I don't infect in the stock market--- never have. But main reason is that to me it all just seems like gambling. Sound people I tell this to then proceeds to give me "in-between" answers to it like "it's not really gambling". It's never a yes, it is or no, it's not. So I figured perhaps it isn't gambling and I just don't understand how investing in the stock market works. Is it really not gambling?

There is a prevailing mis-understanding among people fresh to the market that you can buy and sell as much as you want at the "market price." This is false. You are buying and selling from real people or algorithms that believe they can scalp your order. The idealized scenario is that GME rallies, Melvin covers, and everyone at reddit gets out at the top. This represents a misunderstanding of market mechanics. Melvin will cover before we truly know it, and the crash will happen as quick as the rally.
So with recent events, you must ask yourself:

Who is Your Counterparty?

Nothing is a sure bet. How confident are you that your counterparty is who you think it is? Thousands of redditors & new traders beyond have been buying stocks fully confident that Melvin Capital hasn't exited their trade. This is also supported by some analysis provided by two different firms, although their estimates differ some amount. Confounded in this is the interpretation of the data: Does this include market makers and dealers that are short stock but covered with calls or options deltas? Is their information fully accurate in an event the likes of which has never happened? It's tough to know for sure.

Know Everyone's Hand

Your guess on how much they've covered and when they covered has a massive effect on how you perceive the value of this trade. Buying if you think Melvin has $10b notional to cover is a much better bet than if they only have $2b to cover. You also have to consider how much notional the rest of the market has bought in anticipation of a squeeze. The difference between the two represents your effective edge.
Remember, we don't actually know Melvin's current position. We don't know what's going on behind closed doors. We only know the hand they're showing us via media. Has their clearing firm taken over? Has a much bigger collection of firms absorbed the position? Have they been buying since Monday? Have they covered and have new funds entered the space at a much better level?
You are fighting Goliath at a poker table in the city of Gath. The pot is worth $25 billion dollars. Ken Griffin has never lost. Melvin's prime brokers Morgan Stanley, Goldman Sachs, Deutsche are not used to losing (well, Deutsche is). They will do whatever it takes to take the pot from you and leave you holding the bag. They will not blink twice because there is a lot of fucking money on the line.

Know What Can Go Wrong

Nobody could have guessed everything that happened this week. Prepare yourself for the unexpected. Your brokerage will undoubtedly close out your position at the worst possible time. The stock could be halted for days. You could be assigned on ITM options. Your stock could get delisted. Your stock may get diluted.

Only Spend What You're Willing to Lose

This one is self explanatory. Your investment could go to zero. Even if you think you make money on every trade, if your bet size is 100%, the long term value of your portfolio is zero.

Don't Take Out Loans on Emotional Capital

If you are new, you really don't know the gut-wrenching, stomach-turning feeling of seeing the possibility of your net liquidity hitting zero or negative. It fucking sucks. You just know the highs. You're buying along the speculative frenzy and frantic rallies, wrapped in anti-billionaire & pro-underdog themes. It may even feel good to think that a guy who cut his teeth at a firm notorious for an insider trading scandal is getting his comeuppance. We love the feeling. If you are fully invested financially & emotionally, you are completely overleveraged and will pay the price. Make feeling good your goal, and set limits that you can stomach.
There are several feel-good stories of people making life-changing money to pay off their student loans or their family members' surgeries. Please think twice about this, and only spend what you can afford to lose. If placing a bet makes the difference between your pet living or dying, you may have a gambling problem. These were success stories because they got in at a much better level and could have had a much sadder ending.
Secondly, don't take it personal. There are people on the other side of your trades, your brokerage support line, the subreddit, the media. They are all playing their own hand to the best of their knowledge. It's easy to blame a broker, yell at their support desk, hate-tweet at a company, or even rage-text that guy you know who develops APIs at ETrade. A lot of people across the industry are rooting for you. Fuck, even Ted Cruz and AOC are rooting for you, because this transcends politics. If you're mad at Melvin Capital or Ken Griffin or the guys who crashed the economy in 2008, keep it that way. They will try and misdirect your anger in every single direction: brokerages, the media, and reddit. If your enemies are a few guys at the top holding a $25b short position and moving levers, keep it that way.
Thirdly, if you don't want to be a human being for the sake of the person on the other side, be a human being for your wallet's sake. You make better financial decisions in the absence of emotions.

I’ve been wanting to do a post like this for a long time now. Now that healthcare has basically been the hottest thing for the last year (and somehow still getting even hotter), I thought it would be a good time. Many people try to buy into pharmaceutical companies around FDA approval targets without truly understanding what they’re getting into. Full disclosure, I am a doctor, but I will try to write this in layman’s terms as much as possible. If I get anything wrong, I’ll be sure to edit the post. To the best of my knowledge, everything I am about to say is researched (and therefore correct).
I’m going to go through the entire FDA approval process as a timeline, and then at the end, talk about other things to consider when investing in pharmaceuticals (i.e., more nuanced stuff that requires/applies healthcare understanding). One caveat here is people use “phases” in multiple ways. The way I will use it is the way I see most often being used in press releases and DD on pennystocks.
Preclinical: to begin, you must submit a proposal that basically states why you think a biologic compound will work. Without getting too technical, the preclinical is basically where you demonstrate a proof of concept.
Here is a very generic example: Let’s say that HIV binds to GME receptor on cells. I have been doing petri dish experiments on a compound I created that prevents anything from binding to GME (this is in vitro if you ever see that term tossed around). I submit this evidence to the FDA and say that I think my compound will work in theory. TONS of things work in vitro and never progress beyond that. At this point, the FDA says, “okay we think your compound might work too, you can start human trials.”

Investor takeaway: the results of this phase mean absolutely nothing. If a drug failed in this phase, that would truly mean the company is incompetent in both their ability to assess the science, and in their ability to provide meaningful news to generate investor buzz.

Phase 1: Anything that passes preclinical is ready for human trials. We are talking very small trials, like less than 100 people. For smaller companies, this is their chance to get some hype about their pharmaceutical. For anyone who understands the process, this is truly meaningless. Again, working in vitro does not (and likely will not) translate to working in humans. This phase typically lasts several months and is primarily designed to ensure that the drug is safe.
Here is a real life example, one that has already garnered a lot of attention: Atossa Therapeutics (ATOS) and their new breast cancer drug. Here is where medical knowledge (or solid research) can really help you. Their new breast cancer drug is called endoxifen. There are already multiple analogues (drugs that work in exactly the same way with minor differences in their chemical structures) on the market. Given the number of safe analogues on the market, it is likely (but not certain) this drug will be safe for human use. It is important to note here that phase 1 trials may be done on healthy participants without any disease, solely to test for safety. Accordingly, passage through phase 1 still may not demonstrate proof of concept on humans who have a particular disease.
Let’s say that ATOS had announced its intention to start testing breast cancer treatment and initiate phase 1 trials. Like I said, the likelihood of success is pretty high given the success of previous analogues. On the other hand the downside is huge. Companies can essentially go bankrupt at this stage if their “sure thing” drug or medical device fails. Always be sure to look at risk vs reward. A drug that enters phase 1 only has around a 14% likelihood of making it all the way to FDA approval. Certain categories of drugs like those that treat cancer have even lower success rates (3.4%). While FDA drug approval does appear to be increasing more than 80% of drugs that enter this stage will never see market.

Investor takeaway: the road from here is super long and passing this phase really can’t tell you anything about its success in further stages. Many drugs are analogues and breeze through this phase, it is important not to get too hyped on them for that reason.

Phase 2: Unlike phase 1 that focuses on drug safety, phase 2 tests the efficacy of the drug you are studying. This phase will typically have less than 1,000 participants, but they will all have the disease of interest. In this phase, we are looking to ensure that the drug works (provides statistically significant improvement) and is relatively safe as far as side effects. To limit research bias, sometimes we will divide the participants and give some the drug and keep some as the control group (they may get a placebo or no drug at all).
This is a pretty straightforward stage and lasts anywhere from months to years. It really depends on the drug being studied. I would never really expect a mainstream drug to get through this stage in under 6 months. The only conditions in which that would be logically feasible are either:

COVID (solely because of the politicization of the process) or
drugs treating conditions with extremely high mortality (because people won’t survive more than 6 months).

Lots of companies like to start releasing press releases close to FDA review of phase 2 results. Always be wary of those results. If my breast cancer drug was successful in 600 people and failed in 300, then while the numbers look good, the data may not be there. There is a lot that goes into statistical analysis and it isn’t quite as simple as more people did well than did poorly.
It’s also important to realize that side effect profile is really important. Let’s say the aforementioned breast cancer agent ends up prolonging life in 80% of the study participants that received the drug. However, there’s also this nasty little side effect of developing a pulmonary embolism in 15-20% of people. That’s not insignificant and it is up to the FDA to decide whether or not the risk outweighs the benefit. Sometimes the FDA will order companies to redo this phase if the data are inconclusive. With cancer agents, this is common because the drugs are so toxic to so many parts of the body, so it really is about risk/benefit analysis.
The important thing to look at in this phase when comparing the results of the treatment group to the control group is what is called the p-value. For those of you who took stats, you should know what this is. For those that didn’t, just know that in healthcare, results with a p-value >0.05 are considered insignificant. It’s also important to note that clinical and statistical significance are also key things to remember. Sometimes the benefit of the drug is so minimal that the side effect profile outweighs the benefits and the FDA will prevent the drug from moving forward. It’s also important to remember that if this is a drug entering a market where there are competitors, the FDA will look and see if this drug provides enough benefit over existing drugs before making a decision.
One more nuance that pharmaceutical companies love to do is change the primary target. In the statistics world, that’s a pretty big no-no. If my initial proposal was that the breast cancer agent would prolong the life of my patients, and then suddenly I start talking about how it actually increases their pain-free time, this is a huge red flag. You can deduce that they likely didn’t meet their primary target and pivoted to something else they could meet. In any study you can find specific characteristic that makes you look good.

Investor takeaway: this is the first phase that companies can really release “meaningful” information. Because of this, many companies try to raise funds at this time to capitalize on the hype, be wary of the words used in their press releases and marketing.

Phase 3: Phase 3 is basically a repeat of phase 2, but bigger. It’s used to determine real efficacy of a drug. In raw numbers, we are looking at about 300-3,000 participants and up to 4 years of data. Phase 3 looks at the exact same things as phase 2: efficacy and side effects observed among a treated group (and sometimes compared to a control group).
Statistical significance, that is, the thing that tells you whether the drug worked, is based heavily upon power. If you want to increase power, you can increase the sample size. In phase 3, the FDA is giving the drug a chance to sink or swim. They are once again looking to make sure you don’t discover any new, obscure side effects and to ensure that the phase 2 results were not a statistical anomaly/the drug really does work.
Beyond sample size, the biggest difference between phases 2 and 3 is that we are observing a longer period of time for adverse events. Note the maximum time differences: up to 2 years for phase 2, and up to 4 years for phase 3. There are side effects that don’t manifest within the first 2 years. A very simple example is, actually cancer agents that cause cardiac fibrosis or pulmonary fibrosis after years of use. These are things that may have been masked in the phase 2 study because the duration.
The other thing is that we may discover rarer, more deadly side effects in this phase. Let’s say in phase 2, we found that 2 of our 1,000 participants developed brain cancer. The phase 2 data may show that this was statistically insignificant and cannot be attributed to the drug (remember, sample size is very important). Maybe the phase 3 study will suddenly show that another 8 people developed brain cancer and it was due to the drug.

Investor takeaway: many drugs fail here, and not because they don’t work. They fail because they aren’t significantly better than what is available or the benefit is not enough to outweigh the risks. FDA approval isn’t simply contingent upon a drug working, there are many, many factors that come into play.

Phase 4: this is the big phase, thousands of participants, possibly multiple hospitals around the country/world. This phase further increases the power of the data and shows that the drug really, really does work and is actually safe. Getting to phase 4 is actually a pretty big deal.
At this point, the company will apply for FDA approval including all of the information they have gathered at this point. In this stage, we are considering not only efficacy and safety, but also simplicity of use, and drug abuse potential. Drug abuse potential is a pretty hot topic right now because, well, opioid epidemic. Many opioids in the last few years have not received FDA approval solely because they are too easily abused. This entire application process takes 6-10 months for the FDA to review all the evidence and decide what happens.
It is not uncommon for the FDA to request more data before approving a drug or further review. Many times they will request the company conduct a new study of x to determine y. This is normal but can seriously impede the approval timeline of a drug. This is where you have to remember opportunity cost. After approval it goes to market, yay!

Investor takeaway: you may think once the drug receives FDA approval that you are out of the woods in terms of your investment. You would be wrong.

Making it to market: When a drug finally hits market, there are two major things for investors to consider. Let’s start with the scary one, removal from the market. Remember how many times I’ve mentioned power, and sample size above? That becomes super relevant here. Depending on the drug, when it finally reaches market we may have many-fold more “participants” with which we can study the side effects of the drug.
Sometimes drugs are pulled from the market because certain side effects emerge that flew under the radar during clinical trial phases. Sometimes the FDA sticks a black box warning on the drug (which really makes doctors stop prescribing it unless they have to). In either care, share prices tend to drop. They will plummet, though, if the FDA removes it from market.
Market earnings: The last “opportunity” for investors in the approval process is the sales data after the first quarter of marketing. This is where the company shows their revenue from the sale of the drug. If you have medical knowledge, you can really thrive here. If you don’t, you are likely to get screwed because you probably won’t understand the nuances in what drives physicians to prescribe drugs and avoid others.
Just because a drug works super well doesn’t mean it will ever be used. Examples of that are ACRX’s new sufentanil agents. Those will likely see poor sales data because from a clinical perspective, even though they are approved, and work, they will almost never be used. You would not know that without understanding the specifics of post-operative pain management.
And finally, a disclaimer. Anything I said here, I can be totally wrong. Sufentanil could become the most popular agent on the market for reasons I don’t understand or couldn’t fathom. Maybe ACRX will have an insanely good marketing team. I am simply talking about making the best decision based on the available knowledge. Stock prices are fickle beasts and they don’t always respond the way we expect.
A message to those who tend to hold on to their bags to gamble on FDA approval:

Yes, this really is gambling. Look at the statistics of how often drugs make it past each stage. You lost 40% on ATOS, you know what would be worse? Somehow their drug fails and now you have lost 80%. You see a drug running before FDA decision deadline, don’t buy it. No one knows how the FDA is going to respond and you are just as likely to lose your money than you are to make it.
Honestly, you are more likely to lose money because there are three outcomes, and two cause you to lose money, one of which will potentially bankrupt your position. The FDA could either approve the drug (yay!), outright reject the drug (oof), or ask for more information. That last one is kind of misleading because it may not mean the drug has failed, but it definitely will destroy the hype built up and tank the share price. The extra information requested could take forever to get and you would, once again, have to consider opportunity cost.

If there is anything else you think I should have discussed, just let me know and I will try to add it.
If this was helpful, please let me know. If so, I can start posting regular medical-based DD on the trending healthcare tickers from this sub!

Disclaimer: I am not a financial advisor. This entire post represents my personal views and opinions, and should not be taken as financial advice (or advice of any kind whatsoever). I encourage you to do your own research, take anything I write with a grain of salt, and hold me accountable for any mistakes you may catch. Also, full disclosure, I hold a net long position in GME, but my cost basis is very low (average ~$67--I have to admit, the drop today was too tasty so my cost basis went up from yesterday)/share with my later buys averaged in), and I'm using money I can absolutely lose. My capital at risk and tolerance for risk generally is likely substantially different than yours. In this post I will go a little further and speculate more than I'd normally do in a post due to the questions I've been getting, so fair warning, some of it might be very wrong. I suspect we'll learn some of the truth years from now when some investigative journalist writes a book about it.
Thank you everyone for the comments and questions on the first and second post on this topic.
Today was a study in the power of fear, courage, and the levers you can pull when you wield billions of dollars...
Woops, excuse me. I'm sorry hedge fund guys... I meant trillions of dollars--I just briefly forget you control not just your own but a lot of other peoples' money too for a moment there.
Also, for people still trading this on market-based rationale (as I am), it was a good day to measure the conviction behind your thesis. I like to think I have conviction, but in case you are somehow not yet familiar with the legend of DFV, you need to see these posts (fair warning, nsfw, and some may be offended/triggered by the crude language). The last two posts might be impressive, but you should follow it in chronological order and pay attention to the evolution of sentiment in the comments to experience true enlightenment.
Anyway, I apologize, but this post will be very long--there's just a lot to unpack.

Pre-Market

Disclaimer: given yesterday's pre-market action I didn't even pay attention to the screen until near retail pre-market. I'm less confident in my ability to read what's going on in a historical chart vs the feel I get watching live, but I'll try.
Early in the pre-market it looks to me like some momentum traders are taking profit, discounting the probability that the short-side will give them a deep discount later, which you can reasonably assume given the strategy they ran yesterday. If they're right they can sell some small volume into the pre-market top, wait for the hedge funds try to run the price back down, and then lever up the gains even higher buying the dip. Buy-side here look to me like people FOMOing and YOLOing in at any price to grab their slice of gainz, or what looks to be market history in the making. No way are short-side hedge funds trying to cover anything at these prices.
Mark Cuban--well said! Free markets baby!
Mohamed El-Erian is money in the bank as always. "upgrade in quality" on the pandemic drop was the best, clearest actionable call while most were at peak panic, and boy did it print. Your identifying the bubble as the excessive short (vs blaming retail activity) is money yet again. Also, The PAIN TRADE (sorry, later interview segment I only have on DVR, couldn't find on youtube--maybe someone else can)!
The short attack starts, but I'm hoping no one was panicking this time--we've seen it before. Looks like the momentum guys are minting money buying the double dip into market open.
CNBC, please get a good market technician to explain the market action. Buy-side dominance, sell-side share availability evaporating into nothing (look at day-by-day volume last few days), this thing is now at runaway supercritical mass. There is no changing the trajectory unless you can change the very fabric of the market and the rules behind it (woops, I guess I should have knocked on wood there).
If you know the mechanics, what's happening in the market with GME is not mysterious AT ALL. I feel like you guys are trying to scare retail out early "for their own good" (with all sincerity, to your credit) rather than explain what's happening. Possibly you also fear that explaining it would equate to enabling/encouraging people to keep trying to do it inappropriately (possibly fair point, but at least come out and say that if that's the case). Outside the market, however...wow.

You Thought Yesterday Was Fear? THIS is Fear!

Ok short-side people, my hat is off to you. Just when I thought shouting fire in a locked theater was fear mongering poetry in motion, you went and took it to 11. What's even better? Yelling fire in a theater with only one exit. That way people can cause the financial equivalent of stampede casualties. Absolutely brilliant.
Robin Hood disables buying of GME, AMC, and a few of the other WSB favorites. Other brokerages do the same. Even for people on 0% margin. Man, and here I thought I had seen it all yesterday.
Side note: I will give a shout out to TD Ameritrade. You guys got erroneously lumped together with RH during an early CNBC segment, but you telegraphed the volatility risk management changes and gradually ramped up margin requirements over the past week. No one on your platform should have been surprised if they were paying attention. And you didn't stop anyone from trading their own money at any point in time. My account balance thanks you. I heard others may have had problems, but I'll give you the benefit of the doubt given the DDOS attacks that were flyiing around
Robin Hood. Seriously WTF. I'm sure it was TOTALLY coincidence that your big announcements happen almost precisely when what has to be one of the best and most aggressive short ladder attacks of all time starts painting the tape, what looked like a DDOS attack on Reddit's CDN infrastructure (pretty certain it was the CDN because other stuff got taken out at the same time too), and a flood of bots hit social media (ok, short-side, this last one is getting old).
Taking out a large-scale cloud CDN is real big boy stuff though, so I wouldn't entirely rule out nation state type action--those guys are good at sniffing out opportunities to foment social unrest.
Anyway, at this point, as the market dives, I have to admit I was worried for a moment. Not that somehow the short-side would win (hah! the long-side whales in the pond know what's up), but that a lot of retail would get hurt in the action. That concern subsided quite a bit on the third halt on that slide. But first...
A side lesson on market orders
Someone printed bonus bank big time (and someone lost--I feel your pain, whoever you are).
During the face-ripping volatility my play money account briefly ascended to rarified heights of 7 figures. It took me a second to realize it, then another second to process it. Then, as soon as it clicked, that one, glorious moment in time was gone.
What happened?
During the insane chop of the short ladder attack, someone decided to sweep the 29 Jan 21 115 Call contracts, but they couldn't get a grip on the price, which was going coast to coast as IV blew up and the price was being slammed around. So whoever was trying to buy said "F it, MARKET ORDER" (i.e. buy up to $X,XXX,XXX worth of contracts at any price). This is referred to as a sweep if funded to buy all/most of the contracts on offer (HFT shops snipe every contract at each specific price with a shotgun of limit orders, which is far safer, but something only near-market compute resources can do really well). For retail, or old-tech pros, if you want all the contracts quickly, you drop a market order loaded with big bucks and see what you get... BUT, some clever shark had contracts available for the reasonable sum of... $4,400, or something around that. I was too stunned to grab a screencap. The buy market order swept the book clean and ran right into that glorious, nigh-obscene backstop limit. So someone got nearly $440,000 PER CONTRACT that was, at the time theoretically priced at around $15,000. $425,000 loss... PER CONTRACT. Maybe I'm not giving the buyer enough credit.. you can get sniped like that even if you try to do a safety check of the order book first, but, especially in low liquidity environments, if a HFT can peak into your order flow (or maybe just observes a high volume of sweeps occurring), they can end up front running your sweep, pick off the reasonable contracts, and slam a ridiculous limit sell order into place before your order makes it to the exchange. Either way, I hope that sweep wasn't loaded for bear into the millions. If so... OUCH. Someone got cleaned out.
So, the lesson here folks... in a super high volatility, low-liquidity market, a market order will just run up the ladder into the first sell order it can find, and some very brutal people will put limit sells like that out there just in case they hit the jackpot. And someone did. If you're on the winning side, great. It can basically bankrupt you if you're on the losing side. My recommendation: Just don't try it. I wouldn't be surprised if really shady shenanigans were involved in this, but no way to know (normally that's crazy-type talk, but after today....peeking at order flow and sniping sweeps is one of the fastest, most financially devastating ways to bleed big long-side players, just sayin').
edit *so while I was too busy trying not to spit out my coffee to grab a screenshot, piddlesthethug was faster on the draw and captured this: https://imgur.com/gallery/RI1WOuu
Ok, so I guess my in-the-moment mental math was off by about 10%. Man, that hurts just thinking about the guy who lost on that trade.*
Back to the market action..

A Ray of Light Through the Darkness

So I was worried watching the crazy downward movement for two different reasons.
On the one hand, I was worried the momentum pros would get the best discounts on the dip (I'll admit, I FOMO'd in too early, unnecessarily raising my cost basis).
On the other hand, I was worried for the retail people on Robin Hood who might be bailing out into incredibly steep losses because they had only two options: Watch the slide, or bail. All while dealing with what looked to me like a broad-based cloud CDN outage as they tried to get info from WSB HQ, and wondering if the insta-flood of bot messages were actually real people this time, and that everyone else was bailing on them to leave them holding the bag.
But I saw the retail flag flying high on the 3rd market halt (IIRC), and I knew most would be ok. What did I see, you ask? Why, the glorious $211.00 / $5,000 bid/ask spread. WSB Reddit is down? Those crazy mofos give you the finger right on the ticker tape. I've been asked many times in the last few hours about why I was so sure shorts weren't covering on the down move. THIS is how I knew. For sure. It's in the market data itself.
edit So, there's feedback in the comments that this is likely more of a technical glitch. Man, at least it was hilarious in the moment. But also now I know maybe not to trust price updates when the spread between orders being posted is so wide. Maybe a technical limitation of TOS
I'll admit, I tried to one-up those bros with a 4206.90 limit sell order, but it never made it through. I'm impressed that the HFT guys at the hedge fund must have realized really quickly what a morale booster that kind of thing would have been, and kept a lower backstop ask in place almost continuously from then on I'm sure others tried the same thing. Occasionally $1,000 and other high-dollar asks would peak through from time to time from then on, which told me the long-side HFTs were probably successfully sniping the backstops regularly.
So, translating for those of you who found that confusing. First, such a high ask is basically a FU to the short-side (who, as you remember, need to eventually buy shares to cover their short positions). More importantly, as an indicator of retail sentiment, it meant that NO ONE ELSE WAS TRYING TO SELL AT ANY PRICE LOWER THAN $5,000. Absolutely no one was bailing out.
I laughed for a minute, then started getting a little worried. Holy cow.. NO retail selling into the fear? How are they resisting that kind of price move??
The answer, as we all know now... they weren't afraid... they weren't even worried. They were F*CKING PISSED.
Meanwhile the momentum guys and long-side HFTs keep gobbling up the generously donated shares that the short-side are plowing into their ladder attack. Lots of HFT duels going on as long-side HFTs try to intercept shares meant to travel between short-side HFT accounts for their ladder. You can tell when you see prices like $227.0001 constantly flying across the tape. Retail can't even attempt to enter an order like that--those are for the big boys with privileged low-latency access.
The fact that you can even see that on the tape with human eyes is really bad for the short-side people.
Why, you ask? Because it means liquidity is drying up, and fast.

The Liquidity Tide is Flowing Out Quickly. Who's Naked (short)?

Market technicals time. I still wish this sub would allow pictures so I could throw up a chart, but I guess a table will do fine.

Date	Volume	Price at US Market Close
Friday, 1/22/21	197,157,196	$65.01
Monday, 1/25/21	177,874,00	$76.79
Tuesday, 1/26/21	178,587,974	$147.98
Wednesday, 1/27/21	93,396,666	$347.51
Thursday, 1/28/21	58,815,805	$193.60

What do I see? I see the shares available to trade dropping so fast that all the near-exchange compute power in the world won't let the short-side HFTs maintain order flow volume for their attacks. Many retail people asking me questions thought today was the heaviest trading. Nope--it was just the craziest.
What about the price dropping on Thursday? Is that a sign that the short-side pulled a miracle out and pushed price down against a parabolic move on even less volume than Wednesday? Is the long side running out of capital?
Nope. It means the short-side hedge funds are just about finished.
But wait, I thought the price needed to be higher for them to be taken out? How is it that price being lower is bad for them? Won't that allow them to cover at a lower price?
No, the volume is so low that they can't cover any meaningful fraction of their position without spiking the price parabolic almost instantly. Just not enough shares on offer at reasonable prices (especially when WSB keeps flashing you 6942.00s).
It's true, a higher price hurts, but the interest charge for one more day is just noise at this point. The only tick that will REALLY count is the last tick of trading on Friday.
In the meantime, the price drop (and watching the sparring in real time) tells me that the long-side whales and their HFT quants are so certain of the squeeze that they're no longer worried AT ALL about whether it will happen, and they aren't even worried at all about retail morale to help carry the water anymore.
Instead, they're now really, really worried about how CHEAPLY they can make it happen.
They are wondering if they can't edge out just a sliver more alpha out of what will already be a blow-out trade for the history books (probably). You see, to make it happen they just have to keep hoovering up shares. It doesn't matter what those shares cost. If you're certain that the squeeze is now locked in, why push the price up and pay more than you have to? Just keep pressing hard enough to force short-side to keep sending those tasty shares your way, but not so much you move the price. Short-side realizes this and doesn't try to drive price down too aggressively. They can't afford to let price run away, so they have to keep some pressure on at the lowest volume they can manage, but they don't want to push down too hard and give the long-side HFTs too deep of a discount and bleed their ammo out even faster. That dynamic keeps price within a narrow (for GME today, anyway) trading range for the rest of the day into the close.
Good plan guys, but those after market people are pushing the price up again. Damnit WSB bros and Euros, you're costing those poor long-side whales their extra 0.0000001% of alpha on this trade just so you can run up your green rockets... See, that's the kind of nonsense that just validates Lee Cooperman's concerns.
On a totally unrelated note, I have to say that I appreciate the shift in CNBC's reporting. Much more thoughtful and informed. Just please get a good market technician in there who will be willing to talk about what is going on under the hood if possible. A lot of people watching on the sidelines are far more terrified than they need to be because it all looks random to them. And they're worried that you guys look confused and worried--and if the experts on the news are worried....??!
You should be able to find one who has access to the really good data that we retailers can only guess at, who can explain it to us unwashed masses.

Ok, So.. Questions

There is no market justification for this. How can you tell me is this fundamentally sound and not just straight throwing money away irresponsibly?? (side note: not that that should matter--if you want to throw your money away why shouldn't you be allowed to?)
We're not trading in your securities pricing model. This isn't irrational just because your model says long and short positions are the same thing. The model is not a real market. There is asymmetrical counterparty risk here given the shorts are on the hook for all the money they have, and possibly all the money their brokers have, and possibly anyone with exposure to the broker too! You may want people to trade by the rules you want them to follow. But the rest of us trade in the real market as it is actually implemented. Remember? That's what you tell the retailers who take their accounts to zero. Remember what you told the KBIO short-squeezed people? They had fair warning that short positions carry infinite risk, including more than your initial investment. You guys know this. It's literally part of your job to know this.
But-but-the systemic risk!! This is Madness!
...Madness?
THIS. IS. THE MARKET!!! *Retail kicks the short-side hedge funds down an infinity loss black hole\*.
Ok, seriously though, that is actually a fundamentally sound, and properly profit-driven answer at least as justifiable as the hedge funds' justification for going >100% of float short. If they can be allowed to gamble INFINITE LOSSES because they expect to make profit on the possibility the company goes bankrupt, can't others do the inverse on the possibility the company I don't know.. doesn't go bankrupt and gets a better strategy from the team that created what is now a $43bn market cap company (CHWY) that does exactly some of the things GME needs to do (digital revenue growth) maybe? I mean, I first bought in on that fundamental value thesis in the 30s and then upped my cost basis given the asymmetry of risk in the technical analysis as an obvious no-brainer momentum trade. The squeeze is just, as WSB people might say, tendies raining down from on high as an added bonus.
I get that you disagree on the fundamental viability of GME. Great. Isn't that what makes a market?
Regarding the consequences of a squeeze, in practice my expectation was maybe at worst some kind of ex-market settlement after liquidation of the funds with exposure to keep things nice and orderly for the rest of the market. I mean, they handled the VW thing somehow right? I see now that I just underestimated elite hedge fund managers though--those guys are so hardcore (I'll explain why I think so a bit lower down).
If hedge fund people are so hardcore, how did the retail long side ever have a chance of winning this squeeze trade they're talking about?
Because it's an asymmetrical battle once you have short interest cornered. And the risk is also crazily asymmetrical in favor of the long side if short interest is what it is in GME. In fact, the hedge funds essentially cornered themselves without anyone even doing anything. They just dug themselves right in there. Kind of impressive really, in a weird way.
What does the short side need to cover? They need the price to be low, and they need to buy shares.
How does price move lower? You have to push share volume such that supply overwhelms demand and price therefore goes down (man, I knew econ 101 would come in handy someday).
But wait... if you have to sell shares to push the price down.. won't you just undo all your work when you have to buy it back to actually cover?
The trick is you have to push price down so hard, so fast, so unpredictably, that you SCARE OTHER PEOPLE into selling their shares too, because they're scared of taking losses. Their sales help push the price down for free! and then you scoop them up at discount price! Also, there are ways to make people scared other than price movement and fear of losses, when you get right down to it. So, you know, you just need to get really, really, really good at making people scared. Remember to add a line item to your budget to make sure you can really do it right.
On the other hand..
What does the long side need to do? They need to own as much of the shares as they can get their hands on. And then they need to hold on to them. They can't be weak hands either. They need to be hands that will hold even under the most intense heat of battle, and the immense pressure of mind-numbing fear... they need to be as if they were made of... diamond... (oh wow, maybe those WSB people kind of have a point here).
Why does this matter? Because at some point the sell side will eventually run out of shares to borrow. They simply won't be there, because they'll be safely tucked away in the long-side's accounts. Once you run out of shares to borrow and sell, you have no way to move the price anymore. You can't just drop a fat stack--excuse me, I mean suitcase (we're talking hedge fund money here after all)--of Benjamins on the ticker tape directly. Only shares. No more shares, no way to have any direct effect on the price whatsoever.
Ok, doesn't that just mean trading stops? Can't you just out-wait the long side then?
Well, you could.. until someone on the long side puts 1 share up on a 69420 ask, and an even crazier person actually buys at that price on the last tick on a Friday. Let's just say it gets really bad at that point.
Ok.. but how do the retail people actually get paid?
Well, to be quite honest, it's entirely up to each of them individually. You've seen the volumes being thrown around the past week+. I guarantee you every single retailer out there could have printed money multiple times trading that flow. If they choose to, and time it well. Or they could lose it all--this is the market. Some of them apparently seem to have some plan, or an implicit trust in certain individuals to help them know when to punch out. Maybe it works out, but maybe not. There will be financial casualties on the field for sure--this is the bare-knuckled capitalist jungle after all, remember? But everyone ponied up to the table with their own money somehow, so they all get to play in the big leagues just like everyone else. In theory, anyway.
And now, Probably the #1 question I've been asked on all of these posts has been: So what happens next? Do we get the infinity squeeze? Do the hedge funds go down?
Great questions. I don't know. No one does. That's what I've said every time, but I get that's a frustrating answer, so I'll write a bit more and speculate further. Please again understand these are my opinions with a degree of speculation I wouldn't normally put in a post.

The Market and the Economy. Main Street, Wall Street, and Washington

The pandemic has hurt so many people that it's hard to comprehend. Honestly, I don't even pretend to be able to. I have been crazy fortunate enough to almost not be affected at all. Honestly, it is a little unnerving to me how great the disconnect is between people who are doing fine (or better than fine, looking at my IRA) versus the people who are on the opposite side of the ever-widening divide that, let's be honest, has been growing wider since long before the pandemic.
People on the other side--who have been told they cannot work even if they want to, who wonder if congress will get it together to at least keep them from getting thrown out of their house if they have to keep taking one for the team for the good of all, are wondering if they're even living in the same reality.
Because all they see on the news each day is that the stock market is at record highs, or some amazing tech stocks have 10x'd in the last 6 months. How can that be happening during a pandemic? Because The Market is not The Economy. The Market looks forward to that brighter future that Economy types just need to wait for. Don't worry--it'll be here sometime before the end of the year. We think. We're making money on that assumption right now, anyway. Oh, by the way, if you're in The Market, you get to get richer as a minor, unearned side-effect of the solutions our governments have come up with to fight the pandemic.
Wow. That sounds amazing. How do I get to part of that world?
Retail fintech, baby. Physical assets like real estate might be a bit out of reach at the moment, but stocks will do. I can even buy fractional shares of BRK/A LOL.
Finally, I can trade for my own slice of heaven, watching that balance go up (and up--go stonks!!). Now I too get to dream the dream. I get to feel connected to that mythical world, The Market, rather than being stuck in the plain old Economy. Sure, I might blow up my account, but that's because it's the jungle. Bare-knuckled, big league capitalism going on right here, and at least I get to show up an put my shares on the table with everyone else. At least I'm playing the same game. Everyone has to start somewhere--at least now I get to start, even if I have to learn my lesson by zeroing my account a few times. I've basically had to deal with what felt like my life zeroing out a few times before. This is number on a screen going to 0 is nothing.
Laugh or cry, right? I'll post my losses on WSB and at least get some laughs.
Geez, some of the people here are making bank. I better learn from them and see if they'll let me in on their trades. Wow... this actually might work. I don't understand yet, but I trust these guys telling me to hold onto this crazy trade. I don't understand it, but all the memes say it's going to be big.
...WOW... I can pay off my credit card with this number. Do I punch out now? No? Hold?... Ok, getting nervous watching the number go down but I trust you freaks. We're still in the jungle, but at least I'm in with with my posse now. Market open tomorrow--we ride the rocket baby! And if it goes down, at least I'm going down with my crew. At least if that happens the memes will be so hilarious I'll forget to cry.
Wow.. I can't believe it... we might actually pull this off. Laugh at us now, "pros"!
We're in The Market now, and Market rules tell us what is going to happen. We're getting all that hedge fund money Right? Right?
Maybe.
First, I say maybe because nothing is ever guaranteed until it clears. Secondly, because the rules of The Market are not as perfectly enforced as we would like to assume. We are also finding out they may not be perfectly fair. The Market most experts are willing to talk about is really more like the ideal The Market is supposed to be. This is the version of the market I make my trading decisions in. However, the Real Market gets strange and unpredictable at the edges, when things are taken to extremes, or rules are pushed beyond the breaking point, or some of the mechanics deep in the guts of the Real Market get stretched. GME ticks basically all of those boxes, which is why so many people are getting nervous (aside from the crazy money they might lose). It's also important to remember that the sheer amount of money flowing through the market has distorting power unto itself. Because it's money, and people really, really, really like their money--especially when they're used to having a lot of it, and rules involving that kind of money tend to look more... flexible, shall we say.
Ok, back to GME. If this situation with GME is allowed to play out to its conclusion in The Market, we'll see what happens. I think all the long-side people get the chance to be paid (what, I'm not sure--and remember, you have to actually sell your position at some point or it's all still just numbers on your screen), but no one knows for certain.
But this might legitimately get so big that it spills out of The Market and back into The Economy.
Geez, and here I thought the point of all of this was so that we all get to make so much money we wouldn't ever have to think and worry about that thing again.
Unfortunately, while he's kind of a buzzkill, Thomas Petterfy has a point. This could be a serious problem.
It might blow out The Market, which will definitely crap on The Economy, which as we all know from hard experience, will seriously crush Main Street.
If it's that big a deal, we may even need Washington to be involved. Once that happens, who knows what to expect.. this kind of scenario being possible is why I've been saying I have no idea how this ends, and no one else does either.
How did we end up in this ridiculous situation? From GAMESTOP?? And it's not Retail's fault the situation is what it is.. why is everyone telling US that we need to back down to save The Market?? What about the short-side hedge funds that slammed that risk into the system to begin with?? We're just playing by the rules of The Market!!
Well, here are my thoughts, opinions, and some even further speculation... This may be total fantasy land stuff here, but since I keep getting asked I'll share anyway. Just keep that disclaimer in mind.

A Study in Big Finance Power Moves: If you owe the bank $10,000, it's your problem...

What happens when you owe money you have no way to pay back? It's a scary question to have to face personally. Still, on balance and on average, if you're fortunate enough to have access to credit the borrowing is a risk that is worth taking (especially if you're reasonably careful). Lenders can take a risk loaning you money, you take a risk by borrowing in order to do something now that you would otherwise have had to wait a long time or maybe would never have realistically been able to do otherwise. Sometimes it doesn't work out. Sometimes it's due to reasons totally beyond your control. In any case, if you find yourself there you have no choice but to dust yourself off, pick yourself up as best as you can, and try to move on and rebuild. A lot of people had to learn that in 2008. Man that year really sucked.
Wall street learned their lessons too. Most learned what I think most of us would consider the right lessons--lessons about risk management, and the need to guard vigilantly against systemic risk, concentration of risk through excess concentration of leverage on common assets, etc. Many suspect that at least a few others may have learned an entirely different set of, shall we say, unhealthy lessons. Also, to try to be completely fair, maybe managing other peoples' money on 10x+ leverage comes with a kind of pressure that just clouds your judgement. I could actually, genuinely buy that. I know I make mistakes under pressure even when I'm trading risk capital I could totally lose with no real consequence. Whatever the motive, here's my read on what's happening:
First, remember that as much fun as WSB are making of the short-side hedge fund guys right now, those guys are smart. Scary smart. Keep that in mind.
Next, let's put ourselves in their shoes.
If you're a high-alpha hedge fund manager slinging trades on a $20bn 10x leveraged to 200bn portfolio, get caught in a bad situation, and are down mark-to-market several hundred million.. what do you do? Do you take your losses and try again next time? Hell no.
You're elite. You don't realize losses--you double down--you can still save this trade no sweat.
But what if that doesn't work out so well and you're in the hole >$2bn? Obvious double down. Need you ask? I'm net up on the rest of my positions (of course), and the momentum when this thing makes its mean reversion move will be so hot you can almost taste the alpha from here. Speaking of momentum, imagine the move if your friends on TV start hyping the story harder! Genius!
Ok, so that still didn't work... this is now a frigging 7 sigma departure from your modeled risk, and you're now locked into a situation that is about as close to mathematically impossible to escape as you can get in the real world, and quickly converging on infinite downside. Holy crap. The fund might be liquidated by your prime broker by tomorrow morning--and man, even the broker is freaking out. F'in Elon Musk and his twitter! You're cancelling your advance booking on his rocket ship to Mars first thing tomorrow... Ok, focus--this might legit impact your total annual return. You need a plan, and you know the smartest people on the planet, right? The masters of the universe! Awesome--they've even seen this kind of thing before and still have the playbook!! Of course! It's obvious now--you borrow a few more billion and double down again first thing in the morning. So simple. Sticky note that Mars trip cancellation so you don't forget.
Ok... so that didn't work? You even cashed in some pretty heavy chits too. Ah well, that was a long shot anyway. So where were you? Oh yeah.. if shenanigans don't work, skip to page 10...
...Which says, of course, to double down again. Anyone even keeping track anymore? Oh, S3 says it's $40bn and we're going parabolic? Man, that chart gives me goosebumps. All according to plan...
So what happens tomorrow? One possible outcome of PURE FANTASTIC SPECULATION...
End of the week--phew. Never though it'd come. Where are you at now?... Over $9000^\)!!! Wow. You did it boys, and as a bonus the memes will be so sweet.
^\)side note: add 8 zeros to the end...
Awesome--your problems have been solved. Because...

..

BOOM

Now it's EVERYONE's problem. Come at me, Chamath, THIS is REAL baller shit.
Now all you gotta do is make all the hysterical retirees watching their IRAs hanging in the balance blame those WSB kids. Hahaha. Boomers, amirite? hate when those kids step on their law--I mean IRAs. GG guys, keep you memes. THAT is how it's done.
Ok, but seriously, I hope that's not how it ends. I guess we just take it day by day at this point.
Apologies for the length. Good luck in the market!
Also, apologies in advance for formatting, spelling, and grammatical errors. I was typing this thing in between doing all kinds of other things for most of the day.
Edit getting a bunch of questions on if it's possible the hedge funds are finding ways to cover in spite of my assumptions. Of course. I'm a retail guy trying to read the charts and price action. I don't have any special tools like the pros may have.

I gotta say, I see some good shit out there. I see new members trying to diversify their positions and learn about other stocks and other ways to make money. This is the path my fellow retards. I'm a nobody here, but I have good returns and some good insight. When I came to WSB, multiple people helped me figure out what the fuck I was doing, because I knew jack shit. I care more about my money than yours, but no retard should be left in the dark alone. So let me pass on a couple things. I can't prove shit to you, so read this or don't.
I mainly trade options (Calls and Puts), so that is what I will discuss
Generally the most insane gains will come from being in a specific stock and not an ETF or Index. While riskier, this is where you can hit the homeruns. So decide if you want to go for conservative gains or if you want those huge swings. While what I said is true, I am usually against putting everything into a single bet. Anything can go wrong at any time and no play is 100% guaranteed. The goal of this game is to stay alive. You will lose money on a play at some point, because it is inevitable. So never let yourself get wiped out, because you can always build yourself back up. This goes along with one of my other recommendations: always have SOME cash ready to go. You never know when there might be an incredible opportunity and you do not want to get caught with your ass hanging out.
Paper hands and diamond hands are just words. You ultimately decide when you want to sell or hold and how much profit you want to take. One of my favorite strategies is to say, buy an even number of options on a play, sell half at a modest level of gains (like enough to break even or gain a little bit) and then let the rest ride longer. Look guys, on many plays, you either paper hands at some point or diamond hands long enough to see your positions go red. Some people will bail at 40% gains and others might not take anything less than 500%. Just know that chasing endless profits ups the risk factor, so YOU decide when it's time. Having a target share price for the stock is also a good strategy.
Here's a couple psychological principles in investing. Studies have found that people tend to hold onto losing positions too long and sell winning positions too early. They let their losers lose and cut off their winners short. Apparently most people hate losing more than they like winning. Think about this before you sell. Stocks can often get hot and run multiple days in a row. Sometimes a stock will have one red day and then keep up going. This is why it's important to know WHY you got into a position. Trust your DD and stick to the plan. I had ideas for plays where they went red right away and I bailed... only to see them moon. "Diamond Hands" means that you don't dump your position instantly if it goes down. The hardest thing is knowing if you should cut losses or diamond hands. I'm a retard and we're in a bull market.. so often times the stock will eventually go up. Your call though.
The market makers and big boys want you to lose. They want your money. I'm not going to dive into the realm of possible illegal activities that they may use, but just point out some simpler tactics they will use. Big money often sees retail as "weak hands" aka Buy High and Sell Low. They know FOMO is strong when a stock is going up big and that fear takes over when a stock divebombs. We're in a bull market, which means stonks only go up. However, we still have negative days. Stocks sell off sometimes and things can look bad. Generally, the dip is not time to sell, but instead, time to buy. Case and point, we had a pretty big drilling 2 weeks ago. Do you know what the big money did? They bought the fuckin dip and snatched up everything for cheap. We've been mooning ever since.
Sometimes shit makes no sense. A company can have blowout earnings, exceed expectations, and the stock will tank. I was holding one stock a little while ago that reported a fantastic earnings and proceeded to drill to the core of the Earth that day. It was total bullshit and I knew it, I trusted my DD. So instead of panic selling, I added to my position. Sure enough, the stock began swinging upwards and hit an all-time high just 2 weeks later. This is why simply gambling can bite you in the ass. It's easy to get scared and sell when you doubt yourself because you picked a random thing to buy.
Option Expiration Dates matter. Buying a 1 week option is the cheapest and gives the biggest percentage of profits if it goes your way. However, it can often be a noob trap. One bad day or one piece of bad news can kill your entire position. Stocks trade sideways sometimes. Sometimes they don't do what you think they should do. And sometimes the whole fucking market shits itself for seemingly no reason. So give yourself TIME to work with. Time costs money and hurts profit margins. But it is better to consistently make 50% profit than to hit one play for 300% followed by 10 losers. Look, playing weekly stupidly OTM calls is fun as hell and is a huge rush when it hits. I do at least one or more every week. The key is not loading your entire portfolio into this shit. Remember, no tendies = no more fun.
Along the same lines, Strike Price matters. An OTM (Out of the Money) option means that the Strike Price is a bit of a ways from where the stock's price currently is. OTM options give huge profit margins the further you go out. I personally enjoy using them.. some people don't. But my advice is to balance risk with profit potential. If your call relies on a stock gaining 50% in 2 weeks.. then well, it's probably not gonna happen. ITM (In The Money) options means that your stock is already within the strike price. ITM is a more conservative play and sacrifices massive gains for lower risk.
https://www.optionsprofitcalculator.com/calculatolong-call.html - Use this to get an estimate of potential profits and how much of a move you need
Leaps are fuckin dope. A Leap is a call, but for a much longer period of time. I'm using the term loosely because we're degenerates and some people might consider anything more than 1 month a leap. Given that the market trends up over time, you might even make some money on a mediocre stock this way. A lot of people buy ITM leaps, but again, I'm a degenerate and go OTM a lot.
Implied Volatility (IV) - Extremely fucking important. IV is basically an estimation of how much a stock is predicted to move in either direction. High IV = Expensive Options. It's fucking weird to think, but you can make similar profits from a 2% move on a low IV stock as you can from a 5% move on a more volatile stock. Low IV is fantastic when buying an option on a stock that you think is about to moon. High IV is riskier, so you damn well better think the stock can make some big moves. Buying an option on a stock right before Earnings Report (ER) will be more expensive due to IV. Trying to play ER is usually for suckers, unless you have some really good DD about why a company might deliver a huge surprise. One of the textbook big boy moves is to pump a stock going into ER. The company will deliver great news and then dump hard. You may see people bitching about this very soon. Basically, big money knew ahead of time it would be good, so the stock got pumped and then they took profits.
Buy the rumor and sell the news. Events, press releases, and important dates that everyone knows about are another trap. You will get shit on. Ask someone about TESLA Battery Day. Positive rumors will send a stock soaring though.
Finally, get busy learning. Read about Options on Investopedia and any other things you do not understand. The big boys rely on us to not know what the fuck we're doing to take our money. Learn about the general market. Stocks are grouped into "Sectors" or categories. Start figuring out what they are and pay attention to where the money is going. I didn't even mention half of the shit that goes on in options, so that's on you. The first thing you need to do is to learn what the "Greeks" are. That will teach you how options function.
https://www.investopedia.com/trading/using-the-greeks-to-understand-options/
If anyone wants to talk or discuss, send me a message. I'm a degenerate with no life.
Oh and, if you follow someone's DD and lose money that's on you. I've come up with some genius shit, but I've also lost on some retarded calls. Nobody can pick you a guaranteed winner and hindsight is 20/20.
May the gains be with you

I’ve been wanting to do a post like this for a long time now. Now that healthcare has basically been the hottest thing for the last year (and somehow still getting even hotter), I thought it would be a good time. Many people try to buy into pharmaceutical companies around FDA approval targets without truly understanding what they’re getting into. Full disclosure, I am a doctor, but I will try to write this in layman’s terms as much as possible. If I get anything wrong, I’ll be sure to edit the post. To the best of my knowledge, everything I am about to say is researched (and therefore correct).
I’m going to go through the entire FDA approval process as a timeline, and then at the end, talk about other things to consider when investing in pharmaceuticals (i.e., more nuanced stuff that requires/applies healthcare understanding). One caveat here is people use “phases” in multiple ways. The way I will use it is the way I see most often being used in press releases and DD on reddit.
Preclinical: to begin, you must submit a proposal that basically states why you think a biologic compound will work. Without getting too technical, the preclinical is basically where you demonstrate a proof of concept.
Here is a very generic example: Let’s say that HIV binds to GME receptor on cells. I have been doing petri dish experiments on a compound I created that prevents anything from binding to GME (this is in vitro if you ever see that term tossed around). I submit this evidence to the FDA and say that I think my compound will work in theory. TONS of things work in vitro and never progress beyond that. At this point, the FDA says, “okay we think your compound might work too, you can start human trials.”

Investor takeaway: the results of this phase mean absolutely nothing. If a drug failed in this phase, that would truly mean the company is incompetent in both their ability to assess the science, and in their ability to provide meaningful news to generate investor buzz.

Phase 1: Anything that passes preclinical is ready for human trials. We are talking very small trials, like less than 100 people. For smaller companies, this is their chance to get some hype about their pharmaceutical. For anyone who understands the process, this is truly meaningless. Again, working in vitro does not (and likely will not) translate to working in humans. This phase typically lasts several months and is primarily designed to ensure that the drug is safe.
Here is a real life example, one that has already garnered a lot of attention: Atossa Therapeutics (ATOS) and their new breast cancer drug. Here is where medical knowledge (or solid research) can really help you. Their new breast cancer drug is called endoxifen. There are already multiple analogues (drugs that work in exactly the same way with minor differences in their chemical structures) on the market. Given the number of safe analogues on the market, it is likely (but not certain) this drug will be safe for human use. It is important to note here that phase 1 trials may be done on healthy participants without any disease, solely to test for safety. Accordingly, passage through phase 1 still may not demonstrate proof of concept on humans who have a particular disease.
Let’s say that ATOS had announced its intention to start testing breast cancer treatment and initiate phase 1 trials. Like I said, the likelihood of success is pretty high given the success of previous analogues. On the other hand the downside is huge. Companies can essentially go bankrupt at this stage if their “sure thing” drug or medical device fails. Always be sure to look at risk vs reward. A drug that enters phase 1 only has around a 14% likelihood of making it all the way to FDA approval. Certain categories of drugs like those that treat cancer have even lower success rates (3.4%). While FDA drug approval does appear to be increasing more than 80% of drugs that enter this stage will never see market.

Investor takeaway: the road from here is super long and passing this phase really can’t tell you anything about its success in further stages. Many drugs are analogues and breeze through this phase, it is important not to get too hyped on them for that reason.

Phase 2: Unlike phase 1 that focuses on drug safety, phase 2 tests the efficacy of the drug you are studying. This phase will typically have less than 1,000 participants, but they will all have the disease of interest. In this phase, we are looking to ensure that the drug works (provides statistically significant improvement) and is relatively safe as far as side effects. To limit research bias, sometimes we will divide the participants and give some the drug and keep some as the control group (they may get a placebo or no drug at all).
This is a pretty straightforward stage and lasts anywhere from months to years. It really depends on the drug being studied. I would never really expect a mainstream drug to get through this stage in under 6 months. The only conditions in which that would be logically feasible are either:

COVID (solely because of the politicization of the process) or
drugs treating conditions with extremely high mortality (because people won’t survive more than 6 months).

Lots of companies like to start releasing press releases close to FDA review of phase 2 results. Always be wary of those results. If my breast cancer drug was successful in 600 people and failed in 300, then while the numbers look good, the data may not be there. There is a lot that goes into statistical analysis and it isn’t quite as simple as more people did well than did poorly.
It’s also important to realize that side effect profile is really important. Let’s say the aforementioned breast cancer agent ends up prolonging life in 80% of the study participants that received the drug. However, there’s also this nasty little side effect of developing a pulmonary embolism in 15-20% of people. That’s not insignificant and it is up to the FDA to decide whether or not the risk outweighs the benefit. Sometimes the FDA will order companies to redo this phase if the data are inconclusive. With cancer agents, this is common because the drugs are so toxic to so many parts of the body, so it really is about risk/benefit analysis.
The important thing to look at in this phase when comparing the results of the treatment group to the control group is what is called the p-value. For those of you who took stats, you should know what this is. For those that didn’t, just know that in healthcare, results with a p-value >0.05 are considered insignificant. It’s also important to note that clinical and statistical significance are also key things to remember. Sometimes the benefit of the drug is so minimal that the side effect profile outweighs the benefits and the FDA will prevent the drug from moving forward. It’s also important to remember that if this is a drug entering a market where there are competitors, the FDA will look and see if this drug provides enough benefit over existing drugs before making a decision.
One more nuance that pharmaceutical companies love to do is change the primary target. In the statistics world, that’s a pretty big no-no. If my initial proposal was that the breast cancer agent would prolong the life of my patients, and then suddenly I start talking about how it actually increases their pain-free time, this is a huge red flag. You can deduce that they likely didn’t meet their primary target and pivoted to something else they could meet. In any study you can find specific characteristic that makes you look good.

Investor takeaway: this is the first phase that companies can really release “meaningful” information. Because of this, many companies try to raise funds at this time to capitalize on the hype, be wary of the words used in their press releases and marketing.

Phase 3: Phase 3 is basically a repeat of phase 2, but bigger. It’s used to determine real efficacy of a drug. In raw numbers, we are looking at about 300-3,000 participants and up to 4 years of data. Phase 3 looks at the exact same things as phase 2: efficacy and side effects observed among a treated group (and sometimes compared to a control group).
Statistical significance, that is, the thing that tells you whether the drug worked, is based heavily upon power. If you want to increase power, you can increase the sample size. In phase 3, the FDA is giving the drug a chance to sink or swim. They are once again looking to make sure you don’t discover any new, obscure side effects and to ensure that the phase 2 results were not a statistical anomaly/the drug really does work.
Beyond sample size, the biggest difference between phases 2 and 3 is that we are observing a longer period of time for adverse events. Note the maximum time differences: up to 2 years for phase 2, and up to 4 years for phase 3. There are side effects that don’t manifest within the first 2 years. A very simple example is, actually cancer agents that cause cardiac fibrosis or pulmonary fibrosis after years of use. These are things that may have been masked in the phase 2 study because the duration.
The other thing is that we may discover rarer, more deadly side effects in this phase. Let’s say in phase 2, we found that 2 of our 1,000 participants developed brain cancer. The phase 2 data may show that this was statistically insignificant and cannot be attributed to the drug (remember, sample size is very important). Maybe the phase 3 study will suddenly show that another 8 people developed brain cancer and it was due to the drug.

Investor takeaway: many drugs fail here, and not because they don’t work. They fail because they aren’t significantly better than what is available or the benefit is not enough to outweigh the risks. FDA approval isn’t simply contingent upon a drug working, there are many, many factors that come into play.

Phase 4: this is the big phase, thousands of participants, possibly multiple hospitals around the country/world. This phase further increases the power of the data and shows that the drug really, really does work and is actually safe. Getting to phase 4 is actually a pretty big deal.
At this point, the company will apply for FDA approval including all of the information they have gathered at this point. In this stage, we are considering not only efficacy and safety, but also simplicity of use, and drug abuse potential. Drug abuse potential is a pretty hot topic right now because, well, opioid epidemic. Many opioids in the last few years have not received FDA approval solely because they are too easily abused. This entire application process takes 6-10 months for the FDA to review all the evidence and decide what happens.
It is not uncommon for the FDA to request more data before approving a drug or further review. Many times they will request the company conduct a new study of x to determine y. This is normal but can seriously impede the approval timeline of a drug. This is where you have to remember opportunity cost. After approval it goes to market, yay!

Investor takeaway: you may think once the drug receives FDA approval that you are out of the woods in terms of your investment. You would be wrong.

Making it to market: When a drug finally hits market, there are two major things for investors to consider. Let’s start with the scary one, removal from the market. Remember how many times I’ve mentioned power, and sample size above? That becomes super relevant here. Depending on the drug, when it finally reaches market we may have many-fold more “participants” with which we can study the side effects of the drug.
Sometimes drugs are pulled from the market because certain side effects emerge that flew under the radar during clinical trial phases. Sometimes the FDA sticks a black box warning on the drug (which really makes doctors stop prescribing it unless they have to). In either care, share prices tend to drop. They will plummet, though, if the FDA removes it from market.
Market earnings: The last “opportunity” for investors in the approval process is the sales data after the first quarter of marketing. This is where the company shows their revenue from the sale of the drug. If you have medical knowledge, you can really thrive here. If you don’t, you are likely to get screwed because you probably won’t understand the nuances in what drives physicians to prescribe drugs and avoid others.
Just because a drug works super well doesn’t mean it will ever be used. Examples of that are ACRX’s new sufentanil agents. Those will likely see poor sales data because from a clinical perspective, even though they are approved, and work, they will almost never be used. You would not know that without understanding the specifics of post-operative pain management.
And finally, a disclaimer. Anything I said here, I can be totally wrong. Sufentanil could become the most popular agent on the market for reasons I don’t understand or couldn’t fathom. Maybe ACRX will have an insanely good marketing team. I am simply talking about making the best decision based on the available knowledge. Stock prices are fickle beasts and they don’t always respond the way we expect.
A message to those who tend to hold on to their bags to gamble on FDA approval:

Yes, this really is gambling. Look at the statistics of how often drugs make it past each stage. You lost 40% on ATOS, you know what would be worse? Somehow their drug fails and now you have lost 80%. You see a drug running before FDA decision deadline, don’t buy it. No one knows how the FDA is going to respond and you are just as likely to lose your money than you are to make it.
Honestly, you are more likely to lose money because there are three outcomes, and two cause you to lose money, one of which will potentially bankrupt your position. The FDA could either approve the drug (yay!), outright reject the drug (oof), or ask for more information. That last one is kind of misleading because it may not mean the drug has failed, but it definitely will destroy the hype built up and tank the share price. The extra information requested could take forever to get and you would, once again, have to consider opportunity cost.

If there is anything else you think I should have discussed, just let me know and I will try to add it.

Greeting Theta Gang boys and girls,
I hope you're well and not bankrupt after last week. I'm just now recovering mentally myself. I saw a few WSB converts and some newbies asking for tips, so here you go. V2 of my Options guide. I hope it helps.

I spent a huge amount of time learning about options and tried to distill my knowledge down into a helpful guide. This should especially be useful for newbies and growing options traders.
While I feel I’m a successful trader, I'm not a guru and my advice is not meant to be gospel, but this will hopefully be a good starting point, teach you a lot, and make you a better trader. I plan to keep typing up more info from my notebook, expanding this guide, and posting it every couple months.
Any feedback or additions are appreciated
Per requests, I added details of good and bad trades I made. Some painful lessons learned are now included. I also tried to organize this better as it got longer.
Here's what I tell options beginners:
I would strongly recommend buying a beginner's options book and read it cover to cover. That helped me a lot.
I like this beginner book: https://www.amazon.com/dp/B00GWSXX8U/ref=cm_sw_r_cp_apa_OxNDFb2GK9YW7
Helpful websites:

Tasty Trade (TT) and Ally Invest have helpful articles and videos.
- https://www.tastytrade.com/tt
- https://www.youtube.com/c/tastytrade1/featured
Ally training:
- What is options trading? https://www.ally.com/do-it-right/investing/trading-options-for-beginners/?CP=EM2012111
- Top 10 options mistakes: https://www.ally.com/do-it-right/investing/top-10-option-trading-mistakes/?CP=EM2012111
3 common option mistakes: https://us.etrade.com/knowledge/library/options/common-mistakes-options-traders-make
Common options strategies: https://www.optionsbro.com/basic-options-strategies/
Investopedia has tons of great investing info for stocks and options: https://www.investopedia.com/
Kamikaze Cash Theta Gang Videos: https://youtube.com/playlist?list=PLOweupE79XXiBaeH_xBpkUcYUsrAaKQen
20 rules of professional traders: https://www.investopedia.com/articles/active-trading/022715/20-rules-followed-professional-traders.asp

Don't trade until you understand:

You can lose your entire contract value when buying.
You can lose a lot of money when selling "naked", theoretically unlimited.
How option expiration works.
Theta (decay) and how it works. This is imperative since it's attrition when buying and a payout when selling. https://www.optionseducation.org/advancedconcepts/theta
DTE: Days till expiration/expiry
Options positions with respect to price:
- ITM: In the money; strike is below stock value. Signif
- ATM: At the money; strike is just at or above the stock value, often very highly traded. Can be very effective with moderate - long term expiry.
- NTM: Near the money; strike is above the stock value, but fairly close. Slightly unofficial term.
- OTM: Out of the money; price is at least a few strikes from the current stock price. I would say 10-30% over stock price.
- Very OTM: Not a real definition, this is essentially a lottery ticket. Cheap, but almost certain to expire worthless unless there is explosive movement.
Understand delta in general and how delta changes with ITM and OTM options.
Understand all the greeks at a high level, as you get better understand them well. The greeks: https://www.optionsplaybook.com/options-introduction/option-greeks/
IV, IV crush, and how IV affects pricing. In general, you want to sell when IV is high and buy when the IV is low. Increasing IV is good for held calls/puts. IV drop or crush is generally good for sellers.
Selling options can be quite beneficial. Once you have a good general understanding, lookup thetagang . Kamikaze Cash has good youtube videos on most theta strategies (linked above). I personally believe selling options (especially cash secured) is much safer and can consistently make you profits. Θ Gang 4 life.
FOMO and how to avoid chasing a dangerous trend. DO NOT CHASE FROM FOMO!
What intrinsic and extrinsic value are. Know how they are affected by being exercised/assigned and how theta affects them.
Understand that some of WSB recommendations are straight up high-risk gambling and factor in the information accordingly. Be careful with Meme stocks and the survivorship bias on YOLO plays. However, I love the sub and think it’s hilarious. It has a lot of valuable information / DD if you are comfortable with the “colorful” language. It’s also great if you like rocket ship emojis.

Basics / Mechanics

Understand the 4 "main" option types. Buying or selling a call and buying or selling a put. Spreads and more complex multi-legged option strategies are based off these in some way (see below)
You can sell calls with 100 shares of stock or if you own an underlying longer term option; see LEAPS and PMCCs later. Selling calls naked is incredibly risky and often requires Level 4 (very advanced) permissions and usually a lot of capital. I will literally never sell calls naked since I don't want to ruin my life and end up living in a dumpster eating saltine crackers.
Puts can be sold/written cash covered (cash secured), which means you have the cash in your account to buy 100 shares. Your broker will put this money on hold until the trade is closed. Puts can be sold "naked" using Margin and Level 3 (with most brokers). Your broker will hold a percentage of cost of 100 shares (often 30-40%, 100% on meme stocks) allowing you to sell more puts. This increases your available capital/power as well as increasing risk.

General Tips and Ideas:

Don't EVER leave (short) spreads open on expiration day, close them. (more details below)
Start off trading very small. Slowly build up over weeks / months. You need to get accustomed to a fifty dollar swing a day, then a few hundred, then a few thousand. You need to ensure you don't get emotional (see below). I started trading options with 5k, then 25k, 50k, and later over 100k. I added my own funds over time and used my gains to build my account. Don’t go all in immediately, that’s dangerous and unwise.
Especially as you build up the amount of money you have invested, keep it diversified among several stocks.
- Don't go all in on one thing, ever. Be able to take a hit from one stock and not mortally wound your portfolio.
- A company may be doing great, then there's a major product issue out of nowhere. If you are overexposed in one stock this can really hurt you.
- I had to roll options I sold that were about to expire completely worthless because FDX's CEO changed and the stock took a hard dip.
Don't trade emotionally. If you realize you are emotionally trading for vengeance, you should probably exit the trade and cool off for several days with that stock. Same if you get caught up in a wave of hysteria.
Have a plan for every trade, ideally with entries / exits that are specific values, ranges, or a set condition. This helps remove emotions. This is super important for strong movements and high volatility (see later).
Use an options profit calculator from your broker or an online one before entering a "new" trade, especially a complex multi legged trade: https://www.optionsprofitcalculator.com/
“Rolling” an option: Closing your existing option and opening a similar one at different strike and/or expiration.
- Rolling a call “Up” would be selling a call you own and buying a cheaper call at a higher strike.
- Rolling a put “Down and out” closes your original one and buying or selling one at a lower strike at a longer expiry.
- Better broker interfaces have a literal “Roll” button. I know E-trade does. You can manually do it by selecting relevant contract legs.
If you have a losing trade, re-evaluate it. If your initial assumption is definitely incorrect, close it. Don't stay in losing trades forever and lose the entire value of the option over stubbornness. If you re-evaluate and you think your assumption was right, hold, potentially consider adding another cheaper option (or buy another call / put). Rolling out sold options can help here.
Don't try to day trade, especially with options. It's statistically unlikely to be profitable. Day-trading with options introduces extra liquidity risks and is dangerous, especially with spreads.
Try not to over-trade, you'll likely mis-time the market over time. When I get emotional I over trade, then lose additional money on wash sales. If you scale your entries into positions it should help alleviate your desire to exit positions when they turn badly against you. Whenever I buy calls I do it at larger increments after W almost made me loss my hair; luckily it eventually came back.
NEVER enter a position on a stock you have no idea about, especially when you read about it online or heard about it from some rando.
At market open options contracts are often volatile and inflated. Buying during this time can be more expensive. Options are usually cheaper mid-day, I read somewhere 2-3PM is cheapest. I’ve had success around 12-1PM EST after prices settle.
Try wheeling on cheaper stocks once you get all fundamentals down.
When selling puts if you are very bullish consider "doubling down"; note this is higher risk. Use the credit from your put sale to buy shares or a cheap call. This can be roughly inversed with puts, except I wouldn't ever recommend shorting shares.
Learn from your mistakes. You can’t go back in time and beating yourself up (to a point) is useless. Make a physical &/or mental note of it so you don’t do it again. If you don’t learn from it, then beat yourself up so you won’t do it again.
If you have friends that like to trade, I find it helpful to discuss strategies and planned plays. I talk openly with my close friends about my current holdings and planned trades, it helps keep me accountable. If I get a wide-eyed look, I might be doing something excessively risky or stupid. I’ve over-leveraged myself in calls twice and I knew I shouldn’t have done it both times. When I tell my friends what I did and I’m embarrassed, it exemplifies the face that I shouldn’t have done it in the first place. You will also get ideas for new strategies or plays from them. It’s good to stay versatile and use multiple strategies when appropriate. Beware of group think/echo chambers.
I recommend NEVER telling someone what to buy/sell and when. I’ll tell people MY plays or what I like and why, but I will not encourage them to emulate what I do. Depending on the audience, I’ll tell them my exact positions along with my exit and entrance strategy. With closer friends I’ll offer my thoughts on their trades (if asked). If my friend is doing something really risky (one of my friends does some scary stuff) I may ask them if they want my advice, and provide it, especially if they overlooked a risk/event. I will not encourage someone to execute/enter a trade since it has a high potential for hurt feelings or animosity all around.
Don’t fall in love with a stock. Just because something made you money before and you have high confidence in it doesn’t mean it will keep performing. I joke that FDX betrayed me when it started dipping and losing me money. I was over-confident of its bounce-back and sold too many puts too quickly. I’m in several losing trades because of it. However, I will keep good stocks in my rostetracking list or try different strategies or re-enter trades when they change their behavior.
As you start to both buy and sell options and get more experience in general, you'll start seeing the two sides to every trade. You will likely start adjusting your strategies or trying new trades out because of this. Things will likely click one day. Most/all the greeks and options concepts will become almost second nature. For me this was when I could build an Iron Condor from scratch, which was a watershed moment involving a good understanding of many strategies.
Understand Liquidity and volume.
- Trading in low volume, low open interest contracts results in wide bid/ask spreads and difficulty having your contracts filled. Look at all the data for a contract, not just the strike and price.
- Monthly Expiration dates typically have better liquidity.
- Multi-legged trades (Common examples are 2-legged vertical spreads or 4-legged iron condors) have more difficulty being filled, especially on bad brokers like Robin Hood. Having very liquid options for all legs is extremely helpful in obtaining timely and well-priced fills, which maximize your potential profits.
Time in market vs timing the market:
- It is extremely difficult to time the market perfectly. If you wait for the perfect opportunity forever, history has proven you will miss out on gains. Keeping all your money out of the market has proven to be ineffective. Now if there is something serious happening with a stock/the market (like say a new pandemic), don’t go all in. I recommend entering incrementally at dips. If the stock has huge upside potential it may never go down, so it might make sense to partially enter at the current price.
- IMIO selling puts is a great strategy to get into a stock you like, or at least make money off it. I think buying stock in lots of 100 is usually for suckers. Selling an ATM or ITM put (assuming the math works out) on a stock you were going to buy and hold is ALMOST free money.
- I recommend keeping some cash available regardless. If you have a very large account or expect a downturn, hedging with indexes like QQQ, SPY, or VIX or calls/puts may be wise.
Every trade can't be a winner. You will take some losses, you must get used to it. I don’t like having a realized loss of 1K or more on any trade. However, this will happen, especially with larger accounts.
- As long as you win more often and beat the S&P that year I consider it okay. I’m kind of aggressive, so I consider 20%+ annually good. 30%+ annually is great. 40%+ and I’m dancing. After trading options I am almost baffled by my old belief that 5% annual returns (mostly from dividend ETFs) was “good”. That’s nothing to me now since I’m willing to take risks. Note: While lots of people danced in 2020, realize that’s an insane Bull Run year and is atypical.
- Adhere to your own risk tolerance and never over-extend yourself, especially with margin use. Don’t make huge gambles leaving you uncomfortable. Only gamble with money you are willing to lose.
- My personal strategy is to make safer gains for the year and then enter slightly riskier strategies using those gains. I can be slightly-moderately more aggressive and compound my gains. For me I often sell puts to make money, then when I see a big opportunity I’ll sell a put and buy an OTM or moderately ITM call.
Understand it’s not safe to try and get rich overnight. However, once you hit big “steps” things may start to snowball. You can enter more positions and take more risks if you choose to.
- For me this when I hit 50k, then 100k. I was able to balance low and moderate risk positions to more significantly grow my account. I’ll even do a high risk thing now and again because my gains can absorb it (assuming I have them).
- I can’t wait to get to 250K, then 500K. I know it’ll take quite a long time, but I am confident I’ll eventually be able to have 500K and (hopefully) 1M in my non-401k trading account with gains and additions from my job. I can only imagine how “dangerous” I will be with that kind of capital.
If you missed "the next big thing" like AAPL, TSLA, or the time machine I’m building in my basement. Don't get upset, learn from it. Adapt and become a better trader for next time.
- Figure out why a company was so promising, before they mooned. Determine how you would have traded differently in hindsight. Apply those lessons to the next company you believe has long term growth prospects.
- For me that's putting in 1-2.5k towards shares and/or buying LEAPS on it. Depending on my bullishness I may buy “cheap”, fairly far OTM calls. The far OTM options are sort of lottery tickets. If I'm right the (relatively) low cost will have explosive profits; if I'm wrong, they didn't cost that much so it's a calculated loss I’m willing to accept. For more serious bets I’ll buy ITM LEAPS to run PMCCs on. I also like to buy 1-2K in my 401k for very long-term plays.
The stock market hates uncertainty, it seems to crave the status quo. A shakeup can potential tank a stock, even if it's nothing. With shares you can wait it out, but this can be problematic for options. If you see volatile/uncertain times ahead (politics, disease, manufacturing, earnings, etc.), you might want to reduce your overall portfolio risks or hedge.

Profit Retention / Loss Mitigation

If selling options, it is a viable strategy to close early after a large gain with many DTE left until expiry. See TT videos / strategies on this.
Don't hold options through earnings unless you literally want to gamble. I like playing on earnings run ups, but that can be risky.
If you hold options through earnings, IV crush will happen immediately afterwards, devaluing the option. However, if the option is profitable enough, IV crush won’t matter, which will still make money for a call buyer. A sold put sufficiently far OTM will benefit from IV crush, even if the stock dips after slightly bad or lukewarm earnings.
Don't throw good money after bad. Don't gamble on a recovery if your assumption appears to be wrong or the market is flat out tanking. If you are wrong and still believe in the company, wait twice as long as your original plan (wait for your 2nd entry point vs 1st) before adding to your position.
Consider using stop losses to lock-in profits on rides up or sometimes use them to prevent losses. Note, stops can be easily triggered in volatile options. Now when I'm up a lot on calls (especially around earnings or large momentum run-ups) I always set stop losses. I have been burned too many times. In December 2020 I didn't set a SL on several thousand dollars of FDX calls I was already up on and I "lost" ~$5K of unrealized gains. If you're up big, don't get too greedy.
A possible strategy if a stock is on a tear and you have multiple options open: Close some positions (I prefer to do this incrementally if the stock has momentum), but leave 1+ open in case the stock goes into outer space/the floor. Next, set a stop loss with a little buffer below its current movement / range so it doesn't get hit unless the stock falls hard. Finally, watch the stock closely and if it keeps rising, keep moving the stop loss up in little bits incrementally. This will let you keep more profits on a hot streak, but give some protection and secure more gains. It will also help eliminate FOMO if a stock exceeds your expectations.
Have rules when to roll out, down & out, or up & out. I like TT’s roll at break even or at 1x loss and to always roll for a credit (or for me a very minor cost). Obviously these rules need some monitoring. Know your stocks, the news, and technicals so you don’t jump the gun.
- If you roll early for a credit and you’re right, it’s not the end of the world. You’ll just need to hold longer, which will obviously tie up capital. Sometimes it’s better to tie up some money (especially if you aren’t paying interest) than eating a huge loss.
- Rolling too late can be worse though. I currently have a very underwater FDX put I sold that is over 2x loss, rolling it does almost nothing unless you want to pay a debit or extend it extremely far out.
On huge options gains, I strongly you recommend taking profits by rolling up/down or incrementally sell your contracts at several different prices (this is why having multiple contracts is nice).
- Rolling up involves selling your initial call, then using a fraction of your proceeds to buy a cheaper, further OTM call with the same expiry; puts are inverse this. When rolling up I like to ensure the new option’s cost is 15-40% of my realized gains. I’ll buy a more or less expensive new optoin based on my convication to the stock and predicted movements. You can also roll up and out to get a further expiry and strike.
- This is monumentally important if you are playing with incredibly high rising stocks or during a short squeeze.
- Sad story time: I completely screwed up when I forgot to roll up, twice, during the GME gamma/short squeeze. I didn’t take my own advice; I didn’t have a real exit or transition plan and I got emotional. It all happened so fast and I was at work; the insanity of the run up and subsequent gamma squeeze caught me off guard. I should’ve clocked out and thought through the situation for 15-30 minutes to form an impromptu plan, then executed trade(s). My moderate risk tolerance coupled with my desire to take profits took over. When the stock partially cratered after a run up, I sold to retain gains. In the heat of the moment I thought the squeeze was squoze and it was going to plummet into the ground and I wasn’t being rational.
  - On 1x 4K call I would’ve made an additional 15-25K if I rolled up to a cheaper contract with some of my profits.
  - I know I missed out on significantly more with a 2nd call I had. Depending when I rolled it, it would likely have been an additional 25-50k in profits.
- I talked about learning from your mistakes above. This mistake is branded into my brain due to the massive gains I missed out on by not rolling up. I’m furious with myself as I write this 1 week after the GME gamma squeeze, I’m a planner and I didn’t plan. If anything I own is significantly up ever again, I’m rolling up (or at least setting a stop loss). If necessary, I’ll roll up a trade multiple times to keep extracting profits.
- Learn from my mistake so you don’t miss out on gains too. I strongly recommend rolling up when you are up big on a call / roll down when you are up big on a put. This enables you to take profits, stay in the game, and keep extracting more gains.
If you trade a lot of options, talk to your broker about a discount. I was getting the standard $.50/contract with E-Trade, but I traded over 300 contracts a quarter and was able to get the fee reduced by over $.10 by just asking. I am now doing more spreads and condors, so once my volume gets very high, I’ll ask again.
If you have a broker that isn’t great and you want to switch, leverage your current trading fees to the new broker. Tell them you’ll move over $### thousand if they beat your current options trading fee per contract.

Trade Planning & Position Management Tips

As you gain experience, start monitoring what kind of Delta, OTM, DTE, etc. you are most profitable with. Use it in your future trades. You'll often see the tasty trade 30-45DTE .3 Delta strategy for selling.
Before entering a trade, look at rough technicals like resistances and supports to consider your relevant strikes as well as entry/exit points. Look at upcoming earnings & dividend dates as well as stock/market news.
Consider staggering strikes and expirations for safety and diversity; it’s nice to avoid assignment on 3 puts at once because you used the same strike for all 3.
Incrementally enter positions on large rises/falls. One of my favor strategies is to buy dips after over reactions. By doing this slowly in large price "steps" it helps combat FOMO and helps you avoid getting slaughtered.
- This will also help you avoid "chasing a falling knife". It also ties into having a plan.
- I set alerts at several predetermined prices and I REALLY try not to enter new trades unless I hit my preset points. It makes me less emotional and usually more effective.
Don't buy far expiration options with poor liquidity for shorter term plays. I bought 1x GME 1-year+ LEAPS call before the 2021 short squeeze. That was stupid, I should've bought 2-3x 60-120 day calls to have better liquidity. I also paper-handed it and missed out on my lambo.
If selling options, consider rolling (for a credit) to avoid assignment when it makes sense / meets your plan. Rolling closer to expiration can be a valid strategy to get theta on your side. On the flip side, if the stock moons or plummets it could've been better to roll before it got crazy deep ITM. See rolling “rules” above.
Covered Calls:
- If a stock has a large movement range, I think it can be worthwhile to wait to open a CC after the last one is closed/expires. I have been more successful waiting for another opportunity vs. opening one immediately on the Monday after the second the last one expires.
- Consider selling covered calls at all time highs/peaks. If you sell a CC and the stock dips significantly, and you think it’s temporary, you can buy to close your CC for a quick profit, then reopen it later.
- If you own Meme stocks, selling covered calls runs the risk of missing out on large gains. On these stocks I typically only sell them further OTM than I normally would or not at all. If I do sell CC on a Meme stock I try to ensure I have 25-100 other shares that won’t be called away.

-Advanced Beginner-
Spreads

Spreads (with 2 legs) are neat because they manipulate how delta and theta act. It caps your gains and losses, but you can profit with less stock movement. Try several spreads on a P/L calculator to see for yourself.
Spreads usually require margin trading.
Spreads allow you to define max losses (assuming you close before expiration day) and use less capital.
- Experienced traders will open many spreads at identical/similar strikes to heavily profit off movement. Spreads can make you/lose you a lot of money if you are right.
- For example. I could make a $200 premium off a $500 risk trade, max loss would be $300. This is much more effective capital utilization than a naked or cash secured put, however it does not have the same downside protection or “wheel” potential as a sold put. Higher risk, higher reward.
Vertical Debit spreads: I think of these like mini calls/puts. I personally don’t use them unless calls are outrageously expensive or the break even is absurdly high, but there’s nothing wrong with them. A call debit spread will lower your breakeven and overall cost vs just a call. You can do clever things like making a positive theta call spread if you’re creative. I like doing this since I hate losing money to theta.
Vertical Credit spreads:
- Very good theta strategy to define downside/upside risks.
- A put credit spread is bullish and allows you to bet on upward movement with less capital and defined losses.
- A call credit spread is a bearish strategy that allows you to bet on downward movement. These are very cool since they allow you to sell calls without selling naked calls, which can ruin you financially. I see selling these as better than buying puts since it’s so much easier to be profitable; to be redundant, Θ rocks.
- https://www.schwab.com/resource-centeinsights/content/reducing-risk-with-credit-spread-options-strategy-0
I repeat this on purpose: Don't EVER leave short spreads open on expiration day, close them. If you don't close, they better be VERY far from the strike on a non-volatile stock. In after hours a stock can jump/dip below your strike and be exercised without the other leg to protect you. This can lead to massive, life ruining losses. This is not an exaggeration, google this and be scared. It happened to a fair number of people with TSLA. Video explanation: https://www.youtube.com/watch?v=rtVFj9nRRDo&t=315s
Short Straddle:

Trading Mechanics, Taxes, Market Manipulation

Learn about wash sale rules. They suck and are very easy to activate with options. This will eliminate your ability to write off losses. Over trading can easily cause wash sales. https://www.investopedia.com/terms/w/washsalerule.asp
Short attacks:
- Learn to recognize these sketchy attacks by hedges/firms. They manipulate the market, it’s been documented countless times. A common one is rapid short selling, which pushes the price down.
- Short Ladder attacks:
  - https://www.google.com/amp/s/seekingalpha.com/amp/instablog/11442671-gerald-klein/3096735-anatomy-of-a-short-attack
  - Some people say short ladder attacks don't exist. I've seen some very strange stock nosedives off low volume, so I tend to think they do.
- If you plan well enough and the market doesn’t give up on the stock you may be able to use it as a great opportunity to buy the dip.
Cramer explains how he intentionally manipulated the market when he ran a hedge fund years ago. Multiple links to the video are below since this video gets pulled often, Cramer / The street never wanted this to go public.
- Reuters article: https://www.reuters.com/article/cramer-interview-idUKN2036292620070320
- httpss://youtu.be/r07Gg92YjOI
- https://youtu.be/VMuEis3byY4
- https://youtu.be/JEzsfPmh894
- https://youtu.be/QFfjX8dW-QQ
- Due to this video I don’t fully trust Cramer. His show can give you stock ideas to buy (or inverse), but you never know where his true loyalties lie.
Plan for taxes if you are up big. You may need to over withhold or contribute to taxes quarterly depending on your situation. https://www.irs.gov/taxtopics/tc306

-Intermediate / Advanced Strategies (work in progress)-
You’ll notice many of these strategies inverse one another.
Options Strategy Finder
This website is great for learning about new strategies, you’ll see many links to it below.
https://www.theoptionsguide.com/option-trading-strategies.aspx
Short Strangle / Straddle

Both of these strategies profit from little price movement. I recommend using a P/L calculator to determine BE, profit, etc.
A straddle sells (or buys) two options at the same expiry and strike.
A strangle sells (or buys) two options at same expiry with different strikes.
Both these strategies involved selling a Call and a Put for a credit. Straddle uses ATM legs, strangle uses OTM legs.
Limited max profits and unlimited risk. Due to the unlimited risk, I am not a fan. However, many people like these a lot.
https://www.theoptionsguide.com/short-strangle.aspx
https://www.theoptionsguide.com/short-straddle.aspx

Iron Condor and Iron Butterflies

These strategies profit from neutral or mostly neutral stock movement. They receive a credit to open and benefit from theta decay. If your stock is range bound, these may be a good choice.
These are both 4 "legged" trades, so you will have 4 trading fees to enter or exit the trade. A lower cost or zero cost broker shines here. However, “bad” free brokers will give you poor fills, which may not be worth the discount.
Condors and butterflies have "wings" which are your purchased puts and calls. The wider the wing the higher the max profit/risk. The condor body can be riskier and skinny with a narrow high profit range or wider for a much greater chance of success with lower payout.
An iron condor is built by combining a put credit spread and a call credit spread with the same expiry.
An iron condor can be thought of as a modified short strangle with limited risk, and therefore a bit less profit. I prefer defined limited risk.
The butterfly is similar except instead of a plateau it has a sharp peak. My personal mental note is that a condor looks more like a strangle with wings, while a butterfly looks like a straddle with wings.
Pay attention to earnings dates when you open these, I have forgotten to check before and it led to bad trades.
https://www.theoptionsguide.com/iron-condor.aspx
https://www.theoptionsguide.com/iron-butterfly.aspx

Long Condor (Debit Call Condor)

The debit version of an Iron Condor. You expect the price to stay inside your defined range. This strategy profits from neutral or mostly neutral stock movement. I’ve never tried this, Iron Condors make more sense to me.
Limited risk / limited reward.
https://www.theoptionsguide.com/condor.aspx

Short Condor (Credit Call Condor)

Inverse of an Iron Condor. You expect the price to go OUTSIDE your defined range. These are useful when you expect significant price movement. Credit to open.
Limited risk / limited reward.
Can be harder to set up. I want to try these, haven’t yet.
https://www.theoptionsguide.com/short-condor.aspx

Reverse Iron Condor

Inverse of an Iron Condor. You expect the price to go OUTSIDE your defined range. These are useful when you expect significant price movement. Debit to open.
Limited risk / limited reward.
https://www.theoptionsguide.com/reverse-iron-condor.aspx

LEAPs

LEAP Options are options that are long term with many DTE, often over a year until expiration. LEAP calls are great for long term growth plays (downtrends with LEAP puts) or simply when you really like a company and can't afford 100 shares. LEAPs (or any "longer term" option) enables you to sell a PMCC or PMCP (below)

PMCC / PMCP

PMCC or PMCP are poor man's covered call (or poor man's covered puts). They are diagonal options often used with purchased LEAPs. You sell a shorter DTE call/put with a further OTM strike than your purchased call/put. For PMCC/PMCPs it is often recommended to recoup your extrinsic value as soon as possible, some recommend with your first call CC or put sale, to ensure you are positive if the option is assigned early. These have a lot of moving parts and strategies. If you buy a barely ITM call/put and sell a nearby strike call/put you run the risk of the purchased option getting "blown by" on large stock movement and ending up with a very negative losing trade. Keeping your purchased LEAP deeper ITM should protect you. Check your initial PMCC using an options calculation to make sure you don't screw up.
I'm currently tinkering with these myself. So far I like .7-.9 delta call LEAPS with 30-45 DTE calls on my CC. The goal is to hold the LEAP long term, potentially until expiration, and constantly sell calls/puts on it that expire worthless. Typically the call/put is rolled up and out or down and out if it's going to be assigned, unless you don't want your LEAP anymore.
Some people look at these many sold CC or puts as profits, I look at them as lowering my cost basis until it's zero (or even negative). I have a page in my notebook I write each CC on my NIO LEAP (I Meme stock sometimes). I find it satisfying to slowly see the cost of the original option disappear. When I originally wrote this I had ~2 years left on it and it's 9-10% paid for; that doesn't even count the actual gains the LEAP has.
TT states this is considered an IV play, which I partially agree with. You want to buy these during low IV times since an IV drop will hurt your LEAP value. I look at them more as a way to sell calls/puts on a high IV company with a lot of price movement and potential upside/downside.

Advanced Orders

Guide to several order types: https://us.etrade.com/knowledge/events/webinars/order-types-from-basic-to-advanced-07162019
One Triggers Other (OTO):
- Good brokers will allow you to set these up, some will require a desktop to do it. This lets you link one action to another. In programming think of it like an if-then. You’ll tie a buy/sell to another buy/sell
- Setting trailing stops on options is very chaotic since their price movement can be drastic due to volatility. I prefer to set my trailing stop to a stock.
- What I like to do is set a trailing stop on a stock (or just link it to a stock price drop) and have it sell 1 share I own. Then it immediately executes a market order to sell my call. I’ve had good luck doing this with incredibly volatile plays were stop losses aren’t effective. I’ll often have an order saved and ready saved for when a strong run up starts. When my price alerts start blowing up my phone, I’ll immediately hit execute to turn it on.

Disclaimer:
I’m not a financial adviser, I'm actually an engineer. I’m not telling you to invest in a specific stock/option or even use a specific strategy. I’ve outlined and more extensively elaborated on what I personally like. You should test several strategies and find what works best for you.
I'm just a guy who trades (mainly options) part-time for financial gain and fun. I don't claim to be some investing savant.

I am not new to the risk of penny stocks, been playing with pennies for about 8 years now. Luckily, I have had a lot more success than fails but do not take this as "financial advice" and more something to think about.
Lets talk $HCMC.. the most hyped stock in my opinion over this past weekend and is being pushed for it to still have momentum. If you truly believe this stock will hit a $1 you need to take a step back and learn how much is needed to move a stock with 105.1B Outstanding shares... to put it in perspective, Apple for example has 16.8B.. Apple the Trillion dollar company. I am not saying you can't take a quick gain but read on what share dilution is and how it effects the stock price. When the court decision does occur with HCMC, expect some movement but to move toward $1 the company needs to do a reverse split. I am sure there is a lot more into how a company can reduce its outstanding shares but that is a common one I have seen in pennies. I won't go in-depth in what a reverse split is but look up on that. This stock will move if truly everyone actually throws some cash in it but don't expect a full dollar with 105 B Outstanding shares.
I understand it can be challenging to filter on what will be the next 30% plus gain in one day. Maybe you have seen 100% - 1000% gains on stock websites. Some of you I see asking for recommendations on a $100 to play with on your first investment. You got to know what would be considered a "pump and dump" and a legitimate company. Let's take $INKW for example, this stock had increased close to 80% today. A good amount of people have posted about this stock the past few weeks, and today it moved roughly 80%,. Deals with Walmart, selling out on Amazon, and moving toward Hemp water. There is actual PR (Press Release) with recent information on the stock. It takes 10 mins to learn all this about the company, or what you will see people call DD (Due Diligence). 10 mins of my day before thinking hmm should I jump in? Am I missing the ride? or is this a long term play for me?
The market for me is just a bunch of hype and speculation. ESPECIALLY PENNIES. I personally don't see pennies as long-term investments. I get in and get out like my wife's boyfriend when I go to work. but you got to know what works best for you and if you truly believe in the company. Lets take some other popular stocks I have seen posted here: $OZSC, $ILUS, $HITIF (admitting I own this one for my weed play), $TSNP. I have seen these stocks have solid PR but would not jump in unless DD was made.
As you grow to be an experience trader, learn how to read candlestick graphs. It can be a snoozer learning but if you understand it, it will help a good amount if you want to buy in dips or see when you want to sell. ITS OKAY IF YOUR STOCK GOES RED. Yes, pennies are more risk. I had days losing everything when I first was trying to invest in them but I also had days with huge gains. Its okay to hold but hold knowing your risk tolerance. Remember, you thought long-term because you believed in this company and it has solid potential. Long-term is long-term so don't let a bad week make you take a big lost only to see it rise again the following.
I am in no way an expert in investing nor trying to give you investing advice. This is more for people who really want to understand how to invest, but the high from one of your stocks performing at a 100% and letting your emotions get to you can be a rough lesson to learn when you expect it every time. I didn't understand how to play pennies at all firs starting and for me losing even $100 was a big deal at the time.
There is a lot of pump/dump post on here I been seeing from day old accounts. I even look at the companies they are trying to pump. If there is no website, social media is terrible, or real product ... it is a P/D.
I ask all experience traders to share their advice on this post so we can combat the bots we have been seeing for the crowd.
Good Luck to all the new investors. I consider pennies as a daily gamble more than a long-term. I am sure others view it different.
EDIT:
Just scrolling through frequent questions -
I use TD Ameritrade as my broker. Look into how to use their thinkorswim platform.
I recently opened a Fidelity account to avoid OTC Market trading fee’s though.
Found an article that gives a good summary of some major brokers for pennies:
https://www.google.com/amp/s/www.timothysykes.com/blog/best-broker-for-penny-stocks/amp/
I never been a fan of Robinhood. I opened an account when it was up and coming but didn’t like the layout and lack of stocks that were available to invest in. So not sure how it is today but I do know you can’t invest in the OTC Market through this broker.
Asking for my thoughts on a specific stock -
I really don’t know about some of the stocks that were posted on the comments so I have no thoughts. I see some popular come up, like $OGCN. But I don’t know anything about that company besides it being popular on this subreddit.
Messaging me to ask on what company you should Invest in -
Sorry, I don’t want to answer that. Awesome how you took this post but again I am not an expert. Just sharing my years of experience. I invest with confidence but the risk will always be there. I don’t want you to jump in a boat I wasn’t aware had a hole in it.
What I do when I find interest in a stock but unsure on it is put it on my watchlist. With Ameritrade I am able to keep tabs on its performance, press release, and most of all the dip! But my watchlist consistently change.
Advice on learning to read candle sticks -
Man, this for sure was challenging for me. Probably because it is boring to learn lol. YouTube taught me. I don’t have any sound advice besides looking there. I can’t find the video that I saw repetitively anymore but just searching for it, I see a good amount of people teaching.
When I got comfortable, I experimented with $20 often to see if I had it down. I am sure some people just catch on to it, I wasn’t one of them. But now it is crazy easy to read.

I'm sure some of you, like me, follow WSB and other places, if for nothing more than entertainment. It got me thinking about Gamestop today. I'm mildly annoyed with myself that I didn't do the legwork to understand it when I looked at it in 2019. Being the lazy person I am I saw eh, weak/negative earnings history, outdated business model, and didn't put any more effort into it. I typically don't pay any attention to short percentages. The concepts in play aren't especially hard to understand, and when at that time it was in the $2-5 range it was not unreasonable to think it had a lot more upside than downside, especially with the console cycle coming, even without the benefit of the short pressure.
I'm not much into these kinda of asymmetric longshots with potentially huge upsides, because they tend to get into distributions, probabilities, long-tails, the weakness in black-scholes, all that jazz. I get it on a macro concept level but my math skills revolt and my brain ends up saying too hard, too easy for you to be wrong, leave it alone. Looking back when Gamestop was at $2 with the balance sheet strength it had left and the amount it was shorted at the time, this was a real wide-margin intelligent speculation. A speculation, but one with heaps of implied upside. Whether I could have held on throughout the unknowns of the pandemic, I don't know. And if congress hadn't acted or the fed acted differently, who knows. The outcome could have been very different.
But now is a very different story. The stock isn't $2 anymore, it's $100 or $200, depending which minute of the day your ticker updates. The proposition has changed, not just for the next speculator looking to buy in, but every earlier speculator who already took a position.
So what's a person to do who did take a flyer and gamble on it, or recognized the opportunity early and levied an intelligent speculation? How do you decide when it's time to cash your golden ticket and call your accountant. This is a classic prisoner's dilemma. Assuming the float reported is still accurate, and there is more than 100% of the outstanding shares sold short, then naked short selling has occurred and the short positions are really in the ditch. Last report I read, shorts borrowed several billion dollars to meet margin requirements and pray the GME holders flinch soon.
Logically there has to be a ceiling, some price at which the last dollar is be extracted from the richest short seller, after which their lender of last resort has refused, and the bankruptcy's begin. Price appreciation beyond this is simply the greater fool chasing a story. I don't think there's a way to determine this empirically, since even if you could get all the necessary numbers and guarantee they were accurate, and you could nail down appropriate probabilities and the accompanying profit margins from each scenario, this involves not only a lot of human psychology but a good deal of politics, propaganda, lawyerly wrangling and the potential for backroom dealings. Not exactly the stuff of certainty or traditional value investing, but fascinating (to me, at least) as a spectator. This is a prisoner's dilemma.
Every person who now owns GME long is a prisoner, and every short seller is a prison guard. As long as the prisoners stick together, up to the limit of bankrupting the collective short sellers the squeeze should continue and increase the collective payout. But as soon as the guards are able to flip a big enough holder or enough small holders to knock over that first domino, the formula tips and the second domino caves in, and so on down the line. This is the basis of the theory Malcolm Gladwell outlined in The Tipping Point. So each holder has to consider his or her own selfish interest of cashing out now before that occurs, versus the risk/reward of betting that the group isn't going to tip yet and staying in for a greater amount of price pressure upward, hoping they aren't left to catch a falling knife later.
When is it going to tip, at what price, and how much yoyo action might occur in the meantime, before the final short is settled. I wouldn't even pretend to try and model this. That's Nassim Taleb territory, higher probability mathematics. I'd be fascinated to read about it, but not my bag.
It did get me thinking about options. Is there an opportunity to buy a put option cheaply right now, which might possibly be priced very improperly at this moment. I don't know if one month is far enough out, but things seem to be moving reasonably fast now, so perhaps the dust is settled by then. If you could spend cheaply enough to buy a put option to sell at say $50 a month from now would that constitute a intelligent asymmetrical bet? At some point the shorts will either be liquidated or cover, the "ryan cohen" die-hard believers may stay for the turn around story, but the price pressure is off and all the gamblers start heading for the exits so they can participate in the next gamble. The prisoner's dilemma domino's will start falling. Even if the price eventually settled higher, the downward swing might very well spike down well below $50, or less, during this time.
Looking at cnbc's put options for Feb and March the answer for me was no. Prices look too high for comfort, a lot of people smarter than me have probably already considered this and driven the price up, perhaps as hedges or speculations in the same vein as outlined above. I don't have the skill to figure out at $7 if a $40 PUT option one month out is an intelligent speculation to pick up, so for me it would still just be gambling. If that same put was 75 cents, I could accept it's likely at least a smart speculation, and if not it's cheap enough to take a flyer on. At $6 to $7 I can't. Long tails and options are a fascinating world. Shame I didn't pay more attention in math class.
Curious who else has been ruminating on this, if you have any other perspectives.

GME Short Squeeze What Comes Next Part 3
Hello all,
Before I begin I would like to address something I have been encountering on my posts in the comments section. I keep receiving some hate concerning my opinions and I want to be crystal clear that they are just that; opinions. I also want everyone to know that is is meant to be a dialog. I am not trying to pump this stock because truthfully, this goes far beyond us retail investors at this point. What I want is a dialog between all sides to examine this truly fascinating phenomenon that is occurring.
I would also like to clarify something, I am not a bagholder. I do currently hold bags because I own 336 shares at a $194.34 cost basis, however, that total amount is house money that was used from my profits on the first go around.
I also understand some people are tired of hearing about this because it's the same regurgitated form of someone else's post as it keeps circulating in an attempt to retain hype and drive future buying; this is not what this post is about. As investors and individuals involved in the world of finance, this situation should absolutely intrigue us whether or not we are involved. I am here to present my logic on the situation but encourage healthy discussion and debate.
This brings me to my first claim. This is not over. Now, I am not claiming that a squeeze will still occur, I am simply claiming it is not over, for better or for worse. Several things need to take place for this to be completely over, at which point I will either post my gains or my losses from the adventure.
When I say "it" I am referring to this entire phenomenon, not one short squeeze. I do not think these events, "it", is over. This is largely due to retail and institutional purchasing not really changing all that much since we found the bottom and established support at a staggering $60. This support was lost today and found new support at $50. There was very interesting ATH action and I'm not sure what to make of it.
Millions of bag holders (not just WSB) are still holding and in fact, averaging down, thereby purchasing more. These same bag holders are absolutely refusing to sell for such massive losses and in turn are becoming long term investors on the stock if another squeeze isn't to occur. People are picking up speculative positions in the off-chance of another squeeze. Others are determining this as a fair value for the company, not fundamentally, but based on the future prospects of Ryan Cohen and team. Finally, it is nowhere near leaving the global stage with important upcoming dates that we will discuss later.
To examine why it isn't over let's look at both sides of the argument:

Bulls claim it's not over for many reasons that you can find in the hundreds of other bullish posts, so I won't bore you with those details. My argument on the bull side is more along the lines of what I listed above.
Bears claim it is over because there was a 2250% price increase over the course of two weeks, therefore this must be a short squeeze.

I think we can all agree, bear or bull, that something happened. A 2250% increase certainly isn't nothing. The question is...what? I see several possibilities and would like to discuss them in the comments.

The shorts in fact covered and this was a short squeeze.
The shorts partially covered and this was a partial short squeeze, but the price increase was mainly hype and gamma squeezes.
The shorts didn't cover anything and this was a globally hyped price increase in conjunction with several gamma squeezes.
Some combination of the above 3.

First, the data:
Based on morningstar the short interest is showing 78.46%. Now, I think the website is having some issues storing cookies because it will show the outdated 226% unless you open it up in incognito.
Market watch is showing 41.95%
This spread is interesting for sure, my thoughts are some of these calculations are including "synthetic longs" introduced by S3.
It is extremely possible to manipulate these numbers via illegal methods and even legal methods using options. Please see this SEC document to explain how this would work. I am not trying to convince anyone to fit my narrative, but these things occur far more commonly than one would expect. The reasoning is because the fines for committing the crime are far less costly than letting the event take place. Please see FINRA's website for the long, and frequent list of fines being dealt out due to manipulation. A common culprit? Lying about short volume.
Let's use the absolute worst case scenario being reported of 41.95%, which mind you is still extremely high for one stock:
The shorts in fact covered and this was a short squeeze
What's interesting here is even if the shorts 100% covered all of their positions, they very well could have shorted on the way back down. Why wouldn't you? It would be insane to not open a short position when this hit nearly $500 especially if you lost half of your companies money; what better way to get it back? For the remainder of this thesis, I will be assuming that some of the short positions that exist are newly opened positions at a higher price unless someone has a counter-claim as to why that wouldn't be possible/probable.
That would mean 226% was covered on the way up and another 41.95% was reopened on the way back down. Based on the volume and price changes throughout the past two weeks this simply doesn't pass the math check.
The shorts partially covered and this was a partial short squeeze.
Again, using 41.95% this is highly likely and the most reasonable case. Some, probably the worst positions, were covered on the way up.
I think this is precisely what happened, we had some partial shorts covering but for the most part it was gamma squeezes, hype, and FOMO whereby the price started climbing so rapidly it became smarter for the shorts to just wait out the bubble than to actually cover all of their positions.
Again, we fall into a "what-if" scenario regarding shorting on the way back down.
The shorts didn't cover anything and this was a globally hyped price increase in conjunction with several gamma squeezes.
This scenario does not pass the math check using the 41.95% figure.
If the data is being manipulated then this becomes very interesting because if some of the worst positions are still open then that means all of these HF's losses that were reported were strictly interest and they are simply waiting this out for as long as it takes making back their losses on their newly opened short positions in t $300-$400 range.
Sadly, this puts us in the guessing range yet again. We can do the math and see it's possible this scenario exists, however, we would be comparing it against losses reported by the entities that were being squeezed.
There are way to many what-if's for me to me consider this a possibility, but I can't write it off completely.
Some combination of the above 3.
Truthfully, this isn't worth examining just yet. There would be far to many "what-if's" to address, this is something that could be address at the later dates that we will get to shortly.
Now, I've heard it a lot regarding the 02/09 data. "It's two weeks old". Well, that is always the case. The FINRA short data is always two weeks old and suggesting that we can't pull any information from it at all is asinine. Where it gets quite murky, is the data includes 01/27 information. This was a day unlike any other in this saga.
I will take this moment to address the following upcoming catalysts and when I truly think this will be done; one way or the other.
Today's data 02/09, was very important because if it showed an extremely low percentage then we know shorts have exited and did not re-enter and this is completely done. Given the data does not reflect that, we now must turn to several events that could act as catalysts for either a further squeeze or a complete shutdown.
02/19 - In my last post, I discussed the Failure To Deliver (FTD) conundrum. I do need some help figuring out the exact expiration date. From here "The close-out requirement states that a participant of a clearing agency needs to take immediate action to close 4 out a fail to deliver position in a threshold security that has persisted for 13 consecutive settlement days by purchasing securities of like kind and quantity."
The exact date is slightly irrelevant because I highly doubt all of these FTD's are going to deliver on the same exact day. This site, while it isn't an official channel seems to be doing a good job of tracking data. If you want to learn more about FTD's and the implications there please visit that site or review my last post which has links to follow for further reading.
02/18 - Keith Gill aka u/DeepFuckingValue will testify before congress and RH CEO Vladimir will be attending. This can go several ways which can lead to an SEC trading halt on GameStop or with evidence that proves foul play occurred. Who knows? It will certainly be interesting and I don't even to speculate on the market reaction to this even because it could go a ton of different ways; it will be an important date nonetheless
02/24 - The next FINRA short interest information will be made readily available to the public. This will be far more interesting and helpful information because it won't include the insane volatility of January, but it will also highlight the newest short positions. This data will help further drive where I think this is all going to end. It's possible that shorts opened new positions at $50 thinking it was going back to $12. Let's not speculate too much here either, it's just another dataset that will bring light to the direction this is headed.
03/25 - GameStop ER. This is big too for several reasons. First, this will include the console sales cycle which historically has done well for GameStop. A typical buy the hype, sell the news event. It will be interesting to see how the market reacts leading up to this ER, maybe people won't even touch GME leading up to then due to the recent volatility, but if they do, and if there is still a lot of short interest, this too could force shorts to begin covering. Another critical part of this ER is Ryan Cohen. This will be the first time this new board addresses the public with their plans for the future and for the first time since this entire adventure began, the "dying brick and mortar" narrative will finally begin to change in the public eye. That is still the common misconception regarding GameStop, that it is a dying brick and mortar retailer where nothing has changed. This hasn't been the case for around 6 months now, but this will be the first time it is publicly address. The headlines surrounding GameStop's future plans will be very interesting to read and the markets reaction will be far more interesting.
I have been asked a lot what my PT is and when I expect the squeeze to happen, but let me be clear. Very seldom do squeezes "just happen". In fact, short squeezes are far more common than one would think, they just typically happen over months, if not years and the shorts cover on dips so you don't even notice it's happening. In order to force a squeeze, you need to hold a decent amount of shorts underwater. Soon one will crack and start closing their position, this leads to a series of shorts closing their positions skyrocketing the price until more and more shorts need to cover. This is rare.
I hope this narrative of purchasing heavily shorted companies comes to a close soon because a lot of people are going to lose a lot of money simply buying up companies because they are heavily bet against. Catalysts and massive changes need to occur like overhauling your entire business as is the case with GameStop.
Normally, shorts will close their positions one at a time, covering on dips and you don't even notice it's happening. In times where you see a price rise of seemingly no news could very well be shorts closing their positions because their research led them to realize this company is on the road to recovery.
I digress. Given the most recent data and the multiple upcoming catalysts I am still very bullish on a GME short squeeze. My post from quite some time ago illustrated the importance of catalysts regarding a short squeeze, this is still very much the case. The first run was interrupted and the second run won't happen with magic, it requires a catalyst. Another post was titled For those who do not understand the inevitable GME short squeeze, was at the time "inevitable" because math. That is no longer the case. It is no longer inevitable but it is still possible.
I want to be clear: This is not nearly as close to a sure thing as it once was and it depends on a lot of different factors. One of the largest is the people. Granted, a lot of what's happening now is in the hands of institutions but millions of retailers holding their positions to the grave certainly helps the institutional buyers have more faith in their play to continue a squeeze.
SO WHAT DO I THINK
I think shorts certainly covered some of their positions, but not all. I also firmly believe a significant amount of short positions were opened on the way back down by both HF's and individuals. Some certainly positioned high, but based on sentiment, it appears a lot of people think GME is fairly valued around $20 (which I disagree with but let's use that for the time being). That would mean shorts would have no problem opening positions at 100,70,60, even $50.
42% is still very high which means a squeeze is inevitable so long as the company continues in a positive path. However, squeezes typically aren't as abrupt as people think. They are actually quite common, in fact another position I'm heavily invested in is SPCE and they have been going through a squeeze for several weeks and will continue to squeeze so long as news continues to be positive.
How would we get an abrupt short squeeze? A massive bull run. The new shorts that entered at lower levels wouldn't be too hard to catch, however, they are probably low volume, so when they buy to close, it won't be large enough volumes for massive peaks, but a bull run very well could lead to these lower tiered shorts closing, triggering a gamma squeeze. If gamma squeezes are made week over week then shorts at the higher end would have two options:

Close early and take profits
Wait it out because they are positioned so well that interest means nothing and they don't think there is any hope of us rising to those levels.

In the first case, them closing early would be a nice short squeeze to probably several hundred dollars, but it wouldn't break $1000.
To break $1000 we would need a big bull run to catch the shorts, trigger gamma squeezes, and keep momentum until they are caught and underwater. This is highly unlikely unless there is another global sentiment.
NOTE: ALL OF THESE ASSUMPTIONS I AM MAKING ARE BASED ON THE 42% REPORTING. IF IT IS IN FACT 78% THEN THE POSSIBILITY IS TREMENDOUSLY INCREASED FOR THESE THINGS TO HAPPEN.
SO WHEN DOES IT ALL END
My though is if by the end of March these catalysts were not enough to reignite the hype and squeeze, then it will essentially be over except in the case of a few circumstances:

A VW/Porche moment occurs where a large buyer picks up a large portion of the company.
Some other currently unknown catalyst appears seemingly out of thin air
The data was in fact manipulated. Regardless of what the data says, if the shorts did in fact lie about their short int to take the fine over being squeezed, then they will be squeezed regardless.

It is quite possible, that these catalysts and moments aren't enough to force a squeeze anymore especially if the shorts have repositioned really well. I will retain the mindset that this fateful January 2021 was not a short squeeze. However, that does not mean it will ever actually happen.
SO WHAT IS YOUR PLAY HOOMAN?
Well, I am long on GME which is why I didn't mind hopping back in even at outrageous prices. I will continue averaging down and don't plan on selling for quite some time, probably several years. The reason for this is I believe in Cohen and his team to turn this into something unexpected and I imagine an eventual ROI. Once this is all said and done and I think either the shorts truly have covered or they simply got away with it (Beginning of April), I will be posting my DD for GME as a long play regardless of the squeeze mechanics.
Thank you all for joining me on this wild journey. I hope we can discuss some of these points in the comments like adults and truly try to grasp this wild situation we are all in. There are extremes on both sides from "get over it, the squeeze happened" to a cult like mentality on the other extreme. I hope through discussion we can find the moderate approach and further understand the market mechanics at play.
Thanks for your time
WARNING: Until the squeeze business is over for good, this is a very volatile and risky play. Joining now for the hope of a potential round 2 squeeze should only be done in a speculative manner with money you are willing to lose. This is more akin to a gamble than it is investing. I think the current market price is fair given the future prospects of the company but do your own DD, I will not be releasing any until this squeeze is put to rest.
TL;DR: I am still bullish on this scenario even at 42%, if it really is 78% then I am extremely bullish. There are a plethora of upcoming catalysts that could reignite the squeeze but even if none are powerful enough, with Cohen's new direction we could expect good news for quite some time forcing shorts to exit on a more spread out timeline.
Disclaimer: I am not a financial advisor. I do not wish to sway your opinion in either direction. I simply seek to examine this interesting and volatile situation via crowd sourcing. What you do with your money is entirely up to you.

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