I Made Thousands Trading Gamestop

I can't teach you how. It's a product of my misspent youth. But, I can tell you why.

First, go back on my timeline, and read my previous article on the phenomenon you've been reading about. The basic premise is, at the beginning of this mess, 150% of the authorized float of Gamestop was "sold short". Shares were sold to be bought back later at a cheaper price, many times that's zero, at some later day. The procedure to "sell short" is, an investor, could have been you or me, contacts his broker and asks for a "locate". It's electronic now, however it used to go like this. "I 'd like to short 100 GME. Can I get a locate"? Then, the desk would see, now pay attention, if a client of the firm had paid in full shares that he would allow to be "borrowed". Stock must be fully paid for and hypothecated for a locate to be confirmed. That's how it is supposed to work. So, if the reported short interest at the beginning of this mess was 150% of the stock authorized by the company, I'm going to go out on a limb here and say that there is malfeasance. Someone, or someones, are breaking the law. Why isn't anything done? Read the previous article. It's crooked! The how what and why of this is for the other article, and maybe another time when America reverts to a rule of law that is fair, just, and disseminated to all parties on an equal basis. I think many will agree this is not happening, and it certainly doesn't happen on Wall St. Never has, really. So, I'm entering a foray here where I know the dice are loaded.

Short stocks are sold with margin debit. You actually get a credit selling something you don't own, and as long as you post the proper margin, you simply pay the loan and any vig charged by the firm. When the margin is insufficient, you get a "margin call", which basically is a margin clerk contacting you for more money. If you don't have the money, they "buy you in". Imagine in the market place thousands of shares that really don't exist being bought in along with the normal buying happening on a daily basis. The chart in the above example is a daily chart. You shorted 100 Gamestop at $22.35, and the stock rose to $535 (it did after hours at one point). You received a credit of $2235, and the debit is now $53,500. Of course, you would have had to have kept adding money, paying a borrow of 40% or so, but you get the picture. Now, imagine hedge funds short millions upon millions of shares. One, Melvin, went belly up over this. Now, the trade.

I am not willing to lose 100% of any trade. The people in this thing may be holding from the 4 or 500's convinced they are going to 1000. That's foolish. I will tell you that, IMO, the suits can make this thing dance like a businessman with a thousand ones at the local giggle joint. When I trade it, my holding time is in minutes if not seconds. I've left a lot on the table. Yesterday, I took myself out even, and within the next 90 seconds, it was up ten points. Now the "why".

We've noticed a couple of trends in this, AMC, KOSS, some other heavily shorted names. First, around 3:30, they beat the hell out of the price. At about 4pm, the NY close, the stocks rocket. Seems that's when some calls come round to the desks. The desks are simply buying in stock to cover debits, to protect themselves, or the funds are doing it after driving the price down. But for whatever reason, a buy, technical in nature so you know when to get out, around 3pm to 3:30 and a sell into 4:15 to 4:30 works much of the time. Again, if I'm wrong, I need to be out immediately, because this can go down 30% in a minute.

A tougher trade is the 7am NY extended hour open. Seems there are some "buy ins" and some heavy retail buying which begins at 7am for the major firms. But, you have to sell it, because when the desks regain their footing, they'll knock it right back down. Why?

The firms must maintain "net capital" to stay in business. A trade this size moving against the desk, all leveraged, can be tens of millions of dollars. If the equity of the hedgefund is wiped out, where will the firm go to recoup their loses? And even if they could, and they can't, it would take time, and the regulatory agencies won't give them time. They'll be shut down. So this is getting long in the tooth. Why does it continue. My hypothesis, knowing some of these guys is, they're pigs. They know the value of Gamestop is in the single digits, so if they reshort the stock, they'll recoup their losses. That doesn't seem to be happening; this story is far from over. The internet crowd, the "Wall St. Bets" crowd, is doubling down also. By buying call options far out into the future, they are forcing the market makers to buy stock, to hedge their positions. That's called the Gamma Trade. But it does create demand. There are rumors that GME, firing it's CEO and getting some hitters in there, will sell stock at an inflated level and buy millions in Bitcoin, which is really going to be fun.

For the retail investor. Go elsewhere. Look at the candle from three days ago. It opened in the 30's, finished in the 90's. Along the way, it could have moved 20 points at a rip, and you would have seen your account value go up and down by thousands. It's nerve racking. And there is another rub. The SEC is in the pocket of Wall St., and Wall St. is getting hurt. Yesterday, the SEC, Securities and Exchange Commission, halted trading in 15 names they deemed manipulative. Folks, Wall St. has been manipulating stocks for years. Not much was said. Yesterday, Henry Blodget was on CNBC. He's touted as an expert. Google him, and his partner Mary Meeker. Why now is manipulation so devious? The little guy is winning. At least some of them.

So, here's the rub. Nefarious activities happened, and are happening. Wall St. contributing $80 million to the Dems in the last cycle. They'll be calling that card in before too long if these losses continue. They could shut GME down at any time, wait a week, give the funds time to get their stuff in order, and crush any open. I watch and document the movements in the stocks. They all move in unison. At 3:30 yesterday, GME and AMC, the largest theater chain owner in the world owning buildings that no one enters, moved is such unison that the Director of the Stanford Marching Band is calling for tips on choreography. You watch one, the others will follow in very short order (seconds).

Years ago, as a stockbroker mind you, I taught myself to count cards. There was an anecdote in one of the books about a casino where, at lunch hour, a local walked in with $40 and hit the crap table. If he lost the $40, he left. If any of you have ever rolled the ivory, you know a good run off that forty will bring you ten grand. The pit boss hated that guy, explaining, "we'll never get him!". That's this in a nutshell. I do my best to be wrong immediately. As frustrating as it is to "be right" on the trade, to see it go after I sell, I know the pain of being wrong. I can't let them 'get me'. You've all been taught, "long term, long term". Guess who's trading against you? Yep. How many people do you know that are rich from the stock market that aren't on the Street. Those oceanfront guys on Long Island. That's the game. Now, the bigger picture.

Wall Street and Washington are one in the same. Wall St. siphons the money, and sends some of it to DC so they are allowed to continue the grift. They tip off the pols with inside information, cheapest thing to give away being your product or service, as a sweetener. Don't believe it? Watch the Najarian brothers on CNBC. Their algos identify what they call "unusual option activity", which is smart (crooked) money buying stocks ahead of supposedly inside only news events. Remarkable performance, and no one says a word. Actually, Warren and the like as much as I despise them are correct in their concepts about control. But the Government can never do the right thing for long, the money is too good. So we, the citizenry, suffer in this swamp. If the owners of the Corporations would do the right thing, play by established and transparent rules, a lot of this graft would cease. But if you are the head of a Wall St. bank, and your compensation is 100,000,000 dollars, you must think you are doing the right thing. After all, who gets that kind of vig for doing the wrong thing? If you said Wall St. CEO's, go to the head of the class.

If you'd like to learn more about naked short selling, go to DeepCapture.com, the articles from around the 2006 timeframe. It was all on the table then. I had a piece of that fight. That why it was so remarkable to me it resurfaced like this 15 years later.

The formation of capital is a very worthwhile and necessary cog in the wheel of capitalism. Sex procreates the human race. Leave it to man to incentify both in unspeakable ways.