Yesterday’s trading day for $GME GameStop was the most volatile a stock has ever been (Don’t quote me on that). Being +40% up Market and reaching +140%, as well as being halted more times than we can remember. Ultimately the stock “fell” and closed +18% to 76$. It was beautiful to watch. Fed up average guys and gals vs huge institutional investors with massive capital. With, lots of friends. Also with lots and lots of capital. A huge game of numbers. Select people with large capital or a massive number of individuals with average capital. It’s capitalism war.
The whole way WallStreetBets buy the shares is by buying options. Or a contract that you can execute later. Now, this sure does sound like a short squeeze. +140% in one day. But apparently not. Some say the movement we saw yesterday was a Gamma squeeze. Or the price going up from lots of call options (long position, i.e going up) being bought. If you buy an option, the option seller needs to hedge it. They need to short it. Which creates a spike in the price. Only for a short while. GameStop stock fell from its peak and almost went negative. But how on earth that happened?
Negative Short Selling
It a fun little illegal activity. In which you short a stock without it affirmably existing. Basically shorting the stock without borrowing it. Just making stuff up. Or standard practices for short-sellers. Of course, people know that. And they saw how close Melvin Capital was to liquidate. Then the Empire hit back. Citadel LLC and Point 72 Management have announced they are investing $2.75 Billion into Melvin Capital. That hedge fund that almost went bye-bye. Showing to the world who is best at market manipulation.
Citadel LLC and Point72 Asset Management are investing $2.75 billion into hedge fund Melvin Capital Management, which has been hard hit by a series of short bets to start the year https://t.co/r4mw7e9mAy
— The Wall Street Journal (@WSJ) January 26, 2021
But today is the biggest test for the longs of GameStop stock $GME.
Interestingly the number of members in r/WallStreetBets has grown by 300 000. In 3 days. The empire is strong yes. But there is still hope for the WallStreetBets Jedi. Both sides are exhausted. But Redditors are determined. And it’s showing. GameStop stock is up +15% pre-market today. A fascinating battle is being fought before us. A third wave of call options is likely. We will have to see for ourselves how this saga continues. And if we see the culmination. A hedge fund going down. God speed to all.
Read yesterday’s story here.