Citron is right, GME is hot garbage. So I guess Citron decided if they can't beat them, join 'em! And now they are going to promote stocks? wtf. This is mostly Robin Hoods fault for allowing every degenerate (wsb) to get into trading. I see so many newbies asking on reddit how to open an account because they wanna 'join the revolution' and 'teach wall street a lesson'. It's turned into a farce. I didn't realize a P&D is now called a 'revolution'
Who's fooling who ? By Al Brooks, MD https://www.brookstradingcourse.com/analysis/emini-minor-sell-signal-bar/ ... Stock market news GameStop is controlled by institutions, not by small guys on Reddit.com GME, BB, AMC, and other stocks soaring 30 to 100% a day. Yes, short covering, but the news media is misrepresenting this story. They were so enamored with a David and Goliath fantasy, that they are failing to consider any other explanation. A better historical analogy is tulip mania in the 17th century. GME will probably be sideways to down for many months. They are missing one of the most fundamental points about markets. Markets were created by institutions for their own benefit, and the institutions are quick to seize control. This is true even though the Reddit army temporarily took control of several stocks for several days about a week ago. Yes, Reddit day traders got the rally going by lots of people with $10,000 accounts buying GME stock and call options. But once a big move begins, the institutions see opportunity and many come in. They are so big that they ultimately retake control. There are never enough ants to take down a herd of elephants. The strong institutions will kill both the ants, and the weak institutions that are short. Would I be surprised if the short squeeze continued up to 1,000? Yes. Wednesday was so huge that it will be a very important bar for many years. It is a good candidate for the top. The elephants have begun crushing the ants, and there soon will be none left to buy GME. I believe that much of the trading this week was by institutions. If I were running a high frequency trading firm, I would have told my people early in the week to create appropriate algorithms and start trading. If I were running a short selling shop, I would be telling my traders to short strong rallies, betting against the Reddit army. The goal of the institutions and the day traders is the same. They both see huge moves and tremendous profit potential. But I bet that by Friday, the institutions were the ones making the money. They are very greedy, smart, aggressive, and rich. I suspect that they were creating a big part of the volume. Why are the media ignoring the institutions? Because a David and Goliath story gets far more viewers, and the media needs eyeballs to make money. When they see the opportunity to make money, reason does not matter. Shorts pay interest There is an interesting point about the shorts in GME. They have to sell borrowed stock. The current interest rate that a short has to pay is over 100% per year for GME. The most a short can make is 100%, and that is when the stock goes to zero. Therefore, the short selling firms are risking more than they hope to make. Why would they do that? Because they believe that the probability is very high that they will make enough money to offset the terrible risk/reward. I, too, believe it is a high probability bet, but I think the math is better for me to trade other things. Buying a lot of OTM calls makes a stock go up Many small buyers have been buying far out of the money (OTM) calls, which are relatively cheap because they normally have very little chance of finishing in the money (ITM). The delta is relatively small, often 0.5 (0.5 is big for an OTM stock under normal circumstances) for an extremely OTM call on GME. A delta of 0.5 (50%) means that for every $10 that the stock goes up, the call goes up only $5. But as the stock goes up, the chance of the call finishing in the money goes up. That means its delta goes up. When a trader buys a far OTM call with a delta of only 0.5, the option selling firm only has to buy 50 shares of stock to hedge. Remember, 1 call controls 100 shares. If the stock goes up from option selling firms hedging the calls (buying stock) that they sold, or from small traders buying the stock, the OTM calls become less OTM. The probability of them finishing ITM goes up, which means the delta goes up. If the delta is now 0.8, the option selling firm needs to buy 30 more shares of stock. Therefore, if enough people buy calls, the price of the stock goes up because call selling firms have to buy the stock. It is an interesting feedback loop. Just buying enough OTM calls, hoping the stock will go up, makes the stock go up. Great for company executives! Many company executives and board members own a large number of shares of the company’s stock. It is common to have a CEO’s pay tied to the stock’s performance. The assumption is that if a stock goes up, it is because it is being managed well. This kind of pay package incentivizes executives to do a great job. However, with the short squeezes, the executives are doing nothing to contribute to the dramatic increase in the stock’s price, yet are making a fortune. BlackBerry (BB) is another of these squeezed stocks. CBS has reported that its CEO will get a $90 million bonus if BB trades above $30 for 10 days in a row anytime before the end of 2026. The high of the squeeze so far has been just below $30. BB is still up 300% from where it was 2 months ago. GameStop has lost $1.3 billion over the past 3 years, and it is closing 20% of its stores. That is why some hedge funds shorted it over the past year. But with the short squeeze, 4 members of the board of directors sold some shares at a huge profit. Other executives from these squeezed stocks are large shareholders, and they are also selling some of their stock at a huge profit during the squeeze.