Watching the price action I'm sad but a bit relieved that my concerns on GME becoming a black swan event for financial markets is likely misplaced. Sad because it looks like Main St is being abused yet again and relieved because the risk of contagion from financial firm insolvencies is likely low.
On Friday what we saw was an inability for GME price to continue their explosive upward trajectory despite all the publicity and call to arms online. There was a brief spike to the $400s before quickly falling back and never challenging this level again for the rest of the day. The much touted gamma squeeze in the afternoon never happened because the Calls were covered a long time ago. Actually prices were very weak going into and out of the option expiry period. This has to mess with the Squeezers' confidence.
This situation/strategy is similar to game fishing: you let the fish run at times and pull in a little each time he tires. Towards the end just a little strength is needed to pull in the fish for the kill. Similarly here the buy and hold strategy eventually loses out because there is a finite limit to your investment capital. This is game theory at its finest - how many holdouts can the Squeezers expect to remain when prices start falling and continue falling (from lack of buying power)? And I seriously doubt that Main St was sustaining the 25-175m daily volumes throughout the week: that's billions of $ in transaction flow! Longs likely included many hedge funds (maybe even Melvin). They will eventually bolt when they realise the juice is all squeezed out. Meanwhile the daily fluctuation in GME's price is still huge: $250-400s on Friday - enough for any half decent trader to make a killing selling to less sophisticated investors just buying and holding.
The fall in the Short % was slight: ~8% during the week. That's the main metric promoted to the Sqeezers. There is no hurry to decrease that. Eventually that number will get low enough to break all confidence in this story. A few major WSB captains bailing could also do it. Even an article like which explains the situation to Main St could trigger the rush to the exits when the implications are made clear. This is like the experiment of the Professor who tells his 100 student class to pick a number between 0-100 that is half of the average picked by everyone else (so if the rest of the class all pick 50 and you pick 25 then you win). I heard in the real life demonstration of this experiment the average answer was in the low 20s. It suggests the average person only thinks 2 degrees and expect their fellow man to think 1 degree (give an answer of 50). If everyone was rational they would expect everyone to keep halving their answer (thus halving their own) until eventually the only answer is 0. Not far from where GME can expect to fall once this is all over.
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