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Trading Update 01/27/2021

January 27th, 2021

Preface: What a day. I’ve been on r/WallStreetBets for around 3 years now and I don’t think there has ever been a trading week such as this in the entire history of the sub-reddit. I go more into detail below but the battle against Wall Street has just begun. I should’ve hopped on the GameStop train earlier but something in my heart was preventing me from doing so. I think I’m still salty about the one time I sold my 7 Xbox One games to them for $3.46 in store credit. I still have relatively large positions in Nok, BB, GME, SSPK, and AMC.

Personal Trading Update: I don’t think my portfolio has ever climbed this high intraday ever in my 3 years of trading. My current portfolio consist of shares in Nokia, Blackberry, and Palantir. I ended up selling all 100 shares of Palantir at around 39.50 dollars average and then buying puts around the 44 dollar mark which are currently printing. I sold a few hundred shares of Nokia at the top for 9 dollars and started buying more at the 6.75 mark. I bought more into Blackberry which continues to be my biggest gain so far, almost reaching around a total return of 102% peak. During after-market hours I fomo’d into AMC at around $16.43 and am currently down, but am expecting r/WSB to pump the stock to the moon. 🚀

Explanation by u/Razzamoly:

Basically, it's a battle between WSB and a hedge fund who are short selling ('shorting') Gamestop stock.

Short sellers make a bet that the stock price will go down by short selling it (selling stock they borrowed from a lender while it has a high price then buying it again to return to the lender when it is cheaper - the short seller keeps the difference). They announce that they're shorting the stock as they're doing it.

This causes the stock price to fall due to Gamestop stock holders panicking and selling their stock, since they figure the short sellers must know something they don't. WSB gets pissed off and starts buying Gamestop stock while also encouraging each other and everyone else to do so through memes, causing the price to rise.

The short sellers get nervous and start closing their positions by buying stocks to return to the lender - sometimes even buying stock at prices higher than they sold them for, which results in a loss. Since they're also now buying stock, it drives the price up even further, resulting in even bigger potential losses for anyone short seller who holds on - something which is called a 'short squeeze'.

What are the implications of this short squeeze you may be asking?

Imagine you are on a rocketship to the moon and every 100 feet of elevation that the rocket passes grants you 100 dollars sent straight to your Venmo. Only problem is that the rocketship pilot is planning on dipping out at any given time and if you don’t get off at the before he does, you’re short out of luck cause the rocket will eventually crash land back to Earth. A similar pattern was actually seen in Volkswagen which for a few minutes was considered the most valuable stock during 2008 until it essentially crashed.

Volkswagen Short Squeeze