GME - EndGame part 5: They couldn’t win, so they cheated. Why you should leave Robinhood.
This is an extension of my DD series on GME. If you haven’t read them and have time, they will provide some background. In this post, I will discuss how shorts manipulated the market to score a massive victory today. There is a mass attack in mainstream media to try and portray retail traders as violating the rules, when in essence it’s the guys on the other side who are manipulating.
Sorry it took a long time for me to get this out, but I’ve been fuming all day at the blatant manipulation.
TONIGHT: AOC is doing a Twitch stream. Please tweet this post and this one to her attention and to anyone else (Chamath? Elon SEC? Portnoy? Bueller?), to help people understand the manipulation that’s going on.
TL;DR: Shorts couldn’t win. So they cheated. I’m sharing my research and speculations. This is not financial advice; do your own DD. I didn’t sell any shares today.
Previous Important Posts
- EndGame Part 1 (DTC Infinity) covered the short positions, the float, and potential snowball impacts of increasing prices, and argued that part of the reason that shorts haven’t closed was that it was pretty much impossible for shorts to close
- EndGame Part 2 covered Cohen, fair market cap analysis, and potential investors, in which I talked about the amazing mid-to-long term potential for GME.
- HEY SEC, if you’re reading please read this one - After the Citron tweet, I shared this fan fiction on what looked like blatant market manipulation by shorts on the day of the tweet, and offered some education on strengthening your position. This one got buried and is worth reading.
- EndGame Part 3 covered the gamma squeeze, potential shady tactics by MMs, and some tips for staying safe.
- EndGame Part 4 covered the continued gamma squeezing and the resulting tenuous position of the ~50M shorts that were still in GME.
The setup for the biggest, dirtiest trick of them all
Background you need to understand
The new twist in this story all started with Citadels & Point72’s investment in Melvin Capital, one of the biggest shorts in GME. Remember - Kenny G does not like losing money, so there’s no way he was going into that agreement with a potential loss of $3B on his hands.
Also, Point72 is run by Steve Cohen, who a) is one of Plotkin’s mentors and b) who was previously sued for insider trading and settled for $616M.
These are not nice folks, people.
What you need to know about Citadel
As I mentioned in part 3, I was concerned about the Citadel investment in Melvin because of Citadel’s connection to market makers. It seems like an amazing regulatory oversight.
In addition to the possibility of market-makers employed by Citadel acting in non-neutral ways as I discussed in part 4, this is the other bad shit:
- Many of you are on RobinHood for the free trades. How does RobinHood make money? They sell your order flow data to Citadel and lend your shares to shorts, pocketing the borrow fee.
- Citadel paid RobinHood $100M in one quarter of 2020 just to know what you retards are doing on RobinHood. What do they get for that?
- Citadel knows exactly the positions you’re holding.
- Citadel likely knows how much of that is on margin.
- Citadel knows Robinhood’s margin rules and when they would force you to sell.
- Citadel gets all of your limit buys, limit sells, for every equity and every option
- Citadel gets your history of purchases and sales, giving them very clear ideas of YOUR likely buy and sell points. They know when you bought them, how many, and can probably guess your own personal pain thresholds based on other equity sales.
- Trading on insider information should be illegal right? Well trading on your order data is not illegal for them. Get the fuck out of Robinhood folks. This is why it makes sense to pay for commissions. If you are not paying for the product, you are the product.
- In addition, remember that I discussed that we have been gamma squeezing for the last few days. In short, this means that a lot of the price action has been driven by MMs buying shares to delta hedge the options they’ve been selling you. Guess what?
- Who sold you those calls? Citadel.
- Who knows exactly how many shares are being held at each price level by market makers? Citadel.
The big dirty trick: how I think it happened, the implications, and how it helped the shorts
Remember, that out of 69M total outstanding issued shares, GME still had 50M~60 shares shorted as of today morning.
In my last post, I touched on the potential ripple effects of this short trade going against hedge funds, but here’s a synopsis:
- Hedge fund run leverage portfolios. Here’s Chamath doing a ELI5. Now, if the GME short was gonna go totally tits-up for shorts, say at $1000/share, here’s what would happen:
- You’d start to see a sell-off wider indices, as they have leveraged long positions. In order to not get margin called on their short positions, shorts had to start deleveraging (selling) their long positions. Notice the big selloff in the wider market yesterday? That was likely a whole slew of hedge funds working together to deleverage their longs, selling all at once, to shore up capital for their margin requirements against their short positions.
- Regulators don’t like turmoil in the wider markets. Kenny G, Steve Cohen, and a bunch of funds then likely went to said regulators and said “Oh poor me, I guess I’m going to have to liquidate completely and sucks that means we’re going to maybe trigger a wider market selloff”
- Said regulators: “Oh no! What can we do to get out of this mess?”
- Snakes / Short sellers / Citadel likely asked regulators to only allow closing of positions to soothe the markets and “reduce volatility”. Make it sound like it’s going to be a good thing for the world, to convince the regulators to agree. Make it sound like it’s for the good of retail.
I really want to know who made the decision to only allow closing positions as that was probably the largest coup shorts could have achieved in this fight.
If Citadel or the shorts knew about this decision in advance, or worse - if they made this decision happen, this is one of the greatest acts of market manipulation in history.
As you know, this decision meant that investors could only close their positions today. This means that shorts could only buy and longs could only sell. However, when you remove the ability to BUY for everyone, what happens? You get some selling pressure. Now us diamond-hand retards know not to sell when no one can buy, right?
So it didn’t even have to be you guys selling. It’s very likely that some cooperating hedge fund has been buying shares on the run-up, and chose this morning to sell the shares, triggering a gamma wave down, tumbling the stock down 80% in 1 hour. Thanks SEC for looking out for us!
Let me explain this a bit better
- Remember that market-makers were holding millions of shares of GME to delta-hedge the calls they sold you.
- This is the big one. As the price goes down, say with some selling by the co-operating hedge fund, market-makers have to sell the shares they were holding shares to delta-hedge. Normally, this wouldn’t move the price much, but when no one can buy the shares besides shorts this created a massive selling wave. Something like 30-40M shares had to be sold when no retail investors could buy. What a clusterfuck.
- People warned investors about stop losses and margin. Citadel knows all of your stop losses, and all of your margin holds so as the price went down, not only do more people choose to panic sell but also some folks got auto-sold at the fucking bottom either by margin issues or by their own auto-sells executing.
- As soon as the 80% drop had cleared all of the known auto-sells and margin calls Citadel knows about, shorts and funds turn around and start buying, with volume, right at the bottom. None of us could buy, so the discount is just for the big boys today.
https://preview.redd.it/xxfjwy1cs5e61.png?width=463&format=png&auto=webp&s=50127608c54a37e0a999cf94a3d839586fbc9d89
In addition to this huge push down, they continued to manipulate the stock so none of the few buyers left could actually push the price up. There’s a video on twitter showing the orchestrated sell walls today allowing shorts to keep buying cheap shares. If someone adds it in the comments I’ll link it here.
I believe Citadel, the short funds, and possibly the brokerages colluded to bail out the hedge funds by stealing money from Gamestop investors.
This guy believes Citadel reloaded shorts right before the buy restriction.
Furthermore, they’re fucking smug about it. Here’s Steve Cohen rubbing it in your faces.
What’s next?
Hard to tell. We all need to pay close attention to what happened today. It’s very likely a lot of shorts covered with the heavy discount, but we won’t know for sure for a little bit. I’m still in GME and want to see this thing thrive.
Robinhood and possibly some others are opening up buying tomorrow. This is your money, so be safe. I’m staying in GME out of anger at this point, and closing my Robinhood account. Screw these cheats; screw Citadel. They need to be investigated.
