Only Way Out For GME Shorts Happening Tomorrow… via /r/wallstreetbets #stocks #wallstreetbets #investing


Only Way Out For GME Shorts Happening Tomorrow…

Melvin's SEC Filing Led Me To the Answer… Why GME at $40 Matters Tomorrow…

I've been racking my brain trying to figure out what's going on with the options, and why shorts weren't worried about the share deliveries from contracts expiring tomorrow. While trying to work it out, I've been waiting for the quarterly SEC Filing from Melvin, and we finally got it on Feb 16.

On 2/16/21, Melvin reported a 6,000,000 share Put holding on GME. That is how they planned on covering this, and how I've been saying the shorts could have wormed their way out of this calamity every time someone posts "they had no way out!"… Yah, actually they did, sadly…

Filing: https://fintel.io/so/us/gme/melvin-capital-management-lp

So, I went digging in the time machine to see what contracts were available on the option chain as seen on 12/31/20…

And come to find out, the strike max on any contracts (even all the way out to 2023) was $40 max.

https://i.imgur.com/PAvhWw9.jpg

Now, here's where I smelled the Fuckery cooking…

On 1/27/21, CNBC reported that Melvin capital closed out their short position that Tuesday (the 26th), for "a huge loss".

Tuesday would be the delivery date for the 1/22/21 options after T+2, so it makes sense on the surface…

Except that the highest strike price option available for purchase on or before 12/31/20 was $40… And 1/22/21 closed at $65.01…

There is zero way for any options that Melvin owned in December to have exercised to cover his shares on the 26th.

If Melvin went to market to buy the shares outright, 1/26/21 closed at $147.98. Even if he covered every share at max price, $147.98 x 6,000,000 (the number they were hedging) would only equal $887,880,000…

So, why the $3bil injection of funds?

Routers claims that Melvin started January with $12.5bil in capital and that it dropped to $5bil capital during the GME run, and ended at $8bil to close the month after the $3bil Citadel/P72 bailout.

https://www.reuters.com/article/us-retail-trading-melvin-idUSKBN2A00KW

If they closed out on that Tuesday for $880mil, where did they lose the extra $7.5bil at?…

Even if they only hedged half their bet, and had 12,000,000 short positions to close, it would still only be $1.8bil on that Tuesday. (Much closer to the $3bil bailout, admittedly)

They would have had to have been short ~24,000,000 shares to lose $3bil… So why only hedge 6,000,000 of it?

Here's where it gets extra deep into the Fuckery…

The option contracts available on 12/31/20 go from:

2/12/21 2/19/21 4/16/21

They jump 2 months between contracts, and February 19 is the last exercise date available from a 12/31/20 purchase until April.

https://i.imgur.com/Ut6rpea.jpg

And the highest strike available to buy was… you guessed it… $40.

Tomorrow is the last day until April for those old $40 Put/Call options to finish in the money.

Any firm that tried to hedge their shorts with puts, even with max strike contracts, loses their Put options if the price finishes over $40 tomorrow.

GME short % of volume was 26% Tuesday, 23% yesterday, and 21% today.

One out of every Four shares sold this week has been a short… and now we know why.

If GME finishes over $40 tomorrow, any firm that was trying to cover their shorts through $40 Put options from December (or before) would be stuck buying shares to cover until April.

Any theta gang Call seller that posted $40 max strikes to collect Premium in December is also on the $40 line this week… But they'd need to purchase shares, or lose them if they were covered and still own them (theta gang sold their shares at $400 knowing they could buy them later for less, trust me…)

Now, I do realize that Melvin held 6,000,000 shares worth of options, and that there's less than 20,000 open interest (less than 14,000 now that I look… Over 4,000 have been taken off the chain in the last 48 hours…), but this explains the mad dash to $40…

The calls don't want to get exercised on, and the puts want their shares. They want it to $40 so badly, they've shorted an extra 8,000,000 shares this week alone.

What I don't understand is why those 1,800,000 shares are so important…

We had 24,000,000 in volume today. They could easily snipe 2mil shares in the course of a day or two…

…Unless all of the volume these last few weeks has been entirely the funds trading back and forth, and there's a LOT less public float than we thought…

There was a post earlier of a level 2 order page being constantly hit with 1 share and 0 (yes zero) share orders.

I'm starting to think that they are trading volume back and forth at the third/fourth decimal point with each other. Retail brokers can only do shares in two-decimal prices, ie $420.69… but market makers and the exchanges go to the third and sometimes fourth decimal point. The firms could be trading back and forth, on the books so it affects volume, at a decimal place that retail isn't allowed to access.

Brokers and market makers have a responsibility to give buyers the best whole-cent price, but scalping the spread is how the market makers take profit from order flows and how you get zero commission trades.

It could also be used as a loophole to keep retail from buying the shares that the firms are swapping. If the bid is $419.99 and a firm is selling at the price of $420.0005, but it would cost a retail buyer $420.01 (since we can only deal in whole-cents), it would allow another firm to snatch the shares ahead of retail between the spread. They would just enter a buy limit down to the .0005 decimal point, and take whatever small $420.00 shares are listed on the order book with it.

It would only cost $500 to add 1,000,000 in volume to the trading day at $0.0005/share (plus whatever shares they bought ahead of it).

I've been watching the level 2s from three different brokers, and there's never more than 20 orders total on the books for GME at any given time (and at least two of those are $6969.69 meme asks). Retail isn't selling, and I've never seen a 100k sell order on a book from an institutional holder. So the volume is coming from somewhere we don't have access to, even though it's counted in the daily trading volume…

I'm starting to think they are spoofing volume to make the market think shares are trading, when the pool is virtually dry in reality.

This shit keeps getting weirder…

To close: I actually do think Melvin is out. His Put volume that is no longer seen on the option chain, and his cash infusion both point to that happening. I do think others are fighting to finally dig themselves out of this hole, and tomorrow is their last chance… and I think they've been digging themselves deeper to try to make that happen.

460,000 shares are up for Call assignment if it stays above $40 tomorrow, and 1,370,000 Put shares don't get delivered if it stays above $40 tomorrow. That's $72,000,000 in shares that are being fought over just at the $40 mark…

(Another 1,200,000 put shares deliver under $48, and another 1,300,000 deliver under $50)

What I don't understand though… GME hit $48 during DFVs opening statement, and then we got hit with 4,000,000 short sale orders over the course of the rest of the day (finra).

Who shorts $160,000,000 to secure $72,000,000 in options? Interest on shorts rose from 1.08% Tuesday to 1.35% today. They've been adding more shorts by the day. Why are they shorting it so hard right after a mini-squeeze just happened and they know we aren't selling?

Open interest for $40 Puts on 2/26/21 drops off a cliff to 2,600 open contracts. There is something very special about this weeks options, but I don't have the entire picture of what or why yet…

(2 week delays in reporting are garbage for knowing the market today…)

Unless they know the shares aren't really there on the market to buy…

Oh, in other news, Jane Street just reported owning 1,500,000 in GME call shares and 1,070,000 in Put shares…

Https://fintel.io/so/us/gme/jane-street-group-llc

Jane Street Capital was the market maker that helped save the bond ETFs last year during the crash. When they step in to a large position, there's often a reason behind it.

I don't think this story is done being written yet…

I'm starting to think that those options are the last chance to get shares out of a dry pool…

~~

Edit for Tl;dr:

I think there's no shares on the market and the funds have been spoofing volume.

The 2/19/21 options are the last options available to exercise from before the squeeze until April.

The highest strike available on those contracts at the time was $40.

Jane Street has 2.5mil in shares through option contracts somewhere on the chain. Jane Street is known for helping market liquidity during "Oh Fuck" situations.

This is affecting the market way more than just GME… We just haven't seen how or why yet…

Submitted February 19, 2021 at 08:19AM by SnooWalruses7854
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