Chewy, entered the history as the largest e-commerce acquisition. After achieving his small goal, Ryan invested heavily in buying 6.2 million Apple shares and became Apple’s largest individual investor.

This radical investor wrote to the Game Station board of directors in November last year, urging them to make a strategic transformation as soon as possible and turn the company into the Amazon of the game industry. I don’t know what happened during this period, but on January 11 this year, Ryan took two comrades to the board of the game station.

Based on Ryan’s success on Chewy, stock users and fans feel that he is very capable of turning this lonely physical store into the gaming industry’s Netflix and Amazon. This led to the subsequent soaring and long-short game.

2. Citron leaves the scene

On January 12, the share price of Game Station was mediocre. On the 13th, the stock price began to rise and began to move northward. On January 19, when the stock price was still around US$40, Citron could not sit still. I don’t know if they had accumulated a large number of short positions and decided to open it to retail investors for “class”, “Why the game station is only worth 20 US dollars”.

Unexpectedly, not only did retail investors not accept it, but the more courageous in the war, retail investors led by Wallstreetbets(WSB) began to openly Reddit(a well-known forum website in the United States) draws netizens to go long together, and incites the masses as long as they are of one mind, they can force shorts to buy back stocks and push up stock prices And make a substantial profit. Under his instigation, the stock price rose by another $25 within a few days.

It can be said that it was an organized and large-scale “financial violence.” Citron’s Andrew Left publicly stated that he would no longer express any views on the game station. He claimed that crazy netizens had begun to harass his family. He also claimed to submit relevant evidence to the SEC.

3. Options are the main battlefield

After the announcement of Citron, retail investors rushed into the market like chicken blood, and the highest share price on the day was nearly $75.

Theoretically, the maximum loss of short stocks is not capped.

What is different from the past is that when retail investors are shorting, they not only buy a large number of stocks to push up the stock price, but also buy a large number of call options. The volume of options trading in recent days has far exceeded the total trading volume of last year.

We have explained this phenomenon in our previous article “How SoftBank Uses Gamma to Play the Market Badly”. The constantly pushing up stock prices make market makers with a large number of negative Gammas have to buy stocks to hedge against each other. This forms a positive feedback that makes market makers who hold a large number of negative Gammas hurt each other.

Crazy retail investors need to buy stocks to hedge against negative Gamma market makers. Coupled with the lack of liquidity and the high borrowing rate, they have formed a terrible triple strike.

Last Friday, the maximum strike price of an option on any expiration date in GME was 60. The call option with a strike price of 60 that expires on the 29th this week was around $10 last Friday. This group of retail investors are picking the most out-of-the-money option.(Maximum Leverage) to buy, retail investors with only 6000 US dollars can only buy 100 shares if they buy the underlying stock, but buying 600 options, but leveraging 60,000 shares(600*100, US stock option contract is 100, that is, buying one contract means buying 100 stock options).

This is why we say that options are the main battlefield.

The exercise price is 60 calls, and the largest open interest in the whole market is bought. It is said that this kind of gameplay does not cause much impact when the stock itself is not volatile, but GME is 50%+ in a day The volatility can be bitter for market makers.

Not only that, Friday’s closing price was $65. It is very rare to pull the stock price above the strike price of all options. It can be said that this situation is even worse than competing with SoftBank!

Because these market makers with negative Gamma no longer have any hedging means, and because the theoretical upper limit of stock price increases is not capped, if the stock jumps large enough on Monday, the market makers hold this negative Gamma exposure Mouth can bankrupt a medium-sized market maker.

The first unlucky person of this incident, Melvin Capital suffered a heavy loss in stock shorts last week, and had to be injected with $2.75 billion from its peers Citadel and Point72 to continue its life. At the beginning of the year, this hedge fund had 12.5 billion funds under management, and GME was one of many short positions. It is precisely because of the substantial loss of GME’s short position that Melvin Capital retreated by 30% in the first three weeks of January.

4. Pursuing and fighting

I thought it was over after the leeks pushed the stock price to 65 and rubbed the citron on the ground. What the entire market did not expect was that this was just the beginning.

Back to the GME battlefield, on Monday, January 25, the exchange gaveThe closing price added a lot of high-level execution prices, and the highest execution price was increased from 60 to 115. For market makers, the situation is slightly more favorable because there are more opportunities for hedging.

But the stock price jumped directly to $95 at the opening on Monday, nearly 50% higher than the closing price on Friday. This jump is equivalent to giving the market maker a big punch. This is because As a market maker with negative Gamma exposure, what I fear most is this kind of jump.(gaprisk). The jump in the market not only caused market makers to lose money, but also increased a large amount of negative delta exposure, forcing market makers to continue to buy stocks to hedge.

At the same time, retail investors have started a new round of frantically buying call options. This time call options with the highest strike price of 115 are new targets.

Wallstreetbets keeps beating retail investors. “Get rid of short sellers and go to the fundamentals of TM!” Why is he so confident? This is because GME’s short positions have not decreased but increased during this period!

In addition to penetrating chicken blood, WSB also shared his account and told his followers that they can do the same. There are also a large number of retail accounts posted on the Reddit website, with profits ranging from tens of thousands to millions, and suddenly it has a taste of the currency circle.

The picture below is the closing price on Tuesday night. WSB made a profit of 17 million US dollars!

The exchange was also under-prepared for this retail showdown. One hour after the opening on the 25th, the stock price rose to 120, which once again exceeded the exercise price of all options.

From the chart below, we can see that the frenzied trading of retail investors has resulted in the trading volume of call options at the 115 strike price that expires this week reaching 112,000. Even market makers’ wild asking prices for options cannot stop the enthusiasm of retail investors for crazy buying.

At this time, GME’s option trading is no longer rational at all. The only thought of the red-eyed retail investors is to explode all the short positions in this stock.

5. Go crazy

On Tuesday, the exchange added more execution prices, with a maximum execution price of 200. The current open interest and stock prices and more options that can be traded give option market makers more leeway. There must also be many retail institutions who want to profit from this absurd matchup, thereby increasing The seller of the option.

In the first half, the stock price was still floating between 75 and 100. It seemed that the absurdity had ended, but in the second half, a violent rally began. Call options with the highest strike price of 200 continued to be the target

As of Tuesday’s closing price of US$148, the straddle option (straddle) with a strike price of 200 that expires on February 19 has reached 150 dollars. This means that the market maker tells the leeks that they want to buy this straddle option, unless the GME stock price is lower than when it expires on February 19You will be profitable if you are below $50 or above $350.

6. After the 26th day

GME went from 148 to 214 dollars after the game. This big drama between retail investors and institutions has just begun. As a melon-eater, I really want to see if the institutional bosses will see WSB’s blatant provocation, and unite collectively to fight back to suppress the stock price. After all, such crazy retail investors are limited. Yes, retail wallets are also limited. We will follow up the report to see how this farce ends.

Finally, WSB also wrote an open letter to CNBC, accusing the hedge fund elites who were betting against them for manipulating the market through CNBC and laundering their actions. A peasant uprising was going to overthrow the capitalist class. Look like.

This article is from WeChat official account:Think about options< span class="text-remarks">(ID: sansioption), author: think agency chiefs two derivatives abroad