Shorting the wallstreetbets flash-bubble, the trade of a decade
What is happening at the moment with stocks mentioned in the wallstreetbets thread on Reddit is totally insane and hard to believe.
But to those who have experience, it offers an amazing trade opportunity.
If you have a few minutes, and take a look at the wallstreetbets thread, you will quickly see that most of the people posting have zero understanding of market's mechanics.
One post I read this afternoon was summarizing it all. The poster was writing about GME: "let's keep buying, don't sell, and we will push the stock to $1,000! Then, when Hedge Funds see the price is not going down, they will have to finally buy it, and we will sell them our positions and f¤¤k them".
So institutional that were short at $15 because this stock was overvalued would be long at a $1,000? How does that make any sens?
I saw some guys opening a trading account just for the occasion to bet their savings, after the stock was up 3,000% for the week, other being surprised that after such a craze, it was pulling back, ...
What is happening is absolutely crazy, and they don't realize that at this point, the buyers are just helping earlier buyers to exit and institutional to start selling again. Because seriously, if you are heavily short at $15, don't you want to be more short at $480, in addition to timing you position thanks to the nice data Robinhood is selling you about what the retail traders are up to?!
This whole thing is without a doubt a crazy flash-bubble.
So now, what is the play?
These stocks will back at pre-bubble levels within a few days. and the to-the-moon Implied Volatility will be back to normal.
So if you have the margin, selling deep ITM Calls with 45 DTE is the trade of a decade!
But to those who have experience, it offers an amazing trade opportunity.
If you have a few minutes, and take a look at the wallstreetbets thread, you will quickly see that most of the people posting have zero understanding of market's mechanics.
One post I read this afternoon was summarizing it all. The poster was writing about GME: "let's keep buying, don't sell, and we will push the stock to $1,000! Then, when Hedge Funds see the price is not going down, they will have to finally buy it, and we will sell them our positions and f¤¤k them".
So institutional that were short at $15 because this stock was overvalued would be long at a $1,000? How does that make any sens?
I saw some guys opening a trading account just for the occasion to bet their savings, after the stock was up 3,000% for the week, other being surprised that after such a craze, it was pulling back, ...
What is happening is absolutely crazy, and they don't realize that at this point, the buyers are just helping earlier buyers to exit and institutional to start selling again. Because seriously, if you are heavily short at $15, don't you want to be more short at $480, in addition to timing you position thanks to the nice data Robinhood is selling you about what the retail traders are up to?!
This whole thing is without a doubt a crazy flash-bubble.
So now, what is the play?
These stocks will back at pre-bubble levels within a few days. and the to-the-moon Implied Volatility will be back to normal.
So if you have the margin, selling deep ITM Calls with 45 DTE is the trade of a decade!
Catatan
Here you go. GME at $115.Wallstreetbetser are surprised.
I am sorry for these guys.
There is no substitute for experience, study and a lot of screen time.
At least they gained some experience in all of this.
Hold your sold calls until expiration.
Easy play.
Good luck to all with your trading,
Catatan
GME back at 53.50.Here is an interesting read about KOSS:
cnbc.com/2021/02/04/koss-family-executives-cash-in-44-million-in-stock-during-short-squeeze-rally.html
Experiencing the same flash bubble as GME, it offered an opportunity for free money to directors, execs and main shareholders: they sold on the way up, and now wait to buy back when the stock will be back at to normal.
Profit on the trade: $44 million
Thank you Wallstreetbetser!
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