January 12, Tuesday.
GME closed at 52.8 cents the day before, and pre-market trading was already oscillating above 55 yuan.
When Zhao Chen arrived at the office, the Bloomberg Terminal in front of Lin Shicheng had a curve that he had never seen before - GME's Gamma Exposure Chart.
The chart marks the distribution of open positions of Market Maker on different Strike Price.
Call Options on Strike Price at 20 yuan, 25 yuan, and 30 yuan has the largest open interest, with more than 100,000 contracts piled up at each price.
"Investment banks have the most concentrated demand for Gamma hedging at these three price levels."
Lin Shicheng Enlarge the picture,
"Whenever the stock price crosses a Strike Price, Market Maker must buy Common Stock to maintain Delta-Neutral.
Now that the stock price has reached 50 yuan, the hedging of investment banks Buying Pressure is becoming the main driving force.
Our Options position is also among them - we hold a considerable part of the twenty-five and thirty US Dollar Strike Price contracts."
Zhao Chen put the tea cup on the table and his eyes fell on the Strike Price distribution of the Gamma chart.
"This means that for every dollar the stock price rises, how much will investment banks passively buy?"
"Estimated based on the current open interest volume and Gamma value,
When the stock price rises from 50 yuan to 60 yuan, the investment bank needs to buy approximately 8 million to 10 million shares of Common Stock.
If it rises to 80 yuan, this number will double."
Lin Shicheng Turn the calculation sheet to the next page,
"This is not our active Buying Pressure, but the Options market structure forcing Market Maker to buy passively.
Where do the selling orders come from? Retail investors are buying, Era Vanguard is not selling, Ryan Cohen is not selling, and DFV is not selling.
Investment banks are buying, retail investors are buying, and Short Sellers is closing positions.
Three shares of Buying Pressure came in at the same time, and the selling orders were almost exhausted."
At nine-thirty, NASDAQ opens.
GME jumped short and opened high to fifty-six yuan and fifty cents, and broke through sixty yuan fifteen minutes after the opening.
There was almost no correction on the K-line on Time-sharing Chart, and every buy order exceeding 100,000 shares was eaten within a few seconds.
Lin Shicheng stared at the transaction data and sent a message to Zhao Chen in the internal communication--
"Gamma Squeeze is accelerating. Buying Pressure of Market Maker are concentrated around 60 yuan, and Buying Pressure of retail investors are following behind.
Short Sellers has selling pressure near 61 yuan, but the volume is not large."
By 10:30 in the morning, GME's stock price hit 65 yuan.
Trading Volume exceeded 150 million shares.
The ratio of Short Selling dropped from 68% to 62% - Short Sellers was forced to close its position in Gamma Squeeze.
During CNBC's live broadcast at 11 a. m., the host projected GME's Gamma Exposure Chart on the screen.
This chart comes from a quantitative research institution that specializes in tracking the market structure of Options.
The Gamma values of Market Maker on different Strike Price are marked on the picture--
At the three price points of twenty-five yuan, thirty yuan, and thirty-five yuan, Market Maker and Gamma Exposure reached the peak.
The host used an analytical tone--
"GameStop's stock price exceeded 65 yuan this morning.
The main force driving this round of rise is no longer the Buying Pressure of retail investors, but the Gamma hedging of investment banks.
When GME's stock price crossed the Strike Price of twenty-five and thirty dollars, investment banks were forced to buy Common Stock in the market to maintain Delta-Neutral.
This buying behavior further pushed up the stock price and triggered the real-valuation of more Options, forming a positive feedback loop.
The end of this cycle is when Short Sellers is completely squeezed out."
Commentator Bloomberg invited a Options market structure expert to the midday show.
The expert said something in front of the camera -
"GME's Options open interest has increased tenfold in the past week.
Most of them are concentrated on Out-of-the-Money Call Options.
This structure means that the Market Maker hedge Buying Pressure will last until the stock price crosses all major Strike Price.
Twenty yuan, twenty-five yuan, thirty yuan, thirty-five yuan, forty yuan--each price range is Gamma Wall.
After passing through, investment banks must buy more Common Stock.
This is not retail investors at Short Squeeze, this is Options market structure at Short Squeeze.
Retail investors just pulled the trigger."
On WallStreetBets Forum, a post named "Gamma Wall" was pushed to the top of the homepage.
The text of the post reads--
"GME's Gamma Wall is priced at twenty-five, thirty, thirty-five, or forty yuan.
The stock price has reached 65 yuan. All Gamma Wall have been penetrated.
The hedging of investment banks Buying Pressure is still continuing. Short Sellers needs to buy back a net of 50 million shares.
Fifty million shares of Buying Pressure hit the market - do you know what this means?"
Someone replied below the post--
"It means that the stock price will rise to a level that Short Sellers himself cannot believe."
Another reply read--
"Investment banks are buying, retail investors are buying, Short Sellers is flat. Three shares of Buying Pressure. Where are the selling orders? Where are the selling orders?"
The third reply is more direct--
"The selling order is with DFV. He doesn't sell.
The selling order is at Era Vanguard. They don't sell.
The selling is on Ryan Cohen. He's not selling.
The selling orders are in the hands of retail investors. We are not selling either."
By two o'clock in the afternoon, GME's stock price hit 70 yuan.
By the fireplace in Explorers Club, White-Haired Old Man put down the data sheet and was about to speak--
Next to him, a young man in a dark gray suit suddenly raised his hand.
His name is Elliott, he is the youngest member in the club, and he manages a small but radical Hedge Fund.
He had been looking at his phone quietly in the corner, and now he turned the screen over to face everyone.
"I just established Short Position. At sixty-eight dollars. Two million shares."
White-Haired Old Man's eyes stopped on his face.
"Are you in the sixty-eight block Short Selling GME?"
"Yes." Elliott put the phone on the coffee table and leaned forward.
"You are all closing your positions. Melvin is running, Point72 is running, Citadel is running.
But have you ever thought about one thing - GME's Fundamentals has not changed.
Q3 Report's revenue is still declining, stores are still closed, and additional issuances are still diluting.
Ryan Cohen's turnaround plan will take two to three years to produce substantial financial improvement. The stock price is now $68.
Short Selling ratio dropped from 105% to 62%.
The risk of stampede for Short Sellers is decreasing, and the odds of Short Selling are increasing."
"You are betting that retail investors' emotions will collapse." White-Haired Old Man said.
"I'm betting on a simpler fact - GME isn't worth sixty-eight bucks.
No matter what the ratio of Short Selling is, no matter how powerful Gamma Squeeze is, the intrinsic value of this company will not change due to the emotions of retail investors.
Iceberg was defeated by Short Squeeze at block 48, Short Selling.
But their logic on forty-eight yuan Short Selling is right - the reasonable value of GME is between ten and fifteen yuan.
The current stock price is 68 yuan, which is higher than 48 yuan. The odds of Short Selling are better than when Iceberg entered the market."
There was silence in the room for a few seconds.
Another person - a middle-aged woman who manages the mid-sized Bulls and Bears strategy fund - also turned her phone over.
"I also built Short Position. At seventy yuan. One and a half million shares."
White-Haired Old Man looked at them and was silent for a long time.
Then he leaned back in his chair, with something in his tone that he couldn't tell whether he was tired or cautious.
"You are betting that retail investor sentiment will collapse.
But you have overlooked one thing - DFV's position started from fifty-three thousand US Dollar. Now his position is worth more than ten million.
He didn't sell a share.
The holding cost of Era Vanguard is 11 yuan. They did not sell one share.
Ryan Cohen's cost was $8.43. He didn't sell a share.
The holding cost of retail investors ranges from five yuan to fifty yuan. Their average cost is far lower than the current stock price.
Some of them have floating profits, and some of you have floating losses.
When you are at 70 yuan Short Selling, you need the stock price to fall below 70 yuan at some point in the future to make a profit.
And retail investors just need to continue to hold. Who is under greater pressure?"
Elliott did not answer.
He put away his cell phone, stood up and walked to the door.
When he reached the fireplace, he paused and looked back.
"You also thought the same thing about Tesla. Later, Tesla increased to two thousand yuan. I know.
But GME is not Tesla. Tesla has a Shanghai factory. GME does not."
He opened the door and went out.
The middle-aged woman also stood up and put on her coat.
"I agree that the Short Selling ratio of Elliott. GME is declining. This is the best time to enter Short Selling. The sentiment of retail investors cannot last forever.
Q3 Report's losses are still there, and the additional issuance is still there. The stock price will fall back sooner or later."
She also left. The people who were left by the fireplace looked at each other in confusion.
White-Haired Old Man picked up the Whisky cup and did not drink it. He just watched the amber liquid in the cup swaying slightly in the firelight of the fireplace.
On WallStreetBets Forum, a new popular post is being pushed repeatedly--
"There is a new Short Sellers coming in. At sixty-eight and seventy yuan.
They think that the decrease in the Short Selling ratio is an opportunity for Short Selling.
They forgot one thing - the Short Selling ratio dropped because Short Sellers was pedaling.
When you stamp Short Selling, it's like pouring gasoline into an already burning building."
In the reply below the post, someone posted a screenshot of his Add Position transaction today, with the text "The new Short Sellers is here. They are our fuel."
Someone put DFV's live broadcast replay and Era Vanguard's 13G application document side by side, with only one line of text - "Double insurance."
Someone else posted a screenshot of Iceberg's Short Selling report, with a big red cross on the title "Game Over" and the accompanying text -
"It's not certain who will have Game Over. Now there are two more people who will die."