Author Topic: GME deathwatch - how to profit?  (Read 82856 times)

ChpBstrd

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GME deathwatch - how to profit?
« on: January 25, 2021, 10:58:47 AM »
Background:

Gamestop (GME) is a bricks-and-mortar retailer of physical game discs, gaming accessories, merchandise, and used game discs. They face risks due to decreasing mall traffic, the shift to downloadable games and online retailing, and the obsolescence of physical game discs, with the next hardware cycle probably not even having disc drives. Comparisons are made to Blockbuster video in the early 2000's. Lots of hedge fund money plowed into shorting the stock in 2020, to the point where short interest exceeded 135% of the float.

The high level of short interest led to an epic short squeeze, and since April the stock has gone from $3 to almost $100. The squeeze is actually being organized / pumped by the 1.8 million users of Reddit's wall street bets sub, some of whom have become paper millionaires going long the stock and its call options. Today the stock is up 51%. Friday it was up something like 45%. Trading was briefly halted both days.

Prognosis:

The only significant change in GME's prospects has been a position taken by Chewy cofounder Ryan Cohen, and some board seat changes initiated by him. This sparked speculation that GME will close physical stores and transform into a Chewy or Netflix-like digital distributor. It could happen; dumber things have occurred. Yet it would seem Amazon, Netflix, Apple, Facebook (remember Occulus?), Microsoft, the game developers themselves, or a startup unencumbered by the physical store legacy would be in a better position to execute such a plan - and they are all facing flattening growth if they do not move into new markets. Again, there are many cases of well-capitalized companies missing the obvious, so it could happen that no big competitor decides to seize this game distribution middleman market in the next 2 years or so. As of now, GME management has not articulated a clear physical-to-digital transformation plan.

In the short term, the company is certainly not worth $6.6 billion. That's 15% of a Chewy or 143% of a Macy's. The stock is where it is due to the short squeeze, and that's the end of story. I don't see the company getting cheaper credit due to the short squeeze or being able to issue shares at today's inflated values. If they did issue shares, it would pop the short squeeze, and prices would go down in a hurry.

GME went to the moon, but it can't keep climbing forever. Most short squeezes end after a period of several months, but this is not a typical short squeeze due to (1) a lack of fundamental justification that would keep the stock propped up, such as an earnings surprise, (2) short interest over 100% of float instead of the more typical 20-30%, and (3) the involvement of retail investors.

The price is still increasing at a beyond-exponential rate as the shorts are margin called. In theory, the squeeze ends as the shorts are liquidated and the cost to short goes up (currently ~25%!), but some may double-down. Short interest has only gone from 135% to 102% this month.

Additionally, we all know the end game of the wall street bets retail investors is to sell GME high. If they all started selling, the price would plummet. Thus there is a certain prisoner's dilemma to the squeeze - this cartel of retail investors don't know each other's plans and nobody wants to be the last one to sell their GME.

The willingness of both sides to play chicken means short term price action is unpredictable - it might go up or down 50% tomorrow. However I think the long-term is more clear.

The Question:
 
I humbly predict GME will be worth less in 6 months than it is today. How would you profit from this view?

a) Buy the July 16, 2021 $70 strike put for $38.5/share (breakeven at $31.5).
b) Buy the July 16, 2021 $10 strike put for $1.75/share (breakeven at $8.25).
b) Sell a bear put spread at 80/90, attempt to earn 50%.
c) Set up a condor, etc. (so far volatility has been so high none of these appear profitable)

J Boogie

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Re: GME deathwatch - how to profit?
« Reply #1 on: January 25, 2021, 11:15:11 AM »
Insane price swings today.

I'd go with B.

The Tesla casino can stay open far longer as new tech rolls out and wows investors convinced it's the only company unlocking the future.

What good news can GME share, that they have decent margins on their PS5 sales? That they're going to open more stores? The fact that expanding would probably be taken as bad news means you're probably safe shorting a company that just had a massive runup based on meme kids and their inherited cash that they're dying to blow.

lemonlyman

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Re: GME deathwatch - how to profit?
« Reply #2 on: January 25, 2021, 11:45:56 AM »
I wouldn't touch it. The government is going to do more stimulus soon. This thing can stay inflated way past that expiration.

bwall

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Re: GME deathwatch - how to profit?
« Reply #3 on: January 25, 2021, 01:47:34 PM »
Great question and nice outline of background info.

My short answer to your four possible choices: I'd choose 'A' b/c it has a high break even stock price. In second place I'd choose "C" along the same lines.

I think that borrow rates at 25% per annum* (?) are still rather low for a stock with GME level of volatility. If you can short at $90 or $100 and cover at $20 (the 'natural' price level of GME?) then you can can pay 25% annually till the cows come home. An increase in borrow rates along with a margin call, well, that'd be enough to ruin anyone's day.

Tangential question: What happens if a market maker has loaned you shares to short and then the account from which the market maker has borrowed the shares then decides to sell the shares that were loaned to you? Are you automatically 'bought-in' by the market maker, like when someone exercises a call or put early? Or does the market maker just borrow from a different account and the short seller never knows about the switch? What happens if a market maker cannot find 'new' shares to replace the borrowed shares that the original owner wants returned?

*25% per year = 2% per month = 0.5% per week, 0.1% per day, round numbers.  So, on $1m (or 11,100 shares of GME at $90) that's only $1000 per day, or ten cents per share per day.

Psychstache

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Re: GME deathwatch - how to profit?
« Reply #4 on: January 25, 2021, 02:28:30 PM »
Random question: What happens to options if a company goes bankrupt? Can they still be exercised?

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #5 on: January 25, 2021, 02:34:49 PM »
Random question: What happens to options if a company goes bankrupt? Can they still be exercised?

I held long-duration put options in Sears and went through their bankruptcy. Shares continued trading as usual, but the ticket symbol changed and they were moved to the pink sheets. When that happened, one could no longer take on new long positions in calls or puts, but one could sell their existing options to the market maker or presumably hold out for assignment. I wish I had gone all-in on those.

Google can lead you to the rest of the details.

blue_green_sparks

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Re: GME deathwatch - how to profit?
« Reply #6 on: January 25, 2021, 03:10:41 PM »
Sometimes I buy in on these rockets and take a very short ride up with a trailing stop loss order.

marty998

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Re: GME deathwatch - how to profit?
« Reply #7 on: January 25, 2021, 09:40:34 PM »
oh jesus christ I just went down the Reddit/Wall St Bets rabbit hole on this one. Cracking read.

Bless them all. I love cheering for the underdog.

Nothing better than seeing hedge funds get their asses handed to them. Leeches on society and our investments the lot of them.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #8 on: January 26, 2021, 08:27:49 AM »
Random question: What happens to options if a company goes bankrupt? Can they still be exercised?
Bankruptcy most likely sends the stock lower than all call options.

For example, I have call options with a $3 strike on a small oil company that went bankrupt.  Bankruptcy adds "PQ" to the stock symbol name, and that stock is now selling for $0.12/sh.  Exercising one contract (100 shares) costs $300 to get 100 shares, which are worth $12.  If I exercise a contract, I lose $288, so the call options are worthless to me.  For those options to be worthwhile, the stock needs to go up +2500%, which is why there's no market for them - no buyers.

bacchi

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Re: GME deathwatch - how to profit?
« Reply #9 on: January 26, 2021, 09:24:02 AM »
a) Buy the July 16, 2021 $70 strike put for $38.5/share (breakeven at $31.5).
b) Buy the July 16, 2021 $10 strike put for $1.75/share (breakeven at $8.25).
b) Sell a bear put spread at 80/90, attempt to earn 50%.
c) Set up a condor, etc. (so far volatility has been so high none of these appear profitable)

I opened a bear call spread. The options prices are insane and the chances of it going to 200 are almost nil. I hope.

v8rx7guy

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Re: GME deathwatch - how to profit?
« Reply #10 on: January 26, 2021, 10:51:08 AM »
GME is taking off... 1% per minute.  Circuit breaker likely...

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #11 on: January 26, 2021, 11:28:27 AM »
I've watched GME range from $88/sh to $114/sh today.  I understand that wallstreetbets has billions, but I think the market structure can absorb their attack.  Right now the stock is $102/sh, with the highest strike at $200/sh.  If they push the stock higher, a circuit breaker is triggered - and more strike prices can be added, making their objective harder to reach.  They push, circuit breaker stops trading, and when trading resumes their objective has moved further away.

One way to profit is buying a PUT option, but they have really high costs right now.  Even the 2003 expiring $230 strike options break even in the $75/sh range (I looked when the stock was trading at $110/sh or so, so the first -32% drop only breaks even).  The PUT options seem too pricey.

Which suggests another approach, selling call options.  Neither Vanguard nor IBKR will allow me to sell naked calls - they require owing the stock before selling a call option.  Selling an unprotected call would stand directly in the path of the wallstreetbets locomotive - you only get to decide the distance, not if you'll get run over.  Selling covered calls on a stock you expect to drop would lose more money than you gain by selling early.  So this doesn't seem to be a good choice.

bacchi

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Re: GME deathwatch - how to profit?
« Reply #12 on: January 26, 2021, 11:30:53 AM »
  Neither Vanguard nor IBKR will allow me to sell naked calls - they require owing the stock before selling a call option. 

Hmm, this must be a setting in IBKR. I can sell naked calls all day as long as the margin satisfies.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #13 on: January 26, 2021, 12:04:12 PM »
  Neither Vanguard nor IBKR will allow me to sell naked calls - they require owing the stock before selling a call option. 
Hmm, this must be a setting in IBKR. I can sell naked calls all day as long as the margin satisfies.
I think I found the IBKR setting:
settings > account settings > trading permissions > options

I checked "limited options trading" when I first signed up, which might be why I have that restriction.

v8rx7guy

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Re: GME deathwatch - how to profit?
« Reply #14 on: January 26, 2021, 12:23:00 PM »
a) Buy the July 16, 2021 $70 strike put for $38.5/share (breakeven at $31.5).
b) Buy the July 16, 2021 $10 strike put for $1.75/share (breakeven at $8.25).
b) Sell a bear put spread at 80/90, attempt to earn 50%.
c) Set up a condor, etc. (so far volatility has been so high none of these appear profitable)

I opened a bear call spread. The options prices are insane and the chances of it going to 200 are almost nil. I hope.

Are you concerned yet?

The Hin

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Re: GME deathwatch - how to profit?
« Reply #15 on: January 26, 2021, 12:31:25 PM »
A friend of mine texted me a screenshot of a GME trade he made this morning:
- purchased 200 GME at $86.325
- sold 2 Jan 29 $90 GME calls for $17.20 each

His logic was that unless the price of GME falls below $69.15 before the closing bell on Friday, he'd make money on the trade - and if it closes at $90+, he'll make $735 on the gain in stock price plus $3,440 on the calls = $4,175 profits on an original cash outlay of $13,825. He showed it to me soon after pulling the trigger; I thought about maybe doing the same, but (a) I'm much more risk-averse than him, and (b) I had work and parenting obligations preventing me from giving it full attention.

Of course, GME's price rocketed skywards after he made the trade, and he expressed regret that he had not been more aggressive and sold calls at $100 or higher. C'est la vie, right?

bacchi

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Re: GME deathwatch - how to profit?
« Reply #16 on: January 26, 2021, 12:46:16 PM »
a) Buy the July 16, 2021 $70 strike put for $38.5/share (breakeven at $31.5).
b) Buy the July 16, 2021 $10 strike put for $1.75/share (breakeven at $8.25).
b) Sell a bear put spread at 80/90, attempt to earn 50%.
c) Set up a condor, etc. (so far volatility has been so high none of these appear profitable)

I opened a bear call spread. The options prices are insane and the chances of it going to 200 are almost nil. I hope.

Are you concerned yet?

That's why it's a spread. The downside is limited.

But, yeah, profits will start to slide if there's another huge day.

mizzourah2006

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Re: GME deathwatch - how to profit?
« Reply #17 on: January 26, 2021, 02:09:13 PM »
I honestly think this can get to $200. All the Friday options are ITM by a longshot right now. Those calls are going to trigger another gamma squeeze. From the looks of the order flow the shorts are doubling down. Huge walls at $125 and $150 today and walls of 20-30k at all the other 5s and 1s from $110 to $135 and they busted through those.

Edited to say it's over $175 in AH trading.

Sometimes I buy in on these rockets and take a very short ride up with a trailing stop loss order.

This hasn't seemed to work so far. The shorts are hunting the trailing stop losses. That's largely what caused the rapid drop from $150 to $60 yesterday.

« Last Edit: January 26, 2021, 02:25:57 PM by mizzourah2006 »

PathtoFIRE

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Re: GME deathwatch - how to profit?
« Reply #18 on: January 26, 2021, 02:38:50 PM »
I was watching the AH ticker, and it just rocketed from $200 to $220 in less than a minute. Crazy

v8rx7guy

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Re: GME deathwatch - how to profit?
« Reply #19 on: January 26, 2021, 02:46:50 PM »
I was watching the AH ticker, and it just rocketed from $200 to $220 in less than a minute. Crazy

Millennial investors on Robinhood might be the next wonder of the world... joking, but seriously.

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #20 on: January 26, 2021, 03:01:10 PM »
I tried to do a small, short duration $5 bull put spread around the $50 strike this afternoon just for the shits and giggles but my broker popped up a message that shares were difficult to borrow, please call the trading desk.

Also, there was an internet outage in the Northeast today.

bacchi

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Re: GME deathwatch - how to profit?
« Reply #21 on: January 26, 2021, 03:05:27 PM »
I was watching the AH ticker, and it just rocketed from $200 to $220 in less than a minute. Crazy

Millennial investors on Robinhood might be the next wonder of the world... joking, but seriously.

In order to cash out and make money, wouldn't they have to sell to other robinhooders?

This power will eventually be corrupted by investment companies who learn how to manipulate the stock meme.

blue_green_sparks

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Re: GME deathwatch - how to profit?
« Reply #22 on: January 26, 2021, 03:21:38 PM »
I saw a post warning members of "bot post" attacks by the pro traders saying "the top is in" and to hold fast to $1K ;)
Hmmm..Hi son, BTW can I borrow half a million?

marty998

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Re: GME deathwatch - how to profit?
« Reply #23 on: January 26, 2021, 05:41:46 PM »
Elon Musk tweeted in solidarity and after market trading went bonkers.

I was watching the AH ticker, and it just rocketed from $200 to $220 in less than a minute. Crazy

Millennial investors on Robinhood might be the next wonder of the world... joking, but seriously.

In order to cash out and make money, wouldn't they have to sell to other robinhooders?

This power will eventually be corrupted by investment companies who learn how to manipulate the stock meme.


The market makers need to buy a shit tonne of shares to cover all the “covered” calls they are writing and are gonna get called on. Even now Melvin seems to be doubling down on the bet.

With more than 100% of shares sold short there’s plenty of “demand” on the sidelines for the reddit and RH crowd.

It really looks like a win for the little guys.

bwall

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Re: GME deathwatch - how to profit?
« Reply #24 on: January 26, 2021, 05:49:34 PM »
I was watching the AH ticker, and it just rocketed from $200 to $220 in less than a minute. Crazy

Millennial investors on Robinhood might be the next wonder of the world... joking, but seriously.

In order to cash out and make money, wouldn't they have to sell to other robinhooders?

This power will eventually be corrupted by investment companies who learn how to manipulate the stock meme.

It's the never-ending short squeeze. The buyers at these levels are those who shorted at earlier levels. We know this because the short interest has held steady at 140% of the float. The short covering allows for those shares to be re-shorted to a new short seller. The sellers are the new shorts (or Robinhooders/WSB cashing out)--lining up to get their heads ripped off.

The beauty of the market is that for every buyer there is a seller. The only reason GME is possible is that the shorts pressed their bets and kept shorting at.... $10? Or $5? until there were no shares left to borrow. Most of the price increase above $40 is due to short covering, IMHO, yet the short interest doesn't decrease. You are witnessing the MOASS.


Psychstache

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Re: GME deathwatch - how to profit?
« Reply #25 on: January 26, 2021, 06:35:47 PM »
anyone checked on the popcorn futures? They must be through the roof!

bacchi

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Re: GME deathwatch - how to profit?
« Reply #26 on: January 26, 2021, 06:56:04 PM »
The market makers need to buy a shit tonne of shares to cover all the “covered” calls they are writing and are gonna get called on. Even now Melvin seems to be doubling down on the bet.

With more than 100% of shares sold short there’s plenty of “demand” on the sidelines for the reddit and RH crowd.

It really looks like a win for the little guys.


It's the never-ending short squeeze. The buyers at these levels are those who shorted at earlier levels. We know this because the short interest has held steady at 140% of the float. The short covering allows for those shares to be re-shorted to a new short seller. The sellers are the new shorts (or Robinhooders/WSB cashing out)--lining up to get their heads ripped off.

The beauty of the market is that for every buyer there is a seller. The only reason GME is possible is that the shorts pressed their bets and kept shorting at.... $10? Or $5? until there were no shares left to borrow. Most of the price increase above $40 is due to short covering, IMHO, yet the short interest doesn't decrease. You are witnessing the MOASS.

Right but there's a natural limit. Melvin only has/had $12.5B in assets and the current GME market cap is about at that limit. If Melvin is hitting margin calls, and they probably are given the Citadel funding, there's not much more hedge fund money. If Melvin accounts are closed down, their prime broker will close any shorts immediately and go after Melvin/Citadel for the losses.

tl;dr Short interest reports are updated 2x/month. The next report date is for this Friday and it's entirely possible that Melvin has capitulated and now it's retail traders buying and selling from one another.

bwall

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Re: GME deathwatch - how to profit?
« Reply #27 on: January 26, 2021, 07:44:49 PM »
Right but there's a natural limit. Melvin only has/had $12.5B in assets and the current GME market cap is about at that limit. If Melvin is hitting margin calls, and they probably are given the Citadel funding, there's not much more hedge fund money. If Melvin accounts are closed down, their prime broker will close any shorts immediately and go after Melvin/Citadel for the losses.

tl;dr Short interest reports are updated 2x/month. The next report date is for this Friday and it's entirely possible that Melvin has capitulated and now it's retail traders buying and selling from one another.

See bold.

I bolded exactly what needs to happen to see short capitulation and drive the stock well past $500 and possibly even to $1000. Heck, known short hater Elon Musk sent a single one word tweet and the stock went up $70 points.

I don't think that Melvin has capitulated--if they've shorted 20% of the float since, say, $20, that'd be 10 million shares, then at today's close at $140 that'd be just a $1.2 billion mark-to-market loss. If they've shorted 40% of the float, that'd be 20 million shares, still just $2.4 billion. Enough to get a lot of people fired and clients upset, but still about only 20% of Melvin's capitulation. So, I don't think they've capitulated yet.

Until we see a decrease in short interest (and so far we haven't), then no capitulation has happened-- Just one short seller being replaced by a new short seller. WHo's next in line to lose a fortune? The shorts see the price rise and can't wait for their broker to call them and say they've found shares they can short. Until the stock doubles, of course, then margin calls, covering, and the same broker calls up a new short seller and says they've found shares to short. Rinse. Repeat.

Capitulation is after the broker has called every short seller he knows and no short wants to touch GME. Then the last short to cover has to take any offer, at any price and since there is no new short seller offering product, the broker has to raise the bid to entice longs to liquidate their position. Thus, the price skyrockets.

Since the GME squeeze started at 140% short interest, there isn't any inventory available to be located to offered to the market. It's the perfect set-up. Wall St. got careless. Wall St Bets found the opportunity and now the efficient market theory is being tested.

bacchi

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Re: GME deathwatch - how to profit?
« Reply #28 on: January 26, 2021, 07:55:30 PM »
Until we see a decrease in short interest (and so far we haven't), then no capitulation has happened

You're not seeing any change in short interest because the last public short interest report was on the 15th and the next one is this Friday (to be released next week).

Do you have access to the paid (and $$$) daily transaction short volume to confirm that more shorts are entering?


Edit:

Quote
Capitulation is after the broker has called every short seller he knows and no short wants to touch GME. Then the last short to cover has to take any offer, at any price and since there is no new short seller offering product, the broker has to raise the bid to entice longs to liquidate their position. Thus, the price skyrockets.

If the last short covers at, say, $1000, then who is left remaining to sell to? As someone pointed out already, how does this unravel? This play is based on a short squeeze but if there are no more shorts left that can cover, who gets left holding the bag?
« Last Edit: January 26, 2021, 08:15:33 PM by bacchi »

bwall

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Re: GME deathwatch - how to profit?
« Reply #29 on: January 26, 2021, 08:30:34 PM »
@bacchi ; I do not have access to daily short reporting. I'm trying to follow news reports for this, but I haven't seen any sign of short interest decrease in news reports.

To the second point: No question GME will end in tears, whether for bulls or for bears remain to be seen. Right now it looks like a re-run of WWI style war of attrition.

I'm looking for a massive blow-out with short capitulation at a stock price that would seem ridiculous right now; a 2008 VW style blow out, where the stock went from 200 EUR to 1000 EUR in a matter of a few hours. The only bidder from, say, 400 EUR to 1000 EUR were short coverers. Once that bid was filled, the offer price dropped back down to 200 EUR. The person left holding the bag was the short coverer(s).

I believe that GME has the set-up for such a supernova ending. Time will tell.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #30 on: January 27, 2021, 08:32:38 AM »
I honestly think this can get to $200. All the Friday options are ITM by a longshot right now. Those calls are going to trigger another gamma squeeze.
I hadn't realized there was an Elon Musk booster stage ready to push GME higher.  So yeah, $200 is possible ... in big drop.  GME was over $300/sh overnight, and is $287/sh now.

Earlier in this thread I was trying to sell $230/sh call option for $17/sh roughly, which would currently be losing -200% (247 @ 0%, 265 @ -100% ,  282 @ -200%).  And although this sounds weird, I kinda want to see what happens to the call options.  Will people exercise the call and take profits, or keep going?

I think I need to distract myself by selling Macy's call options (which had good digital sales... but +30%?  Maybe, but Macy's has fully recovered at these levels)

chicklets123

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Re: GME deathwatch - how to profit?
« Reply #31 on: January 27, 2021, 09:43:37 AM »
Now it’s AMC


Sent from my iPhone using Tapatalk

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #32 on: January 27, 2021, 10:37:08 AM »
They are targeting both AMC (+175% today) and GME (+105%).

The Hin

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Re: GME deathwatch - how to profit?
« Reply #33 on: January 27, 2021, 10:56:16 AM »
Seems to me that unless the SEC makes a case for social media-driven short squeeze raids being illegal (and doesn't seem like there's a good case to be made for that) then nothing stands in the way of this kind of coordinated short squeeze on other stocks to continue ad nauseam, right? IMO, the thing that really put the pieces in place for this to happen now, as opposed to say 5 or 10 years ago, is the drop in transaction fees on stock trades (and particularly options trades). Thing is, I think the free trading genie is out of the bottle, companies aren't going to go back to charging hefty trade transaction fees unless they're forced to be a legislative or regulatory body.

bacchi

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Re: GME deathwatch - how to profit?
« Reply #34 on: January 27, 2021, 11:17:55 AM »
Seems to me that unless the SEC makes a case for social media-driven short squeeze raids being illegal (and doesn't seem like there's a good case to be made for that) then nothing stands in the way of this kind of coordinated short squeeze on other stocks to continue ad nauseam, right? IMO, the thing that really put the pieces in place for this to happen now, as opposed to say 5 or 10 years ago, is the drop in transaction fees on stock trades (and particularly options trades). Thing is, I think the free trading genie is out of the bottle, companies aren't going to go back to charging hefty trade transaction fees unless they're forced to be a legislative or regulatory body.

The reason traditional pump-and-dump schemes are illegal is because of the deception.

https://www.investopedia.com/ask/answers/05/061205.asp

"Pump-and-dump is a scheme that attempts to boost the price of a stock through recommendations based on false, misleading or greatly exaggerated statements."

Is this a false, misleading, or greatly exaggerated statement? And, even if it was, how does Melvin/Citadel sue 1000s of redditors?

Quote from: reddit
DONT FALL FOR THE FAKE BS REPORT BY CNBC
Discussion
Melvin capital have not closed their positions!! The volume is too low for it to be even possible. The short interest has not changed!

The squeeze has not been squoze.


(The volume yesterday was 3x the float, which is plenty of volume for Melvin to have closed out their short position.)

bwall

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Re: GME deathwatch - how to profit?
« Reply #35 on: January 27, 2021, 11:29:44 AM »
Seems to me that unless the SEC makes a case for social media-driven short squeeze raids being illegal (and doesn't seem like there's a good case to be made for that) then nothing stands in the way of this kind of coordinated short squeeze on other stocks to continue ad nauseam, right? IMO, the thing that really put the pieces in place for this to happen now, as opposed to say 5 or 10 years ago, is the drop in transaction fees on stock trades (and particularly options trades). Thing is, I think the free trading genie is out of the bottle, companies aren't going to go back to charging hefty trade transaction fees unless they're forced to be a legislative or regulatory body.

The main thing standing in the way of this happening to any other stock is that GME's short interest (the percentage of the float that was sold short) was 140% when it began. That was the set-up for the run from $20 (?) to $380 in about three weeks.

Since a short interest of 20% is generally considered high, there aren't many other stocks that could be short squeezed like this.

Borrow rates are also around 40% p/a today; https://iborrowdesk.com/report/GME. About 3% per month--higher than your credit card and millions of dollars. With this level of volatility, it's just a slow bleed on the shorts.

crimp

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Re: GME deathwatch - how to profit?
« Reply #36 on: January 27, 2021, 12:48:16 PM »
Since I don't often see mea culpa posts around here, I figured I would post my flag and welcome any and all face-punches. Had an idea of myself as a rational, buy-and-hold index fund investor. Got swept up in all the GME speculation, bought a small position. Immediately regretted it, and put in a limit order to sell at the buying price. Came back a while later, and sold at market rate for a small loss. All in all, today I bought a much needed lesson I thought I would never need to learn as a personal experience.

BigMoneyJim

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Re: GME deathwatch - how to profit?
« Reply #37 on: January 27, 2021, 01:06:06 PM »
Got swept up in all the GME speculation, bought a small position. Immediately regretted it, and put in a limit order to sell at the buying price. Came back a while later, and sold at market rate for a small loss.

I actually put in a limit buy order last night. Then I got out of bed to cancel it. I figured what the heck, I haven't been to a casino in years, and why not risk a couple hundred to be part of a meme?

But there's a reason I haven't been to a casino with my couple hundred bucks in a long time: I can always think of a better use for the money. And I started thinking exit strategy because this clearly wasn't a long-term buy & hold play, and I realized the problem that once again I'd have to outguess or outsmart the entire market.

Maybe it will go up more for a few days, maybe not. But I'm convinced no matter what happens it will come crashing down hard in the near future. But I'm also convinced I'm not going to profit off of that arc.

It's a fun story to watch play out, though!

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #38 on: January 27, 2021, 01:08:01 PM »
The shorts screwed up by letting short interest get so high the market for shares could be cornered.

The longs at wsb will get a mixed outcome depending on whether they are early to sell or late to sell.

There is no way to predict this outcome. Can the shorts maintain their loans until the inevitable redemption?

bacchi

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Re: GME deathwatch - how to profit?
« Reply #39 on: January 27, 2021, 01:16:48 PM »
Got swept up in all the GME speculation, bought a small position. Immediately regretted it, and put in a limit order to sell at the buying price. Came back a while later, and sold at market rate for a small loss.

I actually put in a limit buy order last night. Then I got out of bed to cancel it. I figured what the heck, I haven't been to a casino in years, and why not risk a couple hundred to be part of a meme?

But there's a reason I haven't been to a casino with my couple hundred bucks in a long time: I can always think of a better use for the money. And I started thinking exit strategy because this clearly wasn't a long-term buy & hold play, and I realized the problem that once again I'd have to outguess or outsmart the entire market.

Maybe it will go up more for a few days, maybe not. But I'm convinced no matter what happens it will come crashing down hard in the near future. But I'm also convinced I'm not going to profit off of that arc.

It's a fun story to watch play out, though!

My 180/200 spread has been crushed to the tune of -$1500. There's plenty of theta but I shorted too soon.

bwall

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Re: GME deathwatch - how to profit?
« Reply #40 on: January 27, 2021, 01:36:35 PM »
Since I don't often see mea culpa posts around here, I figured I would post my flag and welcome any and all face-punches. Had an idea of myself as a rational, buy-and-hold index fund investor. Got swept up in all the GME speculation, bought a small position. Immediately regretted it, and put in a limit order to sell at the buying price. Came back a while later, and sold at market rate for a small loss. All in all, today I bought a much needed lesson I thought I would never need to learn as a personal experience.

I was 110% sure I was going to sit out this rodeo. Why risk money I don't need for something I already can't get more of (FI)?

I watched it go from $35 to $40 to $60 and then at $90 I decided to buy a few shares, which I promptly sold the next day (yesterday) for $140, very sure I was a smart guy.

I bought back in today at $321, YOLO'd about $10k. I'm holding until options expiration on Friday. Apparently so many naked calls have been written and since the stoke is above the top strike price, it's impossible to hedge above that strike. i.e. shorts cannot use calls to cover.

Here's a conservative (?) way to play GME; write Jan. 29 puts in the $100 to $200 range. The bids are still pretty high ($20 on the $190 strike price) and the likelihood of having them put to you is rather slim, in my non-professional opinion.

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #41 on: January 27, 2021, 03:03:09 PM »
Interestingly, the mood has darkened on r/wallstreetbets.

A couple of weeks ago when I first started monitoring them, it was about 30-40% silly memes such as the battle scene on "300" with the words wsb and citron written over the combatants. The rest were encouraging people to buy into GME, some gain porn --- and also mention of several other heavily shorted stocks like BB, BBBY, AMC, JMIA, etc. They referred to themselves in depreciating terms that are offensive to the mentally disabled and had a happy-go-lucky bro culture. 

Now, all talk of buying any other stock has been banished. Several posts admonish readers to focus on GME because talk of any other stock is a ruse by "the bots" to divert funds from GME. Memes are fewer and farther between, and less funny. About half of the posts are conspiracy theories arguing that broker outages, media stories, posts on other boards, hedge fund activities, the timing of when option chains are updated, etc. are all attempts by the rich and powerful to prevent Robinhood investors from buying more shares. Posts by people with low credit have been banned.

Perhaps experts on the evolution of cults will have something to say here, but to me it seems like the sentiment on r/wallstreetbets has moved from opportunity-seeking to defensiveness. Love-bombing and isolation have occurred and now we're on to strict control. The longs need a steady supply of new buyers to offset defections (people who sell GME) and they need to control defections, but they're changing strategies away from what worked in the past to recruit people to the idea. Maybe the new darker theme will be less appealing to new recruits, and the longs fall apart for that reason. Or maybe the viral momentum and FOMO rationale are by now far more powerful than anything posted on a Reddit forum. We'll see.

MetalCap

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Re: GME deathwatch - how to profit?
« Reply #42 on: January 28, 2021, 11:13:59 AM »
I've followed WSB for a while but have resisted most of their calls, instead going with other more heavily researched discussion forums, still only with play money.

I think after GME things will calm back down.  Their readership went from 700k to 3.6M in a week so there has definitely been a flood that has undermined conversation and any other discussions.

That coupled with the national attention and lockout of Robinhood, etc has pushed them to this corner.  Fun to watch, a tinge of FOMO but its too late IMO.

trollwithamustache

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Re: GME deathwatch - how to profit?
« Reply #43 on: January 28, 2021, 11:19:29 AM »
I'm selling near term waaaay low priced puts. think 10 dollars. Practice safe position sizing of course.

Heres the deal, Gamestop just became a viable business thats going to last for 5 or more years. Whaaaat you say?

GME likely has, and if not will, sell more shares. they may wait a little and follow SEC rules, but at current prices, they will sell equity and get a S#$%^ ton of cash. years of cash. 

sure, some redditors will be left holding the bag. Sell the volatility in safe doses.

v8rx7guy

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Re: GME deathwatch - how to profit?
« Reply #44 on: January 28, 2021, 11:22:49 AM »
I'm selling near term waaaay low priced puts. think 10 dollars. Practice safe position sizing of course.

Heres the deal, Gamestop just became a viable business thats going to last for 5 or more years. Whaaaat you say?

GME likely has, and if not will, sell more shares. they may wait a little and follow SEC rules, but at current prices, they will sell equity and get a S#$%^ ton of cash. years of cash. 

sure, some redditors will be left holding the bag. Sell the volatility in safe doses.

AMC already did this... sold a crap ton of shares @$13.51 .  Reddit is going to make them survive the pandemic

https://www.marketwatch.com/story/amc-entertainment-to-issue-444-million-shares-as-investors-opt-to-convert-600-million-of-convertible-debt-2021-01-28
« Last Edit: January 28, 2021, 11:27:04 AM by v8rx7guy »

mizzourah2006

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Re: GME deathwatch - how to profit?
« Reply #45 on: January 28, 2021, 11:24:07 AM »
Since I don't often see mea culpa posts around here, I figured I would post my flag and welcome any and all face-punches. Had an idea of myself as a rational, buy-and-hold index fund investor. Got swept up in all the GME speculation, bought a small position. Immediately regretted it, and put in a limit order to sell at the buying price. Came back a while later, and sold at market rate for a small loss. All in all, today I bought a much needed lesson I thought I would never need to learn as a personal experience.

I was 110% sure I was going to sit out this rodeo. Why risk money I don't need for something I already can't get more of (FI)?

I watched it go from $35 to $40 to $60 and then at $90 I decided to buy a few shares, which I promptly sold the next day (yesterday) for $140, very sure I was a smart guy.

I bought back in today at $321, YOLO'd about $10k. I'm holding until options expiration on Friday. Apparently so many naked calls have been written and since the stoke is above the top strike price, it's impossible to hedge above that strike. i.e. shorts cannot use calls to cover.

Here's a conservative (?) way to play GME; write Jan. 29 puts in the $100 to $200 range. The bids are still pretty high ($20 on the $190 strike price) and the likelihood of having them put to you is rather slim, in my non-professional opinion.

I YOLO'd back in with some of my gains from originally buying in at $85 Monday morning and then comes the coordinated short ladders. Unless the buy side can get more volume I may be writing this off to offset my earlier gains. The coordinated shutdown of several of the biggest retail trading apps/sites an hour before open was purposeful. The shorts are going to cover their bad shorts and short at the top and make money off of this. Before they all announced they wouldn't allow buying GME was trading at $506 in the early trading hours.
« Last Edit: January 28, 2021, 11:29:59 AM by mizzourah2006 »

frugalnacho

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Re: GME deathwatch - how to profit?
« Reply #46 on: January 28, 2021, 11:56:32 AM »
About half of the posts are conspiracy theories arguing that broker outages, media stories, posts on other boards, hedge fund activities, the timing of when option chains are updated, etc. are all attempts by the rich and powerful to prevent Robinhood investors from buying more shares.

When that failed they just straight up stopped letting robinhood investors buy shares.  I had $35 fun money in robinhood and put it in GME.  As of right now robinhood will let me sell my position, but I'm not allowed to purchase any.

mizzourah2006

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Re: GME deathwatch - how to profit?
« Reply #47 on: January 28, 2021, 12:00:36 PM »
About half of the posts are conspiracy theories arguing that broker outages, media stories, posts on other boards, hedge fund activities, the timing of when option chains are updated, etc. are all attempts by the rich and powerful to prevent Robinhood investors from buying more shares.

When that failed they just straight up stopped letting robinhood investors buy shares.  I had $35 fun money in robinhood and put it in GME.  As of right now robinhood will let me sell my position, but I'm not allowed to purchase any.

Yup, they know the people investing in RH don't exactly have huge amounts of money sitting in a savings account that they can just transfer into Fidelity or E-trade. Even if they have cash positions in RH or could have sold other positions that will take a few days to get over into another brokerage. This was not an accident. As somebody else said the market makers would be held holding the bag for a lot of this and one of the main market makers is Citadel, who also is responsible for basically all of Robinhood's Revenue. Better to have me and you holding the bag than to have Citadel.

PathtoFIRE

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Re: GME deathwatch - how to profit?
« Reply #48 on: January 28, 2021, 12:42:22 PM »
GME likely has, and if not will, sell more shares. they may wait a little and follow SEC rules, but at current prices, they will sell equity and get a S#$%^ ton of cash. years of cash. 

I saw this expressed as a concern last week when all of this started to gain traction (hence my notice, not being a WSB regular), and I saw several nods to GME's 8k which apparently details how many new shares they can issue, the number being not too many. Having never read an 8k or having the slightest idea of what any of that means, maybe someone else can take a look and see whether significant dilution is an option. I kind of figured this was all going to be too short term to matter anyway, but now that WSB seems to have gotten a handle on the huge garbage posts influx from yesterday, I see a lot of chatter about the short squeeze lasting a week or two, not just until tomorrow, so maybe there's time for the board to take advantage of the stock price.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #49 on: January 28, 2021, 12:56:09 PM »
Vanguard still allows buying GME shares.
Or at IBKR, call option contracts - I assume Vanguard would allow that as well.

I think tomorrow will get interesting.  There's a lot of call options expiring tomorrow, and the stock price is already above most of them.  I'm guessing we'll see another push up in the stock price...  I mean, it's probably all castles built on air, but I had a lot of fun setting a limit order for $500 :), with my guess being $300-$400 range tomorrow as the fight enters it's last day: option expiration day.