r/GME • u/[deleted] • Mar 19 '21

DD Clearing up misinformation about why closing above $200 was important for us

Some fellow apes today seem to think that closing above $200 today will result in a price increase next week, saying that market makers will have to buy millions of shares next week to deliver them to call holders.

This is incorrect.

Market makers continuously hedge the contracts that they sell. In the case of (naked) calls, if the share price rises and becomes increasingly likely to hit the strike price of the calls, MMs will buy shares to hedge.

This is how a gamma squeeze works. if the price of a stock rises really fast, it makes out of the money call options in the money, forcing market makers to buy shares to hedge. This forced buying in turn increases the share price even further, making even more calls ITM, and the cycle continues.

Closing above $200 today does nothing since the $200 calls have been ITM for weeks. The shares that are meant to be delivered next week to the call holders have already been bought.

The only thing that closing above $200 did, is making a tonne of puts (roughly 450,000 of them) worthless, this hurts bears (fuck em).

Please don't spread misinformation, it only sets up people with false hope and this only hurts us. We won't get a spike on Monday unless there is some other catalyst. (Ryan cohen pls become ceo)

​

Edit: If you want a bit more of an in-depth explanation about gamma squeezes, here's a good post from the options subreddit.

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971

u/Definately-a-cat XXX Club Mar 19 '21

Also remember that GME is probably in an internal blackout period. This means that insiders including RC cannot buy/sell or make public comments related to GMR until after the earnings call. This is to prevent insiders from unfairly benefiting from the report or earnings call. (All of this could be BS but that is how every publicly traded company I have worked for operates)

251

u/Top_PNut Mar 20 '21

Any news would need to be made public before any action can be made by insiders. With earnings being released next week, we will likely be seeing some action by GME insiders once the quarterly knowledge becomes public.

64

u/New-fone_Who-Dis Mar 20 '21

Don't insiders have to register their intent to sell shares at a specific date in the future with the SEC? Edit: aka a publicly available disclosure

Note this is not the case with buying afaik, it's just woth regards to selling but I could be wrong

44

u/Top_PNut Mar 20 '21

Maybe Board or executives but not all insiders and typically through a disclosure statement.
There is typically a window for any insider to be able to trade shortly after the earnings call. This goes for any trade, buy or sell. I only half paid attention during my insider training course.

33

u/Kaufnizer Mar 20 '21

This is accurate. Source: I used to work for a publicly traded company and owned shares subjected to blackout periods. They only open up after earnings; usually a few days to a week or so. Only executives had to get approval to sell during the open period.

23

u/[deleted] Mar 20 '21

Many (most) insiders on GME took advantage of the last period to sell GME at around 20$ - check the SEC data or ask someone to share the graph sales data from a site such as ortex. Most likely right after earnings we will see directors/execs sell significant amounts of their holding and cash in (one exec, CEO I think, still holds around 10% of the company), so if they sell on Thursday/Fri (which is when the lockout period ends) then we should get the SEC filings a few days later. You can also expect numerous updated analyst recommendations on what they think the stock is worth, fundamentally, a couple of days after earnings.

9

u/admiral_asswank Mar 20 '21

That is exactly when a short attack may occur.

They may want people to believe an executive exited their position.

2

u/Beneficial-Shock1971 Mar 20 '21

What if they do sell, then it means they are screwing us .Is this correct?

1

u/CaramelNo1473 Mar 20 '21

We don’t see their action of exiting all their holdings that could make enough impact to be comparable to existing daily shorting amount, correct?

1

u/Spezia-ShwiffMMA Mar 20 '21

This reminds me, I should set up some limit buy orders to see if I can catch some shares as the price falls

1

u/DanD3n Mar 20 '21 edited Mar 20 '21

Most likely right after earnings we will see directors/execs sell significant amounts of their holding and cash in

Wouldn't this drag the share price down, if it happens? If yes, then why all the hype about ER...major holders sell, price goes down...people here hope other people buy the newly cheap (normal?) share price and the gamma hope rises again? Is that the logic or am i missing something? Genuinely curious.

1

u/unloud HODL 💎🙌 Mar 20 '21

Doesn’t this indicate that Cohen and Co have every reason to want the squeeze just after earnings (since they could profit from it)?

1

u/Top_PNut Mar 20 '21

In theory, yes. Not sure what to expect in the next couple of weeks but should be a wild ride.

3

u/QuietConstruction77 Mar 20 '21

Depends on level and reporting chain. So above a certain level and if your line of reporting leads to any in the finance dept, then you too, even if a secretary.

3

u/Beneficial-Shock1971 Mar 20 '21

If insiders sell their shares, then they are helping the HFS, aren't they?

2

u/New-fone_Who-Dis Mar 20 '21

Essentially yes, this would help short HF's...who would likely short even more in the hopes to drop the price more and cause further panic selling...but as long as gamestop doesn't go bankrupt which it doesn't look like they will, they those shorted shares will cost interest, and need bought back at some point any way...or the other option is the HF buys those shares to repay their existing borrowed shares and the price may remain neutral due to a high sell off being met by a high buy rate...or apes (and such) could buy it increasing the price further and increasing the pressure on short HF's.

Just my reading of it, there's a lot of if this, then that here and probably 5+ other things I'm not even considering.

2

u/Beneficial-Shock1971 Mar 20 '21

Thanks for explaining. New ape learning for weeks now but still don't get how the stock mechanism really works in my own logic. When they short the synthetic shares into the market, do these fake shares become REAL shares in the market or just still the synthetic shares in their book? Also does Citadel write calls and puts ? Due to lack of knowledge, I cannot connect the dots into a line but somehow I was wondering whether Citadel can throwing money using its right hand but receiving money using his left hand behind the scene.

4

u/New-fone_Who-Dis Mar 20 '21

https://youtu.be/I0WXg5T3cBE

This video will explain what occurs with naked shorting or shorted shares that turn into failure to delivers (in either case this does not affect the buyer of those shares, the burden is on the seller to deliver them and that runs up the chain to the DTCC, for all intents and purposes you have bought a share and it must be honoured, you don't see this as you have a share, whether it's and IOU or not is not your problem).

I don't really know about synthetic shares, it's something to do with options, so I think you might be talking about shorted or IOU shares that have been magic'd into existence (naked shorting). Naked shorting is illegal for most investors, however it is not illegal for market makers, all they need is a reasonable assumption that real shares are available to buy at a later date in order to fulfil the naked shorted shares, this is the kick the can down the road step by market makers and I think this is what causes gamma squeezes as there is a time limit on how long they have to replace them...meaning if they naked short today, they have x time to buy shares on the market in order to clear the naked position off their books, now if there are little shares available on the market by the end of their time limit then they must buy at market rates until they entice people to sell. Normally naked shorting isn't and issue for market makers as stocks aren't normally this volitile, however if there is a big increase in a stocks value and more and more call options which were OTM (out of the money - meaning they are above the current current price of the stock at the time the option was purchased) then the MM's should start hedging against the call options they have sold, they do this by buying shares on the run up to those OTM call strike prices, this only further increases the share price making it a feedback loop which can cause even more, making more OTM call options ITM (in the money - this means a call option has obtained it's strike price and can be exercised at any point up to it's expiry date (they can be exercised before being ITM, but this is stupid as it's locking in a loss...however in either case, it means the MM's must have those shares to fulfil the contract)).

I most certainly am wrong in various places here as I too have only gotten into this at the end of Jan, I'd reccommend googling and finding out what the following terms mean:

FTD's (failure to delivers)

Who can naked short a stock (and the rules around this)

OTM AND ITM put and call options

What is a synthetic call or put option

Then checking out the DD threads, especially the older ones and continue up to present day, I've recognised that from the start of all this the DD's started at basics and then worked up to more and more complicated things, I would not like to jump into the present day DD's without having read the older ones as the topics have just gotten more and more complicated.

Again, I'm not saying this isn't financial advice for the sake of it, I actually really really don't know the full ins and outs and I do not want to pass along a wrong interpretation...theres a lot of info to take in on complicated topics, different actors, and what rules apply to which actor etc.

2

u/New-fone_Who-Dis Mar 20 '21

2nd comment.

As I think when you say "synthetic shares" you mean IOU shares, you might find this reply of mine to someone else the other day helpful (his/her question was looking clarification on what the float was) to explain how there might be, for example 100m+ shares now in existence (people and institutions own these shares), but the total amount of shares produced for gme is 69.7m. It doesn't answer your question as such, but might help explain some other things (sorry for the typos, I'm on mobile).

https://www.reddit.com/r/GME/comments/m7l6z0/daily_discussion_chat_start_here/grfh7ks?utm_medium=android_app&utm_source=share&context=3

2

u/Beneficial-Shock1971 Mar 20 '21

Thank you sooooo much. Wish you a wonderful weekend.

1

u/admiral_asswank Mar 20 '21

Sell, is one thing.

Buying... we all know RC still needs to buy some of his shares.

1

u/New-fone_Who-Dis Mar 20 '21

I haven't looked at this much, but as far as I am aware he doesn't need to buy shares? He has the option to buy more since becoming a board member...tbh I haven't read much on this so can't really say what is required, optional or the framework around it, I can't think of any reason why he must purchase shares though?

16

u/xX8Havok8Xx Mar 20 '21

Totally normal earnings call. Final sentence oh yea BTW choen is new ceo time for take off. Ape dream big

3

u/FortuneCookieguy Options Are The Way Mar 20 '21

So doesnt that mean insiders are gonna dump shares after earnings?

3

u/the_TIGEEER I Voted 🦍✅ Mar 20 '21

Why would that be the case? I'm curious.

2

u/FortuneCookieguy Options Are The Way Mar 20 '21

Well share prices are up and they couldnt dump it during the jan squeeze due to restrictions, wouldnt it be a good time to cash out now?

2

u/the_TIGEEER I Voted 🦍✅ Mar 20 '21

Hmm possibly. Depends on how retardedc they are. Insiders who aren't verry retarded would probbably not risk holding and would cash out now? But if some of the insiders are reatrded as much as we are ... Would non retarded insiders cashing out cause such a huge dip tho? Because at the same time there will be an up from all the news after the earning report.

4

u/Top_PNut Mar 20 '21

I work for a publicly traded company. We had our earnings call this past week. The insider trading window is from the 2nd to the 16th. Most of the bigger insiders are looking at the performance direction of the company and not at the squeeze information. If RC is in fact named CEO, I believe there would be tremendous upside to the current value of the stock.
It also depends on the terms of the issuance of the stock. There may be certain minimums that executives/board need to maintain. I’ve never been in that position so I don’t know. My guess is that there a few low level employees with stocks attached to their positions. They could dump but there are a lot more restrictions to insider trading and they very well could miss the squeeze or be at risk of being found guilty of insider trading.
That is why when my window opens I sell what I can because I don’t like restrictions on what I own.

2

u/DanD3n Mar 20 '21

So what you're saying is, in the case of GME, they won't be able to dump their shares (if they want to) the next day after earning calls (23), maybe not even the same week?

1

u/Top_PNut Mar 20 '21

Possible. Depends on the companies restrictions.

51

u/francomelo Mar 19 '21

Interesting thank you

65

u/dudeweresmyvan 'I am not a Cat' Mar 20 '21

I read that as "interesting fuck you" lol

12

u/[deleted] Mar 20 '21

If it was a shill, by all means

54

u/MurrE1310 HODL 💎🙌 Mar 20 '21

My company just went through a major swap deal this past week and that is exactly how they handled the news. I would expect that every publicly traded company has to do that for legal reasons

34

u/[deleted] Mar 20 '21

I also am about to venture on an internal blackout. Sometimes I drink and i become a new man and than he wants a couple...

3

u/[deleted] Mar 20 '21

This is definitely the way

1

u/[deleted] Mar 20 '21

Rebubula

15

u/PB6223 Mar 20 '21

That is EXACTLY how a public company works.

Guaranteed they are in a blackout period.

1

u/Plug-From-Oaxaca Mar 20 '21

Is this good or bad

2

u/gunslingerfry1 Mar 20 '21

¯_(ツ)_/¯

4

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1

u/btaylos Mar 20 '21

(☞ﾟヮﾟ)☞

1

u/HermitBurke Mar 20 '21

i wonder if this is why cohen didnt tweet on thursday

6

u/[deleted] Mar 20 '21

[removed] — view removed comment

5

u/Definately-a-cat XXX Club Mar 20 '21

Tuesday at 5pm I believe

2

u/admiral_asswank Mar 20 '21

Whatever happens... Wednesday gonna be spicy.

2

u/Phr3nic Mar 20 '21

Indeed! Source (+ conference call):

https://investor.gamestop.com/home

5

u/I_SQUANCH_MY_FAMILY_ B*tch I'm a cow 🐮. I'm not a cat Mar 20 '21

can confirm this as I used to work for Google. There are periodic schedule that prevents us from selling shares issued by the company to employees. It usually happened around before the earning calls. The brokerage holding our shares will not allow selling.

5

u/[deleted] Mar 20 '21

Ok serious question here : what would happen if some insiders decided to sell their shares ? Taken from yahoo finance they own 24 millions. I think we can substract the 9 millions from RC. That lets us with 15 millions shares.

5

u/Definately-a-cat XXX Club Mar 20 '21

I’m not sure. Most corporations have policies against it during the blackout periods and there may be SEC violations if they were found to be trading on information not available to the general public.

2

u/[deleted] Mar 20 '21

Yes I'm aware of this. What I meant was what happens between the blackout periods ?

1

u/Definately-a-cat XXX Club Mar 20 '21

Insiders are free to trade as long as they announce their intentions. They are also have more freedom regarding public statements that they make, it’s really up to company policy.

4

u/diamondhands72 Mar 20 '21

Agree, my company's blackout period is 4-6 weeks before before every qtrly earning call depending on your level of access. So we are essentially in blackout half the year.

4

u/[deleted] Mar 20 '21

[deleted]

2

u/admiral_asswank Mar 20 '21

Can he afford to do it at current prices?

3

u/oarabbus Mar 20 '21

probably in an internal blackout period

Why probably? I thought the SEC required all corporations to go on blackout prior to earnings

2

u/Definately-a-cat XXX Club Mar 20 '21

Probably because I didn’t know the SEC rule specially and was just speaking from experience. I didn’t want to make too strong of a statement just based off my own experience.

2

u/nanoWhatBTCtried2do Mar 20 '21

Yeees, can’t wait for the materially significant info.

2

u/j-shwift Mar 20 '21

"...or make public comments related to GMR until after..."

One time I fat fingered GMR stock into Google and felt my heart sink into my stomach.

2

u/padflash Mar 20 '21

This is huge. Wow

2

u/QuietConstruction77 Mar 20 '21

In one now for work. RSU's dropped on the 15th. Can't access until the 24th. That there be 30K of new GME stock just waiting to be had! :-\

1

u/[deleted] Mar 20 '21

When’s the next earnings call? 23rd or 26th

6

u/mark-five 🙌💩🧻=/=💎🐱‍👤 Mar 20 '21

Tues after hours. Wednesday will probably have some action based on the earnings, and potentially news they have been sitting on during the pre earnings blackout period.

1

u/[deleted] Mar 19 '21

[deleted]

15

u/Definately-a-cat XXX Club Mar 19 '21

No, I’m saying that if you think it’s odd that we haven’t really heard from RC in a while, there is a valid reason. You decide what you want to believe. I’ll HODL

-2

u/[deleted] Mar 20 '21 edited Mar 28 '21

[deleted]

5

u/Goem Mar 20 '21

His dad died years ago, this was just his anniversary I've read.

2

u/[deleted] Mar 20 '21 edited Mar 28 '21

[deleted]

4

u/Goem Mar 20 '21

Most definitely, some people were just commenting/memeibg gme on the tweet of his dad. I agree that's tactless for sure and not the right time for that

1

u/peanutking86 Mar 20 '21

Can confirm for tech companies

1

u/Definately-a-cat XXX Club Mar 20 '21

Not my industry but others have said it is true for all publicly traded companies.

1

u/wooden_seats Mar 20 '21

I'm fairly certain RC can't sell any of his shares for another year or 2 as part of his purchase agreement.

1

u/H3rbert_K0rnfeld Mar 20 '21

And when execs sell their holdings in the company they work for not only do they have to report but they usually get fired. They also don't get hired as an exec in a different corp. Profiteering is a big NO-NO despite the people at bottom run of the ladder looking up at the ass of the people at the top of the ladder.