$50,000 to $50 million and The Story of WSB

Well it looks like 2021 is taking after its older relative.

In my four years in the stock market I have never seen such craziness as this week.

While not to discredit NOK and AMC, the GameStop episode will be mentioned in stories and textbooks for decades to come. The battle between retail investors and Wall Street is at a peak which hasn’t existed before.

And this could be just the beginning…

Side note: If this email is showing up in your “promotions” tab you can fix that by simply dragging it to your main inbox.

“ The GameStop saga is a battle of new school vs. old school, amateur vs. professional, rebels vs. the establishment. At the moment, “the kids” are winning.”

- Random WSB Member

Can’t see all those commas? Let me zoom that in for you.

Yep, that’s a $50,000 bet turned into almost $50,000,000…so what happened?

If you were around the market any day this week you likely saw news surrounding the massive price moves in GameStop (GME). On Monday GME opened at $96, touched $150, and then headed back down to $61 before closing. This was nothing compared to the rocket ship which saw GameStop hit $380 in pre market Wednesday and then to $513 early Thursday morning. It has been a wild ride to say the least since last month you could have bought it for $16.

So in order to understand how this individual came upon 8 figures in gains we have to know what caused such a move.

Background and who is Wall Street Bets?

For those who don’t know WSB is a Reddit forum which now has over 7 million members (At the beginning of this week it was at 2.2 million).

The forum is a crazy place, but members began pointing out the massive short interest in GameStop stock months ago and planning ways to profit from it. For those who don’t know being short a stock means that person, or fund, sells shares and plans to buy them back at a lower price and profit the difference.

The problem with this is that there is no max loss. So when the stock begins to go higher those short have to buy back the “sold” shares to close their position.

And you guessed it, that only drives the price higher, aka a “short squeeze.”

When options are involved it can also trigger a gamma squeeze. Though in order to keep this email a reasonable length we’ll save that for another time.

This image from the forum pointed out how GME was the most shorted stock in the market with a short interest of over 130%. This means that there were more shorted shares than available shares to buy.

The combined news of GameStop’s growing online sales, along with Ryan Cohen being added to the board was the initial spark to make GameStop jump. Wall Street Bets was already in position. The run up has been continuing thanks to mainstream media coverage.

For once the retail investor (you) is in charge and the hedge funds aren’t happy as they have already realized billions of dollars in losses.

The Man, The Myth, The Legend.

One of the biggest bulls for GME is known as /DeepF***ingValue (DFV)…you can’t make this stuff up.

DFV has been long GameStop since September 2019 and has been posting his thesis on Youtube. His channel is named “Roaring Kitty” if you want to check it out for yourself.

For those wanting proof you can check his Reddit profile here and see the screenshot history of his $50,000 GME bet. Hint it wasn’t all green.

His position involved a mixture of stock shares and call options. To be exact his January 15th call options were perfectly timed seeing a 14,000% return before he rolled them into April 16th calls.

And yeah, HE’S STILL IN. In his latest screenshot on WSB titled “GME YOLO” he is up 155,000% on those April call options totaling a cool $15.9 million.

Over the run up though he has taken some profits as he is sitting on about $13.8 million in cash as of Friday’s close.

Absolute insanity.

Internet Explosion.

As if things couldn’t get crazy enough the internet blew up on Thursday when Robinhood announced it was not allowing people to buy new shares of GME, AMC, BBBY, and NOK.

Politicians, influencers, and professional athletes all took to social media to project their disapproval of Robinhood’s actions. Some popular names included Mark Cuban, AOC, Donald Trump Jr, Dave Portnoy, and the Winklevoss twins.

Thursday night Robinhood’s CEO appeared on CNBC and it wasn’t a good look for him or the company. When you watch it’s easy to see how something might be going on behind the scenes at Robinhood.

Check out one of the interviews here.

What WSB Doesn’t Want You To Know.

1. They don’t want to appear coordinated. Anything that looks planned as a “pump and dump” in advance could be eligible for punishment by the SEC. If it was up to them they would rather be recognized as a bunch of randoms sharing stocks views.

2. As the forum becomes more popular it’s easier for bots and non-members to direct attention into other investments. They appreciate your support, they don’t want your posts distracting from their poster child GME.

3. While it comes off as comical, members have lost millions of dollars on extremely risky gambling plays throughout the years. Without a doubt the forum has been a place of financial destruction for some.

What’s next?

It’s hard to say after such a crazy week. Some are pointing out that the shorts still haven’t covered in GME and that the real squeeze is yet to come.

While this isn’t for certain, one thing that is easy to see is the risk in putting any money into these hot names. If you want to be a part of the “movement” make sure you risk an amount you would be fine with going to zero tomorrow, because it might happen.

Overall though I have really enjoyed seeing the average population team up against hedge funds who have manipulated the market for years. It’s awesome.

Something is telling me though the ripples of this will change the finance world for years to come. A new generation of investors is here.

Swinging for the fences is fun.

But first one should make sure they are following a proven investing strategy.

My favorite way of doing this is through ETFs and Index Funds. In this ebook written by Sean, aka The Wealth Dad, he thourouly explains the simplest and most proven way to have your money work for you.

So for the price of one AMC share you can learn it all. Once you’ve read this then YOLO away.

Get it here, you won’t regret it.

It was probably the greatest week in money Twitter history for memes.

Here are some of the best ones.

SEE YOU ON THE BEACH!

Meme videos were also 10/10 this week.

In daddy Musk we trust.

Thanks for reading, if you have any questions, comments, suggestions, etc. about the email send me a DM on twitter. See you next week!