You can’t be in the financial world right now without talking about r/WallStreetBets and the short squeeze they pulled off over the last several days.
It was an incredible show to watch, although it certainly wasn’t good for the markets.
Large blocks of money being used to artificially move the market isn’t a good idea. It doesn’t matter if those blocks are controlled by a single hedge fund or by a million small retail traders.
As things wind down, which I believe they are…at least for this particular circus, here are a few thoughts.
- This was an extraordinary situation. There are very few small-cap stocks that have that much big of a short float.
These kinds of situations can open up a lot of opportunities, but they are hard to find and the stock price will inevitably fall. That means in the future people who got in late will likely not be interested again. - When someone (or multiple “someones”) pulls off this kind of trade for the first time it catches everyone by surprise. In the future institutions will be on the lookout for this kind of danger, and will be trying to find these opportunities for themselves. And institutional investors do not need to organize hundreds of thousands of individual investors – so they will be able to move faster and make the money.
- This was a play on the fear and jealousy of the retail investors. I think it was likely a direct result of people stuck at home for months, with no job and nothing to do. As people get back to their lives they won’t have time to watch the message boards like they can now.
- I don’t think we will see such a united front from retail investors in the future. For example, the idea of short squeezing silver is already getting pushback.
People are pointing out that Citadel, one of the funds that got caught in the GME short squeeze, has a large silver position. A short squeeze would help them tremendously.
The people who were pushing the GME squeeze as a cause rather than a money-making trade don’t want to give Citadel the chance to make money.
We will see what the future holds. These kinds of circus sideshow stories are fun, but they are not how we want to make money in the markets.
Get your popcorn and watch, but don’t join in!
Instead – we will just keep quietly grinding out our trades week after week, month after month, and year after year.
Just like we have been doing since 2015 in Options360. (you can still grab a trial membership for just $19)
To Your Success,
Steve
PS. I don’t expect we will see a large short squeeze in silver. But don’t worry – I am putting together some new trades for my Options360 subscribers. Why not join us and take advantage of my work.