GameStop (GME) short squeeze fireworks
- Thread starter Gediminas
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The real traders took profit and moved on already ..
All the big holders who bought after this thing hit the news are going to suffer .. Shame ..
Even silver got hammered today.
Wow this is dirty ..
Basically all the used apps, robinhodd, etoro, cashapp, revolut etc .. All the ones these traders mentioned shut down buying all together .. ANd a huge shorting started since yesterday after hours and it's even stronger now ..
The stock is a falling knife ..
Who would have seen this coming lol ? This never ever happened before 🙂)
Basically all the used apps, robinhodd, etoro, cashapp, revolut etc .. All the ones these traders mentioned shut down buying all together .. ANd a huge shorting started since yesterday after hours and it's even stronger now ..
The stock is a falling knife ..
Who would have seen this coming lol ? This never ever happened before 🙂)
its like you can't buy the stock on any of those retail brokers, insane !
now the shorts have not been covered still though if I am not mistaken, technically this could bounce back up as fast lol
I can't wait to see how this ends, hopefully those crooky hedge funds bleed to death smi(&%
now the shorts have not been covered still though if I am not mistaken, technically this could bounce back up as fast lol
I can't wait to see how this ends, hopefully those crooky hedge funds bleed to death smi(&%
It's your time to shine, if you liked it at $450 you must LOVE it at $102... now is your time to go all in!
the plumbing of the entire financial system is cracking and everyone is getting aware of the manipulations by those f*****s, I would do it again If I could!
there were report of market order hitting above 2000 at the high last week, even 5000!
the shitshow hasn't started yet, just watch rof/%
btw I already double down once 😎
Last edited: Feb 2, 2021
With respect, this isn't how it works. If you buy a call option, the other side of your trade is typically taken by a market maker. There is much written about how market makers work (and its not an obligation to buy the underlying physcial) so probably best to google that rather than me cut and paste here.
As far as I understand, if you buy a CALL you get the option to buy 100 of the stock at a certain price. The person that sold you that option is obligated to give you these stocks when they reach that price (if you exercise the option). I could be wrong though, as I'm not a options pro.
Yes, that part is right, the option is the right but not the obligation to transact at the agreed price.
The incorrect part is that the broker is forced to then buy the 100 shares that you *may* be long should you exercise...and your ability to exercise is also dependent on the kind of option. The market maker will manage his book for *everything* that is on his book to retain a largely neutral stance. If he has sold you calls but has also sold puts to someone else at the same strike then the two hedge each other off and the market maker doesn't need to do anything. This example is simplistic but I trust you see my point. There are myriad ways in which the market make will manage his book that may or may not involve the underlying physical.
Hope it helps.
I have to disagree with you. An option market maker does not want a fully naked exposure, so they buy a certain percentage of their exposure on the open market (20, 30, 40 shares). When you are facing an enormous loss, you could be sure that they will hedge themselves fully - otherwise they will lose millions and millions. See It's Not Just Robinhood, Reddit Rebellion Has Clogged Entire Financial System's Plumbing | ZeroHedge
It is not possible for a market maker option writer to be neutral in such days, as the ratio of calls/puts is hugely skewed. Who would buy puts from him at US$20? Noone.
You may have mis-read my post, I stated that "The market maker will manage his book for *everything* that is on his book to retain a largely neutral stance." (By 'everything', I meant within that particular name'.)
This is in exact agreement with your reply about them wanting to hedge themselves.
Your original post stated "buying call options (which then force the broker to actually buy the stocks)".
This part is not correct. The market maker (MM) is on the other side of your trade (not the broker) and the MM is not 'forced' to do anything. (Some may see this as semantics but the broker is not the MM and saying the MM is 'forced' suggests he is obligated).
The example I gave was deliberately simplistic to explain the point, we've ignored premiums, differing strikes, calender spreads etc.
The MM will manage his book as a whole.
I really wanted only to point out that buying a call does not necessarily result in the market maker buying the underlying.
I'm not saying they *never* have positions in the underlying as well, of course they do, but its more complex that your words suggested is all.
Here's a couple of scenarios to consider...
The stock is trading at $300 and I buy a $275 Call for $50 premium.
The stock then collapses the next day to $75 and stays there until expiry. The $275 Call I've bought is now worthless and I've lost my $50 premium.
If the market maker was 'forced' to fully hedge and bought the physical at $300, he's now lost $225 less the $50 he got in premium from me.
That means he's out of pocket by $175. So as you can see, they need a more sophisticated solution or they'd go broke pretty quickly!
As an aside, there is certainly money to be made buying out of the money (OTM) Puts.
How much is a $40 put worth when a stock is $300. Answer - pretty much nothing.
How much is a $40 put worth when that stock falls to $40? Answer - A whole lot more because although the intrinsic value is still zero, there is still 'time value' which increases as the option approaches the strike price.
So if I believe GME is going to $40 by the end of March, I could buy a bunch of March $40 puts for next to nothing while the price is $300. As price falls, the value of the $40 put increases even if it never actually gets to $40.
However, as per your link, in this particular case the crazy volatility led to some 'interesting' options pricing but I've shown the principle that buying a deep OTM put can still produce rewards if traded properly.
Again, these examples are again simplistic so people can follow along. Professional options trading is more complex and its understanding this complexity that leads to interesting strategies that's aren't possible trading just the physical stock.
Since I appear to have gone slightly off-topic so I'll stop here!!!
Hope it helps. Its a fascinating world to enter for those inclined to do so.
This is in exact agreement with your reply about them wanting to hedge themselves.
Your original post stated "buying call options (which then force the broker to actually buy the stocks)".
This part is not correct. The market maker (MM) is on the other side of your trade (not the broker) and the MM is not 'forced' to do anything. (Some may see this as semantics but the broker is not the MM and saying the MM is 'forced' suggests he is obligated).
The example I gave was deliberately simplistic to explain the point, we've ignored premiums, differing strikes, calender spreads etc.
The MM will manage his book as a whole.
I really wanted only to point out that buying a call does not necessarily result in the market maker buying the underlying.
I'm not saying they *never* have positions in the underlying as well, of course they do, but its more complex that your words suggested is all.
Here's a couple of scenarios to consider...
The stock is trading at $300 and I buy a $275 Call for $50 premium.
The stock then collapses the next day to $75 and stays there until expiry. The $275 Call I've bought is now worthless and I've lost my $50 premium.
If the market maker was 'forced' to fully hedge and bought the physical at $300, he's now lost $225 less the $50 he got in premium from me.
That means he's out of pocket by $175. So as you can see, they need a more sophisticated solution or they'd go broke pretty quickly!
As an aside, there is certainly money to be made buying out of the money (OTM) Puts.
How much is a $40 put worth when a stock is $300. Answer - pretty much nothing.
How much is a $40 put worth when that stock falls to $40? Answer - A whole lot more because although the intrinsic value is still zero, there is still 'time value' which increases as the option approaches the strike price.
So if I believe GME is going to $40 by the end of March, I could buy a bunch of March $40 puts for next to nothing while the price is $300. As price falls, the value of the $40 put increases even if it never actually gets to $40.
However, as per your link, in this particular case the crazy volatility led to some 'interesting' options pricing but I've shown the principle that buying a deep OTM put can still produce rewards if traded properly.
Again, these examples are again simplistic so people can follow along. Professional options trading is more complex and its understanding this complexity that leads to interesting strategies that's aren't possible trading just the physical stock.
Since I appear to have gone slightly off-topic so I'll stop here!!!
Hope it helps. Its a fascinating world to enter for those inclined to do so.
RIP Chamath and all the morons following him that are now watching their portfolio down 50% rof/%
I love this guy, talking about diamond hands while he's selling his stocks like a madman rof/%rof/%rof/%
https://twitter.com/x/status/1367668714733264896
let's not mention, that the $spce stock price went up 150% in 2021 ... in 2 months lol, the volatility always goes both ways, nothing new ...
btw the stock price is still in the green YTD ...
this volatility is the result of the wall street hedge fund degenerate leveraging like crazy and getting rekt, not of chamath selling 200M of the stock ...
chamath was pretty transparent about selling his $spce stocks recently, claiming to be reallocating to a new project/SPAC.
among the current market downturn he stated his portfolio was down more than a billion usd ... this is the very definition of "diamond hands" FYI smi(&%
CHAMATH THE LEGEND !!!
@nomad999 Invest in his SPACs then, if you liked it at $54 you must love it at $24. Or $CLOV from $17 to $6.5... Who wouldn't want to invest in a company with an undisclosed Justice Department investigation rof/%
I must say I agree with you though, Chamath is totally a legend for doing one of the biggest pump and dump in the last few years, scamming his hive-minded followers for billions of dollars and then exiting it to "manage his liquidity"... Massive respect for him, much less respect for his followers
I must say I agree with you though, Chamath is totally a legend for doing one of the biggest pump and dump in the last few years, scamming his hive-minded followers for billions of dollars and then exiting it to "manage his liquidity"... Massive respect for him, much less respect for his followers
I just love the fun and Games this stock gives world.
exciting to see what happens over the next coming days.
exciting to see what happens over the next coming days.
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