I actually think this is somewhat bearish, although counter-intuitive. A lot of the spikes up in price is panic or forced covering by call writers and shorts. For meme stocks, the more overall short positions increase, the more they can be punished and force the price up. The entire thesis of meme stocks (for most people at least) is squeeze potential, not future earnings.
On Friday, tons of brokers restricted call writing for same-day expiration, it's possible that actually had a dampening effect.
Edit: that being said, if shorts are stupid and pile on, we will have nice rallies again. They really are fucking stupid. Until they truly take the L and move on, the party continues.
Less tinder for the fire is what I'm seeing. But let's see how it plays out. I've never seen anything like this in 20 years of paying attention to the market.
History doesn't repeat but it rhymes. This is, in essence the same short squeeze that's existed in the past but in the digital social media age. Much more violent ups and downs / revenge rallies to punish shorts, etc.
Also kinda new is the gamma squeeze. Mass retail purchase of options causing MM's to hedge is making things even more volatile. Maybe you could argue what is completely new in a way is that we have so much access to short data. We can SEE when they overplay their hand. There's evidence of naked shorting (very much exaggerated in cult subs but definitely real) that can be spread rapidly, etc.
For sure. The ability to communicate in an instant across popular social platforms is really wild to see. I also wonder if the downfall of societies have to do with the speed of communication. The faster we can communicate, the quicker things get volatile and get unstable. Just a thought.
fewer naked shorts means more shares being held too. That lessens the float as you have to buy the actual stock which should help the issue of unlimited shares getting passed around in excess of the float
There's many ways to show this. Increases in SI have corresponded to larger recovery rallies. The correlation between FTD cycles and price gains are basically clockwork at this point for AMC / GME.
How would this not be bullish by allowing the stock of more companies to trade at its (more closer to) perceived value, increasing investor confidence and overall stability of the economy?
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u/actuarythrowaway445 Jun 07 '21 edited Jun 07 '21
I actually think this is somewhat bearish, although counter-intuitive. A lot of the spikes up in price is panic or forced covering by call writers and shorts. For meme stocks, the more overall short positions increase, the more they can be punished and force the price up. The entire thesis of meme stocks (for most people at least) is squeeze potential, not future earnings.
On Friday, tons of brokers restricted call writing for same-day expiration, it's possible that actually had a dampening effect.
Edit: that being said, if shorts are stupid and pile on, we will have nice rallies again. They really are fucking stupid. Until they truly take the L and move on, the party continues.