Peak GameStop?
GameStop volume and volatility were much lower this week than in the previous six days. This is true for other very short-circuited names, such as Bed Bath and Beyond, Express and AMC.
What happens?
Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group, ticked off signs that the final game might not be far from GameStop: “More calls than calls have been traded recently. The open interest in calling options is much lower. There is a decrease in volatility. There are signs that Reddit streams are moving elsewhere, such as silver. These are definitely signs of the peak GameStop. “
GameStop shares fell another 30% in premarket trading on Tuesday, after losing 30% on Monday. The stock traded 37 million shares on Monday, down from a high of nearly 200 million on January 22 and the lightest volume in seven days.
Like the GameStop shorts they claim to have kicked out, many in the Reddit community have already made money and gone out. Some are ideologically engaged, but remain for a long time. Others are looking for new opportunities, but Dan Egan, general manager of behavioral finance and investment at Betterment, says it is becoming increasingly difficult to gather troops.
“The human brain longs for the stimulus of change,” he said on CNBC’s “ETF Edge” podcast. “One of the real challenges for this kind of thing is that you have to keep your attention on them, making things bigger and more unusual. And that’s very hard. … This kind of attention is fractured to other things that he might have that chance to climb. So you look at silver, other goods, etc. “
Of course, the problem is that there is no investment committee – even the silver debate has split into pro-opposition groups.
And from here the attention begins to focus, Egan said: “A lot of people think that this was a big change in the way the market works, that as long as a forum or a community of people can focus on a certain stock, I can really move it, it will happen again. But it will be harder, because people will understand that it is a mania, a Ponzi scheme. You have to get in at the right time and get out at the right time … And once you eliminate the ability to focus everyone on the same stock, the ability to raise the price decreases. “
Does fractured attention mean that the impact of the Reddit community will diminish, or can they gather around a new idea that excites a large enough group to make an impact? Silver, assuming it was such a choice, could have been a very weak move.
Eric Balchunas, who covers ETFs for Bloomberg, noted in a tweet that the Silver ETF (SLV) had strong volume but overwhelming price action: “$ SLV traded just over $ 7 billion today ( as predicted), a monster sum and third overall, but shy of record and nowhere near $ GME last week. He ran out of steam in the second half of the day … “
Art Cashin of UBS also noted that the same fervor for GameStop was lacking with silver: “Did I break the back of the short squeeze? It’s not really obvious yet. If continued sales in GameStop remain, it would indicate that it has been broken. the collaboration to squeeze the shorts failed as they turned their attention to grinding. Where I think he may not be successful at all. “
Lack of leadership remains a critical issue, Egan said: “I think they have a few people that you consider leaders, but who are not necessarily there to lead. They were accidental leaders. They lose the feeling of FOMO, the fear of losing something that It’s already happened. It’s a big bubble engine, people who don’t want to regret attending a kind of social event. So that goes down, too. “
Finally, the intense attention the Reddit community has generated means that Wall Street is well aware of what they are doing, he added: “These message boards are largely public and their ability to bring many people and focus that attention depends on the fact that they are public. But that also means he can be an analyst at a bank and you can read these message boards just as much. So the ability to surprise professionals has dropped dramatically now that this once happened. “
What does everything mean? For Murphy, this means a likely return to the status quo ante: “The end of the game is GME back to a more realistic level.”
Note: Susquehanna Financial Group is a market maker of GME and SLV securities. SFG and / or its subsidiaries beneficially hold 1% or more of GME’s securities.
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