugazi, fogazi. It's a wazi, it's a woozi. They're fairy dust. They don't exist. They're not fucking real.

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    But the people and institutional investors they sold them to bought the right to own the shares. And those banks and hedge funds are obligated to deliver them. But now there aren't enough shares to go around. There's an infinite demand for shares, but a finite supply. In a total share recall event, the lenders of the shorted shares could recall every share on borrow and still be 21 MILLION shares short of demand. The banks and hedge funds that created that SHOULD be on the hook. It SHOULD be illegal. Think of how depressed the price was because of it. Think of the loss of market cap, which led to lowered credit ratings, which led to higher interest rates and less borrowing power, and the layoffs and store closures that followed. Awful. The price should go to infinity because the demand the banks and hedge funds created will become infinity.

    Boomers can bitch and moan about RH and college kids dumping their stimmy into GME all they want, but the reality is that a bunch of boomer bankers and hedge funds created a situation that should be legally, economically, and financially impossible. Boomers want to call what retail investors are doing "market manipulation." However, anyone who dug into the situation enough saw the writing on the wall. Honest to goodness due diligence combined with simple supply/demand economics combined with paying attention to the new market trend of retail investors told anyone interested all they needed to know.

    This was me back in September:

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    I know for the bulk of you guys in here that it is too much of a leap of faith to go long on GME, but there is profit to be made on it in the last quarter, being console launch and holiday season. Especially if it hits $10 and the Robinhood millionaires show up. Even more so if another round of direct stimulus is announced.

    The price hadn't even hit $10, yet, when I said that. The house of cards had already been built. A fan had been placed in front of it. And everyone told me that I was crazy for thinking the house of cards would fall over. It wasn't a secret. It was in plain fucking sight. And we are finding out it is everywhere. Wall Street and old guys in banking and finance can harumph all they want about how a bunch of dumb wage earners are gaming their system to make a buck, but I think the reality is that the curtain has started getting pulled back on Old Man Oz. Take me, for example. I've given a detailed breakdown and have proof in this very thread that I had produced this investment thesis MONTHS before it was mainstream and materialized. I gave my credentials above. Want to know how long I've been actively investing? Since March. Same as all the Robinhood punks. All it takes for a large chunk of the population to be competent in anything is 1. Time 2. Education/training, and 3. Financial resources. In March, there was the perfect storm of 1. COVID lockdowns, 2. The internet and educational resources on the various trading platforms, and 3. Stimulus - The ultimate Other People's Money. Millions of $3k hedge funds popped up all over the nation and had the time, education, and money to be just dangerous enough. I traded in a paper account on Think Or Swim for 30 days and was then off to the races. I developed a momentum trading strategy where I combined candlestick patterns, moving average patterns, the RSI, and the Elliot Wave. Not only that, I also voraciously consumed anything I could get my hands on about market history, valuations, and trends. I bought and sold stocks, bought options, and sold covered calls and generated a 10% return over the course of about a month. Then I stumbled on GME, halted all active trading, liquidated any outstanding options, sat on my KO, XOM, and PFE (which was my worst trade) shares and positioned myself into GME. My return is now over 1000%. Either I'm some kind of wonder boy who picked all this up quickly because I'm a high functioning autistic person...

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    Or maybe this shit just ain't as hard as Wall Street wants us to think it is. And maybe Wall Street was so habitually comfortable with how little people knew about their industry in the past that they didn't even bother concealing their moves because they didn't think retail investors would know how to play the other side. Well, the secret's out. This new batch of retail investors spent the last decade learning how to min/max various economic systems in video games. They are accustomed to dumping hours of time learning how to maximize returns on digital assets. They went from watching hours of YouTube videos on how to mine diamonds and make a Fortune 3 pick axe in Minecraft to watching hours of how to turn a couple grand into 5 figures. In some cases, 6 or 7 figures.

    As I stated earlier, I sold half of my position in GME today, but I still firmly believe in the trade I executed. I am now concerned about two things, one being specific to GME. I think the invisible hand of the free market is about to get absolutely doomfisted by either the government or big banks. I think a lot of institutions out there are shook. When GME hit $150 and other short squeezes were popping, a huge market sell-off occurred. I think funds were liquidating to cover their losses because margin calls were going out. In GME alone today, short sellers lost $1.6 billion according to Business Insider. Melvin Capital, supposedly the biggest short seller of GME out there, is down a whopping 30% for 2021, so far. They manage billions. We learned in 2008 that these banks and funds actually interweave into a structural support for the entire financial system. If a multi-billion dollar part of that support structure fails, it increases the strain on the others, and then another fails, and then we have a cascade failure. I think GME and the big shorts come together and negotiate a share purchase of newly issued shares under the condition that they are immediately transferred to the rightful owners to get the short float below 100%. This is actually extremely bullish for GME. They erase their remaining debt, buy out of all of their bad leases, and increase their cash long enough for the turn around. That's why I only sold half of my position. I'm long GME. In Ryan Cohen I trust. But I also think the government steps in and does something to try to fix the rest of the market. As history has shown us, this doesn't mean punishing the banks who created the situation in the first place. No, they're going to increase the regulations on the retail investors. That could also have grave, unintended consequences when retail cashes out all at once.

    So, I feel really good about today, but there may be grave consequences in future. I'll end with the cringiest thing possible: be a retail trader who uses a scene from The Big Short in one of his posts.

     

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    So is this the graph that I see referenced on reddit

    image.thumb.png.08e62438ceb3f3b125fd2a03b38da890.png

    What explains the massive spike in SI all of a sudden? Was there a new massive coordinated short attack just recently, or is there an issue with the underlying data? And if it's the latter, is it even accurate now? Like most of this saga, a huge spike in short interest at this point in the game makes no sense to me. 

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    3 hours ago, Blotto said:

    What explains the massive spike in SI all of a sudden? Was there a new massive coordinated short attack just recently, or is there an issue with the underlying data? And if it's the latter, is it even accurate now? Like most of this saga, a huge spike in short interest at this point in the game makes no sense to me. 

    Pure short interest data can be deceptive.  (1) the reporting is subject to almost 2 weeks of lag (2) does not represent a net short position - it can be offset by other derivatives position on the same underlying. 

    a party can simultaneously short a put option (non-reportable position), and short the stock, to be roughly directionally neutral while collecting premium on it. 

    If there was a market-wide spike in short interest of the shares, without any offsetting positions, you would expect the stock price to have dumped.  It hasnt.  Someone would need to tally all the net changes in all the derivatives and other instruments to really deconstruct the narrative of GME.

    As always with this stock...theres fuckery afoot.

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    13 hours ago, Eastwood said:

    I haven't followed GME for a few months, is the split what is driving the current spike? Or is it a short squeeze again?
    Also, are you still holding some GME?
    Seems like a never ending story of crazyness, and the fight of good vs. evil, traders vs. investors, or suits vs. jeans.....I'm rooting for the commoners and reddidiots

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    I haven't followed GME for a few months, is the split what is driving the current spike? Or is it a short squeeze again?
    Also, are you still holding some GME?
    Seems like a never ending story of crazyness, and the fight of good vs. evil, traders vs. investors, or suits vs. jeans.....I'm rooting for the commoners and reddidiots

    The spike started before the announcement of the split. I hold 1 souvenir share of GME. In my opinion, anyone with any sense took the money and ran already. I’m now loaded up on CRSR because they have a high institutional ownership percentage and are a good acquisition target for companies looking to increase gaming peripheral market share. Also, they sell good products in a space that has had year over year growth for many years in a row, including during the heart of Covid.
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    Also, this has been a rare day for me where I have a little time to burn, so I wanted to chime in on a lot of the chatter that has happened every since that fateful month of January. There’s been a lot of talk on the finance channels and in other media about the “meme driven,” “wallstreetbets,” or “retail investor” driven spike that was the GME trade. Horseshit. All of it. Look at the volumes. No way retail investors could be responsible. Retail player a part, as far as visibility goes, but the real reason behind all of it is that Wall Street was doing what it does but those who were doing it got out over their skis.

    They were certain the GameStop was going bankrupt and if it wasn’t, it was damn near close enough that artificially depressing the share price would get it there anyway. Shit, the only reason I found it was because I was digging through stocks on TDA looking for value and found that GME was worth $10-12 after all assets and liabilities and was sitting at $5. Even if they went bankrupt, they were worth more than the share price. Groovy. But then they got to be 110% institutional ownership and 150% shorted and these finance douchebags want to tell us that retail is to blame? These are the same assholes who were telling us Bear Sterns, et al were just fine and the market was in no danger in 2007.

    Same shit, different decade. Certain firms play stupid games, but only win temporarily stupid prizes. The game is rigged. Play by their rules as best as you can and don’t make any moves in the market that you can be held truly accountable for.

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    I wished I had jumped into this thread from day one, since I have a unique insider view of GME.  But the following quote lifted from another forum I frequent outlines how/why 'HODL' still applies to $GME by the retail investor as yet another mechanism to expose the publicly-traded ponzi scheme and potentially squeeze the shorts even further.

    And yeah, my GME shares are in book-entry form with Computershare.

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    Sure-- Basically, GME is believed to be heavily shorted and over-leveraged by hedge funds. Meaning the market is flooded with more "synthetic shares" than should actually exist, artificially keeping the price down (even through people continue to buy). There are 72M shares that should exist, and the current theories are that the amount shorted is at least that, all the way into the billions.

    The problem is that even when you buy stocks with your broker, they are still "in the market", and can therefore be borrowed against. So the belief is that these hedge funds are continuing to naked short GME and sell them in dark pools, continuing to artificially keep the price down (essentially indefinitely) no matter how many are being bought by retail.

    (John Stewart actually goes into detail about all of this, including naked shorting and dark pools, in his recent show on AppleTV. First 15 mins are also on his youtube channel: https://www.youtube.com/watch?v=bP74RBTE8kI )

    To combat this, redditors started directly registering their shares (DRS tranfer) from their brokers directly to GameStop's holding company, ComputerShare. This effectively takes the share out of the market completely, and into the owner's possession. (Kind of like back in the days when you could get physical stock certificate and put it in a safe.)

    Once all (or close) to that 72M shares are directly registered with ComputerShare, the belief is that this will finally be the trigger for those hedge funds to be margin called (forced to fill all those borrows/"buy back" all those synthetic shorts), triggering the squeeze. (Meaning the price of GME will skyrocket, larger than any short squeeze we've seen before.)

    The movement has been so big, that two quarters ago, GameStop themselves started reporting on how many shares have been directly registered in their earnings reports. In October, it was 5.2M. In yesterday's earnings report, it was 9M for January, which is 12.5% of the total shares. (Redditors believe it to be at least 10M now, with their voluntary tracking, as people continue to buy/DRS every day.)

    It's kind of amazing how a bunch of people on the internet figured this out, and how many are rallying to the cause.

     

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