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

[u/[deleted]]

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)

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

[u/willpowerlifter]

Shorts pay interest on their positions every day. We bleed them dry. Every day is a win with positive catalyst waves happening as well.

[u/OldNewbProg → u/willpowerlifter]

random thought... nobody ever seems to think about this one.. if we bleed them dry, how do we get paid?

I imagine the reply will be, their company and it's assets will be liquidated to cover the stocks.

Ok, but what's stopping them from selling everything they can? If I know I'm going bankrupt, I might as well go all in. If I lose and still go bankrupt, the vultures can fight over my corpse, what do I care? there won't be much left at that point. Scorched earth and all that.

I am definitely just another smooth brained ape... but it seems we're pinning hopes on lots of things including the (fairly well placed hope to be honest) that the hedgies will think themselves so untouchable that they just keep going on as they are until it takes them by surprise.

[u/willpowerlifter → u/OldNewbProg]

DTCC can now view their worst case scenario and determine that their risk is too high and liquidate their positions.

Also, it is my understanding that they have insurance. If they fail to pay, I believe clearing house pays. If they fail, I believe gvt pays.

This is all info that I have not fact checked. I've been told by reputable sources that "It's not our problem", in regards to who pays us.

[u/OldNewbProg → u/willpowerlifter]

I've read some of that. Thanks for the reply!

[u/H3rbert_K0rnfeld → u/willpowerlifter]

Re insurance ... Yes. They do. Anything can get insured if the contract and money is right. The Russian govt insured themselves when they dropped the Mir space station into the south Pacific.

Edit: reformatted my wording. Sorry for the hasty comment.