"So You Just 'Raided' Your First Company" - A Letter To Non-Professional Traders
(www.zerohedge.com)
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Shorts don't expire, they pay interest. And they don't have 4 months, they likely don't even have 4 days.
Right now it's about 30% APY. That's the current stock price of GME (~$300) x 115% the number of float shares (~50million) / 365 per day. (numbers approximate and rounded because math hard)
That's over 40 million in interest per day. Never mind that their positions are so below water they are walking dead. They have dug their graves so deep their only play is literally to keep digging and hope they come out in china. That $3 billion injection that Melvin got from Citadel covers their interest for 75 days at that burn rate, ignoring all their other existing overhead. But that assumes the price stays at $300. If it hits $1,000 they run out of time before March. $2,000 and "Valentines day Massacre" will have a new meaning. It's why they are desperate to run FUD (fear, uncertainty, doubt) articles in press. It's why they are literally committing crimes behind the scenes to drive down and halt further raises. It's why the >$320 closing price leaving tons of options in the money scared the shit out of them. All those in the money options exercising exhausts the brokerage stocks they hold in leverage. That means they have to buy more next week to cover the next round of expiring options if the price continues to rise. There are no new stocks at $300 to buy, shit is about to go parabolic unless they do something, anything!
3 billion only bought the zombie time. To repay their responsibilities at $300 would cost 15 billion. But before Robinhood and others removed the ability to buy new shares 3 days ago, there were multiple documented partial sales as high as $5,400. At that price it would cost 270 billion to repay their responsibilities. At that price interest exhausts their $3billion on Thursday. And that assumes that was the high. It's not.
They are sitting on TRILLIONS in duties and the most they could scrounge up were a few weeks (days) of life support. If they fold, the brokerages must pay out, if they fold the banks must. There is no escape.
They are going to ride their position into the dirt because it's the only play they have. They have to hope they stay solvent longer than you stay (classically) irrational. But all anyone has to do to break them is LITERALLY nothing. More new money comes in to buy rather than sell every day. And every time a "rational" actor sells, it is bought by another "irrational" one who simply likes the stock. The noose doesn't just tighten with every dollar of smart money leaving to be replaced by crayon eating autists, no, the trap door has already been released and the body is already in freefall. You can add more length to the rope, but there's no ground below you and you can't fall forever. There's no slipping the knot, your hands are tied. The story is written, the ending is a few pages beyond. Putting down the book doesn't change how this ends, it doesn't matter if you keep reading or not.
* this is not financial advice, I'm a deplorable dirty poor that lives in a basement and I have not showered yet today
This is a stellar post. STELLAR.
This truth is immutable
I second your thoughts. I have some extra spending. I usually buy silver but I may grab a few shares just for shits and grins.
You should write poetry.
I write critiques of communism on the side and have a dearth of unpublished Star Trek fanfiction. You'd love my my Ferengi episodes.
But the greatest verse you'll ever read will be your grandchild's history assignment on the market crash of the 20's that changed the world - uncertainty spinning in you head over whether it means the one for worse or the one for the better.
This century won't repeat the last, but it will rhyme.
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Bravo sir. BRAVO
Nothing can stop what is coming
Dude you should make this it’s own post. It’s great
Oh well of course, they all did because they believe we are stupid. While they may be correct in that assumption, we are also, bitter and stubborn. Not selling next week either. I want to see them suffer.
I don't get how this is taking on hedge funds either if they were the biggest holders of GME in the first place. Driving the value way up and then letting them sell to retail investors so they're holding the bag. Shouldn't that also make them tons of money even before shorting it on the way down?
Yeah but I'm saying that other Hedge Funds and big institutional investors can sell their GME shares for big money and leave retail investors holding the bag. That seems like the big guy winning even if a few (or just 1?) hedge funds lose their shirt.
This may be the case but this is the shot heard around the world, imo. They're not stopping with GME. Also, someone posted that a Rothschild owns APEX, clearing(?) house that shutdown the ability to buy the stock this past week. I noticed the name APEX and thought immediately, predator. Then I thought, wow, "hunters become the hunted".
the part that makes this so damaging is that they were shorting 140% of the stock, not just all of GME stock...more than actually exists.
I understand the risk you're seeing, but there's two things to counter that:
2) The broker's business models relies on them holding these stocks. To not hold them would be even more irresponsible than what the shorters have done. To understand that, you need to understand options.
Lots of people last week bought the "option" to buy GME at prices above what it was currently at (I don't know, let's say $80 because I don't want to fucking check the exact numbers)
Now how much would you sell an option to buy a stock at 110% it's existing price? A sizeable amount to be sure. But what about 4 times it's existing value? You're effectively betting that the stock will quadruple in a week. You see that for peanuts right? Obviously. Well a lot of people had calls in that were for $320 or lower. So as the price begins to rise, and it becomes more likely that the price will end above what the strike price is, you as the broker start to get a little nervous. The broker model for this scenario is to quietly buy up more and more stock as the likelihood that you'll be called rises. This demand for stock from the brokers combined with regular upward pressure forcing the broker's hands is called the gamma squeeze, incidentally, and can be an impetus to pump prices too high for shorters to maintain, FORCING them to capitulate, which is the big squeeze. But that's not what this is really about.
We closed this week above $320 despite every dirty trick in their book and while many of those options are simply being sold and settled for cash, a ton aren't. They are being exercised. The guy who paid a small premium to buy an option at $320 is saying "bitch, here's the $320 x 100, gimme my 100 GME stocks you owe me". Even assuming the Broker already has those stocks because they followed the model and incrementally bought them as the price of the stock rose, as of Friday, they are tapped. the fuck. out. Because remember, while $320 was a big price point, plenty bought options at $250, $200, and much much lower. "Bitch here's my $10,000, better have my 100 GME stocks"
Next week will be another round of calls expiring, and the Brokers will have to replenish their GME position - they hold those stocks to leverage the options they sell. Not only are they never in a position to sell them the way you fear, they don't even have them in the same numbers if at all anymore TO sell the way you fear. This week they'll likely have to buy more up. And these are just the weekly option. Monthlies are every third Friday of the month, we're three weeks away from the February monthly, and I can tell you $300 was not on anyone's minds for that either, so Brokers have to buy up to cover those now too.
They are scared for a fucking reason
* this is not financial advise, I'm illiterate and dictate my words to a small immigrant child who types them in return for fruit loops and head pats.
I want to expand on this.
The DIVIDEND that a share of GME is likely to pay out is proportionally less that other options, making the existing price irrational to hold in lieu of others
But the leveraged position of Hedgefunds and Brokers makes the share price UNDERVALUED. This stock is worth thousands, because the position it can pay out is near infinite and the chance of it merely paying out tens of thousands is sufficiently high to make it easily worth the risk at ten times the price.
The price of the stock TRIED to correct to reflect the value of it's position, but was hampered by market manipulation and interference. The hedgies did ladder attacks after market when the people couldn't trade (but they could) to give the illusion of it falling, but people countered by buying up at open. Then the money makers changed the rules for places like Robinhood, requiring them to put up 100% (rather than 2% like normal) of the cash value of every trade, for these few stocks, until the money maker's book on those trades settled (every trade usually takes a few days to sort out in practice, even though it's mostly instant for you.)
The effect of that was that they had to limit buying, which meant that Hedgies felt they could safely perform ladder attacks in the open during market hours. They partially succeeded because they reversed a soaring price that hit $480 in just an hour after opening, into a sub $200 dive in the next hour or two. Since the market was open during this attack they were able to trigger a number of stops and crash out positions on margin. And they would have gotten away with it, except the market knew these prices were a bucking bargain.
People outside the US who could still buy on their platforms rallied and gobbled up all they could at these prices, as well as US customers after they frantically moved and set up accounts on platforms they found that could still buy. The market is trying to correct up, and they are trying everything in the book, legal or not, to stop it from rising UP to a price which better reflects it risk/return ratio. Even $300 is a steal compared to whatever that is.