Author Topic: GME deathwatch - how to profit?  (Read 82857 times)

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #200 on: March 02, 2021, 07:55:16 PM »
First, how not to make money: sell calls at low volatility, right before GME gets heavy, volatile buying.  Another way: 2022 or 2023 spreads, with huge bid-ask spreads, offer really horrible risk-reward scenarios.

The bid-ask spreads are relatively narrow for March 12, which is where I bought a bear put spread (my first!).  I bought a $90 put, then sold an $85 put.  I speculate that GME will drop below $87.85/sh by next Friday (Mar 12).  If GME drops to $85 at any point, I'll close the position for $5/sh gain.  Gauging by the breakeven point for "at the money" puts, the market now expects GME to be near $90/sh on Mar 12.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #201 on: March 05, 2021, 12:00:14 PM »
My bear put spread is looking doomed, since $90 and $85 puts are just $0.50 apart.  The equivalent speculation today would be selling $115 put and buying the $110 put: speculate $200 to gain $500 if GME drops below $110.  GameStop stock is just staying where it was last week, going nowhere.

The CEO could dilute the stock just 10%, and triple their cash on hand.  Two years ago GME had a 1.1B market cap.  Diluting their shares just 11%, they could raise 1.1B in cash, more than tripling the company's cash position.  I find it odd the executive team at GameStop wants to transform the company, but refuses to raise a transformational amount of cash.  As Jim Kramer put it, "their silence is deafening".

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #202 on: March 05, 2021, 12:17:04 PM »
The Congressional hearings and possibly their own stock option conflicts of interest seem to have encouraged them to keep a low profile.

arebelspy

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Re: GME deathwatch - how to profit?
« Reply #203 on: March 05, 2021, 02:12:05 PM »
I like the stock.

Disclaimer: Long GME, not a financial advisor.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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bwall

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Re: GME deathwatch - how to profit?
« Reply #204 on: March 05, 2021, 02:13:33 PM »
My bear put spread is looking doomed, since $90 and $85 puts are just $0.50 apart.  The equivalent speculation today would be selling $115 put and buying the $110 put: speculate $200 to gain $500 if GME drops below $110.  GameStop stock is just staying where it was last week, going nowhere.

The CEO could dilute the stock just 10%, and triple their cash on hand.  Two years ago GME had a 1.1B market cap.  Diluting their shares just 11%, they could raise 1.1B in cash, more than tripling the company's cash position.  I find it odd the executive team at GameStop wants to transform the company, but refuses to raise a transformational amount of cash.  As Jim Kramer put it, "their silence is deafening".

Melvin Capital said they'd been sitting on GME since 2014, at $40. So, that sorta re-sets the 'natural price' of GME from $20 to $40, at least for me. Doing the math, that'd put the market cap right at $1.1b, I think, right?

I think I also read that GME bought back $178m worth of shares sometime during 2020, thus reducing their float and leading to the short interest rising to 140%, if I understand correctly. Nothing quite like shorting shares back to the company, right?

Then Roaring Kitty, aka DFV, bought 50,000 shares around $40, post-squeeze, after/when the stock had overshot it's lower bound (see above), thus setting a floor akin to Gandalf in Lord of the Rings "YOU SHALL NOT PASS" or perhaps more like the knight in Monty Pyton's "Holy Grail" "None Shall Pass", depending on one's temperament and outlook on life.

In the meantime GME has acquired enormous quantities of free publicity. Why ruin it by issuing shares? I think it's going to be awhile before the shares drop below $100 again. YMMV.

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #205 on: March 05, 2021, 06:52:01 PM »
In the meantime GME has acquired enormous quantities of free publicity. Why ruin it by issuing shares? I think it's going to be awhile before the shares drop below $100 again. YMMV.

Gamestop should do a promo where you get a freebee if you can prove you lost money on their stock. They could build up a nice marketing database that way, and use it to launch their post-bricks-and-mortar business.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #206 on: March 05, 2021, 11:52:47 PM »
My bear put spread is looking doomed, since $90 and $85 puts are just $0.50 apart.  The equivalent speculation today would be selling $115 put and buying the $110 put: speculate $200 to gain $500 if GME drops below $110.  GameStop stock is just staying where it was last week, going nowhere.

The CEO could dilute the stock just 10%, and triple their cash on hand.  Two years ago GME had a 1.1B market cap.  Diluting their shares just 11%, they could raise 1.1B in cash, more than tripling the company's cash position.  I find it odd the executive team at GameStop wants to transform the company, but refuses to raise a transformational amount of cash.  As Jim Kramer put it, "their silence is deafening".

Melvin Capital said they'd been sitting on GME since 2014, at $40. So, that sorta re-sets the 'natural price' of GME from $20 to $40, at least for me. Doing the math, that'd put the market cap right at $1.1b, I think, right?

I think I also read that GME bought back $178m worth of shares sometime during 2020, thus reducing their float and leading to the short interest rising to 140%, if I understand correctly. Nothing quite like shorting shares back to the company, right?

Then Roaring Kitty, aka DFV, bought 50,000 shares around $40, post-squeeze, after/when the stock had overshot it's lower bound (see above), thus setting a floor akin to Gandalf in Lord of the Rings "YOU SHALL NOT PASS" or perhaps more like the knight in Monty Pyton's "Holy Grail" "None Shall Pass", depending on one's temperament and outlook on life.

In the meantime GME has acquired enormous quantities of free publicity. Why ruin it by issuing shares? I think it's going to be awhile before the shares drop below $100 again. YMMV.
I'm not sure which audience you mean when you say free publicity would be ruined by issuing new shares.  The general public doesn't understand it, while investors find that normal - lots of companies are issuing more shares to survive without revenues.  I'll even go one step further, and say even after AMC issued +100% new shares (mid-Dec 160M, end of Jan 340M), Wall Street Bets kept buying and pushing the stock higher.

As to GME share buybacks, I think you mean 2019, when they went from 102M shares to 66M shares.  During 2020, GME shares varied between 64M and 70M, and they stand at 70M shares now.  So I'm confused by the $40/share figure, since GME hasn't pushed above $10/share from 2019 until WSB pushed the price up.  If GME falls only halfway to it's former market cap, that's still a 80-90% drop from here.

It does appear GameStop is saying "I'm not dead yet" to the hedge funds.  But Roaring Kitty (DFV)'s $2 million purchase is nothing compared to GME trading volumes.  I don't mean to put words in his mom's mouth, but "he's not the messiah", even if multitudes are following him around like in the Life of Brian.

I think there's a group with an even lower profile than the GameStop executive team.  This week started with $5.8 billion in trading volume on Monday, and ended with $4.2 billion on Friday.  Who is spending literally billions of dollars buying GME every day?  I think there's a hedge fund using WSB as cover to make their own plays against other hedge funds.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #207 on: March 06, 2021, 12:07:16 AM »
I like the stock.

Disclaimer: Long GME, not a financial advisor.
The company or the stock?  I'd buy GME for $1/share, because that would be a great value (the GameStop company cash reserves are $450M, or over $6/share).  But at $140/share, their 27 price/book ratio looks very overpriced.  I'm still short a few call options.

When I first sold short, I watched how the news media told everyone about GME's explosive rise, and predicted hedge funds would swoop in to profit.  That came true (then I stopped using predictions, data and measured risk!)... but I'm surprised when the news media isn't covering the stock, the hedge funds ignore it.

Right now there seems to be a balance of buyers and sellers.  If the news media covers the high price of GME stock, I expect that will draw lots more hedge funds back to profiting off the stock, and push the price sharply lower.  That's the point where I plan to close my short call options.

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Re: GME deathwatch - how to profit?
« Reply #208 on: March 06, 2021, 03:22:03 AM »
I like the stock.

Disclaimer: Long GME, not a financial advisor.
The company or the stock?  I'd buy GME for $1/share, because that would be a great value (the GameStop company cash reserves are $450M, or over $6/share).  But at $140/share, their 27 price/book ratio looks very overpriced.  I'm still short a few call options.

When I first sold short, I watched how the news media told everyone about GME's explosive rise, and predicted hedge funds would swoop in to profit.  That came true (then I stopped using predictions, data and measured risk!)... but I'm surprised when the news media isn't covering the stock, the hedge funds ignore it.

Right now there seems to be a balance of buyers and sellers.  If the news media covers the high price of GME stock, I expect that will draw lots more hedge funds back to profiting off the stock, and push the price sharply lower.  That's the point where I plan to close my short call options.


agreed! Like a broken record , The company is worth maybe a case of 25 or 26$ but if they dont change there model which will be tough to do , they will be gone and take alot of carnage with them. Doable yes but a tougher task than say a Best Buy had to. To many others stocks to like or bet on with better fundamentals.

bwall

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Re: GME deathwatch - how to profit?
« Reply #209 on: March 08, 2021, 04:58:30 AM »
I'm not sure which audience you mean when you say free publicity would be ruined by issuing new shares.  The general public doesn't understand it, while investors find that normal - lots of companies are issuing more shares to survive without revenues.  I'll even go one step further, and say even after AMC issued +100% new shares (mid-Dec 160M, end of Jan 340M), Wall Street Bets kept buying and pushing the stock higher.

As to GME share buybacks, I think you mean 2019, when they went from 102M shares to 66M shares.  During 2020, GME shares varied between 64M and 70M, and they stand at 70M shares now.  So I'm confused by the $40/share figure, since GME hasn't pushed above $10/share from 2019 until WSB pushed the price up.  If GME falls only halfway to it's former market cap, that's still a 80-90% drop from here.

It does appear GameStop is saying "I'm not dead yet" to the hedge funds.  But Roaring Kitty (DFV)'s $2 million purchase is nothing compared to GME trading volumes.  I don't mean to put words in his mom's mouth, but "he's not the messiah", even if multitudes are following him around like in the Life of Brian.

I think there's a group with an even lower profile than the GameStop executive team.  This week started with $5.8 billion in trading volume on Monday, and ended with $4.2 billion on Friday.  Who is spending literally billions of dollars buying GME every day?  I think there's a hedge fund using WSB as cover to make their own plays against other hedge funds.

In the meantime GME has acquired enormous quantities of free publicity. Why ruin it by issuing shares? I think it's going to be awhile before the shares drop below $100 again. YMMV.

Gamestop should do a promo where you get a freebee if you can prove you lost money on their stock. They could build up a nice marketing database that way, and use it to launch their post-bricks-and-mortar business.

Yes, something along those lines--I'm not a marketing genius (nor do I play one on TV), but I think there is a huge reservoir of goodwill toward GME. If they can find a way to harness this goodwill, they would be well served.

I think that GME has a float of 55m shares. 70m total, but I guess the missing 15m are locked away (perhaps in Castle Anthrax, awaiting the arrival of Sir Galahad to rescue them?) and not allowed to be traded in.

Here's how I got the $40/share 'natural' valuation of GME.
Melvin Capital claims it began shorting GME in 2014.
https://www.fnlondon.com/articles/melvin-capital-says-it-was-short-gamestop-since-2014-20210218
Although they don't say what day they began, the price level was around $40 in 2014. Then GME reduced their float by 35% (or more??) in 2019 as you state. Thus, the 'natural' price could be $54-ish, assuming no balance sheet shocks between 2014 and 2020.

Stocks often overshoot their upper and lower bounds once they become momentum plays. I am of the opinion that Roaring Kitty has done a lot of rigorous homework in regards to GME--he did clear a few million on GME while all of us here only managed about a few thousand. Thus, putting $2m to work at once is a drop in the bucket as you correctly state. However, since it co-incided with the post-squeeze bottom (almost to the day!) metaphorically, it makes for great theatre and vivid imagery to compare it to Gandalf or the Black Knight. I'll put you i in the camp of the Black Knight, not Gandalf. :)

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #210 on: March 08, 2021, 06:36:46 AM »
As to GME share buybacks, I think you mean 2019, when they went from 102M shares to 66M shares.  During 2020, GME shares varied between 64M and 70M, and they stand at 70M shares now.  So I'm confused by the $40/share figure, since GME hasn't pushed above $10/share from 2019 until WSB pushed the price up.  If GME falls only halfway to it's former market cap, that's still a 80-90% drop from here.
I think that GME has a float of 55m shares. 70m total, but I guess the missing 15m are locked away (perhaps in Castle Anthrax, awaiting the arrival of Sir Galahad to rescue them?) and not allowed to be traded in.
Some of my calculations rely on the outstanding shares, so I'd like to see any sources showing that 15m are locked up somehow.  According to their 2020 Q3 quarterly report, they had 65m shares at that time:
https://news.gamestop.com/news-releases/news-release-details/gamestop-reports-third-quarter-results-positive-start-fourth

But I'm relying on Y-charts for the 70m figure:
https://ycharts.com/companies/GME/shares_outstanding

The situation gets more interesting looking at Yahoo Finance data.  Their data shows 70m float, but 27.3% held by insiders (19m shares).  But they both claim only 45m shares are available, and that institutions own "122.04%", which is questionable.
https://finance.yahoo.com/quote/GME/key-statistics?p=GME

Morningstar lists 55m of institutional ownership, and since 55m / 45m = 122%, that might be where Yahoo got it's figures.
https://www.morningstar.com/stocks/xnys/gme/ownership

If I'm wrong about the outstanding shares for GameStop, I might also be wrong about other stocks, which impacts their recovery.  So I'm interested in any data that shows the number of outstanding shares isn't 70m.

bwall

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Re: GME deathwatch - how to profit?
« Reply #211 on: March 08, 2021, 06:59:35 AM »
I use Etrade and they have two categories under the Fundamentals tab... "Shares Outstanding" and "Number of Floating Shares"..... how to upload a screenshot here....... perhaps someone can provide instructions or if someone else has Etrade they can provide a screenshot......

I haven't reviewed this data elsewhere and I don't know where Etrade sources their data. My offhanded guess is that insider shares do not contribute to the float, but, \_(ツ)_/



frugalnacho

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Re: GME deathwatch - how to profit?
« Reply #212 on: March 08, 2021, 10:30:55 AM »
Anyone still holding?  Price is at $189 now and climbing. 

bwall

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Re: GME deathwatch - how to profit?
« Reply #213 on: March 08, 2021, 11:08:11 AM »
GME just cracked $200, up $60 on the day, and I have not a single share.

I suspect we are witnessing a new short squeeze. There was still 30% short, or so. Presumably from a higher cost basis, but, well, the shorts are all losing big today.

Look at the options activity; Mar. 12 expiration, top strike price of $800 has over 30,000 contracts changing hands today, price is up from 90 cents to $3.40. Insane.
The $200 strike has over 18k contracts changing hands today. If the $200 close in the money on Friday.......


dignam

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Re: GME deathwatch - how to profit?
« Reply #214 on: March 08, 2021, 11:57:19 AM »
Anyone still holding?  Price is at $189 now and climbing.

Yep, still have all my shares.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #215 on: March 08, 2021, 12:37:09 PM »
bwall - Interesting.  So most likely, between 51m and 55m shares available.  I assume the total shares is used in market cap calculations, but I think I'll investigate it at some point to see.

Friday's $4.2 billion GME trading volume has been exceeded by today's $9.4 billion in trading volume.  I wonder who is investing billions every day.  At any rate, it's not hedge funds selling shares, so I closed my bear put spread.  I paid $215, then sold for $26, for a -88% loss (or $179 loss).

I've decided AMC is a much easier target.  Disney is releasing it's latest film on it's platform and in theaters at the same time.  That screws over movie theaters that are used to having exclusivity for 1-3 months, and Cinemark has protested by refusing to show the movie.  Other streaming services are taking movie theater customers, and then there's significant debt owed by movie theaters.  Despite this very weak position, AMC is up +80% or so from it's 2019 highs.

So I opened a bear put spread on AMC ($9.16/sh).  I bought a $9 PUT for $4.05, and sold a $6 PUT for $1.95, meaning I've invested $2.10 to possibly gain $3.00.  The options have implied volatility similar to GME, which is the biggest risk: the stock could stay above $9 and the spread expires worthless.

bwall

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Re: GME deathwatch - how to profit?
« Reply #216 on: March 08, 2021, 01:07:12 PM »
bwall - Interesting.  So most likely, between 51m and 55m shares available.  I assume the total shares is used in market cap calculations, but I think I'll investigate it at some point to see.

I presume that the 'missing' shares are held by people who cannot liquidate them quickly due to insider regulations. I think that some insider stock sales have to be programed months in advance in order not to fall foul of some regulator. They still contribute to market share, but aren't available for quick sale, or for shorting, for that matter. A veritable Castle Anthrax.

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #217 on: March 08, 2021, 01:17:41 PM »
I've decided AMC is a much easier target.  Disney is releasing it's latest film on it's platform and in theaters at the same time.  That screws over movie theaters that are used to having exclusivity for 1-3 months, and Cinemark has protested by refusing to show the movie.  Other streaming services are taking movie theater customers, and then there's significant debt owed by movie theaters.  Despite this very weak position, AMC is up +80% or so from it's 2019 highs.

So I opened a bear put spread on AMC ($9.16/sh).  I bought a $9 PUT for $4.05, and sold a $6 PUT for $1.95, meaning I've invested $2.10 to possibly gain $3.00.  The options have implied volatility similar to GME, which is the biggest risk: the stock could stay above $9 and the spread expires worthless.

By the price, I'm guessing you picked up the September 2021 spread. Right now, short interest is "only" 22%, but that's still above where Tesla was in early 2020. Will you hold until Sept. even if the price pops to $30 or $40 during short squeeze round two?

https://www.marketbeat.com/stocks/NYSE/AMC/short-interest/

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #218 on: March 08, 2021, 01:40:05 PM »
bwall - That reminds me of another castle in that movie, but I can't figure out a way to make a joke about that and GME at the same time.


ChpBstrd - That's right, put options expiring Sept of this year.  With a put spread, my risk is the amount I invest.  I'm limiting how much I speculate in GME + AMC, which is why I closed the GME put spread to initiate the AMC put spread.

In my favor is that GME is up 10x or so, while AMC is up 2x.  There doesn't seem to be as many people interested in AMC - which has also shown it's willing to print shares... that could make it very difficult to target.

You could look at call and put options on GME to see where the market seems to think GME is headed.  There's a lot of uncertainty, reflected in wide bid-ask spreads.  I think it's hard to find profitable combinations of options after April 2021 (there's no May or June GME options at this time).

arebelspy

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Re: GME deathwatch - how to profit?
« Reply #219 on: March 08, 2021, 01:50:06 PM »
Anyone still holding?  Price is at $189 now and climbing.

I am still long GME. Sold some covered calls today and bought some more shares with the premium received.

I think it has a ways to run up still.

This is not financial advice, I am not a financial advisor, I just like the stock, etc.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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bwall

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Re: GME deathwatch - how to profit?
« Reply #220 on: March 08, 2021, 07:30:24 PM »
Anyone still holding?  Price is at $189 now and climbing.

I am still long GME. Sold some covered calls today and bought some more shares with the premium received.

I think it has a ways to run up still.

This is not financial advice, I am not a financial advisor, I just like the stock, etc.

Covered calls is the best/safest way to play GME, provided, of course, that you want to own the stock.

I'm kicking myself for not picking up a couple hundred shares back at $40 so that I could do just that. But, at the time I thought that $40 was just a bleak way-station to $30, and then $20, only to rest somewhere in a sub-$20 netherworld, among the detritus of the RMS Titanic. Little did I know that GME was bottoming at the time..... c'est la vie..... this is how I learn where the signposts are in the equities world--by stumbling into them.

The options premiums one can receive now are fantastic. If one can manage to write covered calls that expire out of the money, then you can sell the same lottery ticket a few times. Not bad work if you can get it. This merry go round could last for months. Or end tomorrow. It's a white-knuckle ride.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #221 on: March 09, 2021, 08:41:06 AM »
(I'm still short GME calls, which is my bias)

I wonder if the pressure is building for the GameStop to issue more shares?  If they issue just 2 million shares, that dilutes by less than 3%, and nets them $237/sh x 2 million = $474 million.  They can double their cash pile with a 3% dilution.

I'm still looking for a news article that both (1) explains where the purchases of GME are coming from; and (2) uses data to back up it's explanation.  I don't believe WSB is buying billions of dollars of stock every day (over $3 billion in the first hour of trading today, for example).  Shouldn't billions be traceable?

bwall

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Re: GME deathwatch - how to profit?
« Reply #222 on: March 09, 2021, 09:50:38 AM »
(I'm still short GME calls, which is my bias)

I'm still looking for a news article that both (1) explains where the purchases of GME are coming from; and (2) uses data to back up it's explanation.  I don't believe WSB is buying billions of dollars of stock every day (over $3 billion in the first hour of trading today, for example).  Shouldn't billions be traceable?

It's gonna be a long wait.

Brokers and market makers have no obligation to say who their buyer is. It might not even be allowed for them to say, IDK.

WSB doesn't have that kind of money. Their genius in GME was alerting those with money as to the opportunity available. Then, those with money piled in, forced the shorts to cover and then that was that.

Basically, in the past two weeks, from $40, to say, $140 (or so), the only buyers were those who believed in the stock. Which is why I never bought and keep referencing Roaring Kitty's $40 line in the sand. I thought his buy was a ruse to deflect attention from his congressional hearing. Nope. He really did believe. And, he was dead right.
All those who wanted out have had great opportunities to exit the stock since $40. Only when all the sellers are gone can the stock rise. And that's what we're seeing now.

Since $140, we've got short covering and momentum buyers, I presume. Momentum will sell once the run is over, if they're not selling already. Yet, the stock is still rising b/c, well, the buyers are overwhelming the sellers. The shorts don't want to touch it, and I can't blame them--short interest is still waaaayyyy too high and the easy money shorting is gone.

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #223 on: March 09, 2021, 10:49:46 AM »
(I'm still short GME calls, which is my bias)

I wonder if the pressure is building for the GameStop to issue more shares?  If they issue just 2 million shares, that dilutes by less than 3%, and nets them $237/sh x 2 million = $474 million.  They can double their cash pile with a 3% dilution.

I'm still looking for a news article that both (1) explains where the purchases of GME are coming from; and (2) uses data to back up it's explanation.  I don't believe WSB is buying billions of dollars of stock every day (over $3 billion in the first hour of trading today, for example).  Shouldn't billions be traceable?

1) It would be very hard for GME management to know on which days they could sell stock for $200 and which days they could sell stock for $40. Given that they have to announce these issues in advance and use investment bank intermediaries, it's not simply an issue of management clicking the sell button. Thus it is hard to say we plan to sell xxx,xxx shares to raise about $xxx,xxx,xxx because they have no idea what price they'd get.

2) Investment secrecy is generally a tenet of American broker/dealers and market makers. Unless someone does an interview or press release, big positions are not publicized in real time. E.g. If I'm running a typical hedge fund and charging an enormous amount to my clients, I lose my entire edge if my investments are publicized in real time and people can just mimic my trades. We retail peons can only speculate, but I think you're right about the WSB crowd. The thing with GME is that it's as close to a sure thing to go down as anything ever has been, and so it is a constant short target, which makes it a constant short squeeze target. This yoyo might bounce all year until the news gets bad enough.

dignam

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Re: GME deathwatch - how to profit?
« Reply #224 on: March 09, 2021, 12:01:19 PM »
^ Exactly.  We will not ever know the full extent of the positions of the big players.

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #225 on: March 09, 2021, 01:09:06 PM »
The options premiums one can receive now are fantastic. If one can manage to write covered calls that expire out of the money, then you can sell the same lottery ticket a few times. Not bad work if you can get it. This merry go round could last for months. Or end tomorrow. It's a white-knuckle ride.

IDK, given that this stock could go from $200 to $20 next week selling CCs sounds like a good way to end up being a bag holder.

I've played with a few scenarios on the assumption that GME is either in squeeze-on or squeeze-off mode. A Strangle or straddle would seem to work best in this binary system, so that one makes money whether GME falls back to earth or rockets to the moon. Maximum losses are finite and maximum gains are infinite. Only problem is that it's so expensive the possible returns are relatively low. E.g. $15,292 at risk to try and earn $2,782 when the stock goes back down to $40, or $4,169 when the stock again reaches $420.

arebelspy

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Re: GME deathwatch - how to profit?
« Reply #226 on: March 09, 2021, 08:34:22 PM »
I'm still looking for a news article that both (1) explains where the purchases of GME are coming from; and (2) uses data to back up it's explanation.  I don't believe WSB is buying billions of dollars of stock every day (over $3 billion in the first hour of trading today, for example).  Shouldn't billions be traceable?

Right, it's not WSB. Big players like the stock, or at least the squeeze.

The hedge funds aren't all, like, on the same side. They're sharks. Someone(s) clearly sees a profit to be taken from Melvin/Citadel.

Long term it'll go down from where it's at. In the short and maybe even medium term? I think it still has upside.
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ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #227 on: March 09, 2021, 09:39:39 PM »
Most of our attempts to profit by simply buying puts or selling calls have been thwarted because when GME is in short squeeze mode, the implied volatility is so high it is a gamble whether or not it will move far enough ITM. With puts and calls at extremely high prices, I look to spreads. But volatility also means the "spread" is spread out across all price ranges, because there is high uncertainty which spreads will be ITM and anything could happen.

If I want to buy an April 23 bear put spread at 125 and 135, it'll cost me $4.73.
At 170/180 it's $5.90.
We just moved up 36% in price, $45, and the value of a $10 spread changed by a whole $1.17. That's what extreme uncertainty looks like.

However, I doubt the squeeze can last 45 days. It didn't last time, and this time the short interest is starting out much lower, ~30% of float. The sharks will start taking profits soon enough. If I was to bet again, I'd probably play the 170/180 bear put spread with 45 days remaining.

frugalnacho

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Re: GME deathwatch - how to profit?
« Reply #228 on: March 09, 2021, 10:09:16 PM »
$261 aftermarket price.

Those of you that like the stock, or are just along for memes, what is your sell price?  I have a sell price set at $800.  Thinking of changing it to a real number though.


arebelspy

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Re: GME deathwatch - how to profit?
« Reply #229 on: March 09, 2021, 10:39:09 PM »
I sold some covered calls on Monday morning for this Friday with a strike price of $360. I thought we'd hit 360, but next week, not this week. After two days, I think I'm wrong, and we will. So I guess that's the sell price for a good chunk of my shares.

Right now I'm thinking more timeline than price--I can see it going in a mostly upward direction through next week. All the 800 calls on the books for the 19th are interesting. And the convergence of the bonds, NSCC rule change, stimulus checks hitting, earnings call, etc. all in the next few weeks puts a lot of upward pressure, IMO.
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MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #230 on: March 10, 2021, 02:27:12 AM »
I don't know if companies can specify conditions in their share offerings, like a limit order does  ($200 limit sell of 2 million shares!).  I've only seen a specific date specified, and am not familiar with the rules.  But I believe GME is the exception, as other companies have used their own higher stock prices to raise capital.

I assume the target is Friday call options, so the buying pressure is likely to continue if that's the case.  If they do it right, the buying pressure remains not only through Friday, but for the 2 day settlement period (next Tues) so those who sold contracts can't buy shares cheaply before settlement.

I think the same institutional buyer has been involved for a week ($20 billion in purchases Mar 1-5), so even data that's a week old would be interesting.  The only article I read estimated retail orders by the source and order size, and said retail traders remained at a similar percentage of dollar volume compared to before the late Jan buying of GME.  So their conclusion was an institutional buyer was involved - probably a hedge fund, and probably targeting Melvin Capital.

The last buying surge involved widespread media coverage, which brought huge numbers of hedge funds to the market.  The selling pressure, plus the fact hedge funds are unlikely to hold GME shares suggests that was short selling.  What I don't get is why they left... did they cover their short positions later?  Or did they short at high enough prices to not care about $250/share?

When I've looked at long-term put spreads or call spreads on GME, they don't make sense.  Often a spread costs money to create, and then risks losing money.  Or there might be a $8000 wide spread paying $8, for a 0.1% gain of the money at risk.

arebelspy

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Re: GME deathwatch - how to profit?
« Reply #231 on: March 10, 2021, 07:28:12 AM »
What makes you think they left?

As far as the spreads, you're trying to make it rational. There's a lot irrational here, and a lot of taking advantage of dumb money (that is, I suppose, rational itself).
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Re: GME deathwatch - how to profit?
« Reply #232 on: March 10, 2021, 08:15:57 AM »
$261 aftermarket price.

Those of you that like the stock, or are just along for memes, what is your sell price?  I have a sell price set at $800.  Thinking of changing it to a real number though.

My meme sell price is $10k.  But in reality I'd be dumb to not sell around $800-$1k.

frugalnacho

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Re: GME deathwatch - how to profit?
« Reply #233 on: March 10, 2021, 08:57:03 AM »
Yeah, I'm thinking I'd be dumb not to sell it in the $300-400 range.  Won't be life changing money for me even if it goes to $10k.  I have no idea what's happening, or how high it might go, but I should dip out at some point.  Definitely don't want to watch it fall back below $100 and just be holding my tiny shares. 

frugalnacho

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Re: GME deathwatch - how to profit?
« Reply #234 on: March 10, 2021, 10:16:16 AM »
Welp I paper handed out at $330.   Should net me about $100 in short term capital gains.  I still have 0.12 shares in robinhood that I am letting ride.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #235 on: March 10, 2021, 10:24:11 AM »
What makes you think they left?
In early February, every buying attack was met with a wall of selling.  There was a huge amount of money fighting whoever bought GME stock.  Things settled down for a few weeks... and now buying attacks are unopposed.  Back in early Feb, these same attempts would have gone nowhere... now in early March, they succeed.

Since I'm dramatically limiting how much I speculate in GME/AMC/etc, I closed one of my AMC spreads to open a GME spread.  There wasn't much difference between Oct, Nov and next Jan, so I went with a Jan 2022 bear put spread.

I guess I might as well reveal the details, since I'd like to mention a couple things:
buy) GME $200 strike put expiring 2022-Jan-21 : $107.10/sh
sell) GME $100 strike put expiring 2022-Jan-21 : $41.70/sh
By speculating with $65.40/sh, I can potentially gain $100/sh.

Other numbers had worse leverage, or a worse breakeven point.  The above speculation breaks even when GME hits ($200-$65.40) $134.60, and has a maximum profit at $100 ($200-$100).  So when GME hits $100, I sell - there's no point to keeping it.

I considered July, but decided I wanted more time.  And since Oct/Nov spreads weren't that different from 2020 Jan, I went with the later date.  I didn't even look at April options, as that's too high risk for me (the new me!).  I'm leaving open the very strange possibility that GME stock remains elevated for months - not likely, but possible.

v8rx7guy

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Re: GME deathwatch - how to profit?
« Reply #236 on: March 10, 2021, 10:40:43 AM »
Wow a $100+/sh drop in minutes...

Edit: $150+/sh

frugalnacho

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Re: GME deathwatch - how to profit?
« Reply #237 on: March 10, 2021, 10:55:53 AM »
and then a $65 share gain in mere minutes.  looks like it tripped the breaker again?

arebelspy

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Re: GME deathwatch - how to profit?
« Reply #238 on: March 10, 2021, 10:58:44 AM »
and then a $65 share gain in mere minutes.  looks like it tripped the breaker again?

Something like 6 times now in 31 min.. impressive when the halts are 5m each.

Expecting volatility, but this is crazy.
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frugalnacho

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Re: GME deathwatch - how to profit?
« Reply #239 on: March 10, 2021, 11:01:05 AM »
Owning GME be like:


ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #240 on: March 10, 2021, 11:34:38 AM »
That short strangle idea I shared earlier went from 152.92 to 226.58. This was the way.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #241 on: March 10, 2021, 08:12:27 PM »
The price moves in Wednesday's market remind me of the day a wall of selling arrived in early February.  There was a huge drop, then a bounce back, then a struggle where the stock price didn't go anywhere - just moved in a narrow range.

But even if hedge funds have returned to sell the stock short, I don't get why they arrived.  There's no mainstream news coverage of Game Stop.  Maybe they monitor it for certain price levels, like $300/share?

Picking stocks will always partly be about luck: an hour after I opened my bear put spread on GME, it plunged from $300 to $175.  My guess is the stock rises in pre-market trading, then gets hit again soon after the Thursday open.

arebelspy

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Re: GME deathwatch - how to profit?
« Reply #242 on: March 11, 2021, 07:39:21 AM »


Picking stocks will always partly be about luck

Largely.

I'm still very confused why you think hedge funds left and came back.

They've been in the whole time. Just real scared at a 300-400 price level.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #243 on: March 11, 2021, 08:54:00 AM »
Picking stocks will always partly be about luck
Largely.
It's not luck when the market is ignoring reality, like at the start of the pandemic.  The stock market was down -4% on March 10, 2020.  The situation was so urgent the Fed called an emergency meeting a few days early, and dropped rates to 0% and introduced quantitative easing.  Experts predicted widespread cases, and in every country where Covid-19 got a foothold, it expanded rapidly.  All of the data pointed in one direction, and the market got it badly wrong with a -4% net drop from Mar 9-10.  So sometimes stock picking is based on data, while the U.S. stock market is not.

I'm still very confused why you think hedge funds left and came back.

They've been in the whole time. Just real scared at a 300-400 price level.
I think the price moves on Jan 28 show hedge funds are not scared in the $300-$400 range.  On Jan 28, GME hit a high of $483 and a low of $112, closing at $194.  I view that as hedge funds seeking to profit by selling short a stock that trades far above what it's worth.  If anything, hedge funds get greedy when GME hits $300-$400/share, and begin short selling.

Back on Feb 2-4, sellers pushed GME's price lower each time: $141 ==> $90 ; $112 ==> $92 ; $91 ==> $54.  That group of sellers seemed to be absent in the first week of March, when the stock ranged from $100 to $150.  The same prices appeared, but the selling pressure didn't return.  That selling pressure was absent at the same prices where it appeared earlier... so I assume those sellers left.  And since the volumes were in the billions, I assume it was hedge funds or other institutional money.

Maybe the $300-$400 range is correct, but describes when hedge funds get greedy.  From Feb 2 - Mar 9, GME never pushed above $300... then on Mar 10, it hit $349.  That same day, selling pushed the stock dramatically lower (a $172 low, closing at $265).  But I'm not sure where those same sellers are today... much lower volume, and GME stock has gone from $242 to $282 so far ...

Earlier selling pressure was like a wall that pushed GME lower and lower.  That doesn't seem to be what's happening this week, so it seems like less selling pressure now than in late Jan/early Feb.

trollwithamustache

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Re: GME deathwatch - how to profit?
« Reply #244 on: March 11, 2021, 10:35:42 AM »
1. every time GME surges up or down, volatility increases.
2. pick your fundamental business value, someone said 40s, someone else said 25.
3. After any big move up, sell near (2-3 week out) PUTs at your fundamental business value price.

This way you are selling volatility. I sold some 40 puts for next week, and after the price went up, they are even more expense! But I remain confident that I can hold them through next week and likely not be assigned. IF I was assigned, I'm ok holding at that price.  I might sell a few more. 

When in doubt, the strike price should be lower and the premium demanded higher.




ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #245 on: March 11, 2021, 11:36:15 AM »
1. every time GME surges up or down, volatility increases.
2. pick your fundamental business value, someone said 40s, someone else said 25.
3. After any big move up, sell near (2-3 week out) PUTs at your fundamental business value price.

This way you are selling volatility. I sold some 40 puts for next week, and after the price went up, they are even more expense! But I remain confident that I can hold them through next week and likely not be assigned. IF I was assigned, I'm ok holding at that price.  I might sell a few more. 

When in doubt, the strike price should be lower and the premium demanded higher.

My understanding of how most options pricing systems set prices is that for an option with 30d duration, the model looks at the previous 30d, and for an option with a 5d duration, the model looks at the previous 5d, etc. Your observation about put prices going up even as the stock went up supports this view; as the previous x days showed more volatility, the option reflected more volatility, and those recent volatile days became more influential. It also suggests that betting on lower volatility might be a good choice when it appears the short squeeze has ended.

One way to do this would be a reverse calendar spread - buying a short-duration option and selling a long-duration option. This type of spread will appreciate if volatility decreases.

https://www.investopedia.com/terms/r/reverse-calendar-spread.asp

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #246 on: March 12, 2021, 06:34:16 AM »
I wonder if after Friday, there will be less motivation for buyers to push up the price (options expire Friday), while more hedge funds will learn over the weekend that GME is near $250/sh.  The last buying attack stalled over a weekend, so Monday could be interesting.

1. every time GME surges up or down, volatility increases.
2. pick your fundamental business value, someone said 40s, someone else said 25.
3. After any big move up, sell near (2-3 week out) PUTs at your fundamental business value price.
In theory, getting paid $1.09 for a $40 GME put expiring Mar 29 is less than 3% of the money at risk.  In practice, GME hasn't gone below $40 since these buying attacks began - let alone drop below $40 on days when options expire.


One way to do this would be a reverse calendar spread - buying a short-duration option and selling a long-duration option. This type of spread will appreciate if volatility decreases.
So maybe selling 2022 or 2023 $800 GME calls, for either $86 and $94, respectively.  And then buying an April ($45), July ($74) or November ($83) call.  The lowest risk calendar spread also pays the least (Nov $83 vs 2022 Jan $86), so that checks out.  I wonder when GME will have May + June options, instead of nothing between April and July.

ChpBstrd

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Re: GME deathwatch - how to profit?
« Reply #247 on: March 12, 2021, 09:57:04 AM »
One way to do this would be a reverse calendar spread - buying a short-duration option and selling a long-duration option. This type of spread will appreciate if volatility decreases.
So maybe selling 2022 or 2023 $800 GME calls, for either $86 and $94, respectively.  And then buying an April ($45), July ($74) or November ($83) call.  The lowest risk calendar spread also pays the least (Nov $83 vs 2022 Jan $86), so that checks out.  I wonder when GME will have May + June options, instead of nothing between April and July.

I was thinking more short-term, like buying the April 16 and selling the April 30.
At the 280 strike, this call spread would be a credit of $11.65/share. Will the April 30 $280 call be worth less than that on April 16? My magic 8 ball says chances are good, but right now the March 26 call at 280 is selling around $90 so it's a big gamble on the timing of the short squeeze ending.

Thinking a step ahead, as soon as the April 16 option expires and IF the April 30 option is selling for more than $11.65, one could buy another April 30 call and convert that short call into a bear call spread to control the risk of holding a little bit longer. I do not like the idea of holding short calls on GME and one would likely be victimized by a margin call.

trollwithamustache

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Re: GME deathwatch - how to profit?
« Reply #248 on: March 12, 2021, 11:58:32 AM »
1. every time GME surges up or down, volatility increases.
2. pick your fundamental business value, someone said 40s, someone else said 25.
3. After any big move up, sell near (2-3 week out) PUTs at your fundamental business value price.

This way you are selling volatility. I sold some 40 puts for next week, and after the price went up, they are even more expense! But I remain confident that I can hold them through next week and likely not be assigned. IF I was assigned, I'm ok holding at that price.  I might sell a few more. 

When in doubt, the strike price should be lower and the premium demanded higher.

My understanding of how most options pricing systems set prices is that for an option with 30d duration, the model looks at the previous 30d, and for an option with a 5d duration, the model looks at the previous 5d, etc. Your observation about put prices going up even as the stock went up supports this view; as the previous x days showed more volatility, the option reflected more volatility, and those recent volatile days became more influential. It also suggests that betting on lower volatility might be a good choice when it appears the short squeeze has ended.

One way to do this would be a reverse calendar spread - buying a short-duration option and selling a long-duration option. This type of spread will appreciate if volatility decreases.

https://www.investopedia.com/terms/r/reverse-calendar-spread.asp

The problem with a calendar spread is you don't really know anything about what future implied volatility will be or price wise where GME will end up over that timeframe. This price battle has gone on for far longer than I expected.

The only thing I know for certain is that I am comfortable buying GME at 40 and holding it a while.

So I can write 5 puts at $40 for two weeks out and let the $$ decay. After they expire march 19, I will look to write another 5. If I time it right, I will get more volatility premium. If I time it wrong like I have been doing, I will make less volatility premium. I may or may not end up with a position I want.

MustacheAndaHalf

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Re: GME deathwatch - how to profit?
« Reply #249 on: March 13, 2021, 06:41:13 AM »
I've been waiting for a mainstream news outlet to comment on GameStop, and I just saw a BBC News article.  It will take more than that, but suggests I might see more mainstream news coverage before Monday's open.  The more mainstream news coverage, the more likely Monday becomes a repeat of Feb 1 for GME shares.

I think calendar spreads on GME are beyond my new, lower risk tolerance.  After the first expiration in a calendar spread, the trade turns into a selling a call without protection.  Been there, done that, have the losses to show for it...

p.s. I've asked arebelspy to demote me from Moderator to someone who can just move threads around.  I wanted to let people know it has nothing to do with our interaction in this thread.

 

Wow, a phone plan for fifteen bucks!