Down goes the Dow

What's the percentage of funds that beat the market? It's less than like 5% right?

agip wrote:

Fact checker wrote:

11/27/20

energy stocks bottomed in September so there was plenty of time for rising before 11/27

4/29/20

seattle prattle wrote:

Like i said, I opted for XLE for the energy play.

agip wrote:

short selling is hard to regulate...

the problem of naked shorting is hard to stamp out, last time I paid any attention to the problem.

and pump and dumps are always fodder for regulators.

not sure what the rules are on a bunch of people getting together and trying to squeeze a name. Doesn't sound right but I'm not sure what the rules are.

Bear with me, I'm writing this after 2 glasses of Tawney Port. Come home late this afternoon after brisk 7 mile walk, wife starts asking me, "whats all this $hit about Gamestop", after about 10 minutes of trying to explain, she says "forget about it"

First from Diogenes @WallStCynic aka James Chanos.

"Am still amazed that traders, both amateur and professional, do not comprehend that every share sold short creates an additional share “long” in the float. And that shares can be lent multiple times if the buyers hold them in margin accounts. Back Office 101."

"Say a company has 100 shares outstanding, but short interest is reported to be 150%(!)of the outstanding. On the brokers’ books there will be 250 shares long, and 150 shares short. The net amount (250-150) will always equal the actual shares outstanding."

"Please note that in this example, the short position is actually only 60% of the tradable float (150/250), not 150% (150/100). It’s also why high-short interest stocks are pretty liquid. A larger tradable float."

Also realize, in regards to Regulation SHO, MMs are exempt from naked short interest rule.

Implications, read this. ( I will get back to Squeezemetrics later )

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So what does this have to do with GME and Melvin Capital? Well when M.C.'s 13f was reported for 3Q 2020 it showed

Melvin’s most recent filing showed that it held 5.4 million puts on GameStop, valued at more than $55 million — an increase of 58 percent during the third quarter. ( also large # of puts on BBBY, LQND, FIZZ )

When M.C. bought those puts MMs would delta hedge by shorting these stocks. WSB knew if they could push shares higher by buying calls; 1st MMs will delta hedge by BUYING SHARES. 2nd, hopefully this would push underlying higher and as M.C.'s puts moved further OTM the MM's would reduce hedges by BUYING BACK SHARES, a virtuous cycle. M.C. countered by shorting and trying to pin underlying closer to ITM and making MMs short more shares reversing the cycle. They obviously lost, but in no way were they shorting GME at $4 or where short over 100% of float.

Now back to MMs naked short selling. Ever notice how a stock opens high and drops a couple of handles 15 minutes later ? Esp a stock that had some positive news report. Everyone wants in, who the hell would want to sell. Well, the MMs ( specialist NYSE ) has to make a market, so they push opening high , short, than buy back at the lower price. A constant money maker back in the 90s. Day before Dell's earnings, MMs would try to push price lower making current holders think someone knew bad news was coming, you buy. Next AM, DELL beats whisper # ( Dell knew how to play the earnings game ). Stock opens $10 higher, you sell at opening, always seemed to be the high of the day. Oct 1998, those bought at opening had to wait 6 weeks ( Russian default, LTCM ) to recover.

Back to Squeeze, hit 6 month and GEX. This and VIX Backwardation, not looking good

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Read this.

Nite all, good luck.

Thanks LGEML, you share really interesting and informative links.

Coincidentally, me and the spouse are listening to Malcolm Gladwell's "What the Dog Saw," which is a collection of his favourite old essays. In it he talks about Nassim Taleb's hedge fund days, and explains the approach he was trying to take back then, only buying options (and not selling options) where the payoff would be rare but very large, and the rest of the time he would bleed money. So, the opposite of every typical investor's instinctive approach, being happy with a likely very small gain most days balanced by the reasonable probability of occasional large losses (and effectively no chance of occasional very large gains for most of us), his approach was to be happy losing a little every day against the good chance of occasional very large scores.

This is not unlike what Hussman's fund sort of looks like it's set up to do, and is line with what Igy has described before as his barbell approach (the term is borrowed from Taleb's writings).

Googling a bit this morning i see a "black swan" ETF run by a Nassim mentee, Mark Spitznagel of Universa Investments (he was Taleb's hedge fund's chief trader back when Gladwell looked into this 15 or 20 years ago) jumped 4000% last April as a result of covid-related market turmoil.

I also found that other similar funds have not always scored big, and they mostly tend to lose money over time, like HSGFX, with occasional big jumps that don't necessarily cancel out the slow bleeding.

It ain’t over

Gme up another 35% premarket to 485.

agip wrote:

It ain’t over

Gme up another 35% premarket to 485.

Ha ha, I just saw that. Maybe I'll be giving up my dignity at the end of the year, $77 is a long fall from $485. I'm still confident.

Hey la gente,

can you give a primer on VIX backwardation? I did a bit of googling, but don't really have the time today to digest what I could find. Can you share a cliff's notes version of what can be taken from that?

VS-SJW-IR-TS idiot wrote:

agip wrote:

It ain’t over

Gme up another 35% premarket to 485.

Ha ha, I just saw that. Maybe I'll be giving up my dignity at the end of the year, $77 is a long fall from $485. I'm still confident.

Hey la gente,

can you give a primer on VIX backwardation? I did a bit of googling, but don't really have the time today to digest what I could find. Can you share a cliff's notes version of what can be taken from that?

Opposite of contango

la gente esta muy loca wrote:

When M.C. bought those puts MMs would delta hedge by shorting these stocks. WSB knew if they could push shares higher by buying calls; 1st MMs will delta hedge by BUYING SHARES. 2nd, hopefully this would push underlying higher and as M.C.'s puts moved further OTM the MM's would reduce hedges by BUYING BACK SHARES, a virtuous cycle. M.C. countered by shorting and trying to pin underlying closer to ITM and making MMs short more shares reversing the cycle. They obviously lost, but in no way were they shorting GME at $4 or where short over 100% of float.

If they bought puts when GME was at $4 then how is that not shorting it at $4? Even if they bought way ITM spreads, it was still dumb, and they clearly over-leveraged. Why would you buy more contracts than available free float? What's the end game, take them to bankruptcy court?

Only know as of 9/30/2021. They held 5,400,000 puts at a cost of $55,080,000, that's 10.2 cents a share. Also, remember they were buying puts on what they ( and others ) thought were candidates for bankruptcy. By spreading their bets, all they needed were a couple oh hits or near hits for a big payday. As their puts moved further OTM they probably rolled over into new positions. In 3Q they had increased from 3.4 million to 5.4 million. I don't think they ever shorted with borrowed shares, but I could be wrong. The source of the large short positions comes from MMs hedging of put options and just daily market making. I'm sure the delta was low, but imagine how many shares MMs initially shorted on all those puts which are the equivalent of 540,000,000 shares.

Their hubris led them to scoff at a bunch of ragtag internet amateurs, especially since they were specifically targeting them and their short positions, and to continue to double down ignoring all risk metrics. It seems, judging by Mon and Tue put volume, M.C. tried to make a last stand, failed and raised the white flag on Wed. Late Fri PM will be interesting, weekly options expire and the big dogs will want to reduce risk over the weekend. Then next week will it be a case of rinse and repeat ? Groundhog's Day is Tuesday.

Some 13f info for 9/30/2020

VS-SJW-IR-TS idiot wrote:

agip wrote:

It ain’t over

Gme up another 35% premarket to 485.

Ha ha, I just saw that. Maybe I'll be giving up my dignity at the end of the year, $77 is a long fall from $485. I'm still confident.

Hey la gente,

can you give a primer on VIX backwardation? I did a bit of googling, but don't really have the time today to digest what I could find. Can you share a cliff's notes version of what can be taken from that?

Follow

@VixCentral

@6_Figure_Invest

day 3 of broken Schwab trading.

it won't work between 930 and 1000 3 days in a row

miserable service.

Whoops, reminder to self, don't post in the morning until a cup a coffee. I have to rework Melvin Capital's put exposure equivalencies and costs.

agip wrote:

day 3 of broken Schwab trading.

it won't work between 930 and 1000 3 days in a row

miserable service.

All of them are having trouble. A savvy business person could have a real opportunity here to start a broker business that doesn't crater under load

Dr. Racket wrote:

agip wrote:

day 3 of broken Schwab trading.

it won't work between 930 and 1000 3 days in a row

miserable service.

All of them are having trouble. A savvy business person could have a real opportunity here to start a broker business that doesn't crater under load

"Robinhood removed GameStop, AMC, BlackBerry, and Nokia from its trading platform on Thursday, leaving investors unable to buy the highly volatile stocks."

Oh and apparently Michael Burry, who put in a $17 million position back in 2019, has a position now worth about $250 million lol.

The guy is a confirmed time traveler if you ask me

now schwab tells you that your trade failed, then it appears on your blotter, executed.

marvelous.

I'd hate to be them, unwinding all this.

No doubt people thought their orders failed and resubmitted, probably getting both trades unintentionally.

GME is about 20% of the weight of XRT now

lol spreads are all over the fvcking place

picked up a few lotto tickets on XRT - 1/29 P $73