Disclaimer: Nothing here is financial advice, no matter the formulation.
Im an ape with only very basic actual understanding of the situation.
EXTREMELY IMPORTANT: If I made any mistake, please correct me asap. Being able to udpate this thing quickly is why Ive made it html unlike the last one.
This was originally a couple few questions I wanted to ask in a simple post and I realised I need to get a better understanding of the basics myself.
Then I thought my better understanding of low-level very basic stuff could help others (as even the easiest-to-read DDs are often a step above that).
So I put some exemples, then I added my questions, and figured out I could find the answer, so Ive put them there, and finally I ended with my full updated presentation.
Then I remembered that, obviously, other posts on reddit already explain all that very well, so I decided to trash my explanation.
Then I realized many apes are sometimes too lazy to seek out answer so ill try to shove some in their mouth. And since reposting is bad, here's my (probably flawed) version.
Before we start, here's my previous 'guide' on how to not panic
during the Mother Of All Short Squeezes :
Its far from perfect, so please be sure to read the users comments for counterpoints :
original thread [ MOASS : How to not fuck up - extended ]
HOW SHORTING WORKS
1 - Shorting
You bet a share price is going down.
You plan to sell a share to Bob at the current market price (100$) without actually having it. You simply "promise" you will give him later.
You wait for the price to drop and you finally buy it at market price (60$) and give it to Bob. That's shorting.
So Bob gave you 100$, and you paid 60$ for it, so you get 40$. A profitable plan ....
2 - Short margin
... but since you dont have the share right now, Bob wants some guarantees : you must first show him you already have the money to buy one, and you're keeping it in a safe pocket for that usage only.
So if the price goes up, Bob knows he can come to you and say "dude, I know you have only 100$, so you better use them to buy that share now before the price goes up !", and you HAVE to.
But you, the shorter, realize the price may not go down in a straight line, and market fluctuation could temporarily put it at 105$ before that falling, forcing you to buy the share and give up your position. So you say :
"Look, ill keep 150$ in my pocket instead, so dont panic if the price goes up a bit, i have enough *margin*"
3 - Margin call & why it squeezes
All is well in your pefect plan, except the price does not go down. It goes down. Fuck.
You are now forced to buy that share from the market at market price *right now* to give it to Bob beacause you reached your margin, **thats the margin call**.
The problem is there could be no one selling at 150$.
If at that point the only available share to buy is at 175$, so you pay 175$, you give it to Bob, you're sad, but situation is resolved.
Now imagine you're not you, but mini-Citadel, and you didnt promise 1, but 10 share to Bob.
Maybe the first share you will buy back will be at 175$.
But then the next person willing to sell one asks for 180$ ...
... and you'll have to buy it.
And the next offer is 210$ ...
... and you'll have to buy it.
And the next offer is 350$ ...
... and you get the picture.
And so that continues until you bought all 10, so you end up pushing the market price up yourself because you're buying all there is.
Bad, baaad plan, but it get worse :
HOW SHORTING FAILS
AND APES WIN
"Apes Together Strong"
So, lets go back in time a little : you (mini-Citadel) just "sold" the 10 shares to Bob, but you're confident the share price will go down because you know many tricks to force it to go down because you're a dirty little bastard.
Then comes a cute little kitten sniffing arround looking like a little ball of fur that he is.
And suddendly that seemingly harmless fucking kitten looks at your pocket and lets out a lourd roar :
" THIS DUDE IS SHORTING HARD, I SURE HOPE HE WILL FIND BUYERS IF VALUE GOES UP, OTHERWISE HE WILL HAVE TO BUY SHARES AT A VEEEERY HIGH PRICE "
And the apes heard that.
They stop munching on their crayons, look at YOU, look at each other, and strangely they suddendly feel the stock is lovely and start sharing *public opinions* about why they like it and how
it would be crazy if for some reason no one wanted to sell !
They publicly offer their opinions and ideas, but they are not giving financial advices or agreeing on a plan of action because it would be market manipulation and you sure know about that since you're mini-Citadel.
So now everyone and their mother is buying collectively yet on their own accord, and the values go up.
Comes 150$ and you have to buy back the shares you shorted.
But somehow no one is selling at that price.
"Ok guys, ill buy shares for 175$. No one ?
200$ ? 250$ ? ... 500$ ?
Seriously, no one ?!
Come on guys I HAVE to buy, be nice !"
But you're met with no offers, because you've forgotten you're mini-Citadel and the all the 'guys' are people you bullied in highschool, being 'nice' is not their plan.
Sucks to be you, the price will be yours to decide.
In theory, in such a situation the price is potentially infinite. That's why you see absolutely crazy prices like 1M$, 10$, 100M$ and so on, because its apparently *technically* possible (the best kind of).
One would say the sky is the limit, except the whole situation here is so huge that the limit is far beyond the sky, hence : *TO THE MOON*.
What if the shorter
doesnt haveenough money
to pay ?
Bob is a smart guy.
He know even if you've kept 150$ per share in your pocket in case of trouble, you will probably need more than that because you have a lot of shares to buy and *you* will make the price rise higher that it will be when the margin is reached.
So before agreeing with the deal, he asked you for more guarantees.
You said :
"I also have lots of cash for general emergencies, and worse come to worst you can request money from my pals Chad, Josh and Georges for money, see : they signed the paper for that."
Fair enough, bob agreed.
Well, fuck, the margin call comes, you're not happy, but you have to start buying.
Now heres come the real problem :
The only available shares are on sale for ten fucking million dollar because after seeing the kitty proven right, apes dont feel like selling lower than that.
Since you dont have that kind of money in your special pocket, you have to use all your emergency funds, but thats not enough either and start asking money from Chad, Josh & Georges.
Your friends are pissed, but they have to give you the money as they signed *your paper*.
However, you need to keep buying shares, and evey share is more expansive that the other so you keep requesting money from them.
Soon they run out of emergency money too, and they start requesting money to *their* friends who signed *their papers*, and so on, and so ...
Thats how you get a global fucking mess, because the price keep rising and rising and now everyone is forced to sell their stuff and call people who owe them money, who in turn will have to call people who owe them money, all because a friend of a friend signed a paper with the wrong fucking idiot - you.
Note : In the current real life events, there are many reports lately of large banks/financial institutions suddendly selling *lots* of stuff to have *lots* of liquidity at hand.
Coincidence ? - I ... let that thinking to other apes, and they seem to "think not".
Anyways, thats why a short squeeze is not limited by one organisation and can potentially pull money from basically the whole world reserve (hint: that's many moneys).
But that exemple above only if the only bananas available are owned by apes that refuse to sell !
True. But apes dont need to own most of the bananas - they just need to own enough so that at some point you have to buy them some.
For exemple, lets say there are only 10 bananas in the world, and I own just one. Even if you manage to buy 9 bananas from normies at a low price, you'll still have to buy mine, at my price.
That questions of "how many bananas there are" (the float) and "how many bananas you must buy" (the short float percentage) is answered in the next chapter.
Understand the float
to avoid sinking the MOASS
Why selling too early
will fuck you
AND everyone else
Here we enter the part where my ignorance will be most visible.
PLEASE CORRECT INACCURACIES AND RETARDNESS
WHAT IS "THE FLOAT"
"The term float refers to the regular shares a company has issued to the public that are available for investors to trade."
Ape language = "the total number of bananas that exist in the nature"
WHAT IS "SHORT PERCENT"
"The short percent of float is the percentage of shares short in relation to the number of shares that make up a stock's float."
Ape langage = "The number of bananas the shorters have promised to buy"
WHAT DOES "WE OWN THE FLOAT" mean
theorical numbers here - the actual numbers in various DDs are much more favorable to us
Is hedge funds have shorted 70% of the float of a stock, that means they have promised they will by 70% of all the existing bananas at some point. (That point is either when they decide, or when the price goes over their margin. They cant hold for too long because they pay interest on it.)
If 40% of that float is currently owned by apes, that means if ALL non-apes sell their 60%, there are still 10% to buy from apes, becauses there's no one else to buy from. At that point they're stuck with us damn apes that are literally free to decide any price.
But if among apes, some have sweaty hands, they may panic and think "I have to sell now before they bought all the bananas they need", and to be the first to sell, they'll sell relatively cheap. If enough ape do that, the HF will have bought all their bananas at a high, but not crazy price.
How selling ONE SHARE
can get you more money
than selling all shares
"If I wait, I may miss the top and I wont get anything !
"Ill sell most of my shares at a reasonnable price and keep one share just in case of a jackpot."
First just a small note about the "chance of jackpot" :
The 3 months worth of public DDs from various sources and open to critics are not saying :
"there is some chance of crazy high price"
They are saying :
"according to all rules the price WILL BE
what the people decide"
I mention "according to rules" because things could happen 'outside the rules'.
However, that would mean some very indentifiable people (shorters & their friends) would have decided to explode the whole US trading system to at least some extent but sending a clear message that 'US trade system is rigged' and scare away investors en-masse.
You can imagine many very important, very powerful, very money people would not take too kindly to that, so I think its not really a good card to play if you value your ... whatevers.
Back to buisness:
if I understand it correctly the quantity of shares that HFs must buy is between ~50% (according to official numbers) and more than 100% (according to various DDs, like this one) of the float, so half all the bananas.
Why can it be more than 100% ? Because SHENANIGANS. Its technical, but from what I understand hf fucked themselves by greeding too hard.
So what does that give us ? Lets see :
Imagine 10 apes have 20 bananas each, which are all the bananas existing in the worlds so the "float" is 200 shares.
Now lets say HFs needs to buy 50% of the float, so 100 bananas.
CASE 1 : PAPER-HANDED APES
Some apes piss themselves and sell everything as soon as they see an extra digit, ruining it for everyone including themselves.
Apes see the price raising. Half (5) of them see a nice round 1000$ price and think :
All that 'big' money just under my nose might disappear the next minute, better take it while its here !
So Those 5 apes get 20k$ each selling their 20 bananas, totalling 100 bananas : The HFs have bought what they needed.
5 apes get 20k$, and the other 5 apes get nothing because of them.
The apes that sold laugh at the others that 'didnt play smart like them' and got nothing directly because of them.
The HFs are safe and the and whole finance world lets out the mother of all collective relief sigh.
CASE 2 : SWEATY-HANDS APES
Apes try to act smart when it not their forte, and it ruins it for everyone including themselves.
Apes see the price raising and think :
this is already nice, ill sell 10 bananas, and keep the other 10 for the moon.
100 bananas are sold to the HFs at 1000$ each. The HFs has covered (bought all they needed to) and thats the end of the squeeze.
All apes get 10k$, thinking they've made the right choice because it crashed just after that, and the whole finance world lets out the mother of all collective relief sigh, again.
At this point, you might be thinking :
Well duh, apes that sold everthing in case 1 got the most moneys. I want many moneys, so ill do that too.
Just wait till you read case 3 :
CASE 3 : DIAMOND-HAND APES
Apes do what they're best at : being dumb and stubborn.
Apes dont sell. A few normies do, but that's nowhere enough because apes hold most of the float.
The price raise and raise like crazy : 1k$, 10k$, 100k$, 1M$ ...
At some point, you've unlocked "get rich instantly" button. Selling just ONE SINGLE BANANA will be enough for you to live confortably for many years, if not for the rest of your life.
Go on. Sell. But sell ONLY ONE BANANA. Nothing more. Why ?
Why not just sell all your bananas then an there ?
You'd get all the rich you wanted !
Because of 3 reasons:
- Reason 1:
Selling all would just be falling back to CASE 1, simply with a higher base number. That mean despite you already being rich, your greed could cause late apes to not get anything at all.
Greeding regardless of the consequences to others is what hedge funds do, not apes
Apes strong together, ape no fight ape.
- Reason 2:
Why panic ? You're already fucking rich with just one banana sold ! Face it : even if the market crashed to 0 the next second, that's still more money you even dreamt of getting 'for free'.
If you still focus on the money you 'lost' instead of the fact you're fucking rich now, you need to slap yourself hard think again.
Look ... Im a nice ape and all but Im not just gonna throw millions away just to be cool !Well, no ones asking you to throw away money for nothing in return.
When you hold for the sake of all apes, that includes YOU, because ...
- Reason 3:
The price is still fucking rising ! As long as apes sell slowly instead of "wholesale chunks", the price for each single banana rises.
This means later, after other apes have got the chance to sell one banana too.
Not only you're already rich with the first banana sold, but the next banana will bring you even more money than the first !
AND you helped other apes !
Plus you can rinse & repeat, to get even more $$$ and help others again.
- Bonus reason:Your 'good enough' price on the way up might be dog shit
The very top of the squeeze coul be so high, that even selling on half the way down then can still be a hundred times what you tought was 'good enough' to you.
Selling all you have too early means you risk missing out on the full potential of the squeeze, and the difference can be huge.
Conclusion of case 3:
All apes rich. Predatory HFs & their friends poor.
So thats how selling just 1 or 2 bananas, can get you more money than by selling 10.
Holding is not rocket science, its rocket fuel.
How do you know enough apes will be behave well enough ?
Just look at the community.
The daily brain wash- i mean hype we spread.
The crazy ammount of effort everyone puts into the whole deal, from the smartest apes to the dumbest crayon muncher.
The community is already showing you they are generous and willing to give to other : now by giving their time, later by not greeding on money.
And again : not greeding here is not just being nice, its directly what will push the rocket to the moon
In this case, its both
"sharing is caring"
"caring is winning"
So As long as enough apes understand the logic at play here, it works. So just spread the word, explain how and why it works, make nice drawings with crayons if you need, but get the information arround.
This is purely a smooth-brained ape analysis. You might be fooled by the nice moving texts, but the truth is I know so little about trading and markets that I might give a better analysis while blacked out on crayon-based vodka. Those are merely opinions, not fact, even if my wording seems to hint otherwise. You've been warned (again).
PLEASE TELL ME ASAP if what Im saying is dumb or could lead to bad decisions. This is HTML, I can fix it in under a minute (if im not sleeping) and avoid spreading unintentional FUD.
Also be sure to warn people in the comments.
Ok, too many words, only remember HOLD = GOODO. But still, sell sometime, no ?
What I keep in mind
- The price will go between 'very' high, to 'number-is-too-long-display-bug' high.
- The squeeze will keep squeezing as long as there's enough float that is not for sale.
- Regarding the float owned by retail (mostly apes and apes-encouraged people *please confirm): it definitely will not stop at 400$ like last time.
- The vast majority of the float must be bought
- Retail owns basically all of that float, and this means mostly (?) apes and apes-encouraged people
This leads me to believe that
- The price should at the very least reach x10 or x20.
Im feel many people reading/making serious DDs will want to spit at my face for even daring to mention such a low price but im just saying it 'will at least by this point'
If I get it right that means that, at this point,
everyone could just sell 5% or 10% of their shares to cover the investment and then buckle up and sit confortably doing nothing at all.
I know many people scream that selling on the way up and how it will kill the squeeze, but if apes only sell 10% at max, surely that wont be enough to fuck up the whole thing ?
My point is:
If we can afford to sell 10% without jeopardizing the moon objective, I think it would be better to say it instead of keeping apes in the dark and potentially push the to bad decisions.
I highlight this not because im sure of it, but this is a critical point of my reasoning and if its wrong I want to be corrected fast.
Smooth brains : check the comments for any counter points
My exit strategy
- Once the price is high enough, I sell ~5% to ~10% of my shares to refund my investment.
EDIT 27/04 removed : I still keep this as an option as a 'feel better' pill in case I get paranoid because of the excitation, but as no DDs that I know of ever seemed to indicate a possible worse-case scenario (total crash), and with the very positive outlooks for the future of GameStop, there is no real basis to be scared at that point.
- I wont sell anyhing on early dips that could happen at 400, 800, 1500 or whatever.
EDIT 27/04 : Not even to double down.
SELLING TO BUY THE DIP HAS MECHANICALLY THE SAME EFFECTS AS PAPERHANDING : it helps HFs cover their shorts for very cheap prices. Dont do it.
- After this, ill probably sell one or two shares on the way 'just in case' at landmarks like 10k, 100k ... making sure I still have about 80-90% of my shares
- I keep a close eye on both the price and the volume to try to figure out when the top comes, but even if I think "the top is now", im not selling. Im getting ready to sell on the way down
- From what I guess is the top, I start selling on the way down.
- On the first sell, I probably let go 10-20% of my shares here, and on the way down I gradually sell most of the rest
-At the end of the squeeze, I WILL STILL HAVE SHARES LEFT because even if it was high, maybe it wasnt the real squeeze. Either way :
If there is no more squeeze, or I completely miss the mark, or even if for some magic/trickery reason there's no squeeze at all :
GameStop is in a fucking good position right now, and im willing to bet the share price will still be higher after the whole ordeal
in other words :
I LIKE THE STOCK
Important to know
before the squeeze
AVOID SELLING "TO MARKET PRICE" Due to important variations of prices, at the moment you'll want to sell, it could be that the first 'buy order' available is far below the last market price, and you could sell much lower than expected. So, limit orders.
You may have overlooked that, but be sure you know how your trading app work : how to sell only a few shares, how to use limit orders & so on.
EXTREMELY IMPORTANT having a lot of money is not as simple as you might think. Not taking the necessary steps might make you lose most of it and even seriously fuck up your life. There are a few guides arround (see below) giving you step by step guides on what to do once you get the cash.
To me, the most critical compilation to learn and understand everything about the MOASS is here :
This god-class compilation of god-class analyses by the wrinkliest apes around, along with easy-to understand guides and documents on various questions.
It probably includes the MOASS preparation guide but I mention it separately because there's so much important stuff here. MUST READ and do a checklist.
You'll find any information you need there, such as basically the thing Ive written here but explained better and with less mistakes. I still went on with this version that for the reason mentioned at the start : wanted to try to talk smooth-brained to smooth-brained, and do it in a way thats not
too much text at once is scary. Too late to change my mind anyways.
I made a game
Its about trying to get money out of a big squeeze while not knowing much about it. Dont expect too much from it tough.
Its here :
Thanks for reading.
I spent the night on this but couldnt put everything I had in mind or do a better proof read, sorry. I really wanted to be here for corrections and comments, but Ill deal with it tomorrow. Please be sure to read comments in case I fucked up some stuff
I think Ill try to make an image version of this later as you guys liked the previous 'guide' this way.