Gamestop was my free share when I joined Robinhood earlier this year. Dumped it the second I'd made a few cents off of it (it was doing awful at the time). Whoops! I'll just throw this on the "I...
Gamestop was my free share when I joined Robinhood earlier this year. Dumped it the second I'd made a few cents off of it (it was doing awful at the time). Whoops! I'll just throw this on the "I sold my meager fractions of a bitcoin way too soon multiple times" pile.
Unfortunately, there's good evidence the price of Bitcoin is being fraudulently manipulated by Tether right now. Sometimes I look around and feel like I'm the insane one for not investing in...
Unfortunately, there's good evidence the price of Bitcoin is being fraudulently manipulated by Tether right now.
Sometimes I look around and feel like I'm the insane one for not investing in crypto, or doing crazy shit with options. Maybe I'm the fool for squandering my time by investing only in broad, sector-based ETF's (ARKx), and simple long-term holding of stocks I feel are worthwhile (AAPL, mainly).
Now it's $330! That's almost enough for an xbox I'd purchase from literally anywhere but Gamestop haha. I was curious so I looked at the price of the share when I got it (for free). It was at...
Now it's $330! That's almost enough for an xbox I'd purchase from literally anywhere but Gamestop haha. I was curious so I looked at the price of the share when I got it (for free). It was at $3.94 and when I sold it, it was at $4.13. Obviously I'm not really shook up about it because nobody could have ever predicted what happened with GME.
I mean there are probably other players involved in this. I still think WSB is more a useful tool for them rather than the driver of this. I read (not sure if it's true) that the Big Short guy put...
I mean there are probably other players involved in this. I still think WSB is more a useful tool for them rather than the driver of this. I read (not sure if it's true) that the Big Short guy put $17M into GME last fall and that the total value that has been pumped into GME in the last few weeks far exceeds what one could reasonably expect even a critical mass of retail investors could amass.
Yeah that's fair. Kinda crazy how the story is evolving. I made some money off it yesterday (thanks for that tweet, Elon) but I'm not gonna bet on it again; even if the stock still goes up 3x, the...
Yeah that's fair. Kinda crazy how the story is evolving. I made some money off it yesterday (thanks for that tweet, Elon) but I'm not gonna bet on it again; even if the stock still goes up 3x, the risk-reward is nuts at this point.
Matt Levine wrote a bunch about GameStop in his newsletter today: The GameStop Game Never Stops It also briefly shot all the way up to almost $145/share today, before crashing to $60 and currently...
There is no creation of money. For every buyer, there is a seller. It's more like a ponzi scheme. Also, what makes you think the big players would risk market manipulation? The SEC doesn't mess about.
simply create money
There is no creation of money. For every buyer, there is a seller. It's more like a ponzi scheme.
Also, what makes you think the big players would risk market manipulation? The SEC doesn't mess about.
The most rational post I have seen on WSB is this We are already near the upper end of this entirely arbitrary range, as the stock topped out at about a high of 380 today. Short interest was at...
Exit strategy 1: Just along for the ride
Maybe you don't care at all about GME's balance sheet or Cohen's planned turnaround, you bought a couple shares on a whim to be part of a unique movement. You don't intend to be a long-term Gamestop shareholder nor do you really care if you miss out on the highest peaks, so long as you make a few dollars and get to say you were part of the squeeze.
If I were this person, what would I do? I'd pick a number between 0 and 3 that I feel represents my confidence in the retail market's current expectation for Cohen and GME, and multiply it by 128. I'd submit a limit sell order for all my shares at that share price.
We are already near the upper end of this entirely arbitrary range, as the stock topped out at about a high of 380 today.
Exit strategy 2: Pants-shitting fear
You've got a handful of shares and maybe some options and you're up big. You don't know much about squeezes or fundamentals or greeks and every time there's a dip and the stock gets halted you shit your pants and your finger hovers over the sell button. But then the price jumps up and you wipe the drenching sweat off your face and promise to hold firm next time.
If I were this person, what would I do? I'd sell all my options that expire sooner than 30 days at market open to reduce the number of pairs of pants I'm going through. I'd keep all my shares and longer-dated options until the news comes out that the shorts are being liquidated. And I'm not watching hedge fund managers get on Fox Business or CNBC or whatever, I'm following WSB and Twitter for rapid fire updates about short volume. If the short volume as reported by WSB posters drops below, say, 50% I'm selling everything and getting out. I might also pick a maximum times-revenue multiplier (something pretty high, like 4 or 5) and use that for a limit sell for shares.
Exit strategy 3: Diamond hands
You've got bigger balls than most, and this isn't your first time dumping a significant fraction of your net worth into a company whose financials you've never looked at. You want to ride it to the peak, if at all possible, and you want to impress the pants shitters and the weak-kneed with your maximum gains. You are ok with increasing your cost basis to squeeze out extra tendies on the way to the top.
If I were this person, what would I do? I'd sell my weeklies on open tomorrow and immediately plow every dollar of those 20-bagger returns into shares. If my longer-dated options were purchased at extreme IV I'd do the same for them, otherwise I'd let them ride. I wouldn't sell a single share until the final squeeze, when news comes out that Melvin is done, and then I'd unload (in my pants). See you on the moon, brother.
So the only reason to hold is to wait for the shorts to fold.
FAQ 5: Who will buy our shares at the peak?
The idea behind selling at the peak isn't to sell your shares to another retail trader, but to sell your shares to the desperate short sellers who are forced by their prime brokers to liquidate their positions at any cost. That's the difference between a perfectly legal and time-honored short squeeze and a pump-and-dump. This isn't about irrationally driving the price upwards with the hopes of selling to a bigger idiot, it's about buying and holding and waiting for the shorts to crack and beg us to sell to them.
But will the shorts fold? There are 70m shares outstanding and 72m shares short. So 142m possible shares. 90m shares traded hands today. I'm no expert, but that is insane. A significant chunk of the 70m shares outstanding are held by long term investors who wont or can't sell. Think ETFs like blackrock. This suggests that for every short that is folding, another short is taking their place. Perhaps multiple times a day. So the answer is, not yet.
One braindead simple way to calculate a fair stock price for a company is to use a "times-revenue" valuation. You take the company's revenue ($6.466B in 2020) and multiply by some magic number (often 0.5 for low-growth companies and 2 for high-growth companies), then divide by the float (number of shares available to trade, 50.65M). A times-revenue multiplier of 0.5 gives a GME stock price of $64, while a multiplier of 2 gives $255.
This isn't a particularly sophisticated method but whatever, I'm not a particularly sophisticated investor.
Working backwards, if Melvin Capital thinks that GME is overpriced at $20 then a times-revenue valuation would suggest a multiplier of 0.16. That's extraordinarily low for a retail business. If you applied that multiplier to Best Buy ($43B revenue in 2020, 231.59M float) you would get a stock price of $30. Best Buy currently trades for $115, which works out to a much more reasonable multiplier of 0.62.
This is incredibly optimistic, and we already hit the 3x revenue multiple.
If I were to be insanely optimistic, I would value GME's current revenue stream like a high growth tech stock, which are currently going for anywhere from 5 (AMZN) to 30 (TSLA). So there isnt a lot of upside left, and the stock is incredibly tempting to short. There are only a limited number of shares typically available to short, so perhaps the reason we do not see an increase in short interest is nobody wants to lend any more shares to short.
Another way to look at valuation is simple market cap comparison. The market cap of GME is currently $25b. We are talking MongoDB, Etsy, or Slack valuations. If the stock price doubles just once more, GME will be one of the top 220 public companies by market cap.
The last way to look at valuations is to look at options prices. The harder a stock is to short the more the underlying options prices reflect market participants expectations about price movement. An ATM Leap Put is going for around $190 with an underlying strike of $260 (we are down after hours.) So $19,000 down earns me a maximum of $26,000 if the stock goes to absolute zero in a couple of years. That is a 33% profit if the stock goes to absolute zero, with a possibility of 100% loss.
Punch GME into the probability lab and you will see the market expects GME to be at $15 in a month and at $5 by April. Which starts to make the unlimited downside of shorting GME and even the 80% yearly cost look surprisingly attractive.
Watching the chart today was pretty intoxicating, it's not surprising that people get addicted to it like any other form of gambling. I bought several shares on Monday and sold a few at the peak...
Watching the chart today was pretty intoxicating, it's not surprising that people get addicted to it like any other form of gambling. I bought several shares on Monday and sold a few at the peak today so I'm already up a couple hundred no matter what happens next. The apparent institutional outrage at the situation is amusing regardless, so I'm happy to have been involved in some small way.
This continued going even further today, with GameStop stock jumping over 50% more, to a new all-time high. It was briefly the most actively-traded US stock and had its trading halted multiple...
I’m glad to have done my part. I wonder if wallstreetbets will get their wish of $100 per share. On another note, is what’s taking place here illegal? The subreddit is actively trying to...
I’m glad to have done my part. I wonder if wallstreetbets will get their wish of $100 per share.
On another note, is what’s taking place here illegal? The subreddit is actively trying to manipulate the market. But I don’t see how you could actually convict someone given the size of the crowd.
You just described all of day trading, didn't you? In a way? I mean, it's definitely good memes, a boatload of irony, but I'm not sure about how much is genuine trading analysis and how much is...
It's basically a get rich quick scheme
You just described all of day trading, didn't you? In a way?
I mean, it's definitely good memes, a boatload of irony, but I'm not sure about how much is genuine trading analysis and how much is get rich quick schemes. I mean, the guy who initiated the GME long seems to be going in on it along with everyone else. I don't know how much of this was good analysis and how much of it was a self-fulfilling prophecy brought on by hype, but I vaguely remember hearing that GME's reports are actually looking up.
I wonder if wallstreetbets is being used to data-mine trading intel. I mean, there's obviously a good amount of post-hoc validation there which makes the front page look like a lot of these guys...
I wonder if wallstreetbets is being used to data-mine trading intel. I mean, there's obviously a good amount of post-hoc validation there which makes the front page look like a lot of these guys know what they're doing; and obviously if you peel that layer off and just look at falsifiable, non-trivial predictions, you'll not be left with nearly as impressive predictions, but I wonder if those would still beat the market (or at least achieve parity).
Does this have anything to do with big tech though? With the way reddit works the only algo based promotion WSB gets is popular posts got to /r/all, but that's pretty insignificant in the grand...
Does this have anything to do with big tech though? With the way reddit works the only algo based promotion WSB gets is popular posts got to /r/all, but that's pretty insignificant in the grand scheme of things.
Like WSB could easily happen on a federated platform instead. You're not going to stop people from voluntarily searching up a community that drives itself into a hysteria.
But I don't see this as a platform issue. Reddit here is the vessel in a very simple manor - they're just a free, public message board. It's different then, say, Facebook or Youtube having black...
But I don't see this as a platform issue. Reddit here is the vessel in a very simple manor - they're just a free, public message board. It's different then, say, Facebook or Youtube having black box algorithms focused on some metric which has poor real world side effects. There, the platforms are actively doing something that causes the activity.
That's fair, although I'd imagine you could emulate most of it with the lower bound of the wilson score + some basic time decay, which may be what it is under the hood anyway. But I don't think...
That's fair, although I'd imagine you could emulate most of it with the lower bound of the wilson score + some basic time decay, which may be what it is under the hood anyway. But I don't think it's the "hot" feed that's making GME hot. Just existing and allowing people to post is enough (for that matter, seems like every discord I'm in has a WSB-esque channel now).
WSB reminds me of Jesse Livermore. The guy was a self made millionaire (billionaire by todays standards), who made money by trading on technicals back in the early 1900's. He had three...
The guy was a self made millionaire (billionaire by todays standards), who made money by trading on technicals back in the early 1900's. He had three bankruptcies, two divorces, and ended up killing himself.
10 minute video that filled in a lot of the backstory for me: How r/WallStreetBets Made GameStop's Stock Price Soar: Reddit Takes on Short Sellers - TLDR News
10 minute video that filled in a lot of the backstory for me:
Just to explain a bit more about the theory of the case from WSBs side, I'm not saying it's not stupid, but people also aren't just treating this as a ponzi scheme. Really the new board members or...
Just to explain a bit more about the theory of the case from WSBs side, I'm not saying it's not stupid, but people also aren't just treating this as a ponzi scheme. Really the new board members or anything fundamental is irrelevant at this point.
The theory for profit is that WSB as a collective will buy Gamestop shares and also buy Gamestop calls (which forces market makers to buy Gamestop shares as well) - all this drives up the price of Gamestop, which causes the aforementioned short squeeze. Then, as the shorters are forced to liquidate their position by their brokers are their infinite potential for loss goes over their collateral, the WSB members will happily sell their insanely overpriced shares to them.
It's obvious to everyone Gamestop is not worth this much money, and while the stock market is not zero sum, it's also obvious that Gamestop is not exactly about to produce this much value in innovation or efficient resource allocation, so it is somewhat zero sum in this specific case, and WSB wants the shorters to be the people on the loss.
There's a sort of vengeful "fuck you" air right now, where this is the "normal people" playing complex financial instruments against larger funds. Whether or not this ends up well for all the retail investors is another question but again, it's not just a ponzi scheme. There is a "strategy" which acknowledges the zero sum nature of things.
There's plenty of that attitude on display in this recent thread. I must admit I'm amused at the idea of a ragtag group of internet commenters turning the system around and fleecing large...
I must admit I'm amused at the idea of a ragtag group of internet commenters turning the system around and fleecing large corporations with it. Their systems can't account for that sort of crowdsourced activity, and frankly no system ever could. It also makes the regulatory agencies look like the pro-corporate sacks that they've become. I'm going to be very interested to see how this phenomenon progresses.
I may be wrong, but I think time will demonstrate this really isn't the case. The short sellers and Wall Street pay for access to all the Robinhood data -- they will be hedging appropriately...
I must admit I'm amused at the idea of a ragtag group of internet commenters turning the system around and fleecing large corporations with it.
I may be wrong, but I think time will demonstrate this really isn't the case. The short sellers and Wall Street pay for access to all the Robinhood data -- they will be hedging appropriately (nothing is stopping them from buying GME) and have likely already covered enough of their position. In the end its going to be facebook grandmas and kids who FOMO into this and get left holding the bag. Also, Wall Street makes money off retail investors. No matter who ends up holding the bag everyone who is involved in executing all these orders is laughing all the way to the bank.
I think there is a bit of conflation between different institutions here. Wall Street is not one big monolith. Market makers like Citadel (securities) are laughing their way to the bank, of course...
I think there is a bit of conflation between different institutions here. Wall Street is not one big monolith. Market makers like Citadel (securities) are laughing their way to the bank, of course (although, it'll be a bank in Chicago since they're not actually on wall street) since the extreme volatility is great for them, they don't really give a shit if GME goes up or not.
Also, it's the MMs that "buy data" from Robinhood, but that's already a misrepresentation of what happens. That's usually how payment for order flow is described... for some reason, but it's more that they're buying customers. Executing orders is how they make money. Yes, they also get the data from those payment flows and perhaps that helps in their modeling and risk assessment but it's not the primary reason.
But that's different from hedge funds like Melvin. No doubt they are hedged on the position, but hedging only limits your losses. It does not prevent you from losing money - it's not like they're engaged in arbitrage.
So MMs are like the Casino in a poker game - they make money by skimming a percentage of all the Poker games that go on. They indeed win so long as trades keep going on. They don't really care who specifically wins and loses, they just want more games to go on.
Hedge funds are like professional poker players. They're playing the game, are ostensibly experts at least, but they can lose money.
Admittedly I'm out of my wheelhouse here so I'll defer to you but there seems to be a sentiment of inevitability for GME to hit $1000 and beyond as a result of a short squeeze. I don't doubt that...
Admittedly I'm out of my wheelhouse here so I'll defer to you but there seems to be a sentiment of inevitability for GME to hit $1000 and beyond as a result of a short squeeze. I don't doubt that the hedge funds will lose money but that it's likely they're already hedging. Melvin has apparently already exited their GME position.. Correct me if I'm wrong but no one is guaranteed to be paid out here by a short squeeze if it already happened?
Edit: Another short seller has also already hedged. From my linked article:
Another high-profile short seller, Carson Block, told the Financial Times on Wednesday that his hedge fund Muddy Waters had “significantly cut” its short positions “across the board”.
“It’s not rocket science — massively reduce your shorts or risk going out of business,” Mr Block said. “This phase will pass, but in the meantime it’s best to be a spectator rather than a participant.”
There seems to be some real skepticism about this. Not like I can tell. This isn't my wheelhouse either so I'll content myself with munching popcorn and enjoying the show.
There seems to be some real skepticism about this. Not like I can tell. This isn't my wheelhouse either so I'll content myself with munching popcorn and enjoying the show.
I doubt it will hit $1000 - admittedly WSB goes so far into the irony rabbithole that it's hard to know which statements are genuine, which are sarcastic, and which are both sarcastic and genuine...
I doubt it will hit $1000 - admittedly WSB goes so far into the irony rabbithole that it's hard to know which statements are genuine, which are sarcastic, and which are both sarcastic and genuine at the same time.
But the short interest in GME has not dropped significantly. Melvin, as a private fund, doesn't have to disclose anything, so you'd have to take their word on it. Maybe, maybe not, but there's plenty of short positions, and plenty of new short positions as it's obvious to everyone that Gamestop is not worth 12b dollars.
So I think the game of chicken between retailers pumping the stock to short squeeze and the funds trying to capitalize on the eventual dramatic fall will continue.
You could argue it's a weird form of stock bashing, but that statement is not necessarily indicative of the exact degree to which they've closed their shorts (Citron, for instance, still has a...
You could argue it's a weird form of stock bashing, but that statement is not necessarily indicative of the exact degree to which they've closed their shorts (Citron, for instance, still has a small short position) so there is leeway if they wanted to do that. And, to be honest, funds sometimes do soft market manipulation.
Hah, I guess I shouldn’t be surprised! Will be interesting to see if this gives the Bide. administration the political cover to better regulate some of this.
Hah, I guess I shouldn’t be surprised! Will be interesting to see if this gives the Bide. administration the political cover to better regulate some of this.
Is there a reason they picked GameStop specifically? (I've never heard of them spoken of in good terms by their potential customers.) Are they trying to send a message to the company as well as...
Is there a reason they picked GameStop specifically? (I've never heard of them spoken of in good terms by their potential customers.) Are they trying to send a message to the company as well as the investors, or was the choice of stock basically arbitrary?
It was heavily shorted. In fact, there were 40% more short positions on GME than there were outstanding shares, which is ridiculous. The attempt to rally a short squeeze started quite a while ago...
It was heavily shorted. In fact, there were 40% more short positions on GME than there were outstanding shares, which is ridiculous.
The attempt to rally a short squeeze started quite a while ago but it seems that the actual positive news of new activist investors gave the movement the tailwind to do, well, this.
It seems WSB has been doing this - successfully - for many months, with many stocks. They haven't been making hoverboard money, but they have been turning profits for themselves overall. When they...
It seems WSB has been doing this - successfully - for many months, with many stocks. They haven't been making hoverboard money, but they have been turning profits for themselves overall.
When they found out that GameStop was shorted so heavily that there are 40% more shorts outstanding than there are shares of GameStop to cover them they realized it was the ultimate golden opportunity to burn more of the wall street firms that are so reckless with our money. The idea that there aren't even enough shares of GameStop in existence to cover the short positions is frankly incredible.
Then it went viral. Not just a little viral, this is a full on pandemic level of viral activity. Not surprising considering how low the trust in wall street has been. People sense an opportunity to make the billionaires bleed, and they have them backed into a corner now in a room that is filling with lava.
It'll get worse, too. If this is successful, with this level of viral activity, this will not be the last stock/company they use as a billionaire beatstick. They'll have all that much more money to invest in future bets against the billionaires, and unprecedented viral activity kicked even further into overdrive by the success of this gamble.
It's not an exaggeration in the least to say that this has the potential to shake the foundations of the entire market. There is no guarantee of course, but it's a very real possibility. Just a week ago even suggesting this could happen would have had you laughed out of any conversation.
At this rate congress may have to do an emergency bailout of some of these firms, who are being put into the same positions of peril that the housing crash caused in 2008. If congress passes that bailout - while holding out on the $2k/month stimulus checks - we may see some pretty spectacular fireworks. The corruption of the system is being laid bare in the sunlight right now in real time.
My apologies to everyone if I'm 'oversharing' on this topic but I find it quite fascinating (as I'm sure do many others). To use an analogy used in the other thread, what we're really talking...
My apologies to everyone if I'm 'oversharing' on this topic but I find it quite fascinating (as I'm sure do many others).
It'll get worse, too. If this is successful, with this level of viral activity, this will not be the last stock/company they use as a billionaire beatstick. They'll have all that much more money to invest in future bets against the billionaires, and unprecedented viral activity kicked even further into overdrive by the success of this gamble.
To use an analogy used in the other thread, what we're really talking about is -- at best -- busting out a professional poker player from a casino game. The casino and the rest of the professional poker players aren't really upset -- they're happy there's a new influx of amateur players. The casino takes its cut regardless and the rest of the professionals have inexperienced people to shark. Framing this as a class war is a bit like trying to make the casino go broke by winning enough poker games.
At this rate congress may have to do an emergency bailout of some of these firms, who are being put into the same positions of peril that the housing crash caused in 2008. If congress passes that bailout - while holding out on the $2k/month stimulus checks - we may see some pretty spectacular fireworks. The corruption of the system is being laid bare in the sunlight right now in real time.
The bailouts were done with a gun to the head of the financial system. I don't see any such gun here -- just another body of a hedge fund or two that may lose everything or may just take a bad haircut.
That's if it stops here. Once there's a 'happening' online you know how it snowballs. I also get the sense that this is about poker cheats and rigged poker games, not the casino itself, to...
That's if it stops here. Once there's a 'happening' online you know how it snowballs. I also get the sense that this is about poker cheats and rigged poker games, not the casino itself, to continue your analogy.
Complex social phenomena like this evolve each cycle, they never exactly repeat. The folks who were so big on shorting have to reevaluate the risk now that they know they are being hunted. I'm...
Complex social phenomena like this evolve each cycle, they never exactly repeat. The folks who were so big on shorting have to reevaluate the risk now that they know they are being hunted. I'm sure they'll adjust their behavior. Of course, so will the crowd, and the game will continue. This crowd may move on from shorting to other activities - they'll keep looking for weak spots and when they find one they'll pounce. If they lose big that may take some steam out of it, but if they keep winning, even at reasonable levels rather than big scores, they'll keep playing.
It feels trite to say 'the market will sort it out' yet that's exactly what's happening.
That's an interesting observation. It seems there is already a bit of a messaging war in terms of left-populists and right-populists trying to capitalize on this. Maybe they will find some common...
That's an interesting observation. It seems there is already a bit of a messaging war in terms of left-populists and right-populists trying to capitalize on this. Maybe they will find some common ground but I'm doubtful. I fear as the conversation steers towards conspiracy by 'them' that groups like Qanon will have the easiest time making inroads into something like this. I'm definitely jumping the gun here, but it almost feels like the next 'Gamergate' to me, in terms of establishing a radicalization pipeline.
Gamestop was my free share when I joined Robinhood earlier this year. Dumped it the second I'd made a few cents off of it (it was doing awful at the time). Whoops! I'll just throw this on the "I sold my meager fractions of a bitcoin way too soon multiple times" pile.
I mean, had you kept it, you'd have maybe made like $60 more. You'd have been better off with more BTC I think :)
Unfortunately, there's good evidence the price of Bitcoin is being fraudulently manipulated by Tether right now.
Sometimes I look around and feel like I'm the insane one for not investing in crypto, or doing crazy shit with options. Maybe I'm the fool for squandering my time by investing only in broad, sector-based ETF's (ARKx), and simple long-term holding of stocks I feel are worthwhile (AAPL, mainly).
Now it's $330! That's almost enough for an xbox I'd purchase from literally anywhere but Gamestop haha. I was curious so I looked at the price of the share when I got it (for free). It was at $3.94 and when I sold it, it was at $4.13. Obviously I'm not really shook up about it because nobody could have ever predicted what happened with GME.
I mean there are probably other players involved in this. I still think WSB is more a useful tool for them rather than the driver of this. I read (not sure if it's true) that the Big Short guy put $17M into GME last fall and that the total value that has been pumped into GME in the last few weeks far exceeds what one could reasonably expect even a critical mass of retail investors could amass.
Yeah that's fair. Kinda crazy how the story is evolving. I made some money off it yesterday (thanks for that tweet, Elon) but I'm not gonna bet on it again; even if the stock still goes up 3x, the risk-reward is nuts at this point.
Matt Levine wrote a bunch about GameStop in his newsletter today: The GameStop Game Never Stops
It also briefly shot all the way up to almost $145/share today, before crashing to $60 and currently settling somewhere around $80.
There is no creation of money. For every buyer, there is a seller. It's more like a ponzi scheme.
Also, what makes you think the big players would risk market manipulation? The SEC doesn't mess about.
The most rational post I have seen on WSB is this
We are already near the upper end of this entirely arbitrary range, as the stock topped out at about a high of 380 today.
Short interest was at 102% of outstanding and 260% of float as of year end. Since then short interest has gone up slightly.
Melvin Capitol closed their short position and Citron Capital covered at a 100% loss.
So the only reason to hold is to wait for the shorts to fold.
But will the shorts fold? There are 70m shares outstanding and 72m shares short. So 142m possible shares. 90m shares traded hands today. I'm no expert, but that is insane. A significant chunk of the 70m shares outstanding are held by long term investors who wont or can't sell. Think ETFs like blackrock. This suggests that for every short that is folding, another short is taking their place. Perhaps multiple times a day. So the answer is, not yet.
This is incredibly optimistic, and we already hit the 3x revenue multiple.
If I were to be insanely optimistic, I would value GME's current revenue stream like a high growth tech stock, which are currently going for anywhere from 5 (AMZN) to 30 (TSLA). So there isnt a lot of upside left, and the stock is incredibly tempting to short. There are only a limited number of shares typically available to short, so perhaps the reason we do not see an increase in short interest is nobody wants to lend any more shares to short.
Another way to look at valuation is simple market cap comparison. The market cap of GME is currently $25b. We are talking MongoDB, Etsy, or Slack valuations. If the stock price doubles just once more, GME will be one of the top 220 public companies by market cap.
The last way to look at valuations is to look at options prices. The harder a stock is to short the more the underlying options prices reflect market participants expectations about price movement. An ATM Leap Put is going for around $190 with an underlying strike of $260 (we are down after hours.) So $19,000 down earns me a maximum of $26,000 if the stock goes to absolute zero in a couple of years. That is a 33% profit if the stock goes to absolute zero, with a possibility of 100% loss.
Punch GME into the probability lab and you will see the market expects GME to be at $15 in a month and at $5 by April. Which starts to make the unlimited downside of shorting GME and even the 80% yearly cost look surprisingly attractive.
Watching the chart today was pretty intoxicating, it's not surprising that people get addicted to it like any other form of gambling. I bought several shares on Monday and sold a few at the peak today so I'm already up a couple hundred no matter what happens next. The apparent institutional outrage at the situation is amusing regardless, so I'm happy to have been involved in some small way.
This continued going even further today, with GameStop stock jumping over 50% more, to a new all-time high. It was briefly the most actively-traded US stock and had its trading halted multiple times: GameStop share price reaches record high amid Reddit-driven short squeeze
I’m glad to have done my part. I wonder if wallstreetbets will get their wish of $100 per share.
On another note, is what’s taking place here illegal? The subreddit is actively trying to manipulate the market. But I don’t see how you could actually convict someone given the size of the crowd.
I do wonder how much control the moderators have over the subreddit.
I don't understand that place. Gambling is addictive, I guess.
You just described all of day trading, didn't you? In a way?
I mean, it's definitely good memes, a boatload of irony, but I'm not sure about how much is genuine trading analysis and how much is get rich quick schemes. I mean, the guy who initiated the GME long seems to be going in on it along with everyone else. I don't know how much of this was good analysis and how much of it was a self-fulfilling prophecy brought on by hype, but I vaguely remember hearing that GME's reports are actually looking up.
I wonder if wallstreetbets is being used to data-mine trading intel. I mean, there's obviously a good amount of post-hoc validation there which makes the front page look like a lot of these guys know what they're doing; and obviously if you peel that layer off and just look at falsifiable, non-trivial predictions, you'll not be left with nearly as impressive predictions, but I wonder if those would still beat the market (or at least achieve parity).
Isn't it far more likely people are using it to move the market in a predictable fashion in classic pump-and-dump fashion?
Does this have anything to do with big tech though? With the way reddit works the only algo based promotion WSB gets is popular posts got to /r/all, but that's pretty insignificant in the grand scheme of things.
Like WSB could easily happen on a federated platform instead. You're not going to stop people from voluntarily searching up a community that drives itself into a hysteria.
But I don't see this as a platform issue. Reddit here is the vessel in a very simple manor - they're just a free, public message board. It's different then, say, Facebook or Youtube having black box algorithms focused on some metric which has poor real world side effects. There, the platforms are actively doing something that causes the activity.
That's fair, although I'd imagine you could emulate most of it with the lower bound of the wilson score + some basic time decay, which may be what it is under the hood anyway. But I don't think it's the "hot" feed that's making GME hot. Just existing and allowing people to post is enough (for that matter, seems like every discord I'm in has a WSB-esque channel now).
The coefficients were always open-source, and I think it's extremely unlikely they've changed: https://github.com/reddit-archive/reddit/blob/753b17407e9a9dca09558526805922de24133d53/r2/r2/lib/db/_sorts.pyx#L47-L58
Here's an article from 2015 that explains it more: https://medium.com/hacking-and-gonzo/how-reddit-ranking-algorithms-work-ef111e33d0d9
WSB reminds me of Jesse Livermore.
The guy was a self made millionaire (billionaire by todays standards), who made money by trading on technicals back in the early 1900's. He had three bankruptcies, two divorces, and ended up killing himself.
10 minute video that filled in a lot of the backstory for me:
How r/WallStreetBets Made GameStop's Stock Price Soar: Reddit Takes on Short Sellers - TLDR News
Just to explain a bit more about the theory of the case from WSBs side, I'm not saying it's not stupid, but people also aren't just treating this as a ponzi scheme. Really the new board members or anything fundamental is irrelevant at this point.
The theory for profit is that WSB as a collective will buy Gamestop shares and also buy Gamestop calls (which forces market makers to buy Gamestop shares as well) - all this drives up the price of Gamestop, which causes the aforementioned short squeeze. Then, as the shorters are forced to liquidate their position by their brokers are their infinite potential for loss goes over their collateral, the WSB members will happily sell their insanely overpriced shares to them.
It's obvious to everyone Gamestop is not worth this much money, and while the stock market is not zero sum, it's also obvious that Gamestop is not exactly about to produce this much value in innovation or efficient resource allocation, so it is somewhat zero sum in this specific case, and WSB wants the shorters to be the people on the loss.
There's a sort of vengeful "fuck you" air right now, where this is the "normal people" playing complex financial instruments against larger funds. Whether or not this ends up well for all the retail investors is another question but again, it's not just a ponzi scheme. There is a "strategy" which acknowledges the zero sum nature of things.
There's plenty of that attitude on display in this recent thread.
I must admit I'm amused at the idea of a ragtag group of internet commenters turning the system around and fleecing large corporations with it. Their systems can't account for that sort of crowdsourced activity, and frankly no system ever could. It also makes the regulatory agencies look like the pro-corporate sacks that they've become. I'm going to be very interested to see how this phenomenon progresses.
I may be wrong, but I think time will demonstrate this really isn't the case. The short sellers and Wall Street pay for access to all the Robinhood data -- they will be hedging appropriately (nothing is stopping them from buying GME) and have likely already covered enough of their position. In the end its going to be facebook grandmas and kids who FOMO into this and get left holding the bag. Also, Wall Street makes money off retail investors. No matter who ends up holding the bag everyone who is involved in executing all these orders is laughing all the way to the bank.
I think there is a bit of conflation between different institutions here. Wall Street is not one big monolith. Market makers like Citadel (securities) are laughing their way to the bank, of course (although, it'll be a bank in Chicago since they're not actually on wall street) since the extreme volatility is great for them, they don't really give a shit if GME goes up or not.
Also, it's the MMs that "buy data" from Robinhood, but that's already a misrepresentation of what happens. That's usually how payment for order flow is described... for some reason, but it's more that they're buying customers. Executing orders is how they make money. Yes, they also get the data from those payment flows and perhaps that helps in their modeling and risk assessment but it's not the primary reason.
But that's different from hedge funds like Melvin. No doubt they are hedged on the position, but hedging only limits your losses. It does not prevent you from losing money - it's not like they're engaged in arbitrage.
So MMs are like the Casino in a poker game - they make money by skimming a percentage of all the Poker games that go on. They indeed win so long as trades keep going on. They don't really care who specifically wins and loses, they just want more games to go on.
Hedge funds are like professional poker players. They're playing the game, are ostensibly experts at least, but they can lose money.
Admittedly I'm out of my wheelhouse here so I'll defer to you but there seems to be a sentiment of inevitability for GME to hit $1000 and beyond as a result of a short squeeze. I don't doubt that the hedge funds will lose money but that it's likely they're already hedging. Melvin has apparently already exited their GME position.. Correct me if I'm wrong but no one is guaranteed to be paid out here by a short squeeze if it already happened?
Edit: Another short seller has also already hedged. From my linked article:
There seems to be some real skepticism about this. Not like I can tell. This isn't my wheelhouse either so I'll content myself with munching popcorn and enjoying the show.
I doubt it will hit $1000 - admittedly WSB goes so far into the irony rabbithole that it's hard to know which statements are genuine, which are sarcastic, and which are both sarcastic and genuine at the same time.
But the short interest in GME has not dropped significantly. Melvin, as a private fund, doesn't have to disclose anything, so you'd have to take their word on it. Maybe, maybe not, but there's plenty of short positions, and plenty of new short positions as it's obvious to everyone that Gamestop is not worth 12b dollars.
So I think the game of chicken between retailers pumping the stock to short squeeze and the funds trying to capitalize on the eventual dramatic fall will continue.
I mean if they say they have exited their position and don't that's a pretty clear market manipulation case for the SEC, no?
You could argue it's a weird form of stock bashing, but that statement is not necessarily indicative of the exact degree to which they've closed their shorts (Citron, for instance, still has a small short position) so there is leeway if they wanted to do that. And, to be honest, funds sometimes do soft market manipulation.
Hah, I guess I shouldn’t be surprised! Will be interesting to see if this gives the Bide. administration the political cover to better regulate some of this.
Is there a reason they picked GameStop specifically? (I've never heard of them spoken of in good terms by their potential customers.) Are they trying to send a message to the company as well as the investors, or was the choice of stock basically arbitrary?
It was heavily shorted. In fact, there were 40% more short positions on GME than there were outstanding shares, which is ridiculous.
The attempt to rally a short squeeze started quite a while ago but it seems that the actual positive news of new activist investors gave the movement the tailwind to do, well, this.
It seems WSB has been doing this - successfully - for many months, with many stocks. They haven't been making hoverboard money, but they have been turning profits for themselves overall.
When they found out that GameStop was shorted so heavily that there are 40% more shorts outstanding than there are shares of GameStop to cover them they realized it was the ultimate golden opportunity to burn more of the wall street firms that are so reckless with our money. The idea that there aren't even enough shares of GameStop in existence to cover the short positions is frankly incredible.
Then it went viral. Not just a little viral, this is a full on pandemic level of viral activity. Not surprising considering how low the trust in wall street has been. People sense an opportunity to make the billionaires bleed, and they have them backed into a corner now in a room that is filling with lava.
It'll get worse, too. If this is successful, with this level of viral activity, this will not be the last stock/company they use as a billionaire beatstick. They'll have all that much more money to invest in future bets against the billionaires, and unprecedented viral activity kicked even further into overdrive by the success of this gamble.
It's not an exaggeration in the least to say that this has the potential to shake the foundations of the entire market. There is no guarantee of course, but it's a very real possibility. Just a week ago even suggesting this could happen would have had you laughed out of any conversation.
At this rate congress may have to do an emergency bailout of some of these firms, who are being put into the same positions of peril that the housing crash caused in 2008. If congress passes that bailout - while holding out on the $2k/month stimulus checks - we may see some pretty spectacular fireworks. The corruption of the system is being laid bare in the sunlight right now in real time.
My apologies to everyone if I'm 'oversharing' on this topic but I find it quite fascinating (as I'm sure do many others).
To use an analogy used in the other thread, what we're really talking about is -- at best -- busting out a professional poker player from a casino game. The casino and the rest of the professional poker players aren't really upset -- they're happy there's a new influx of amateur players. The casino takes its cut regardless and the rest of the professionals have inexperienced people to shark. Framing this as a class war is a bit like trying to make the casino go broke by winning enough poker games.
The bailouts were done with a gun to the head of the financial system. I don't see any such gun here -- just another body of a hedge fund or two that may lose everything or may just take a bad haircut.
That's if it stops here. Once there's a 'happening' online you know how it snowballs. I also get the sense that this is about poker cheats and rigged poker games, not the casino itself, to continue your analogy.
It certainly beats following politics, though. :)
I mean if nothing else I don't think any short sellers are going to be quite so bold in the future. Hard to see this perfect storm being repeated.
Complex social phenomena like this evolve each cycle, they never exactly repeat. The folks who were so big on shorting have to reevaluate the risk now that they know they are being hunted. I'm sure they'll adjust their behavior. Of course, so will the crowd, and the game will continue. This crowd may move on from shorting to other activities - they'll keep looking for weak spots and when they find one they'll pounce. If they lose big that may take some steam out of it, but if they keep winning, even at reasonable levels rather than big scores, they'll keep playing.
It feels trite to say 'the market will sort it out' yet that's exactly what's happening.
That's an interesting observation. It seems there is already a bit of a messaging war in terms of left-populists and right-populists trying to capitalize on this. Maybe they will find some common ground but I'm doubtful. I fear as the conversation steers towards conspiracy by 'them' that groups like Qanon will have the easiest time making inroads into something like this. I'm definitely jumping the gun here, but it almost feels like the next 'Gamergate' to me, in terms of establishing a radicalization pipeline.
I think you have a point there, that's an astute observation I hadn't considered before.
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