Peak GameStop?
GameStop’s volume and volatility were much lower this week than in the previous six days. This also applies to other strongly abbreviated names, such as Bed Bath and Beyond, Express and AMC.
What is happening?
Chris Murphy, co-director of derivatives strategy at Susquehanna Financial Group, pointed to signs that the game’s end may not be far off for GameStop: “More put options than call options have been negotiated recently. Interest open interest on call options is much less. decline in volatility. There are signs that Reddit flows are moving elsewhere, like silver. Those are definitely signs of the peak of GameStop.
GameStop’s shares fell another 30% in pre-market trading on Tuesday, after losing 30% on Monday. The shares traded 37 million shares on Monday, down from an increase of almost 200 million on January 22 and the lowest volume in seven days.
Like the GameStop shorts they claim to have released, many in the Reddit community have already made money and are out. Some are ideologically committed, but remain for a long time. Others are looking for new opportunities, but Dan Egan, Betterment’s director of behavioral finance and investments, says it is getting harder to muster troops.
“The human brain craves stimuli through change,” he said on CNBC’s ETF Edge podcast. “One of the real challenges for this type of thing is that they need to keep their attention on themselves, doing things bigger and bigger and more unusual. And that is very difficult. … This type of attention is being fragmented by other things that may have this possibility of rising. So you are looking at silver, other commodities, etc. “
The problem, of course, is that there is no investment committee – even the silver debate has been divided into pro and opposition groups.
And this is where attention starts to lose focus, Egan said: “Many people think that this has been a radical change in the way the market works, that as long as a message board or community of people can focus their attention on a specific action, they can move a lot, it will happen again. But it will be more difficult, because people will understand that it is a bit of a mania, a Ponzi thing. You need to get in at the right time and get out at the right time … And once you remove the ability to focus everyone on the same stock, the ability to push the price up falls. “
Does fragmented attention mean that the impact of the Reddit community will diminish or can they gather around some new idea that encourages a group large enough to make an impact? Silver, assuming it was that choice, may have been a very bad move.
Eric Balchunas, who covers ETFs for Bloomberg, noted in a tweet that Silver ETF (SLV) had a large volume, but a price action below expectations: “$ SLV traded just over $ 7 billion today (as predicted) ), a monstrous amount and third overall, but he was shy and nowhere near $ GME last week. He kind of lost strength in the second half of the day … “
Art Cashin of UBS also noted that the same fervor for GameStop was absent with the silver: “Did we break the back of the small squeeze? It is still not very evident. to tighten the shorts broke when they diverted their attention to the sliver. Where I think they may not have any success. “
Lack of leadership remains a critical problem, said Egan: “I think they have some people that you consider to be leaders, but they are not necessarily there to lead. They were accidental leaders. They are losing their sense of FOMO, the fear of losing something that already kind of happened. This is a big bubble driver, it’s the people who want to not regret participating in a kind of social event. So, this is also falling.
Finally, the intense attention that the Reddit community has generated means that Wall Street is well aware of what they are doing, he added: “These message boards, for the most part, are public and their ability to attract many people and focus that attention it depends on whether they are public. But it also means that you can be an analyst at a bank and also read these message boards. So the ability to surprise professionals has decreased dramatically now that it happened once. “
What does all this mean? For Murphy, it means a likely return to the status quo ante: “The final game is that GME returns to a more realistic level.”
Note: Susquehanna Financial Group is a securities market maker for GME and SLV. SFG and / or its affiliates own 1% or more of GME’s securities.
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