| I think much of reddit is junk, and very much agree with the QAnon take. I largely agreed with the point you are making until GME went back up in February. It happened all at once, so it was not retail traders but a centralized entity. That didn't make sense to me, and still doesn't make sense to me. I don't understand who profits from this behavior. Burry at one point linked to a blog article on NOPE[0], the Net Options Pricing Effect. The NOPE is an extremely basic metric that attempts to figure out how much of the market is based on the underlying stock, and how much is based on derivatives. I expect Burry figured this out a decade ago and has a much better metric for himself. I think this is why he found this trade early. As we learned in the housing market of 2006 and the XIV in 2017, when the derivatives gets to be much larger than the underlying, the tail starts wagging the dog. I think the only naked shorting going on is legal, as MM are free to do so if it provides liquidity according to the basic black scholes model. We can see that the OI on $0.50 puts and $800 calls is extremely excessive. When you have the OI of the January 2022 is at $.50 puts at 132,345 contracts, it seems to reason that the tail is wagging the dog. If Hedgefunds had puts and that made MM create naked shares, and those shares were then bought by Cohen who then joined the board and locked in those shares, that's in essence a Buyback. If those shares no longer exist and retail buying is leading to an even bigger squeeze, who is buying those puts? Why would Hedgefunds buy the puts again? They should have given up when they lost %50. [0]: https://medium.com/swlh/options-degenerate-marketplaces-part... |
Agree with you here. These names have been coopted by pros. Who exactly I am just as clueless as you. But this sort of gamesmanship happens 24/7 in markets, it's just usually not as visible. It's probably coordinated, possibly illegal...but it's not the grand conspiracy that /r/wsb thinks.
> Burry at one point linked to a blog article on NOPE[0], the Net Options Pricing Effect. The NOPE is an extremely basic metric that attempts to figure out how much of the market is based on the underlying stock, and how much is based on derivatives.
Otherwise known as dealer gamma, something that is closely tracked in all markets. Options OI and pinning are serious business. NOPE didn't invent this.
Naked shorting is 1) risky and 2) not possible to the degree being alleged (also - cornering markets never works). MMs do not want to be massively naked short...it's antithetical to their business model.