GME 1/25/2021
From u/hello-world-foo-bar Great insight into what happened at $159. Fuck Melvin
DD
Implications of Citadel, & Point 72 Bailout of Melvin Capital | Steve Cohen/Plotkin's Likely Massive Put/Call Wall Strategy
First, all you diamond hands are hereby promoted to Lt. Colonel after today. All you paper hands should be ashamed with yourself, but you still have time to help your fellow brothers against the Big Bad, Melvin Capital.
Context
Melvin Capital was bailed out today[1]. They were close to liquidating their position but were rescued. This is supported by the fact that as GME passed the 115 gamma ramp and headed to 150, the rest of the market was going red, likely from Melvin liquidating. This could have caused a cascading effect across other funds an positions, but that's another post. What is evident was that Melvin Capital was likely about to start liquidating but was rescued by Plotnik's Papa Steve Cohen with 2.75B [1]
Conjectures
I'll describe how Melvin Capital will likely try to countermove their weak position. Everything I write is conjecture, and would be a very low investable thesis but let's continue with the white boarding.
The GME 60C is the beginning and the end for you guys. Huge amounts of call buying and delta hedging occured at this strike. 10s of Millions of shares are linked to these derivatives.
Melvin's Capital goal is to not be forced into a short squeeze. You guys want the the infinite short squeeze to be triggered. MM/Citadel Securities provides the price discovery on how expensive each countermove is for the actors in this game.
Melvin Capital is likely not to double down on naked shorts with the new funds because if he loses in that move, Plotnik's career is over and may face criminal charges for abusing his fudiciary duties by doubling down with more naked short selling.
We saw today how someone forced GME share price to drop over 10% and force halts, thereby dropping off vega and killing off any gamma ramping. It happened over and over. So we know that's what they tactically want to do.
Steve Cohen's, famous hedge fund manager, has a favorite play. He would create massive call and put walls around a strike price to kill off vega and prevent gamma, and collect premium. In ELI5, Cohen would put up massive blocks of expensive puts and calls so that participants would have to churn through them before gamma could be ramped. By the time it happened, theta would have made your positions not profitable. And Cohen would collect the premium as actors tried to hammer through those put and call walls. He basically does this to kill volalitity.
Plotkin was Cohen's right hand man.
So expect Plotkin will use the 2.75B to drive GME price below 60, then he will ressurect massive put/call walls around a strike price and wait out the ITM 60C options across the calendar. This will kill vol and dampen gamma to prevent a gamma squeeze that can trigger an infinite short squeeze.
Retails counter move
Retails only chance is to have a big whale on your side to blast threw those put/call walls that will kill vol; or it's a race against time to trigger the gamma squeeze before Plotkin drives the price below 60 and erects the massive put/call walls that make all the ITM 60C expire worthless and dampens anymore gamma ramping to force a short squeeze.
Retail must drive GME to 115 and soon