Board 8 > Stock Topic 36

(+) Yeah! (+)

Right. My point is synthetics as a whole are created by unusual options activity. Synthetics are allowed to be created due to options contracts. When they're deep in the money puts or out of the money calls, it's basically a license to fiddle with short interest and the price as you see fit, regardless of whether positions are closed or open. Synthetic shorts don't have to be reported, but if they short a synthetic long that isn't reported, why are you assuming a synthetic short is reported any more than a synthetic long is?

The only reason anyone had to cover in GME is because the stock price ultimately got to the point where all the options used to play the games were put in the money (or out of the money in the case with puts) where the synthetic shares and because subtlety was thrown out the window in a desperate attempt to drive it back under the price where the options to hedge the synthetic were. Jan 4th was when it reached peak. The following weeks leading into the squeeze it was actually lower. In fact, the funny thing about GME is the second time it squeezed in February the reported interest was actually around 20-30%. But why did it run in February? Do you think it just naturally did that? I think short positions that were still in play were being closed, using the higher springboard options created by the first run up (900 strike, 950 strike) as the hedge for the second round of synthetics.

Anyway the point is the reported interest is almost meaningless in terms of actual numbers-- synthetic shorts created by market makers don't have to be reported. But like, creating synthetic shares is a process that takes time-- if the price gets driven above the full option chain then it just adds fuel to the fire.

Synthetics don't matter to the extent that they offset each other. But synthetic long shares show up as identical to real shares in your brokerage account. If you buy a share, you generally cannot tell if you have bought an original or synthetic share.

A low reported shorted interest does not necessarily mean that there is nothing weird going on with synthetic stuff but a high reported short interest means that even if all the synthetics are offsetting each other, there is still a high short interest. That was the case with GME.

red sox 777 posted...

I think you're missing the big picture here. The point is, why should the share price move up like that? Why wouldn't it stay at $20 forever and let market makers feast on options premiums? Because the market saw the short interest number and started thinking a squeeze was likely, rather than extremely unlikely. Without the GME surge the AMC surge probably never happens, and it wouldn't matter how crazy the option chains were. There would just be no expectation that the price would move.

The bigger picture here is that synthetics were the reason it squeezed that hard combined with a lot of people who weren't phased by the market maker driving the price down (paper hands are what allow the synthetic positions to eventually become covered over time) to flush them out.

The ingredients are for the MOASS squeeze are:

1. Synthetic shares
2. People holding through low prices.
3. Catalyst for the price to move up. (if your force removal of synthetics as in the case of OSTK/BBIG, 1 and 3 are the same thing)

That's the common thread between all MOASS, be it Overstock or Volkswagen or AMC or GME. Reported SI number being high is why GME had 2 and 3, but that's not the reason it squeezed in and of itself. AMC's SI was actually never that high. But the synthetics were absolutely there.

Lopen posted...

The bigger picture here is that synthetics were the reason it squeezed that hard combined with a lot of people who weren't phased by the market maker driving the price down (paper hands are what allow the synthetic positions to eventually become covered over time) to flush them out.

The ingredients are for the MOASS squeeze are:

1. Synthetic shares
2. People holding through low prices.
3. Catalyst for the price to move up. (if your force removal of synthetics as in the case of OSTK/BBIG, 1 and 3 are the same thing)
That's the common thread between all MOASS, be it Overstock or Volkswagen or AMC or GME. Reported SI number being high is why GME had 2 and 3, but that's not the reason it squeezed in and of itself. AMC's SI was actually never that high. But the synthetics were absolutely there.

Synthetics had nothing to do with Volkswagen. Porsche and one of the German states owned between them 95% of the shares. There was a short interest around 12%. Ergo, it was effectively impossible for all the shorts to cover without buying from Porsche or the German state. When Porsche announced this the price immediately shot up at open the next day.

This is the same fundamental dynamic with GME and with almost all historical short squeezes. What made GME new is that it was the first major short squeeze carried out without a major concentration of shares in a few hands.

I recall there was a lawsuit regarding Overstock with regard to the creation of fictitious shares that were used to sell short with no borrowing of real shares. It was something like that. That's more what you are comparing to with BBIG I guess but I would guess that for every Overstock, there's 100 stocks where this stuff ultimately came to nothing.

Actually, historically the single most important factor for a short squeeze was considered to be concentration of the long interest in a small number of hands. IIRC, collusion between long shareholders was banned in the 30s or 40s and after that, the number of corners dropped off dramatically.

I mean you do know that with Volkswagen Porsche is literally apes right.

If you have 12% short interest and 95% of the float owned by people who aren't selling what do you think 12% short shares come from. That's a combined total of 107%-- that last 7% (and probably much more-- 12% reported of 5% is worse than GME's short interest ever was) is what? Synthetic.

Lopen posted...

I mean you do know that with Volkswagen Porsche is literally apes right.

If you have 12% short interest and 95% of the float owned by people who aren't selling what do you think 12% short shares come from. That's a combined total of 107%-- that last 7% (and probably much more-- 12% reported of 5% is worse than GME's short interest ever was) is what? Synthetic.

If it was synthetic based on the remaining 5% they might have been okay. Because they might have been able to purchase synthetic long shares originating from the remaining 5% to cover shorts. The problem was most of the short shares were probably originally borrowed from Porsche or the German state that owned 20%.

I'll walk through it.

1. Porsche lends a share to short seller. Short seller sells the borrowed share to third party investor. At this point Porsche holds a synthetic long share (created by short seller's act of borrowing) and third party investor holds a real share. Short seller is short a share. There are 2 long shares (synthetic + real) and 1 short share, which is a net of 1 long share, which is what we started out with, so the math checks out.
2. Porsche buys third party investor's real share. Now Porsche holds 2 shares - one real, which was purchased from third party investor, and one synthetic (created by short seller's act of borrowing). Third party investor holds no shares. Short seller is still short 1 share. There are still 2 long shares and 1 short share for a net of +1, which checks out.
3. Porsche demands short seller return the share it borrowed. Short seller goes to buy it back from third party investor, but he no longer owns it. Porsche owns it, so short seller has to buy it back from Porsche so that it can then be returned to Porsche. Short seller is screwed.

The other world (the one where the short sellers are fine) is this:

1. Hedge Fund A owns a real share and lends it to Hedge Fund 1. Hedge Fund 1 sells it to Fund B. Now Fund A owns a synthetic share, Fund B owns a real share, and Fund 1 is short a share.
2. Fund B lends the share it just bought to Fund 2. Fund 2 turns around and sells it to Fund C. Now Fund A and Fund B both own 1 synthetic long share each and Fund C owns a real share. Fund 1 and Fund 2 are both short a share.
3. Fund C lends the share to Fund 3, who sells it to Fund D. Now Funds A-C all own 1 synthetic long, Fund D owns a real long, and Funds 1-3 are all short a share. The overall net is still +1 long share.
4. This happens 25 times. Now Funds A-Y all own a synthetic share, Fund Z owns a real share, and Funds 1-25 are all short a share.
5. At this point, the reported short interest is 2,500% since there are 25 short shares and a single real long share. However, there are also 25 synthetic long shares.
6. Fund A demands the return of its share from Fund 1, excited about triggering the MOASS. Can Fund 1 return it? They can, as long as they can convince any one of Funds B-Z to sell them a share.
7. With the return of the share, the synthetic long share held by Fund A and the short share that was the obligation of Fund 1 have now been offset and canceled. Fund A still holds one long share, which could be the real share formerly held by Fund Z or one of the synthetic shares from Funds B-Y. If it's the real share, Fund 1 cannot make any more demands for the return of it share.
8. Supposing, however, that Fund 1 repaid Fund A by acquiring one of the 24 synthetic shares held by B-Y and not the real share held by Z, Fund A still holds a synthetic share. But it is a different synthetic share, which was written by one of Funds 2-25 rather then Fund 1. So Fund A tries again to trigger to the MOASS, and demands that fund return its share.
9. Yet again, their counterparty is able to return the share as long as they can buy it from one of the 24 remaining funds (other than A) that own either a synthetic or a real share.
10. A can keep trying, but as long as the other funds do not expect a squeeze to occur, they keep on selling and all A achieves is to eventually get its real share back, with no squeeze.

What you want for a short squeeze is not long chains of synthetics, but naked short selling and naked call writing.

Note that in the second example, if Funds A-Z collude with each other, Funds 1-25 are absolutely screwed and will have to pay whatever is demanded. This is how a good deal of pre-1940 corners worked. If Funds A-Z do not collude but independently come to the conclusion that the MOASS is inevitable, Funds 1-25 are also screwed. The effect is the same as if the long funds had colluded. If, however, the long funds do not believe a squeeze is coming, the chain of synthetics can grow arbitrarily long.

If the underlying stock is actually worthless, and one of the long funds tries to trigger the MOASS by having diamond hands, that fund will be left holding the bag as the other long funds will sell at some price to covering shorts while the diamond handed fund will be left with worthless stock and no squeeze.

So the significance of the 140% reported SI in GME is not that such a level of short interest guaranteed that there were not enough shares for shorts to cover - there were, since the total number of long shares including synthetics was probably well north of 200% of the number of real shares- it's that it made the market believe that the shorts were unable to cover. The other important thing is that a lot of the shorts were apparently naked shorts without a hedge.

I mean the problem is that in the real non-hypothetical world there's not a flawless chain of accounting and Funds B-Z are all lending shares out to short that they themselves are borrowing, you're not going to resolve it so cleanly. Like I'm not going into a hypothetical but if there's a chain where you've got I dunno Fund X lending to Fund C and D and then Fund C borrowing from D, do you think at each step we're auditing to make sure that the share can trace back to a real share from Fund A.

Ultimately if you're heavy in synthetics this kinda stuff is just going to happen. It's not as simple as A goes to B goes to C goes to etc. Things are going to be naked by accident or on purpose, because you've got the real shares technically being returned but a circular chain of synthetic shorts backed by a call which may or may not be naked.

There's a difference between a liquidity trap and a situation where shorts are mathematically cornered (the only way to cover is to buy from a shareholder who refuses to sell). I think these long chains of synthetics exist in lots of things all the time, and they rarely ever blow up. Exploiting these things is how market makers make money.

It's difficult for these liquidity traps to blow up because market makers can supply virtually unlimited liquidity. As long as it really is a liquidity issue. It's like expecting to profit from a liquidity trap in the broader economy by shorting while the Fed is in charge. As long as it really is just a liquidity trap, the Fed can provide unlimited liquidity to get rid of the problem.

I know you want to call that rigged, but it's really not that rigged, or perhaps it's better to say it's not rigged in a stupid way. Because there are problems unlimited liquidity based on unlimited leverage cannot solve.

A liquidity issue isn't a liquidity issue if you're doing a hard audit of shares to distribute a dividend though

Most spinoff situations don't have huge chains of synthetics which is why you don't see this often. They're in something like IBM or Pfizer. Big companies that don't really have a point to try and short into the earth because they aren't going out of business ever.

Twitter's board adopted a poison pill to try to prevent a takeover by Elon Musk. Looks like the stock is probably heading back toward $30. These poison pills really should be banned.

As a reminder, TLRD adopted a poison pill to prevent the company from being acquired and then shortly after declared bankruptcy, wiping out the shareholders. Not sure how the board can possibly justify that as being in the best interest of shareholders.

I kinda wanted to buy some puts off the Elon news. Probably will be too late on Monday.

Damn it EVRI

Looks like the CC talking about earnings for BBIG must have been pretty well received. Up 8% when post earnings dump are in vogue and the market as a whole is dumping.

I did listen to it. Didn't mention anything I didn't know but I guess it's good to know management is reaffirming the steps taken.

Big things of note

- Confirmed Adrizer integration in lomotif, and that Zash/Vinco merger is basically official in all but ticker name

- Confirmed CryptTyde will spinoff "during Q2"

- Freescape, CryptTyde's MMO thing, will launch during Q2/Q3

- Revenue from Adrizer will start to show up in May Q1 earnings

I think there's a lot of buying going on right now. If we pop anytime before July I should be extremely well off. Will be continuing to build position until CryptTyde spinoff. Might actually get a few 2024 calls depending how long it stays pinned.

The interesting thing is Adrizer is continuing to be owned by Vinco rather than the ZVV joint venture which is currently only containing Zash/Lomotif items. I think it's a hint that they intend to use Adrizer in Freescape as well so some portion of ownership will need to go to the Tyde spinoff. That's just me guessing, but is overall good news if done as that's more ad revenue streams.

At this point it's just kinda gambling with how many naked shorts there are out there when determining upside. The thing is, every time reported short interest goes down and the price goes down, by definition naked shorting (or incorrect reporting) must be occurring. This has happened so many times though, yeah. My floor is still in the $12 range on the record date of the spinoff but I really do think it's hitting $30-$40. Time will tell. Last week was rough as I really was hoping to profit take on that gamma ramp to remove my risk and keep what I have now long, but as a long term play I'm unshaken.

Just for the record I break even at around $6. That's including my 15k realized loss. Lots of averaging down since last October

Just got an email that Vanguard won't be allowing purchases of OTC securities going forward...

The thing is, every time reported short interest goes down and the price goes down, by definition naked shorting (or incorrect reporting) must be occurring.

I wish you make a fortune off of this, but there is another possibility - that long stock is being sold - so it's not true by definition.

Long selling isn't logical at this stage and none of the supporting data suggests that

Like I know it sounds tinfoil but Occam's Razor with all known data is actually naked shorting here not long selling, even if it would in most cases in the market be long selling.

At some point you have to acknowledge the weirdness of the data set youre in as relevant info and think off balance volume, cost distribution estimates on webull, dark pool volume, institutional investor filings, etc etc actually means something and not just discard it all because naked short selling is not allowed.

Like yes assuming the sky is blue makes more sense in 99% of cases than saying "well it only looks blue, there's a complex light alteration system put in place in the upper levels of our atmosphere to make the red sky look blue", but we've got ample evidence this stock moreso than so many others out there is in fact Mars.

Like I guess the tldr my point is you have to fabricate a lot more data (a lot of which is officially reported data from the exchange) with assumed naked short selling than without. Just on known institutional volume and assuming all retail were paper hands the stock should be well into the 5s.

At some point you have to assume an implausible amount of things to justify a lack of naked short selling.

It doesn't take a lot of selling to move the price down a long way if there isn't much buying.

Also, I am beginning to feel like Occam's Razor suggests there could be some insiders/big players gradually selling long stock. Maybe they are stringing retail along with hype for a short squeeze while they are dumping their stock? I mean, if we're talking about tin foil theories, that probably happens a lot more often than this whole naked short selling/counterfeit shares thing. And is easier to do without doing things that are definitively illegal.

The problem with that theory is the institutional filings have been buying the dip along with retail. You've got millions of shares being purchased pretty much every month.

I mean it may happen it may not-- I'm not actually in it for a squeeze. I have options that are less than Jan 2023 for BBIG for a squeeze. I believe in the company long term. The point is the price has no reason to be moving down since new management has come in-- no serious investor who isn't trying to penny flip would sell and honestly with completely honest price movement it should be at minimum $8 (ath adjusted for warrant dilution). Basically speculation on successful execution of what it's currently doing was what got it to $12--closer to the finish line should make the price go up, not down.

Let's just say there is a lot more substance to it than Gamestop's business approach evolution that was supposedly supposed to make the company grow

Like the squeeze is the upside, not the play itself

Fair value I see it getting to $25ish. That's just basic market cap math and how much I think a Tiktok alternative without the China stigma on it should be minimum worth (that's basically 5b market cap). That's literally just taking the valuation of the short video platform and owning the advertising engine for it, no other assets related to NFTs and such being considered.

Right now their market cap is barely above cash on hand which will tell you how far down the rabbit hole this really is.

Squeeze you can go much much higher and that's why the mid range duration (July and October) options are so juicy right now

Are you sure there aren't provisions in place for massive dilution through shares/options for employees? Sometimes that's where the catch is.

The dilution is about maximum. The only dilution currently on the table is $9 warrants, which if it gets back up to $9 Im very happy

There will be a shareholder vote for more dilution up to a 400m float, which to me, isnt a big deal as long as it occurs well after Tyde is distributed. It was originally slated to vote on April, when it looked like Tyde would not release in a timely enough fashion the vote was pushed out to July

However, Tyde likely releases before April 30th because Hudson Bay is due Tyde Warrants and there will be a considerable penalty if there is no Tyde by April 30.

Fully diluted to 400m still puts 5b valuation at $12-$13 per share price tag which is a 5x gain from here. And again I find 5b a low ball compared to other players in the space, but that's what the appraisal was a year ago based on millions of active users and it provides a good baseline for a fair valuation.

Everyone should seriously get in EVRI. It is at like a six month low. It will recover. It wont do anything crazy, but I am 80% sure it will go up 10% from where its at now at some point within the next month.

EVRI finally doing homie stock things. Im only down 7% now *eye roll*

You're saying the one time you actually got in Evri instead of considering getting into it it went down? Sucks!

Mistimed tf out of it. But I know it will get back up to $22 sooner than later. I got it around $21.06.

Netflix is probably the only time I was actually smarter than the market
Honestly fuck this stock, it had no reason to so expensive, it had no reason to be part of the Acronym called "FANG"
Imagine being one of the most financially sucessful companies ever but never expanding past your "monthly subscription" business. You WILL reach a ceiling sooner or later.
Not to mention how easy it is for other competitions to rise up against you.
Netflix really should have used the money to get into the video game business. Should have bought a few smaller and beloved companies. Then make a "game pass" or whatever

While I agree 300b Market Cap was silly Netflix is looking a bit undervalued now imo

Omg Netflix

Maybe we are finally getting out of the tech bubble

Speaking of tech bubble Lopen's negative play of the week (partial credit Greengravy294)

75p on May 20 for Square (earnings May 6)

The way the market has been reacting any reduced guidance for earnings will utterly destroy the stock. It's also trading at like 400 p/e so lot a room to fall

Why I don't buy individual companies anymore (aside from adding to my positions):
https://gamefaqs.gamespot.com/a/user_image/5/3/0/AACxJ5AADJyi.png
https://gamefaqs.gamespot.com/a/user_image/5/3/1/AACxJ5AADJyj.png

That said, I never bought Netflix in any serious amount so while my QQQ is down, I'm otherwise okay. I have a fraction of a share because I was going to sign up for M1 Finance's credit card which gives rewards for companies you have at least a fraction of a share in.

Flipped half of my Block puts. The rest get to ride for free

Somehow stocks went red today.

I wonder what's up with this big reversal from green to red today.

Bond yield hit new highs.

red sox 777 posted...

I wonder what's up with this big reversal from green to red today.

Bad earnings, supposedly. I know Joe Biden also talked about Ukraine today but I don't know what the details are.

Zachnorn posted...

Bad earnings, supposedly. I know Joe Biden also talked about Ukraine today but I don't know what the details are.

Bad earnings doesn't make sense. Because they came out yesterday after market close or today before market open, so if that was the cause, the market would have opened red. Probably the market just being generally pessimistic I guess.

That's just what I read on Yahoo Finance. I think it's pessimism in general. People probably wanting to sell off when it's high because of anticipation of a crash.

The Fed is also signaling a rate hike in a month. At least that's what some article showing up in my thinkorswim is saying is the reason behind my SOFI going down.

It looks like all the signs are pointing to the Fed forcing us into a recession to beat inflation. The stock market, of course, moves before the economy does. So hopefully once the recession starts, the market will start rising in anticipation of the recovery from the recession.

Meanwhile though...

ow my portfolio

The Too-Efficient Market hypothesis: the crash and recovery are both already priced in

I also want to say that the interests of investors are often not aligned with the interests of workers in the US generally. Higher wages are linked to lower corporate profits. High employment in the US is also linked to less outsourcing to other countries with lower wage levels, and thus, to lower corporate profits. Lower corporate profits are linked to lower stock prices.

We have been in a very long term trend going back to the end of WWII in which outsourcing caused US wages to stagnate while profits increased. If this trend finally breaks, it may be bad for stocks but you may also feel happy about workers getting paid more.