2021.01.23

Reddit WallStreetBets comment GameStop GME media Bendetto4 ChantiHawk

Today in the Financial Times of Kilroy: what the heck happened on Friday and what's going to happen Monday?
What happened?

Reddit WallStreetBets GameStop GME trading halt 69 lmao itmetheSEC

On Friday GME hit a circuit breaker above $70 from a 52-week low of $2.57.

Reddit WallStreetBets trade in irony comment OstracizedPanda

This is Gamestop, the brick-and-mortar video game store famous for pushing strategy guide sales, offering terrible trade-in values, and mistreating their employees. It's the last holdout from the era of Electronics Boutique, Babbage's, Funcoland. Gamestop has been compared to Blockbuster, in that physical media is being phased out and can be purchased without leaving the couch. Oh yeah, and there's a pandemic happening.

Still, The Big Short's Michael Burry said in August that he was long GME.

Reddit WallStreetBets DeepFuckingValue GameStop GME positions

Just as importantly, so did /u/DeepFuckingValue, now a household name around WSB. So while retail activity has seemingly been pumping GME since December, this week got a little more crazy:
Everybody is asking "what is the squeeze", but nobody is asking "how is the squeeze"

What happened last week with GME stock price and option was a combination of a gamma squeeze [1] and infinite short squeeze [2]. For the first time in financial history all GME call options are in the money (ITM) because the highest call strike price set by the CBOE for Januaray 29, 2021 is $60.

Note: A primer on gamma squeeze: https://old.reddit.com/r/wallstreetbets/comments/l2t9bf/gme_i_think_this_is_a_gamma_squeeze_where_dealers/ Market Maker [1] are in a condition never observed in financial history. Hundred of thousands of retail are buying the GME 60C across the options calendar and MM can't hedge properly because there are not enough GME shares to buy to properly financially hedge (accounting for the interest rate to borrow)

Did retail traders do this? While validating any of this is far above my pay grade, Cunningham's Law gives me some confidence in the analysis provided by so-called 4chan with a Bloomberg terminal. The major financial journals haven't loudly disagreed, although it should be noted they're probably enjoying increased web traffic from this event. That said, even an honest assessment of the GME situation could be missing the moves made by the Scions and Softbanks.


The story of WSB/FinTok/retail vs institutional traders is... well, fun. Simply, it's "real people" using their collective financial power to beat the "moneyed elites who have always done this, to our detriment" (see image at the top of this section).

Reddit WallStreetBets comment Citron research Steven Hawking Early_Negotiation_92

WSBers with three shares of GME are proudly announcing the Retail Revolution. For me, it seems more like a bunch of traders stormed some sort of financial capitol building in a largely ineffectual publicity stunt. WSB et al broke some algos and surprised the market makers with their ability to spontaneously organize, but anonymous web forums can be manipulated and algos can be changed.

Regardless, it seems worth pausing to enjoy how a pandemic, social media, and free/cheap trades managed to create a brief moment of financial history for a company that shouldn't even exist. It's a pandemic and Netflix's action movies are total garbage, it doesn't take much to entertain me.
What's next?

...the MM's/brokers are going to have to deliver a ridiculous amount of shares when these expired options settle. Typically, settlement is on Tuesdays. I've read estimates that 10-15M shares worth of calls expires ITM last Friday. Again, this is fucking retarded.

Please note that none of the above movement relates directly to the short squeeze... but it will. Because there are now 10-15M shares tied up in the clearing houses, there are now even fewer shares to be borrowed. There are estimates that the true short interest on this stock was around 300%. Now, with about 20% of the total float committed to the fucking clearing house as they sort out Friday's shitshow, I expect true short interest is closer to 500%.

Demand for GME will continue to pump on Monday. This is a cultural event now, where every lay person can be a modern-day Robin Hood. The shorts are going to have their positions closed whether they like it or not if this continues (which it will). Since there are far far far fewer shares floating over the next 2 trading days, though, a squeeze on Monday or Tuesday could utterly destroy Melvin and the other shorts.

Source.

BlackBerry BB share price

Most of WSB is focused making GME a repeat of Volkswagen in '08. The other ticker that is making the rounds is Blackberry. It would be interesting if retail investors rolled their GME earnings into an even bigger move on the company formerly known as RIM.
Back to xoomer investments

Dr Parik Patel tweet Elon Musk Jeff Bezos richest man fundamentals

Still, I thought I'd compile a list of stonks I track for wheels and long term/401k.

5G ETF investing mobile TMobile Apple TSMC

Sadly, I think I bailed out of NXTG and FIVG a bit early.

SPAC options

I haven't gotten to deep into it, but Corey recommends selling calls on SPACs that have options. He provided some examples with monthly OTM calls for about 10% purchase value.

Symbol
Name
Current price
Sector
Role
Notes
AMD
Advanced Micro Devices
$90
Semiconductors
Wheel/growth
AMD and Intel seem like stable investments - their x86 processor lines aren't going to gobble up market share, nor are they going to lose it immediately. Apple and Microsoft have already indicated acceptance of a longterm move to ARM, but for now they'll pump out processors and try to one-up each other. At a sub-$100 share price, AMD is half a Microsoft and a fifth of an nVidia. I'm not sure the Xilinx acquisition will do too much.
BATT
Battery ETF
$19
Metals/technology
Growth
A way to capture the growth of battery metals as well as electric vehicle companies.
BB
Blackberry
$15
Software
Growth/bet
Research in Motion's second act: abandoning secure handsets in favor of embedded operating systems (they bought QNX some time ago). Currently this may be WSB's next pump and dump, but it has legit growth potential - just not at this price.
CRSR
Corsair
$40
Hardware
Wheel/growth
Corsair moved beyond RAM to a crowded gaming hardware industry that has two camps: gratuitously overpriced and sketch. Could they establish a go-to brand for PC parts and peripherals? Regardless, they carry nice premiums without much investment.
ERIC
Ericsson
$12
Telecommunications
Growth
Buying Ericsson is basically a bet on Europe and the US permabanning Chinese mobile infrastructure companies.
MJ
Alternative Harvest ETF
$20
Cannabis
Growth
If there's a sector that warrants investment in an ETF rather than a single company, it's cannabis. This industry isn't likely to disappear given the current climate and has plenty to gain.
MSFT
Microsoft
$225
Software
Wheel
I'm not sure Microsoft's stock price is going anywhere fast, but it's stable and perfect for selling calls with a mid-level investment.
NOK
Nokia
$4
Telecommunications
Growth
Buying Nokia is basically a bet on Europe and the US permabanning Chinese mobile infrastructure companies.
NVDA
nVidia
$550
Semiconductors
Wheel
Bounces between $500 and $600 pretty regularly, weekly wheels can be traded for $400-$1,000. ARM acquisition makes me bullish about this company long term.
PFE
Pfizer
$36
Biotech/pharma
Bet
There's a case to be made for owning a huge pharma company. I'm going to look at February earnings and perhaps bail out. Being first to market with a vaccine was priced in a while back, but the full financial benefit might not yet be understood.
PLTR
Palantir
$32
Defense
Wheel/growth
While this company has limited customer growth potential, it is irreplaceable in its domain. Option premiums are currently high and it may be undervalued.
RKT
Rocket Mortgage
$20
Financial
Wheel/growth
IPOed around 20 last year, options volume is middling but may gain momentum as the economic climate settles.
SLV
Silver
$23
Metals
Hedge/inflation
A hedge against monetary policy and required investment to talk to stacker/libertarian friends.
SMH
Semiconductor ETF
$240
Semiconductors
Wheel/growth
Fairly high already, semiconductors are only growing. Worth buying into for growth after the next correction.
SPCE
Virgin Galactic
$35
Space
Wheel
Volume high relative to share price, and you're buying into the meme "Pleas fly again".
TSM
Taiwan Semiconductor
$130
Semiconductors
Wheel/growth
Huge name in semiconductors which are, you know, going in more and more things like light bulbs, exercycles, and vaccines.
TWM
Russell 2000 2x Inverse ETF
$16
Financial
Hedge/correction
While the Russell doesn't capture the mom-and-pop businessess that are supposed to be hit hardest by the pandemic, large small businesses may be more affected than the Fortune 500.
UVXY
Volatility ETF
$10
Financial
Hedge/correction
This will slowly decline in value but skyrocket when the rug pull finally arrives.
VXX
Volatility ETF
$16
Financial
Hedge/correction
Volatility ETF that doesn't turn quite so sharply as UVXY and VIX.
XLE
Energy Sector ETF
$42
Energy
Growth/dividends
If you don't mind unethical investing, the energy sector is recovering from 2020 and XLE has ETF-level exposure.
XOM
Exxon Mobil
$50
Energy
Growth/dividends
If you don't mind unethical investing, the energy sector is recovering from 2020 and XOM pays hefty divvies.

Feet fire fireplace

Am I doing FIRE right?