GME deathwatch - how to profit?

[arebelspy]

arebelspy - I think I replied earlier that massively in the money calls make no sense at all.  They cost just as much as the stock, and nullify holding a short position.  If you are both bullish and bearish on the same stock, you pay fees and get no profits.

I think this is one of the clear pieces of evidence the short interest is much higher than reported, as they're using these massively ITM calls and massively OTM puts to roll out their FTD times on short positions to not be showing failure to delivers and not have to deliver or report on how short they actually are.

Some of the other evidence involves the buy/sell ratios on major brokers, activity reported from various international brokers, etc.

Maybe I'm misunderstanding the short position + deep in the money calls, because it makes no sense to me.  Someone shorts 100 shares of GME stock at $175 ($17,500 worth) and then buys 100 shares (1 contract) call option with a $60 strike for $12,200.  How can they possibly profit?

They aren't profiting. They're losing money.

But buying time by kicking the can down the road. They have tons of shorts they've created, and need to deliver those shares, or risk getting a FTD. Instead they can buy--and immediately exercise (why you don't see it in the open interest)--a deep ITM option from their buddy. Now they have the shares on their books to show they've covered. Only their partner doesn't deliver those shares, but just kick the can down the road further.

It's not to make money. It's to avoid having to cover and going backrupt.

I can't find a better explanation for all that deep ITM call activity (which were purchased, even if you don't see it as open interest).

Married puts are an even better way to do it.

[ChpBstrd]

The strategy of kicking the can down the road reflects pure and absolute conviction on the part of the shorts. They are willing to pay the time decay on their protective calls because to them it's such a sure thing GME's price will eventually revert to its value. On the flip side, this means the level of shorting never does go down and this attracts people to hold the stock long (including the people selling the calls, who hedge by going long). It's a standoff to see if the shorts will recoup the time decay on long calls before it exceeds the amount of their future gains.

They are using far-ITM call options because time decay is slowest for these options, even if they cost a fortune, and because their time value will increase as GME falls closer to the strike price in their predicted scenario. E.g. GME is $166.35, an October call at the 20 strike has an asking price of $147.60 (Note the near-zero $1.25 time decay! That's the cost of maintaining a $166.35 short position.). When GME goes near $20 in August, as predicted, the call will gain time value due to being close to the money - maybe $4 - and the entity who is short GME can both get out of the short position and sell the long call option for some extra cash.

To me, the weird thing about this setup is on the long side. The long side reflects pure and absolute conviction that the short squeeze alone will increase the price of the stock forever, because as the longs observe, the shorts are full-conviction and can't profitably get out of the trade anyway. It is a game of musical chairs then, which is why the same people buying crypto are going long meme stocks.

Short squeezes used to be understood as something that lasted maybe a month, but GME has been going on for at least 5 months. Tesla was the original long-duration short, and it could be said their squeeze lasted years before the bears finally capitulated and short interest dropped to its current 5%ish range. Maybe Musk's eccentric behavior and disregard for norms was a brilliant move to lure the shorts in and pump up his own stock? I think the party ends when twice-burned investors refuse to short anything over X% short interest, or when tax loss harvesting season arrives and increases the allure of getting out. I also wonder how long the longs will continue to "like the stock" when it's not gone anywhere consistently for a few months and they see other longs taking their profits while the shorts demonstrate how they can bide their time for years?

[arebelspy]

What'll be interesting is if the number of votes for the upcoming shareholder meeting (6/9) come in way above the outstanding number of shares due to the massive shorting (and naked shorts).

[ChpBstrd]

ChpBstrd - It doesn't look like a Covid sensitive stock.  If you look at a graph of Macy's stock, there's a huge drop when the pandemic starts.  On GEO's stock price graph, it's hard to spot.  The first year of the Trump Presidency was more dramatic for the stock than the pandemic.  If Biden follows through with not renewing any contracts with private prison companies, GEO will keep losing business.  Would it make sense to wait 2-3 years for the next Presidential election cycle?

I think it's safe to say the COVID trade is over. For evidence, look at the airlines and cruise lines which are back to or above the values they had before sustaining all this damage.

GEO has been in decline for years as opposition to private prisons quickly went from a fringe position to a priority on the Democratic party platform. GEO didn't exactly defend their record well, jumping after contracts with ICE to participate in the separation of immigrant children from their families and visibly donating to GOP politicians. The stock market considers them to have bet it all on red and lost, which is why their stock is down 80% over the past 5 years, even as the S&P has doubled. A management shakeup would not be a surprise.

But did they really lose it all? Sure, in a couple of years they'll have a lot fewer federal contracts, they'll probably no longer be a REIT, and they'll be attempting to work off heavy leverage and sell off empty prisons, but there will be some residual value from their state and international businesses. I seriously doubt the federal government will forbid the states from contracting with private prison operators. 

Bureau of Prisons: 12% of revenue
US Marshals: 15% of revenue
Immigration & Customs Enforcement: 23% ..

So basically half their revenue is at risk, but the Biden administration's instructions were to not renew any contracts. Most of these contracts probably have years remaining. In other cases, if the government wanted to get rid of GEO they would either have to build a new facility from scratch, buy the facility from GEO, or lease the facility from GEO. It is unclear how far the mandate goes, but clearly we cannot simply write off all that revenue. GEO itself projects only a 9% reduction in revenue next year.

GEO's 2026 bonds sell for 67 cents on the dollar and might go lower, depending on negotiations which are said to be pending. It might not be a bad idea to put on a stink bid at 55 cents or so, because many banks have divested from the industry and there might be few buyers. If we haven't reached maximum pessimism yet, this could pay off. 

[MustacheAndaHalf]

arebelspy , ChpBstrd  - Can both of you be right when one argues options are exercised immediately while the other says they're held long-term at a cheap time decay?

Instead they can buy--and immediately exercise (why you don't see it in the open interest)--a deep ITM option from their buddy. Now they have the shares on their books to show they've covered.

If they have -100 shares (short) and buy 1 call (100 shares) and then exercise it, the call gives them +100 shares, closing their short position.  They're not short - they have zero shares.

They are using far-ITM call options because time decay is slowest for these options, even if they cost a fortune, and because their time value will increase as GME falls closer to the strike price in their predicted scenario. E.g. GME is $166.35, an October call at the 20 strike has an asking price of $147.60 (Note the near-zero $1.25 time decay! That's the cost of maintaining a $166.35 short position.). When GME goes near $20 in August, as predicted, the call will gain time value due to being close to the money - maybe $4 - and the entity who is short GME can both get out of the short position and sell the long call option for some extra cash.

Except literally nobody is holding October GME call options at a $20 strike.
https://finance.yahoo.com/quote/GME/options?date=1634256000&p=GME
So... where are these massive numbers of deep in the money calls?

If they have -100 shares and 1 call contract (+100 shares), they cannot profit.  If the stock drops $5, their -100 shares cost $500 less to buy back ... while their deep ITM calls lose $500 in value.  They are paying fees to go nowhere - no profit.

[MustacheAndaHalf]

ChpBstrd - It doesn't look like a Covid sensitive stock.  If you look at a graph of Macy's stock, there's a huge drop when the pandemic starts.  On GEO's stock price graph, it's hard to spot.  The first year of the Trump Presidency was more dramatic for the stock than the pandemic.  If Biden follows through with not renewing any contracts with private prison companies, GEO will keep losing business.  Would it make sense to wait 2-3 years for the next Presidential election cycle?

I think it's safe to say the COVID trade is over. For evidence, look at the airlines and cruise lines which are back to or above the values they had before sustaining all this damage.

Two years ago Carnival Cruises stock (CCL) traded at $50.40/share.  Factoring in dilution, that's like $31.23/share.  CCL is trading for $27.57/sh right now, with +13% room to a full recovery.  It doesn't look fully recovered to me.

Two years ago Macy's (M) traded for $19.62/share.  Macy's didn't dilute much, so the after dilution equilvant is $19.55/share.  Macy's trades at $18.16/share now, so it might recover +8% more.  WSB has added volatility, pushing it up above $20 some days - but it is not above it's prior value.

There's Occidental Petroleum (OXY) that was $49.09/sh on May 21 2019, or about $39.33/sh after dilution.  It trades at $25.36/sh now, with +55% room to grow.  And oil has done really well already, but there's still room.

I still see room for stocks impacted by Covid to recover.

[arebelspy]

Instead they can buy--and immediately exercise (why you don't see it in the open interest)--a deep ITM option from their buddy. Now they have the shares on their books to show they've covered.

If they have -100 shares (short) and buy 1 call (100 shares) and then exercise it, the call gives them +100 shares, closing their short position.  They're not short - they have zero shares.

They don't actually have the shares, they just print synthetic ones as a market maker... and then will need to deliver them later.

I thought we had talked about this earlier in the thread when I linked to the SEC paper describing how this can be used to get around FTDs and hide short interest?

Some other links:

https://www.reddit.com/r/GME/comments/m05jed/mystery_solved_the_deep_itm_calls_are_coming_from/

https://www.reddit.com/r/GME/comments/mhv22h/the_si_is_fake_i_found_44000000_million_shorts/

[ChpBstrd]

They are using far-ITM call options because time decay is slowest for these options, even if they cost a fortune, and because their time value will increase as GME falls closer to the strike price in their predicted scenario. E.g. GME is $166.35, an October call at the 20 strike has an asking price of $147.60 (Note the near-zero $1.25 time decay! That's the cost of maintaining a $166.35 short position.). When GME goes near $20 in August, as predicted, the call will gain time value due to being close to the money - maybe $4 - and the entity who is short GME can both get out of the short position and sell the long call option for some extra cash.

Except literally nobody is holding October GME call options at a $20 strike.
https://finance.yahoo.com/quote/GME/options?date=1634256000&p=GME
So... where are these massive numbers of deep in the money calls?

If they have -100 shares and 1 call contract (+100 shares), they cannot profit.  If the stock drops $5, their -100 shares cost $500 less to buy back ... while their deep ITM calls lose $500 in value.  They are paying fees to go nowhere - no profit.

I noticed that, but wanted to focus on trying to understand the mechanics of a protective call trade to see if it is a viable thing participant could do, even if in real life they are actually going naked short. There is open interest for far-ITM calls, but across different durations it does not seem like enough to hedge 20%+ short interest in the shares. I have not done the math to see how many shorts could potentially be covered by calls across all expiration dates. Plus, for several expiration dates, the available options only go down to a still-very-high strike price.

The way to make money with a far-ITM protective call would have to involve selling its increased TV as GME falls. Maybe if GME falls $5 the profit from a protective call wouldn't be noticeable, but if GME fell close to the strike price, the call would stop falling as quickly as the shares and would instead build up a buffer of TV that would constitute the profit on exiting the whole position. The TV for deep-ITM options is very low, so it costs very little to hold this completely safe position and wait for the right time to exit. Still, it seems like there are easier ways to make these few bucks.

That said, if I were a testosterone-crazed young trader with a binary home-run or get-fired career outcome, I would be tempted to go naked short on the rationale that it's a lot harder for GME to be short squeezed 500% higher now than it was when GME was a $20 stock. The short squeeze has already squeezed, so why hedge further? Maybe that explains the low open interest in calls.

In reality, it seems most open interest is concentrated at the money, with a big blip at the highest call strike where Redditors can yolo for less than a dollar a share. This would seem to be a strange way to hedge a volatile stock, because TV and decay are so high near the money. But it also involves tying up less money and earning higher profits in the event of a sudden meltdown to far below the call strike. That's what the shorts continue to bet on: a sudden and deep collapse in value.

[bwall]

ChpBstrd - It doesn't look like a Covid sensitive stock.  If you look at a graph of Macy's stock, there's a huge drop when the pandemic starts.  On GEO's stock price graph, it's hard to spot.  The first year of the Trump Presidency was more dramatic for the stock than the pandemic.  If Biden follows through with not renewing any contracts with private prison companies, GEO will keep losing business.  Would it make sense to wait 2-3 years for the next Presidential election cycle?

I think it's safe to say the COVID trade is over. For evidence, look at the airlines and cruise lines which are back to or above the values they had before sustaining all this damage.

GEO has been in decline for years as opposition to private prisons quickly went from a fringe position to a priority on the Democratic party platform. GEO didn't exactly defend their record well, jumping after contracts with ICE to participate in the separation of immigrant children from their families and visibly donating to GOP politicians. The stock market considers them to have bet it all on red and lost, which is why their stock is down 80% over the past 5 years, even as the S&P has doubled. A management shakeup would not be a surprise.

But did they really lose it all? Sure, in a couple of years they'll have a lot fewer federal contracts, they'll probably no longer be a REIT, and they'll be attempting to work off heavy leverage and sell off empty prisons, but there will be some residual value from their state and international businesses. I seriously doubt the federal government will forbid the states from contracting with private prison operators. 

Bureau of Prisons: 12% of revenue
US Marshals: 15% of revenue
Immigration & Customs Enforcement: 23% ..

So basically half their revenue is at risk, but the Biden administration's instructions were to not renew any contracts. Most of these contracts probably have years remaining. In other cases, if the government wanted to get rid of GEO they would either have to build a new facility from scratch, buy the facility from GEO, or lease the facility from GEO. It is unclear how far the mandate goes, but clearly we cannot simply write off all that revenue. GEO itself projects only a 9% reduction in revenue next year.

GEO's 2026 bonds sell for 67 cents on the dollar and might go lower, depending on negotiations which are said to be pending. It might not be a bad idea to put on a stink bid at 55 cents or so, because many banks have divested from the industry and there might be few buyers. If we haven't reached maximum pessimism yet, this could pay off.

+1 on COVID trade: it's over. If the stock hasn't gone back to pre-covid levels by now, then that is a result of their impaired business, not a sign of future upside to come.

When I look at GEO, I see a value trap with few (none?) catalysts that could change the trajectory.

[MustacheAndaHalf]

Instead they can buy--and immediately exercise (why you don't see it in the open interest)--a deep ITM option from their buddy. Now they have the shares on their books to show they've covered.

If they have -100 shares (short) and buy 1 call (100 shares) and then exercise it, the call gives them +100 shares, closing their short position.  They're not short - they have zero shares.

They don't actually have the shares, they just print synthetic ones as a market maker... and then will need to deliver them later.

I thought we had talked about this earlier in the thread when I linked to the SEC paper describing how this can be used to get around FTDs and hide short interest?
https://www.reddit.com/r/GME/comments/mhv22h/the_si_is_fake_i_found_44000000_million_shorts/

Their theory is that deep ITM calls ($9 to $17) were used to avoid synthetic short positions from violating "failure to deliver" (FTD) rules.  They showed the open interest was stable while daily trade volumes spiked - options were traded and exercised the same day, in large volumes.  That poster was watching Yahoo Finance's GME options page all day, which I won't do.  But they also used "Market Champion" for similar data, which tells me access denied for using a VPN.  So I can't check on GME call volume in May at low strike prices:
https://marketchameleon.com/Overview/GME/OptionSummary/Volume

All of which is strange, but that post starts with "Today (MAR31)", suggesting it's almost 2 months old.  A summary graph shows the big Jan spike, 2 week delay, then the end of Feb spike, and ends with another 2 week delay.  That graph implies that April will begin with another spike caused by FTD covering ... but the price of GME did not spike in the first week of April.

Is there evidence of high short interest, FTD, or FTD covering in May?

[arebelspy]

Yeah, I was linking to when the theories were first explained months ago to explain them to you.

There has been other DD (deep dives or due diligence) in the meantime on a lot of different facets as people try to put puzzle pieces together.

Everyone still holding GME has their own reasons for doing so; mine is the March 10th activity. There is nothing normal about a stock opening at 269 (from a previous close of 246), rising to 348 in a matter of hours, dropping to 172 with 5 trading halts in 35 minutes, then bouncing back and ending the day at 265.

If the shorts covered in January, why was there a massive short attack to make sure the price didn't go above 350 in March?

To directly answer your question: yes. There is evidence since those posts of using deep ITM calls and married puts to hide FTDs, indicating massive short interest.

There's lots of things pointing to GME having a short interest much larger than what's being reported publicly (such as the amount of buy vs sell activity on various brokerages, and the volume activity, as the buy orders are all being routed through dark pools). So for me, I still like the stock, and I'm still holding.

[MustacheAndaHalf]

If the shorts covered in January, why was there a massive short attack to make sure the price didn't go above 350 in March?

To directly answer your question: yes. There is evidence since those posts of using deep ITM calls and married puts to hide FTDs, indicating massive short interest.

Since April, GME has not hit $200/share. If the short sellers acted at $350/share, weren't they right?

If you do come across that evidence again, does it match my theory of declining short interest?  Is the call volume lower in Feb than Jan... lower in Mar... lower in April... etc?  There needs to be significant hidden short interest for a short squeeze to work.

As I understand call options, settlement happens the next day for everyone - individuals, hedge funds, market makers.  Maybe that's wrong, and a market marker is buying deep ITM calls to delay settlement longer than 1 day?

When someone buys a call option and exercises it, they just threw away the time value.  That doesn't seem worth it for an option that settles the next day.  Buying shares on the open market would be more efficient.

[arebelspy]

If the shorts covered in January, why was there a massive short attack to make sure the price didn't go above 350 in March?

Since April, GME has not hit $200/share. If the short sellers acted at $350/share, weren't they right?

These weren't new shorts betting it would go down, they were the hedge funds fighting to keep the price low so they didn't get margin called.

Whether they were right or not remains to be seen.

There needs to be significant hidden short interest for a short squeeze to work.

Correct.

When someone buys a call option and exercises it, they just threw away the time value.  That doesn't seem worth it for an option that settles the next day.  Buying shares on the open market would be more efficient.

Correct.

They aren't making money doing this, they're losing money. They're doing it to buy time (literally) and kick the can down the road.

They don't ever actually receive those shares from the call options, they just show them on their books and 21 days later or so their partner who sold them that option needs to deliver or get a FTD... or find some way to kick that FTD can down the road.

The option settles, yes, but that doesn't guarantee that the shares are delivered, basically.

[MustacheAndaHalf]

If WSB and hedge funds all buy a stock, it goes up with or without short covering.  So even if some shorts are covering, I think WSB + hedge fund buying also explains some of the stock price moves.  I had forgotten that in mid-March Macy's had a big surge in it's stock price - as did AMC.  So maybe the price moves are a mixture of WSB + hedge fund buying, and some degree of short covering.

Did WSB analyze Macy's and AMC Theater's stock?  The short positions and FTD numbers?

If the shorts covered in January, why was there a massive short attack to make sure the price didn't go above 350 in March?

Since April, GME has not hit $200/share. If the short sellers acted at $350/share, weren't they right?

These weren't new shorts betting it would go down, they were the hedge funds fighting to keep the price low so they didn't get margin called.

Whether they were right or not remains to be seen.

People who hold do not decide stock prices - it's people trading that determine prices.  So to send GME stock lower, someone had to be selling.  It had to be a new short position, otherwise there's no trade.

People who sold short at $350 have had months to take a profit.  Maybe they were right, and failed to take a profit, which is very foolish (and something I've done).

When someone buys a call option and exercises it, they just threw away the time value.  That doesn't seem worth it for an option that settles the next day.  Buying shares on the open market would be more efficient.

The option settles, yes, but that doesn't guarantee that the shares are delivered, basically.

Thanks, that's a clear description.  So there's some kind of call option that loses money, and when it's settled... it's not really settled.  Market makers can wait 3 weeks to deliver shares.

But that's only market makers - I thought hedge funds only got 3 days?  How can hedge funds pull this trick, if they only have 3 days?


I'd be curious to see new data showing that deep ITM call buying is still going on, and especially the amounts involved.

[arebelspy]

They couldn't cover in that time, or they'd have started a huge squeeze due to the amount they're short.

They keep adding to their short position kicking the can down the road (and putting buys in dark pools to keep the price down and sells on the market), any start to cover kicks off a squeeze.

Citadel is a market maker and short hedge fund abusing their position as a MM to do all this.

There is a lot of data on calls and puts that are irrational except as FTD covering, I can dig up some later when I'm at my computer or feel free to search /r/superstonk for "married puts" or "otm calls" and such terms. :)

[frugalnacho]

People who sold short at $350 have had months to take a profit.  Maybe they were right, and failed to take a profit, which is very foolish (and something I've done).

Maybe they are still short because they think it's still over priced.  Surely you have a bunch of investments currently in the green, so why not take the profit on all those instead of letting them ride?

[MustacheAndaHalf]

People who sold short at $350 have had months to take a profit.  Maybe they were right, and failed to take a profit, which is very foolish (and something I've done).

Maybe they are still short because they think it's still over priced.  Surely you have a bunch of investments currently in the green, so why not take the profit on all those instead of letting them ride?

I might not be the best example for that, since most of my investments are in Covid recovery stocks that I'm holding until they go bankrupt or recover.  Some have recovered (airlines, restaurants) and I've sold those stocks.  Others haven't, and I remain invested.

My track record on buying puts is quite bad.  So maybe my purchase of GME puts is a good sign for people going long.  :)

A third viewpoint would be that GME is stuck between two ranges, $140 to $180.  I imagine that's one of those observations that can fail spectacularly when it proves to be wrong.  But if you bought puts when the price nears $180, and sold those puts to buy calls near $140, that would have limited risk.  It's not something I've done, but it would be an investment approach halfway between pessimism and optimism for GME stock.

[arebelspy]

People who sold short at $350 have had months to take a profit.  Maybe they were right, and failed to take a profit, which is very foolish (and something I've done).

Maybe they are still short because they think it's still over priced.  Surely you have a bunch of investments currently in the green, so why not take the profit on all those instead of letting them ride?

I might not be the best example for that, since most of my investments are in Covid recovery stocks that I'm holding until they go bankrupt or recover.

I think little investors like you for GME aren't relevant. Certain hedge funds like Citadel have shorted the stock multiple hundred of percents of the float and hidden those shorts via various tricks like married puts.

Tens of millions, maybe hundreds of millions of shares.

Will the price return to rational at some point? Sure. But not until all shorts have covered, with a big squeeze along the way.

The hedge funds shorted at $350 (doubling down), yes, but they couldn't take profit on it at $40 because they were still massively short at $4 and $12 and needed it to keep falling, and taking profits on the $350 shorts (and covering losses on the lower ones) would have kicked back up a squeeze, so they never did. And it keeps rising at a reliable t+21 delivery date.

On April 26 (the last t+21 FTD date) I added a calendar event for today to see if those predictions have held. So far it looks like a tentative yes. (To be fair, I didn't think it would take this long, a few months was my thought in Feb/March, we're now almost 4 months in... We'll see how long they can keep delaying.)

I wouldn't be betting against GME right now on any sort of short or medium timeframe.

I am long, and still like the stock.

[arebelspy]

GameStop has an NFT site now.

Nft.gamestop.com

Seems like they maybe have a digital transition plan.

https://www.reddit.com/r/Superstonk/comments/nl1qq0/we_arent_even_grasping_how_big_the_nft_news_is_yet/

Also gave info on a GME crypto token:
https://www.reddit.com/r/Superstonk/comments/nl0lk1/gme_token_info/

Crypto dividend (aka Overstock) could kick off the squeeze.

[arebelspy]

Oh man, you're in for some exciting stuff then! The Internet is filled with dumb things.

You're a bit too late for Time Cube though, gonna have to Internet Archive that one. :D

[MustacheAndaHalf]

I think people going to the hospital after trying a hot pepper is dumber still:
https://en.wikipedia.org/wiki/Hot_pepper_challenge

...
My track record on buying puts is quite bad.  So maybe my purchase of GME puts is a good sign for people going long.  :)

A third viewpoint would be that GME is stuck between two ranges, $140 to $180.  I imagine that's one of those observations that can fail spectacularly when it proves to be wrong.  But if you bought puts when the price nears $180, and sold those puts to buy calls near $140, that would have limited risk.  It's not something I've done, but it would be an investment approach halfway between pessimism and optimism for GME stock.

Does self awareness count for something?  "My track record ... is quite bad ... GME is stuck between two ranges, $140 to $180".  I mean, the skill it takes to be that bad - literally a day before the stock pushed up past $200/sh.  Safe to say I'm a bad predictor of GME's short term moves.


GME's board meeting is scheduled for June 11, just over 2 weeks from now.  If I wanted to get people excited, I wouldn't announce my biggest piece of news 2 weeks ahead of a board meeting.  So is something more spectacular planned for 2 weeks from now?

[frugalnacho]

[arebelspy]

GME's board meeting is scheduled for June 11, just over 2 weeks from now.  If I wanted to get people excited, I wouldn't announce my biggest piece of news 2 weeks ahead of a board meeting.  So is something more spectacular planned for 2 weeks from now?

The board meeting is 6/9*, not 6/11.

And yes, there's more fireworks coming, IMO.


*Much digital ink has been spilled about the fun immature nature of this date.

[MustacheAndaHalf]

frugalnacho - to respond to the "tired of being wrong", it's very much limited to short term moves.  I got a lifetime of being right packed into 2020, so I'm good to go for a long time.  I pushed 100% equities within 2% of the bottom (one trading day early) while also calling that bottom in another thread.  I've run an experiment that beat the market by +80% since it started in March 2020.  Maybe I got tired of the market being wrong in 2020, and now I'm trying to join in with my short-term GME moves.

[frugalnacho]

Don't take my criticism too seriously, I'm just fucking around.  But man are a lot of people consistently wrong about GME, including me.  I have no fucking clue what's going on or who to believe or what the real truth is.  This entire rollercoaster has just reaffirmed my belief in slow and steady growth in index funds.  I can't outsmart the market, or even a group of self proclaimed retards buying up meme stocks. 

[ChpBstrd]

What's weird about GME is that the short interest ratio is now only 22%. This is still high, but certainly not 140% any more. Shorts are paying 0.98% interest to borrow those shares.

https://fintel.io/ss/us/gme

According to Yahoo Finance, there are 134 stocks with short interest ratios over 22%. There are 9 with SI higher than 50% of float, including BBBY, GEO, and EVI. If the rationale for HODL'ing GME was the short squeeze, why aren't investors rushing to these names with higher SI and why aren't they rushing out now that the short squeeze is clearly on for GME? Are they waiting for GME to go back down before selling?

GEO and EVI even have positive TTM earnings.

In late 2020, when GME short interest was 140%, then yes there was a strong rationale that a massive short squeeze was imminent. But with GME at 22% short interest, what's the rationale for it rather than the other 134 companies? BBBY and GEO have twice the shorts. 

[arebelspy]

What's weird about GME is that the short interest ratio is now only 22%.

IMO, that is not true.

The short interest is well above 100%.

A few things:
- It was very likely well above 140% before, that was just the highest # they could report.
- FINRA changed how short interest is calculated in February, and now it's not possible to even be over 100%, because they count all shares, not a % of the float, and possibly even synthetic shares. You aren't comparing an apples to apples number.
- The reported short interest is on borrowed shares, but there's other ways to short and not have it show up in those numbers. See: earlier discussion of shorting, not delivering the shares, and then hiding the failure to delivers (FTDs) via options trickery.

Short interest right now is insane, I'm betting in the hundreds of percent.

In late 2020, when GME short interest was 140%, then yes there was a strong rationale that a massive short squeeze was imminent. But with GME at 22% short interest, what's the rationale for it rather than the other 134 companies? BBBY and GEO have twice the shorts.

The rationale is the public numbers are wrong, and reading the research (DD:deep dive/due diligence) on GME, if you find it convincing, means you hold GME. That's what all the people on r/SuperStonk have done, decided that GME is still the play because the shorts haven't covered (and keep increasing their short position).

[arebelspy]

For the record, I expect GME to easily 4x from where it's at. Four figures.

As I've said for months, I think the squeeze is still on.

Disclaimer: Not financial advice, and I'm long the stock.

[bwall]

I find @arebelspy 's argument (short interest is very high and unreported) to be very convincing.

Here's why:

Secrecy is the nature of a winning short position. If word gets out that you're short, you'll be crushed. It's not my opinion, it's just how the market works.

After GME soared in Jan/Feb. 2021, Melvin Capital and others very loudly announced the closing of their short positions. They had no choice--they had to broadcast that they were out of GME in order to stop people from buying. Did they really close their short? Well, judging by the 1Q losses they announced it makes sense. But did they really close out 100%? Only their trading desk knows.

Once I learned about how a synthetic short works; Buying DITM Calls allows you to avoid a Failure to Deliver notice while also allowing you to not have to report a short position, I knew that the public short information on GME would be suspect until the stock became re-aligned with the company fundamentals.  I even recall when Melvin Capital was publicly defending their short position (remember the video conference they'd announced?) they said 'We know more about shorting stocks than you do. Synthetic shorts.' I had no idea what they meant. Now I do and, I think:

1) The stock is (still) way overvalued compared to the value of the underlying company, even after six months. (How the hell does GME go from $145 to $250 in less than a week? with no news???) . I think we can all agree on this point. Therefore:
2) What is preventing the stock from dropping? What set of facts have to be true in order for the stock to stay (rise) at these levels?

A) No net sellers. Everyone who wanted to cash out/sell already has.
B) No short sellers. No one would risk a naked short on this stock, reporting their short interest and bringing attention back to GME.
C) Anytime the stock drops, buyers come in and drive the price back up. Who are these buyers? The WSB/YOLO trade is already over. They spent all their GME money already, very early on. It's not index funds and it's not value investors or even long term buy and hold. So who is the marginal buyer?
D) Is the marginal buyer a i) institutional long? ii) Hedge fund (long) iii) Hedge fund short covering?  iv) Someone else?

For me  b/c I can't think of who'd be in the 'someone else' category, I'm forced to go with: Hedge fund short covering.

Now if my premise is correct so far (and it might not be); why wouldn't the hedge fund short covers wait and cover at, say $100, instead of $140? Answer: There are so many that need to cover that the weakest hands have to cover at their first opportunity. If this is true (and it might not be), it would dovetail best with arebelspy's theory over the competing theories.

Final thoughts: I think that $1000 for GME is a bold call and one I wouldn't have made. But, GME has humbled so many stock forecasters and it's re-writing what I consider possible. I'd place a friendly wager (a beer?) that GME will see $500  before it sees $100.

[chasesfish]

I'm looking forward to the movies that will be made about this.

I don't know GME's business well enough to have an opinion now one way or another.  I actually banked a subsidiary they spun off in my professional career and I thought management was kind of incompetent.  That ship turned so there's a chance of a legitimate company with real leadership....



Speaking of movies...what do you think about AMC this week?  I did a consulting gig in this business and have loaned into it for years.  The company is worth....nothing.  They still can't pay their full rent due to $EPR (which I do own).   I was shorting it at $14 then selling at $10 or $11, but was fortunate no shares were available.   I do have some put option limit orders out there to buy $15 puts for $5/contract looking out into 2023.

The only game for this company is to issue stock into this strength and retire shares....but they still have lease liabilities to pay.

[ChpBstrd]

@arebelspy do you know of a handy reference other than statements by anonymous people on social media where I could read more about changes you describe to the way short interest is calculated. I also found https://www.finra.org/filing-reporting/regulatory-filing-systems/short-interest#notices which does not list any relevant recent announcements (you'd think something as momentous as a change in the way something is calculated would be noted). I also found https://www.finra.org/rules-guidance/notices/information-notice-051019 describing in detail how short interest is calculated. The only ways I see to hide a short transaction is if an individual using a brokerage shorted shares that the brokerage had in their inventory (i.e. other people's long stock positions, in margin accounts). This would not require the brokerage to exchange with another brokerage, which is the event that triggers the FINRA rule.

Relevant quotes:

A common example is where a firm is facilitating a customer order to sell long. The firm may elect to first sell an equivalent number of shares from its own trading account to another firm and then purchase the shares from the customer at the same price to fill the outstanding long sale order. Trading in this manner reduces risk for the firm by enabling it to manage its inventory and lock in a price for the customer execution. Although this trading model involves two separate trades—one between the two firms and one between the firm and its customer—the two offsetting trades are executed at the same price to fill a single customer order. Thus, FINRA rules provide for the public dissemination of only one of the trades (the trade between the two firms) so as not to overstate the reported volume.

Some market participants mistakenly conclude that the bi-monthly short interest data is understated because the Daily File reflects short sale volume that is much larger than what is reported as short interest. However, short interest data reflects short positions held by market participants at a specific moment in time on two discrete days each month, while the Daily File reflects the aggregate volume of trades executed as short sales on each trade date. Therefore, while the two data sets are related (i.e., short sale volume may ultimately result in a reportable short interest position), they are not necessarily correlated.
For example, if a firm sells short 1,000 shares of security ABCD, then purchases 1,000 shares of ABCD later the same day, the short sale volume in the Daily File will include the 1,000 shares that were sold short. Because the firm sold short and purchased an equivalent number of shares that day, it did not establish or accumulate a short position in ABCD; thus, its short sale has no impact on the reported short interest in ABCD.

I agree that a "synthetic short" position (buy a put, sell a call) or naked short calls would not appear on the FINRA numbers because they are options, not borrowed shares of stocks that brokers have to report. Do you mean to say that in an environment where there are rampant naked short call positions, an event similar to a classic short squeeze could occur and the holders of the naked short calls would have to buy stock to hedge their losing bets?

For example, I can see a trader operating on the following algorithm:

     Sell naked short calls on GME at the 240 strike.
          If GME reaches 240, buy GME stock at 240 to transform the position into an ATM covered call to halt losses.
               Wait for the massive time value to erode off of the naked short call.
          If GME goes down instead, profit from exiting the naked short call.     

Is this what you are saying is happening?

[MustacheAndaHalf]

How the hell does GME go from $145 to $250 in less than a week? with no news???

I believe it was spurred by GameStop revealing they are building an NFT platform.
https://markets.businessinsider.com/currencies/news/gamestop-nft-building-ethereum-powered-platform-hiring-team-ecommerce-transformation-2021-5-1030467635

[MustacheAndaHalf]

Don't take my criticism too seriously, I'm just fucking around.  But man are a lot of people consistently wrong about GME, including me.  I have no fucking clue what's going on or who to believe or what the real truth is.  This entire rollercoaster has just reaffirmed my belief in slow and steady growth in index funds.  I can't outsmart the market, or even a group of self proclaimed retards buying up meme stocks. 

I'm also thinking that by posting here so often, people get the impression of me as only a bear on GME.  If I posted about my other positions, it would just be constant, annoying bragging.  Too bad that's not my style, but that's why I don't mention the other investments much, and probably give everyone a biased view that GME is my only holding.  So sometimes I like to remind people I'm running an experiment that is beating the market by 80%.

When speculating, I need to stick to being an event investor.  Right as the January GME spike was breaking, I sold call options and had a nice profit.  Then, after the event was over, I repeated the same behavior when it made no sense - short calls on GME.  When there's no event, I need to do nothing.

This NFT boost to GME stock seems like an event, so I bought a few puts on Friday morning.  I'm happy with that timing, although there's a significant risk that Ryan Cohen makes more announcements and drives the price higher.

[MustacheAndaHalf]

As I've said for months, I think the squeeze is still on.

Why is it taking this long for a short squeeze?

I suppose the answer is "cheating with synthetic shorts and deep ITM calls".  GME market makers are losing slowly over time to avoid recognizing large losses.  When Congress looked at the issue, they only held hearings about people who were publicly visible - I don't think they followed the money.

Citadel doesn't get caught with "fail to deliver" fines very often.  Last year they were fined ... wait for it ... $10,000 for "fail to deliver" by FINRA.  I'm guessing a $30 billion market cap company isn't scared of a $10,000 fine.
https://files.brokercheck.finra.org/firm/firm_116797.pdf#page=50

Given the number of abuses, it does seem like they're pushing the limits.  So at what point does FINRA discover massive "fail to deliver" cheating?  If I can coin a term, "fail to deliver kiting"... like check kiting, but with FTD notices.

https://en.wikipedia.org/wiki/Citadel_LLC#Regulatory_issues
"In 2020, Citadel Securities was censured by FINRA a total of 19 times for a variety of misconduct, including failing to close failure-to-deliver positions, naked short selling, inaccurate reporting of short sale indicators, executing trades during circuit-breaker halts, and failing to offer its clients best prices on the bid-ask spread."

[arebelspy]

How the hell does GME go from $145 to $250 in less than a week? with no news???

I believe it was spurred by GameStop revealing they are building an NFT platform.
https://markets.businessinsider.com/currencies/news/gamestop-nft-building-ethereum-powered-platform-hiring-team-ecommerce-transformation-2021-5-1030467635

Nah. The NFT stuff came out after the rise started.

It went up due to the FTD cycle. It's on a t+21 day cycle.

[arebelspy]

As I've said for months, I think the squeeze is still on.

Why is it taking this long for a short squeeze?

They don't want to go bankrupt?

They're kicking the can down the road as long as possible.

Why would the short hedge funds initiate the squeeze by trying to cover?

It hasn't squeezed cause there's no catalyst. The price needs to get high enough for margin calls, and that hasn't happened. When it gets close we see stuff like March 10.

There are several things that could cause a catalyst, like a reverse merger causing a new cusip number or a crypto dividend causing the shorts to have to cover cause they can't deliver that (see: overstock).

My money is on the number of  votes for the shareholders meeting coming in way over the amount of issued shares and that causing the catalyst for a squeeze (possibly via share recall).

[arebelspy]

Citadel doesn't get caught with "fail to deliver" fines very often. 

Yeah, all the illegal activity they do give very pathetic fines from the SEC or other regulatory bodies; they aren't a disincentive, just a cost of doing business.

That's why I think a different catalyst other than government intervention will be what kicks off the squeeze.

[MustacheAndaHalf]

How the hell does GME go from $145 to $250 in less than a week? with no news???

I believe it was spurred by GameStop revealing they are building an NFT platform.
https://markets.businessinsider.com/currencies/news/gamestop-nft-building-ethereum-powered-platform-hiring-team-ecommerce-transformation-2021-5-1030467635

Nah. The NFT stuff came out after the rise started.

It went up due to the FTD cycle. It's on a t+21 day cycle.

GME stock stayed below $200 for all of April and May (much longer than 21 days), and then the same day NFTs are announced, GME hits $269.  So it seems like when the 21 day cycle is a factor, the price didn't move that much.  When NFT offerings are a factor, the price spiked much higher.

I'm not following where the 21 day cycle begins.  Is it fair to say FTD problems cause price spikes in GME stock?

If it's based on peak prices:
Jan 28 GME hits local peak $483
+28 days, Feb 25 GME peaks at $185
+13 days, Mar 10 GME peaks $349
+25 days, Mar 26 GME peaks $219

These peaks already don't make sense when measured on a 21 day cycle.  With FTD, there's exactly 21 days to deliver, which means buying calls every 21 days.

? April 14 peak ?  GME opens $144 and hits $174
? April 19 peak ?  GME opens $172 and hits $175
? April 26 peak ?  GME opens $151 and hits $175
? April 27 peak ?  GME opens $184 and hits $188
? May 13 peak ?  GME opens $147 and hits $170
? May 17 peak ?  GME opens $160 and hits $183

Where is the 21 day cycle in April and May?  There's May 28 with a peak of $269, but 21 days before that GME stock wasn't moving much at all (from May 4-10).  So if the 21 day cycle causes price spikes on May 28, why did nothing happen on May 7?

I'm both curious and criticizing - my questions drive at things I don't understand, which I find hard to explain with a 21 day cycle.

[arebelspy]

https://redd.it/nksg03

It's a bit confusing to read, but it was a prediction made.months ago updated a few times that predicted May 25 two months early.

As I said, on April 26 I added May 25 to my personal calendar to see if the prediction held.

Another example this was made a week ago:
https://redd.it/nf22qz

The whole superstonk sub was waiting for this week, specifically the 25th/26th.

[MustacheAndaHalf]

https://redd.it/nksg03
It's a bit confusing to read, but it was a prediction made.months ago updated a few times that predicted May 25 two months early.

It looks like their original predictions use T+21 trading days.  With most weeks having 5 trading days, that's like 29 calendar days.  There's another claim that at the end of the month, call options expire, and that predicts the surge in demand.  Although they disagree with that, both views seem to point at the end of month tending to have a surge in GME's stock price.

That fits the data better, with the last Th/Fri being the highest GME price (with one exception on Tues Apr 27 at $188, but the 2nd highest price was Friday Apr 30 at $184).

[ChpBstrd]

Careful, y'all.

When one overthinks a chaotic system, one often ends up with an explanation resembling superstition.

[arebelspy]

When one overthinks a chaotic system, one often ends up with an explanation resembling superstition.

Indeed. But when someone makes precises, not vague, predictions months in advance and they come true, something interesting might be happening.

There's plenty of crazy theories tied in with GME right now, and a large part of researching it is separating the credible from the not.

[MustacheAndaHalf]

Careful, y'all.

When one overthinks a chaotic system, one often ends up with an explanation resembling superstition.

Superstition does not involve data.  The prediction that GME will spike at the end of each month is backed up by data from Jan to May.  So it might be something, but superstition doesn't quite fit.

Their theory is that "failed to deliver" would force market makers to take huge losses on short positions in GME.  To avoid those huge losses, the speculation is that they buy deep in the money calls and exercise them the same day - thus avoiding a "failure to deliver" for another 21 days.  Buying a deep call and exercising it immediately is very strange and doesn't make financial sense - it's just throwing away the time value of the option.  The fact that has been happening is strong evidence something strange is up.  So there's the predictions, and strange behavior that is hard to explain without the theory.

Of course, there's two things to watch for when someone posts their theory and it comes true:
(1) How many other places did they post different theories?  There's a mail scam where you send 32 letters predicting APPL will go up, and 32 more predicting it will go down.  The people who received a failed prediction are dropped from the mailing list.  Then you divide them again, making a new prediction.  And so on... the 16 people who saw you predict correctly twice in a row are unaware that 48 people saw your prediction fail.

(2) A feedback effect: on a really popular forum where people believe they need to buy GME at certain times, you provide a time for them to buy GME.  Their buying drives the stock up, fulfilling the prediction.

[gertitorpe]

How do I profit from the retail stock mania in the past year: Virtu Financials
It's a publicly traded market maker and financial services company in the US. Robinhood and other retail brokerage companies may forward their buy or sell orders, to Virtu or another market maker companies who execute these orders at or a better price as currently available on the market. If the executed price is better as the best marketed price, Virtu and the brokerage company will split that difference earned and count as revenue.

In other words when retail trading volume and/or volatility in stock markets is high, Virtu and other market maker companies make a bank.

Risk: there are discussions at the SEC to better regulate Virtu and other market makers which may significantly affect their business model, revenues, stock price, etc

Disclaimer: I own shares of Virtu

[arebelspy]

GameStop just announced their shareholders meeting will be just 15 minutes.

Reddit speculation is that they'll just announce that the vote count is way higher than number of shares and they can't accept the vote or proceed. (And then likely initiate share recall or some other action.)

https://redd.it/nqv2tm

[arebelspy]

https://www.reddit.com/r/Superstonk/comments/nqu45p/why_is_no_one_talking_about_this/

ALL the meme stocks are going up.  BB, AMC, BBY, GME. They're all moving in concert because of these hedge funds that have shorted them. I think GME is the ultimate play, but right now they're all tethered.

I don't see how anyone can believe the shorts covered when they said they did, all the evidence points to the contrary.

They'll all dive together too next dip.

[tacticalteam4]

What do you make of GME not rising as drastically as the others today? Too expensive to FOMO into compared to the others?

[arebelspy]

What do you make of GME not rising as drastically as the others today? Too expensive to FOMO into compared to the others?

My speculation: Yeah, that, and the hedge funds still more desperate to keep GME down. It's their biggest liability. Some of them (like Susquehanna) actually went long AMC to try to recoup some. But AMC definitely getting some FOMO bump right now.

[MustacheAndaHalf]

On CNBC I heard it claimed that 80% of AMC shares are owned by retail investors.  And a brief poke around suggests it could be accurate, when you include institutional investors + insiders.  That really calls into question my theory that hedge funds have been pushing up AMC's price, or GME's price.  Yesterday tens of billions of dollars worth of AMC shares changed hands - that seems like an excessive amount for retail investors to buy in one day.  But now I'm not sure...

If the GME board meeting simply announces there's too many shares short, and ends the meeting, that seems likely to fuel another buying frenzy.  It would mean an insider confirms that WSB believes, that short positions using fake shares are being kept alive using tricks with derivatives.  And it serves Mr Cohen's interests to get rid of those shares as well, since their existence dilutes his voting power.  I guess we wait and see what happens next week.

[arebelspy]

Okay normally I borrow stock from shareholder A to short it and sell it to shareholder B. By lending out their share, A gives up voting rights, and b can vote. 1 share, one vote.

Now say I'm a market maker, and someone buys a share of GME. I say okay, here's the share. As a market maker I can create that share out of thin air, and I'm supposed to match with a buyer within a few days (longer cause I'm a market maker). But now I don't. I get  failure to deliver (FTD). But then I use options trickery to delay the FTD another few weeks. Repeat.

I'm (the market maker) short that share, but by creating the share, now there's an extra owner entitled to a vote.

Do that tens of millions of times and now there's more people with shares that want to vote than there are real shares.

I glossed over kinda quickly cause on phone, but I think that should be enough to understand, yeah?