🚀 Is the Gamestop Short Squeeze Over? 🚀

To be honest, I’m pretty sick of hearing about GameStop non-stop for the past week, but I am in this trade and I know a lot of other people are, so I thought I’d make a video breaking down what happened this past week and how this squeeze may eventually come to an end.

Remember: shorts aren’t contracts that expire. They may get margin called by their broker forcing them to liquidate other positions, close their shorts, or add more funds to their account. They don't expire. Options contracts expire and those have an effect on this squeeze, but that is not shorting the stock.

🚀 If you are in this position, please be careful. I wish you all the tendies your heart desires. 🚀

Gamestop Update (Friday, January 29th)

Well, this felt like the longest week of my life. A lot has been going on since I posted this video on Saturday talking about the massive short squeeze with GameStop. If you haven’t seen that yet, I recommend watching that first and then coming back here so you understand the basics.

If you’re a new subscriber, welcome to my channel where I cover different ways to make money online both with the stock market and without it.

And before I get any further, just a disclaimer that I am not a financial professional, this is not investing advice, and as of today, Friday the 29th, I am holding shares of GameStop.

So I’m going to try and cut through all of the noise and misinformation to give you an update on what’s been happening.

Since I posted that video on Saturday night, GameStop has been on an absolute tear. It opened Monday at $96.80 and closed today at $325, for a $228.80 gain. It even hit an all-time high pre-market early Thursday of $513.

This story has been all over the news this week with lots going on.

Basically, you have a lot of noise, a lot of distractions, and if you’re in GameStop as a trader, it can be easy to freak out and want to sell.

So let me cover some key things about this whole situation and if you’re in this trade this can hopefully help you out.

Brokerage/Clearing House Issues

So we were at a high of $513 pre-market Thursday, and then before the market opened, many brokerages disabled investor’s ability to buy shares of Gamestop, AMC, Blackberry, and others in the name of protecting investors. This caused GameStop’s stock to fall to $261 by the time the market opened.

That’s a $252 drop in roughly 2 hours. Absolutely insane.

The question here is: which investors are they really protecting by barring retail investors from buying? Buying drives the price up and if you block tens of thousands of retail investors from buying, you’re suppressing the price and helping out the hedge funds that went short on these stocks get out of their position. This seemed like another attempt to scare retail traders into panic-selling.

While it seemed just about all of the major brokerages had some sort of limitations, I’m mainly trading with TD Ameritrade, which still let me buy shares. It seemed the main brokerages that were restricted were brokerages that use Apex Clearing as their clearinghouse like Robinhood, Webull, and Tastyworks.

So while your brokerage like Robinhood or TD Ameritrade helps you execute your trade, the clearing firm is the party responsible for actually handling the transaction. They are essentially the middleman taking on the risk involved in a transaction if one party fails.

So as the middleman, Apex Clearing has to put up collateral on behalf of the broker and the customer to help settle trades. If their risk becomes too great – like if they are worried one party of the transaction will be unable to pay, then they can tell the brokerages they won’t be able to settle trades for specific tickers.

That’s what we saw happen on Thursday. I’m guessing since GameStop’s price was increasing so rapidly, Apex must have been concerned about short’s ability to pay or customers buying on margin may get margin called when a stock swings too much in the opposite direction.

Real quick, let me explain what buying on margin is. Buying on Margin is when you sign up for Robinhood and start a transfer from your bank account. Robinhood will give you ability to buy shares instantly, even though it takes several days for your money to actually settle into your Robinhood account. So you’re essentially borrowing from Robinhood to make your trade before your money actually gets there.

Basically, brokers like Robinhood need to have more money set aside for all of these trades so the clearing houses don’t get screwed over.

Now, I don’t really want to speculate as to whether there is a greater conspiracy at play here with brokerage’s or market makers having their own agendas to shut down the retail trader and help out the short hedge funds.

What I do know is the hedge funds Citadel and Point72 bailed out Melvin Capital to the tune of 2.75 billion dollars after Melvin Capital suffered 30% losses in the last three weeks.

Citadel has a subsidiary called Citadel Securities, which is a market maker. Market makers play an important role by providing markets with liquidity. Breaking that down even more simply, market makers can decide whether to take the other side of a trade that comes in, or they can send it to marketplace to have an existing party take the other side of the trade. They get to profit the difference between the price someone is willing to pay and the price someone sells for, known as the bid-ask spread.

The reason I bring Citadel up is that Robinhood sells their customer’s order flow to Citadel and other companies. These companies could quickly see a bulk of Robinhood user’s orders come in and front-run them… meaning they could see that there are 1,000 buy orders of GameStop at $10, so they could go and try to scoop up the shares for $9.90 and then turnaround and sell them to you for $10, pocketing the 10-cent difference.

And, mind you, Citadel was fined 22 million dollars by the SEC in 2017 for screwing over retail investors with their algorithms that do this.

So while that is a pretty crappy practice that takes place, it’s not just Robinhood. Most retail brokerages sell their customer’s order flow to these high frequency traders. But all of that to say it’s a predatory practice that you should know about and adds to this main street vs wall street narrative.

So even today, when I believe most brokerages allowed normal cash buying of GameStop shares, Robinhood placed limits on their customers, first restricted to 5 shares if you didn’t already own any, then further restricting it to 2 shares and then just 1 share.

It sounds sketchy, but I think it comes down to Robinhood needing more capital. They had to take hundreds of millions in loans from banks this week and raise an additional 1 billion dollars from existing investors to handle this surge of new users buying up shares of volatile companies like GameStop, AMC, and BlackBerry.

Regardless, if you are unhappy with Robinhood – I personally wouldn’t recommend it – you can transfer your shares to another brokerage. But, you will have to pay $75 to do so.

Has the Squeeze Happened?

A lot of new investors may be wondering if the squeeze has already happened because the price has already gone up 400% this week alone.

You also had CNBC announce that Melvin Capital, who were heavily short on GameStop, sold out of their short position. I am skeptical of this – and while it may be possible they’ve closed out all of their shorts, in reality we don’t know for sure if they exited their entire short position or just partially covered. For some reason, they were running promoted posts about Melvin Capital closing their shorts, which to me, is fishy. Remember, CNBC is not your friend. I personally think they are on the side of Wall Street, not people like you and me.

The latest data from S3 Partners shows 57.83 million shares are still shorted, which is 113% of the available shares out there.

It seems like while some funds who were short GameStop at maybe 8 or 10 dollars may have been able to close out their short position, new shorts have stepped in. So let’s say you thought GameStop would go bankrupt and drop from $8 to $0 so you went short. When they didn’t go bankrupt and instead, their share value increased to $100… you may have bought back the shares to close your short and take the L. But another fund could step in and say, “well, $100 is way too high for GameStop and it won’t stay at this high, so I’m going to enter a short position here, betting it will go back to $20.”

Well, when the price hit $200, they may have closed their short by buying the stock back at $200. And then another fund could attempt a short here, betting it will fall below $200… so in theory you could just have an endless cycle of hedge funds trying to short GameStop at higher and higher levels and get burnt when the price increases far beyond what they expected.

So knowing we have over 50 million shares short, if shorts need to cover, where are they going to get their shares from?

Well, they could maybe get some shares from a paper-handed goofball on WallStreetBets, but individual investors only account for about 16% of GameStop’s float, or about 8 million shares. The rest of the available float is owned by institutions and funds, like Blackrock, Fidelity, and Vanguard.

So it is possible that these funds may sell around current levels to take advantage of the inflated price. When you’re watching GameStop trade throughout the day, make sure you keep an eye on volume. This shows you how many shares are being transacted per candlestick. So here for instance, we had about 216,000 shares trade in just one minute. This is one of the reasons why you don’t have to worry as much about these shorts covering in after hours or pre-market – there just simply isn’t enough volume during this time for them to buy if they wanted to.

So has the squeeze happened? It’s currently happening. You have shorts suffering massive losses and the price working it’s way on up to levels disconnected from the fundamentals of the business – which is exactly what retail traders were hoping for.

Corporate Announcement

One thing that has been strange is we haven’t heard a peep from GameStop as a company. With all of this non-stop coverage about the whole saga, they’ve remained silent. Many are speculating as to whether or not they will release more shares at these crazy high prices. This would give them a huge infusion of cash, which they could definitely use as a company to help pivot away from retail. It would help out the shorts to an extent by providing more available shares for them to exit from some of their positions, but it would also provide some stabilization for the price and would be a long-term bullish outlook for the company.

According to Youtuber Trading with Bruce, (whose GameStop livestream I’ve been enjoying all week) they could have been under a gag order or still developing strategy, and we could see them make an announcement once January is over.

This may be how the squeeze comes to an end if hype dies down over the next few weeks and new shares are released. But with the way things have been going, it could take shorts weeks to unwind from their positions and end the squeeze.

More Noise

There has been a lot of misinformation in the media and on Twitter and just about everywhere else. When WallStreetBets on Reddit went private to handle the technical difficulties of having over one million new members overnight and unprecedented traffic, everyone on Twitter freaked out, stating such falsehoods like “Reddit Banned WallStreetBets,” – when anyone who’s been on WallStreetBets for more than a month knows they take it private every once in awhile to take care of some issues. It’s simply more fear-mongering to scare us retail traders out of our position.

You then also have other posts on Reddit or even in these comment sections claiming Blackberry or AMC or others are going to be the next GameStop. And while those stocks were heavily shorted – in my opinion they are merely distractions from GameStop. They don’t have over 100% shares shorted with low float and strong bullish catalysts. Anyone who missed out on GameStop is desperately looking to find something that will work similarly, and I just don’t see it happening the same way with these other companies.

You also have reports of the SEC and government monitoring the situation. To me, that’s a boilerplate response for something that has made international headlines. Remember, the amount of money being traded with GameStop is mere peanuts compared to the rest of the market. And the government would love to collect your capital gains taxes on your earnings.

My point is to try and parse through the noise to find actual facts that can help you be more informed. Wall Street hates losing money and will do whatever they can to come out on top.

What You Should Do

I had a lot of people messaging me and asking if its too late to jump in on GameStop and the thing is we could see this stock go higher – much higher – or we could see it come crashing back to sub-$100 levels. If you want to enter a position with prices this high, that is up to you. I personally would not. The last time I bought shares was on Thursday when I bought that effing dip for $141 a share. My cost basis is still below $60, and that is where I am personally comfortable being. And while I do have pretty decent diamond hands, I also want to be responsible with my trading. So I am still holding a fair amount of shares, but I have locked in profit. The rest is just house money, so I can take the risk of holding it as long as I’d like.

Literally house money. I want to buy a house.

If you’ve been in this trade, I hope you’ve held it together this week as I know I have been stressed as can be, waking up at 3am with anxiety. I also hope this video cleared up some confusion or questions you may have had and hopefully I didn’t over-complicate things. There was so much happening this week in relation to GameStop, and I’m running on fumes.

Hope you can get some sleep this weekend, and I’ll see you on the moon.

I will do a video once this is all over recapping my trade, so make sure you’re subscribed and hit the thumbs up button on this video to enable diamond hands.