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My Not So Short Story on GME

Eastwood

By Eastwood
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Eastwood
Eastwood

I'm not a financial advisor. This is not financial advise. I don't work in finance. I do not have a degree in finance. Actually, I have a BA and I'm bad at math past Cal I. I won't apologize for the l

Captainant
Captainant

Turns out, dumping trillions of dollars of liquidity into a stagnant market leads to stupid shit happening. Who knew!

52-80
52-80

You’re hoping that a guy barely meeting working class threshold throwing almost 2 months of pre-tax income into a single speculative play ... should make a reasonable financial decision.    i t

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Bone3421

Bone3421 716

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The fact that gme only had 15m in volume while amc had almost 800m and bb 340m should be very telling....they let all these other "meme" stocks pop because its manageable to them.

Now if my belief is true(hunch) that someone started covering today(forced or cave??) Then we hopefully see dominoes start falling

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RGBIII

RGBIII 22838

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Just now, Bone3421 said:

The fact that gme only had 15m in volume while amc had almost 800m and bb 340m should be very telling....they let all these other "meme" stocks pop because its manageable to them.

Now if my belief is true(hunch) that someone was started covering today(forced or cave??) Then we hopefully see dominoes start falling

Shareholders meeting is rocket fuel IMO

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Angry Gorilla

Angry Gorilla 1766

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I have a question for you GME/AMC diamond apes...

 

I've seen people (mostly on other sites) claiming they are holding until ridiculous prices like $500K.  Assuming these hedge funds start getting margin called and forced to cover their positions and the price skyrockets, isn't there a price point where the hedge funds don't have the money to cover the positions?  If they are short tens of thousands of shares, where do they come up with the capital to cover if the prices hits $10K, $50K, $100K, etc.?  What happens then?

 

Next question, if all the short positions are forced to cover and the price does shoot up to $500K, how do the retail holders cash out?  Every transaction needs 2 sides, and who is paying $500K for a single share of a company not currently turning a profit?  Isn't the smart move to sell some shares on the way up, and not hold out for an astronomical price point like $500K?

 

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Wally Fairway

Wally Fairway 5541

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Posted (edited)
11 minutes ago, Angry Gorilla said:

I have a question for you GME/AMC diamond apes...

 

I've seen people (mostly on other sites) claiming they are holding until ridiculous prices like $500K.  Assuming these hedge funds start getting margin called and forced to cover their positions and the price skyrockets, isn't there a price point where the hedge funds don't have the money to cover the positions?  If they are short tens of thousands of shares, where do they come up with the capital to cover if the prices hits $10K, $50K, $100K, etc.?  What happens then?

 

Next question, if all the short positions are forced to cover and the price does shoot up to $500K, how do the retail holders cash out?  Every transaction needs 2 sides, and who is paying $500K for a single share of a company not currently turning a profit?  Isn't the smart move to sell some shares on the way up, and not hold out for an astronomical price point like $500K?

It creates market havoc; see Archegos hedge fund collapse circa March 2021. In the end, if the fund runs out of money to cover the short, then the brokers/banks that lent them the shares are on the hook to replace the shares that were shorted but that their customer was not able to cover.

Edited by Wally Fairway
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Bone3421

Bone3421 716

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I have a question for you GME/AMC diamond apes...
 
I've seen people (mostly on other sites) claiming they are holding until ridiculous prices like $500K.  Assuming these hedge funds start getting margin called and forced to cover their positions and the price skyrockets, isn't there a price point where the hedge funds don't have the money to cover the positions?  If they are short tens of thousands of shares, where do they come up with the capital to cover if the prices hits $10K, $50K, $100K, etc.?  What happens then?
 
Next question, if all the short positions are forced to cover and the price does shoot up to $500K, how do the retail holders cash out?  Every transaction needs 2 sides, and who is paying $500K for a single share of a company not currently turning a profit?  Isn't the smart move to sell some shares on the way up, and not hold out for an astronomical price point like $500K?
 
Well first of all for the 2nd point...a short position has to be closed at some point. That's why squeezes work, a short is obligated to buy shares to close position.

For the first point.. Berkshire trades at 434k currently, there is plenty of money in the market to cover.
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Angry Gorilla

Angry Gorilla 1766

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3 minutes ago, Bone3421 said:

Well first of all for the 2nd point...a short position has to be closed at some point. That's why squeezes work, a short is obligated to buy shares to close position.

For the first point.. Berkshire trades at 434k currently, there is plenty of money in the market to cover.

How do the people that don't sell before the last short position covers cash out?

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Bone3421

Bone3421 716

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How do the people that don't sell before the last short position covers cash out?
That would be problematic but you would have to be dumb to be in that spot. If you read up on other squeezes(Volkswagen, overstock,etc) you will see it's not a quick event. So you should be able to sell close to the peak, hopefully.

We will know more after votes are announced in a week or so. Will give idea to how many shorts are still floating around out there
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Eastwood

Eastwood 4394

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1 hour ago, Angry Gorilla said:

I have a question for you GME/AMC diamond apes...

 

I've seen people (mostly on other sites) claiming they are holding until ridiculous prices like $500K.  Assuming these hedge funds start getting margin called and forced to cover their positions and the price skyrockets, isn't there a price point where the hedge funds don't have the money to cover the positions?  If they are short tens of thousands of shares, where do they come up with the capital to cover if the prices hits $10K, $50K, $100K, etc.?  What happens then?

 

Next question, if all the short positions are forced to cover and the price does shoot up to $500K, how do the retail holders cash out?  Every transaction needs 2 sides, and who is paying $500K for a single share of a company not currently turning a profit?  Isn't the smart move to sell some shares on the way up, and not hold out for an astronomical price point like $500K?

 

Market chaos happens a lot sooner than $500k. I think somewhere around $9k a share would put GME worth of the actual shares issued at half a trillion dollars. With the way the stock was shorted, almost the entirety of that half a trillion would be shorted shares. That half a trillion shortfall would cause so much liquidation that a huge selloff would occur, triggering all kinds of other events like stop-losses, algorithms reacting, margin calls that have nothing to do with GME, and so on. When GME tickled $500 a share, the market had a brief 15-30 minute selloff. It didn't recover until after the halts on buying started being implemented, which crashed the price through panic selling. I believe that we saw market support shuddering under the coming weight of a runaway price spike and the effects it would have on the market as a whole.

The situation is still very perilous. I've said several times that I don't know how they could possibly ever unwind this situation without paying GME directly to issue enough shares. My concern is that it will be taxpayers that have to do it, when in reality, hedge funds and other financial institutions defrauded the system to create this situation and directly harmed GME in the process. But those with the power to fix the situation really have just decided to look the other way while others continue to operate around it clueless as to the true possible fallout. It's the financial equivalent of the Beirut explosion.

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52-80

52-80 19147

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Posted
15 hours ago, Angry Gorilla said:

I've seen people (mostly on other sites) claiming they are holding until ridiculous prices like $500K.  Assuming these hedge funds start getting margin called and forced to cover their positions and the price skyrockets, isn't there a price point where the hedge funds don't have the money to cover the positions?  If they are short tens of thousands of shares, where do they come up with the capital to cover if the prices hits $10K, $50K, $100K, etc.?  What happens then?

 

Next question, if all the short positions are forced to cover and the price does shoot up to $500K, how do the retail holders cash out?  Every transaction needs 2 sides, and who is paying $500K for a single share of a company not currently turning a profit?  Isn't the smart move to sell some shares on the way up, and not hold out for an astronomical price point like $500K?

1. that's the hedge fund's (prime) brokerage's problem to worry.  at some point, they will liquidate their clients to prevent further catastrophe.  it happened with archegos capital.

 

2. we've already seen it play out on GME twice, and with now-recent many many other short squeezes - at some point, people start jumping off the ship to take profits.  further, not all of the price action is due to speculators buying up shares.  MUCH of the buying is by the counterparty of options contract (=market makers) buying long shares to hedge their short calls.  as the people sell their calls for profit AND/OR as the calls decay time value, the market makers will start to sell their long shares because to reduce their hedge.   

this selling action can also move price down and catalyze retail stock holders to sell to lock in their gains.  will also trigger stop losses and etc.

 

the zoomed out view is not that these stocks can ramp up interminably... the zoomed out view is that these stocks move very violently due to all these reflexive mechanics

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hayden_horn

hayden_horn 11362

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$300 seems to be the magic number for now. 

i'm under no illusions of $500k, but $500 should not be too far out of order, imo.

i bought at $252, so i'm just happy to see it back above that level. i ain't getting rich on this, it's just kind of a surreal kind of fun.

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Bone3421

Bone3421 716

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$300 seems to be the magic number for now. 
i'm under no illusions of $500k, but $500 should not be too far out of order, imo.
i bought at $252, so i'm just happy to see it back above that level. i ain't getting rich on this, it's just kind of a surreal kind of fun.
500, pfft....once the 8k comes out and we see the votes we'll find out how high this goes
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Bone3421

Bone3421 716

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https://news.gamestop.com/node/18956/html. 
image.png.2e3e1d3edea5c56308c8ce35a97dceba.png
was the popular theory that there would be more votes then official  shares outstanding? 
That was the theory being thrown around...so not the best news for that. I'm on free shares so I'll hold a bit longer and see what happens.

If it drops to far guess I'll be stuck with shares until the transformation is complete and it takes off
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Blotto

Blotto 23488

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55 minutes ago, Bone3421 said:

That was the theory being thrown around...so not the best news for that. I'm on free shares so I'll hold a bit longer and see what happens.

If it drops to far guess I'll be stuck with shares until the transformation is complete and it takes off

Well, my guess is there will immediately be a host of WSB theories to explain away the vote tally, along with a few new theories to keep the fish on the hook. Its why I mentioned the comparison to Q earlier in the thread. There are simply too many unsophisticated investors that are deeply emotionally and financially invested in this idea of spectacular GME riches on the horizon. Not much will change their minds at this point.  Unsophisticated in the “retail” sense, with access to far less capital, information, and connections than wall street.

And just like there’s plenty of money to be made manipulating people who desperately want a different political reality, there’s plenty of money to be made to be made manipulating the price between $100 and $300 now that the stock has captured the fancy of the reddit crowd. If you can figure out who’s pulling the strings, you can make money right along with them. But “them” isn’t the masses HODLing on reddit.  

The only thing I know for sure is that it’s CURRENTLY a shit company that is wildly overvalued, but also heavily manipulated. Can mgmt turn it around in a few years? Sure, won’t be easy, but its possible. Nothing else about this makes much sense to me, so I sit on the sidelines until I can figure out an angle. I have no skin in this game but find it to be a fascinating case study on herd behavior.

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Bone3421

Bone3421 716

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Well, my guess is there will immediately be a host of WSB theories to explain away the vote tally, along with a few new theories to keep the fish on the hook. Its why I mentioned the comparison to Q earlier in the thread. There are simply too many unsophisticated investors that are deeply emotionally and financially invested in this idea of spectacular GME riches on the horizon. Not much will change their minds at this point.  Unsophisticated in the “retail” sense, with access to far less capital, information, and connections than wall street.
And just like there’s plenty of money to be made manipulating people who desperately want a different political reality, there’s plenty of money to be made to be made manipulating the price between $100 and $300 now that the stock has captured the fancy of the reddit crowd. If you can figure out who’s pulling the strings, you can make money right along with them. But “them” isn’t the masses HODLing on reddit.  
The only thing I know for sure is that it’s CURRENTLY a shit company that is wildly overvalued, but also heavily manipulated. Can mgmt turn it around in a few years? Sure, won’t be easy, but its possible. Nothing else about this makes much sense to me, so I sit on the sidelines until I can figure out an angle. I have no skin in this game but find it to be a fascinating case study on herd behavior.


I would say the "currently shit company" is not accurate. They paid off debt, refreshed board with top talent from Amazon,chewy and announced new CEO and CFO. I would say currently they are looking pretty strong.
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Blotto

Blotto 23488

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Posted (edited)
52 minutes ago, Bone3421 said:


 

 


I would say the "currently shit company" is not accurate. They paid off debt, refreshed board with top talent from Amazon,chewy and announced new CEO and CFO. I would say currently they are looking pretty strong.

 

Relative to market cap, I should say. 5 yrs ago, GME did twice what they do today  in sales and actually made money. Now they lose plenty of money and need to completely revamp their entire business to remain relevant. Yet their market cap is 10X what it was 5 years ago. There is no way to justify their current market cap as a retail operation. Its just market fuckery, which will have to last for years until they create a new identity. 

On average, successful retail stocks typically trade at 1X sales. GME is currently trading at about 5X sales. They are basically priced today as if they have already turned the business around completely  and conduct 100% of sales online. But they don't. I remember when JCP hired the apple retail chief as CEO to turn around their business....it didn’t go well. Just hiring new people doesn’t mean shit. Maybe Chewy and friends succeed, maybe they don’t. 

 

 

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Wally Fairway

Wally Fairway 5541

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1 hour ago, Blotto said:

Relative to market cap, I should say. 5 yrs ago, GME did twice what they do today  in sales and actually made money. Now they lose plenty of money and need to completely revamp their entire business to remain relevant. Yet their market cap is 10X what it was 5 years ago. There is no way to justify their current market cap as a retail operation. Its just market fuckery, which will have to last for years until they create a new identity. 

On average, successful retail stocks typically trade at 1X sales. GME is currently trading at about 5X sales. They are basically priced today as if they have already turned the business around completely  and conduct 100% of sales online. But they don't. I remember when JCP hired the apple retail chief as CEO to turn around their business....it didn’t go well. Just hiring new people doesn’t mean shit. Maybe Chewy and friends succeed, maybe they don’t. 

It seems to me that the better comparable is that they are being valued like they are a start-up, and everyone is hoping that the "new" business model really dazzles and attracts VC, hedgies or a buy-out. 
I gave up on believing in an efficient market theory years ago; the market is irrational and can stay that way for a very long time

 

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SquishMitten

SquishMitten 10403

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On 6/8/2021 at 1:15 PM, Angry Gorilla said:

Next question, if all the short positions are forced to cover and the price does shoot up to $500K, how do the retail holders cash out?  Every transaction needs 2 sides, and who is paying $500K for a single share of a company not currently turning a profit?  

 

I think all other parts of your post have been addressed except this one. Yes, every transaction needs two sides. The price doesn't just go from $300 to $500K instantly. Somebody is purchasing them on the way up. That's why it goes up. It doesn't come down until there are no buyers willing to pay the $500K (or whatever it peaks at). In the case of shorts, eventually they don't have a choice. Somebody has to cover them. If the HF goes tits up, somebody else covers them. That's as far as my knowledge goes though. I have no idea what happens if everybody in the chain goes bankrupt, but I assume insurance and/or bailouts eventually come in to play.

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SquishMitten

SquishMitten 10403

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Dangit. I'd sold a handful of GME the other day at $310, which covered my initial investment leaving me with house money on my last 15 shares. Had buy orders in at $206 (with all the money I'd pocketed with the sales at $310) and woulda gotten a few free shares out of the swing. Looks like I missed the bottom of this dip by $5. So close!

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SquishMitten

SquishMitten 10403

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3 hours ago, Angry Gorilla said:

Thanks for the explanation.  I meant more when all the shorts are covered and there are no more forced covers.  

That's when the price would begin settling back to a proper valuation because there won't be many willing to buy at that price (other than FOMO, but that only lasts so long). 

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Eastwood

Eastwood 4394

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1 hour ago, SquishMitten said:

If i had a time machine, I would've gone back much farther than yesterday

If I had a time machine and went back to when I first discovered this in May '20 and dumped all that I could have safely parted with into April 16 2021 options, I would have netted $3.5 million.

I think it has more to drop before it finds level. It's still losing momentum, a bunch of bearish candlestick patterns, still hasn't dropped to the 50 day moving average, and there aren't many supports left on the chart between here and the 100s. We'll see, though. As long as the short interest is what it is, the stock will act outside of the traditional market analysis tools.

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52-80

52-80 19147

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check out this trade on AMC, using Nov 19th expiring options:  Buy 50-strike put + Sell 45-strike put.

pricing right now at 3.50 per contract = $350 deduction from your account.  max loss is losing the entire $350.  max profit is $150. 

 

here is a plot of profit-loss curve at the expiration date in November, with stock price in X.  stock price at 46.50 your position is breakeven.  below 45 you get the max gain.  above 50 is max loss.

image.thumb.png.f8aa4861f8d4478f857293a5110b81e8.png

 

this is the profit-loss curve at an arbitrary time -- i set for next month at September 24th.  e.g. at stock price 38, your position is +$25  (which you'd rather ride until November).

by the way, if you change the volatility parameter, the slope of this curve will change, but not by very much

image.thumb.png.1cab2633f57b8e5934b486e8a1ac06e3.png

 

AMC has been in a range of $30-40 for most of recent months, after slowly deflating from the squeeze

image.png.23f5b43381bd3507023a8120446f1ec4.png

 

 

basically, for a $350 expenditure, you have a good chance of turning a %50 profit by november, and your total risk is capped to that $350.  no margin calls.

 

you could also drag out the expiration to December 17th and the play is largely the same.  could tweak the strikes if its your fancy.  long 55P short 50P costs $365 for max gain $135

 

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Bone3421

Bone3421 716

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Posted
check out this trade on AMC, using Nov 19th expiring options:  Buy 50-strike put + Sell 45-strike put.
pricing right now at 3.50 per contract = $350 deduction from your account.  max loss is losing the entire $350.  max profit is $150. 
 
here is a plot of profit-loss curve at the expiration date in November, with stock price in X.  stock price at 46.50 your position is breakeven.  below 45 you get the max gain.  above 50 is max loss.
image.thumb.png.f8aa4861f8d4478f857293a5110b81e8.png
 
this is the profit-loss curve at an arbitrary time -- i set for next month at September 24th.  e.g. at stock price 38, your position is +$25  (which you'd rather ride until November).
by the way, if you change the volatility parameter, the slope of this curve will change, but not by very much
image.thumb.png.1cab2633f57b8e5934b486e8a1ac06e3.png
 
AMC has been in a range of $30-40 for most of recent months, after slowly deflating from the squeeze
image.png.23f5b43381bd3507023a8120446f1ec4.png
 
 
basically, for a $350 expenditure, you have a good chance of turning a %50 profit by november, and your total risk is capped to that $350.  no margin calls.
 
you could also drag out the expiration to December 17th and the play is largely the same.  could tweak the strikes if its your fancy.  long 55P short 50P costs $365 for max gain $135
 
Sir this a gme thread
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52-80

52-80 19147

Posted
Posted
10 minutes ago, Bone3421 said:
6 hours ago, 52-80 said:
check out this trade on AMC, using Nov 19th expiring options:  Buy 50-strike put + Sell 45-strike put.
pricing right now at 3.50 per contract = $350 deduction from your account.  max loss is losing the entire $350.  max profit is $150. 
 
here is a plot of profit-loss curve at the expiration date in November, with stock price in X.  stock price at 46.50 your position is breakeven.  below 45 you get the max gain.  above 50 is max loss.
image.thumb.png.f8aa4861f8d4478f857293a5110b81e8.png
 
this is the profit-loss curve at an arbitrary time -- i set for next month at September 24th.  e.g. at stock price 38, your position is +$25  (which you'd rather ride until November).
by the way, if you change the volatility parameter, the slope of this curve will change, but not by very much
image.thumb.png.1cab2633f57b8e5934b486e8a1ac06e3.png
 
AMC has been in a range of $30-40 for most of recent months, after slowly deflating from the squeeze
image.png.23f5b43381bd3507023a8120446f1ec4.png
 
 
basically, for a $350 expenditure, you have a good chance of turning a %50 profit by november, and your total risk is capped to that $350.  no margin calls.
 
you could also drag out the expiration to December 17th and the play is largely the same.  could tweak the strikes if its your fancy.  long 55P short 50P costs $365 for max gain $135
 

Sir this a gme thread

Do similar for GME in October, long 200P short 195P

 

cost 315$ per contract. Max profit $185 

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