Source: career hedge fund trader
https://www.bloomberg.com/news/articles/2021-06-01/amc-games...
There are a lot of outright shorts. But there are also a lot of shorts for other reasons, and those people aren’t bleeding.
Nothing you have said indicates you understand professional options markets.
Are there any resources or books or anything you'd suggest checking out? Right now I'm definitely at an early "learn as much as possible" stage and would love to hear any suggestions you might have on how to get exposure to this world.
Thanks.
Presuming it’s the latter, I would start here: https://reddit.com/r/Superstonk/comments/nwqaj0/gme_moass_th...
That’s a link to a comprehensive beginner’s guide covering the GME saga so far, and offers plenty of supporting research in favour of a further potential squeeze. I hope it’s a useful starting point for you, assuming that’s what you were asking after!
I guess one goal would be to be able to walk into a trading role at a hedge fund (long/short probably? Also curious about macro strategies) and be at a decent starting point to hit the ground running
Then using what you've learned in your textbook, just keep your book hedged, without any opinion. Watch how your greeks change, and how that corresponds with your risk and pnl. Most people only really end up learning on the job. I didn't "get" options until I started running some risk and making some money. But that only happened when I first started working.
Now of course you want to do both, because ultimately you'll want to know why vols are trading where they are, which will be determined by the behavior of the underlying. But at first you just want to get a qualitative sense of how all the pieces fit together. Then once you do, you can do you fundamental analysis and incorporate that thesis, and start to develop a vol thesis.
One of the most well-known contributors at Superstonk is a former Citadel employee — he’s even spoken publicly about these events in an interview with CNBC. I think that makes him less of a “rando” than an otherwise-anonymous career hedge fund trader, who just happens to support your viewpoint.
There are experts on both sides. Nobody knows what’s going to happen. We’ll see!
>One of the most well-known contributors at Superstonk is a former Citadel employee
Source for both of these?
And here’s Dave’s interview with Superstonk: https://youtu.be/AYct0XX0uTU
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As for “plenty” of career hedge fund traders: I’ll accept “plenty” is a bit of a meaningless word here. Given the anonymous nature of Redditors, I’ll struggle to give you any meaningful identities.
Anecdotally, however, I’ve come across quite a few who claim to be professionals, and were accompanied by some kind of reasonable evidence to back it up. /r/DDintoGME has often brought attention to these people.
There have been several professional traders providing regular updates from their corporate Bloomberg Terminals [1].
Michael Burry, famed investor from “The Big Short”, held a long position on GME [2]. I think he sold it last year, but his tweets have been very bullish about the prospect of a market crash and accompanying MOASS resulting from Wall St being overleveraged. Take this one with a pinch of salt.
Perhaps, most tellingly, there are plenty of major hedge funds — including Blackrock and Vanguard (both of which are full of career traders!) — who seem to think it’s worth holding [3].
[1] https://reddit.com/r/Superstonk/comments/nzyh7f/14062021_gme...
[2] https://www.reddit.com/r/investing/comments/cthume/dr_michae...
I've not argued for/against GME. I've just argued against the conspiracy theories. I have zero insight into their core business, and if I don't have edge, I don't trade. But I know a thing or two about how markets work, and all of the conspiracy nuts who have jumped onto the GME story just don't really get it. That's what I take issue with.
They even disclosed to investors the risk of a further short squeeze on their stock. If they don’t have reason to believe that’s a possibility, it would never have been put on the record in a public filing.
In addition, assisting the SEC about 'ongoing manipulation' can just as easily mean that the SEC may be considering mass hyping of the stock through reddit to be manipulation. It does not mean that there is definitely shady stuff going on that GameStop is worried about.
GameStop’s filing did note the following [1]:
“the inquiry is not expected to adversely impact us”
The SEC themselves have commented on the investigation too [2]:
"SEC staff continues to monitor the market in light of the ongoing volatility in certain stocks to determine if there have been any disruptions of the market, manipulative trading, or other misconduct," a spokesperson for SEC said in a statement.
"In addition, we will act to protect retail investors if violations of federal securities laws are found."
[1] https://www.bloomberg.com/news/articles/2021-06-09/gamestop-...
[2] https://www.reuters.com/world/us/us-sec-says-observing-marke...
I think that's a major misunderstanding of how the statement works. Gamestop think the SEC inquiry won't affect their business - they aren't making any claims about its effect on their stock price. In a normal world, these would be close to equivalent, and you could interpret the statement as "this will not impact us to an extent that is material to our stock price", but that's not OK to do here.
They are currently completing an at-the-market offering for 5,000,000 shares, as a means to raise capital to fund their new digital strategy. We don’t know how long this will continue to go on for.
You may or may not be aware of this, but their new chairman is on a major recruitment drive and is taking on many new technology-focussed executives (lots of former Amazon execs, a total change in perspective for a brick-and-mortar retailer that was nearly bankrupt last year).
This has all been disclosed in their recent filings — and so as I understand it, at the present moment their share price is directly linked to the performance of their business.
Ultimately, though — I’m just speculating. This is far from the only indication they’ve given that retail investors needn’t worry. Just some food for thought. I wouldn’t normally give much weight to this if it weren’t also for everything else they’ve got going on at the moment. Time will tell!
“Forget GameStop” is a running joke by this point: https://www.reddit.com/r/GME/comments/mhc9vf/dont_forget_to_... — and that post was from nearly 3 months ago. These headlines haven’t slowed down since!
Some people speculate hedge funds are allowing AMC to squeeze, as a way to raise money to cover their GME shorts — not outside of the realms of possibility, given Citadel hold long positions on AMC. The timing of AMC price spikes has also correlated with FTD cycles, but that’s a whole other can of worms.
AMC seems to be covered by the media far more often than GME. On days when GME’s price has rocketed up, there appeared to be media blackouts, and it goes largely unreported. The same thing doesn’t seem to be happening with AMC (at least, not to anywhere near the same extent).
Other common observations include trading apps like Robinhood only sending users push notifications when GME’s price drops significantly — but never when it’s rising. This has not been observed with any other stocks, as far as I’ve seen.
The DTCC new rules + ongoing restrictions at brokerages suggests to me something is going on. For instance tdameritrade makes me call in to sell covered calls on my GME position while they allow me to sell covered calls through the web interface for my other positions.
I never said this wasn’t true. By all accounts this appears to remain true.
What I take issue with is all this talk of “naked shorting” which is a very specific thing and I’ve not seen any data to suggest this has happened at scale. It also fundamentally misunderstands now Citadel Securities makes money or even just options basics (the vast majority of retail are buying calls which means any MM will be long underlying against their short calls). It’s the conspiracy theory stuff which is nonsense.
This is almost certainly NOT the case. Do you have any data to back this statement up?
The MOASS theory relies simply on retail investors buying and holding shares. On the rare occasion when someone posts to Superstonk about their GME options, the user is quickly warned against them, without fail, every single time I’ve seen it happen.
Retail investors were no doubt trading options through Robinhood back in January. But after all the drama back then, Robinhood has since suffered a mass exodus of users to different brokerages.
It’s clear from spending any time at places like Superstonk that retail investors who’ve read any of the DD have moved away from RH en masse. There was a big push across the community to do this back in February, but I appreciate this isn’t obvious knowledge to someone who hasn’t kept up-to-speed with it for the past 6 months. Options are normally only ever mentioned by uninformed new users.
I should have been clear: I meant that in terms of options volumes (as was my lead into that claim about options volumes) that most retail are buying calls, as opposed to puts.
I have no doubt that in totality, most retail are just buying shares. But for those trading options, it is overwhelmingly calls.
Has it? Is there any public evidence that their user count is down?
https://fortune.com/2021/02/19/robinhood-brand-damage-gamest...
https://seekingalpha.com/news/3655984-76-respondents-plan-to...
If you go to Superstonk and search for “Robinhood”, you’ll find hundreds of real-world examples backing up my claim.
Any Superstonk users posting screenshots from Robinhood were immediately encouraged by their peers to transfer their shares away, in a mass campaign on the subreddit spanning the course of several weeks. Users would post helpful guides to walk others through the process, which I’m sure I remember reaching the front page at points.
Today, screenshots of brokerage accounts are posted to Superstonk many times throughout the day. But I genuinely cannot remember the last time a user posted a screenshot from Robinhood. T212, eToro, WeBull — screenshots all day long. But there is little to suggest a meaningful number of Superstonk users still use RH.
(Side-note: interestingly, the Robinhood exodus helped provide further evidence suggesting shorts are still in trouble. Many users who transferred their shares away from Robinhood found the cost basis of their transferred shares to be wildly inaccurate — often hundreds of dollars above the price they actually paid for them).
I don't like Robinhood. They gamify investing (the two metrics they shared with me were number of users and average number of visits per day - which is a terrible metric for an investment platform). I have no desire for them to succeed. But what you've posted isn't evidence of a "mass exodus".
>If you go to Superstonk and search for “Robinhood”, you’ll find hundreds of real-world examples backing up my claim.
All that proves is that robinhood is losing a bunch of superstonk users, but it doesn't say whether they're losing users in net or how much % of robinhood's userbase are made up of those users.
But I also linked to an article in Fortune, suggesting 56% of users want to leave. This was not a survey of Superstonk users.
Until they release any numbers, the best we can do is speculate. However it seems to me that RH’s reputation was significantly damaged as a result of this.
They also have an ongoing class-action lawsuit from retail investors to sort out.
Just type “Robinhood review” in to Google, and you’ll see this extends far beyond the Reddit echo-chamber.
Burry at one point linked to a blog article on NOPE[0], the Net Options Pricing Effect. The NOPE is an extremely basic metric that attempts to figure out how much of the market is based on the underlying stock, and how much is based on derivatives. I expect Burry figured this out a decade ago and has a much better metric for himself. I think this is why he found this trade early.
As we learned in the housing market of 2006 and the XIV in 2017, when the derivatives gets to be much larger than the underlying, the tail starts wagging the dog. I think the only naked shorting going on is legal, as MM are free to do so if it provides liquidity according to the basic black scholes model.
We can see that the OI on $0.50 puts and $800 calls is extremely excessive. When you have the OI of the January 2022 is at $.50 puts at 132,345 contracts, it seems to reason that the tail is wagging the dog.
If Hedgefunds had puts and that made MM create naked shares, and those shares were then bought by Cohen who then joined the board and locked in those shares, that's in essence a Buyback. If those shares no longer exist and retail buying is leading to an even bigger squeeze, who is buying those puts? Why would Hedgefunds buy the puts again? They should have given up when they lost %50.
[0]: https://medium.com/swlh/options-degenerate-marketplaces-part...
Agree with you here. These names have been coopted by pros. Who exactly I am just as clueless as you. But this sort of gamesmanship happens 24/7 in markets, it's just usually not as visible. It's probably coordinated, possibly illegal...but it's not the grand conspiracy that /r/wsb thinks.
> Burry at one point linked to a blog article on NOPE[0], the Net Options Pricing Effect. The NOPE is an extremely basic metric that attempts to figure out how much of the market is based on the underlying stock, and how much is based on derivatives.
Otherwise known as dealer gamma, something that is closely tracked in all markets. Options OI and pinning are serious business. NOPE didn't invent this.
Naked shorting is 1) risky and 2) not possible to the degree being alleged (also - cornering markets never works). MMs do not want to be massively naked short...it's antithetical to their business model.