LogFAQs > #950847773

CoolCly posted...

I completely agree with Nanis - that was just an excuse to continue to encourage everyone to keep buying without looking like you are trying to screw over the retail people buying, and without having do what red sox just astutely pointed out... nobody is telling you when to sell. WSB absolutely wanted nobody to ever sell, but that was a critical part of coming out of GME without a loss.

As for what the Interactive Broker says, that lines up with some data Destiny shows that in the later days of the price increases, buying was actually coming from institutions and not retail investors. Retail investors were net selling. So it really did require the insitutions to keep buying to cause the squeeze. But I wonder why they stopped.... would they have stopped regardless of the retail investors getting their buys halted or not, or was that the signal to them that this was probably over and to reverse course?

Based on the short selling data we have from S3 (probably trustworthy at this point), short sellers went from being short about 120% of the float to about 50% short in 2 days on 1/28 and 1/29. To close a short position you must buy the stock, and that's a lot of stock being bought, so probably most of the institutional buying was short sellers covering.

On net, retail investors made billions, and short sellers lost billions. But yeah, there are retail investors who lost (those who got in late), and there are short sellers who won (those who got in late).

And there is a fairly simple game theory explanation for why they would slow down buying to cover when the brokerages stopped the buying. If you are a hedge fund, and you believe that the stock is going to go past the point where you get margin called, it is to your advantage to get out earlier, not later. If you can get out at $400, you take losses but don't go bankrupt. If you wait until it hits $2,000 and you get margin called (supposing you can withstand it up to then), you go bankrupt. If you are a fund without a lot of exposure (maybe your margin call point is $10,000, and you are confident the squeeze will end before you get margin called), then you can ride it out.

But for the funds with margin call points nearer the market price, they must have felt tremendous pressure on 1/27 and the morning of 1/28 to cover. Of course they didn't want to do it because they knew it would (a) result in big realized losses, and (b) their own buying would drive up the price. Some of the earlier shorts (Citron, Melvin) already covered on 1/27 or earlier. And probably, that frenzy of buying on the morning of 1/28 that took the price above $480 was some of the other funds deciding to get out now while they still could with their businesses intact.

Once the buying restrictions go into place, suddenly the funds are not expecting the price to go up. So there is no need for a mad rush for the exit to be first to get out - they understand that everyone will be able to get out - at some loss, but it won't be the world where the first person out loses $400/share and later people have to pay $4000/share. And you see them covering the majority of their positions probably in the 300s.

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September 1, 2003; November 4, 2007; September 2, 2013
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