Good morning, good afternoon and good evening my fellow retards around the world.
I know many of you are more like this if it comes to reading DDs. But I wanted to explain a few things with the ultimate aim, that you dont need to do read any more DD but rather can do your own DD. As most of you cant read anyways, Ill put a TLDR with symbols at the bottom. So here we go.
General squezze theory (I know a lot of words but reading will make you a big brain 🦍)
There are two types of squezzes:
- short squezze
- gamma squezze
Short squezzes:
Evil Hedgefunds and MMs sell a stock, which they dont have, in hope they can buy it back cheaper. Now price goes up --> Hedgefunds have to cover to cut their losses. Otherwise there is the risk of unlimited loss, as stock price can go up infinitely. If they wait to long they get margin called, because their broker is in fear that they cant cover anymore. And no one wants to get margin called.
Gamma squezzes:
Evil MMs (and others) sell far OTM call options. Now price goes up and suddenly those options are ITM. MMs now have to buy the stock to cover their sold options making the price surge once again bringing new formely OTM options ITM, which then again leads to the price surging. This feedback loop is called a gamma squezze. For this to happen you need to have high numbers of OTM option sold at certain strike prices. Just enough, that the next strike price is reached. It is more likely that lower strike prices are reached. MMs know that, hence they have already hedged some of there sold OTM options with these lower strike prices. This is called Delta Hedging. That means you need higher number of OTM options with lower strike prices then of those with higher strike prices to keep the Squezze going.
If you want to go even deeper I suggest you look at u/Natural_Profession_8 post. He also did a formula, which you can use to calculate how to have the biggest leverage with option buying, meaning forcing MMs to buy the most shares with the purchase of option with a certain strike price.
What you always need to keep in mind for both kinds of squezze that the price run up to trigger the squezze has to be rather fast. Otherwise, there is more time to cover shorts or hedge options and hence having less effect on the price.
Applying this to the current GME situation
Short squezze:
Im sorry to say that, but I dont think a squezze solely because of shorts covering will be happening any time soon. You have all seen how the short interest has dropped tremendously from the previous legendary 226%^(1) within the last to reporting dates to now 60%^(2).
^(1: 01/14/21,) ^(Yahoo Finance) ^(with Morningstar data, which suggests a Float of roughly 27M shares)
^(2: 02/11/21,) ^(Yahoo Finance) ^(with Morningstar data, which suggests a Float of roughly 27M shares)
"But there was no volume?". Just look at the numbers. GME had a average Volume of 40.49M per day over the last three months. As a stock with roughly 70M shares outstanding thats a lot.^(3) AMZN had a 3 months average volume of 3.73M per day with roughly 7x the shares outstanding of GME.^(4) There was enough volume.
^(3:) ^(Yahoo Finance)
^(4:) ^(Yahoo Finance)
"But what is with the institutional ownership?" You all probably all seen these posts, where its said "Institutions solely hold xTimes Outstanding shares of GME. So there has to be massive short interest." (e. g. see [here](https://www.reddit.c