posted ago by HighFrequency ago by HighFrequency +30 / -0

I just came across this old post on reddit (49d) but it is the most detailed, logical and reasonable analysis Ive seen on the GME MOASS since buying my first share back in January. Perhaps even more relevant now as we can all hear the pre-flight checks starting!

I copied only the last half of the article. I highly encourage fellow smoothbrain apes to read the whole thing (and comments) here: https://www.reddit.com/r/GME/comments/mmo9kw/from_fake_shares_to_millionaires_common/

Do the short sellers have to buy back every single share? Simple answer: No, just the same amount as they sold short.

This quickly gets a bit complicated, but I'll do my best to explain. For short sellers to close their position, or "cover" as it is often referred to, they must deliver back real shares to whomever they borrowed from. If they borrowed and sold 10M shares, they must buy 10M shares and give them back. If they shorted 100M, they must buy back 100M. And in the end, when all Shits have covered, there will be 70M shares left, the same amount that was issued in the first place. But even if the float has been shorted several times, it is still very possible that some shares are not involved in this process at all!

At step 3 in the illustration, there are 135M shares on the market, and they have to get it back down to 70M as in step 1 to cover all their positions. Suppose the Shits do the exact reverse of step 3 and 2 (in that order) in the illustration. Now all shorts are covered, and all is well, but note that the 30M shares that was not lent out in step 2 were never involved in the process of shorting and covering. And the 40M shares that were lent out to be sold short in step 2 were held by the same people the whole time (the lenders), and were not bought back. This sums up to 70M shares (the total number of shares outstanding) that were not bought to cover! Even if the entire float was shorted many times over, some portion of the shares may never be involved in this process at all, and 70M shares (the number of originally issued shares) will never be bought to cover. If the Shits have shorted more than the float, this simply means they have to buy back some shares more than once. More specifically, they must buy some shares and return to one lender, then buy shares from this lender to give to another lender, and so on, until all lenders have gotten their shares back.

It doesn't matter to the short sellers which shares they buy to cover. If they buy real shares, then great! If they buy shares that have been lent out, the lender must recall the shares and deliver them, and the short seller still gets real shares to give back, so also great! (If the shares were lent to the short seller in question in the first place, they will end up owing each other the same amount of shares when the lender recalls, so it just cancels out. If it was lent to a different short seller, the other short seller is now forced to cover to deliver them.)

What did we learn?

No matter how many shares are sold short, not all shares must be bought to cover. The number of shares outstanding (almost 70M for GME) will not be bought back in the end. It doesn't matter to the short sellers which shares they buy, they just have to buy the same amount as they sold short. Even shares that are lent out can be bought to cover, it just means that the lender who sells them must recall the shares, which will force more shares to be covered.

🚀 Will I get to sell my shares at any price I want?

Simple answer: No. Unless you personally own all shares outstanding, the price you'll be able to sell at depends on others.

This is not easy to explain in a sentence or two, and I actually wrote an entire DD on the subject a few days ago, but I'll give you the essence of it here.

I already concluded above in the section "Do the short sellers have to buy back every single share?" that they don't. This means, for example, that if you set your price to a trillion dollars, and everybody else are willing to sell for 100 million, you will never get to sell your share, no matter how many shares are sold short. As I tried to explain using the 4-step illustration, short selling adds shares to the original shares outstanding. Simply put, this means that no matter how many shares are sold short, 70M shares (the number of shares outstanding) will not be bought back when the short sellers cover. For example, if 100M shares are sold short, then there will be 170M shares "out there" owned by some person or entity, and any of those 170M shares could be put up for sale, and the short sellers must only buy 100M of those to cover all their positions. If all shareholders simultaneously offered their shares for sale at the price they desired for each share, and all the short sellers bought all the shares they needed to cover, the 70M most expensive shares would not be bought. By this simple observation, one could assume that the peak price of the squeeze will be determined by the 70 millionth most expensive share among all shareholders (but it's not that simple, at least there's a lot of psychology involved as well).

But not only apes will be holding those 70M shares! Some shares will never be put up for sale, at least not under normal circumstances. We can only speculate on how many shares are truly "locked up", but I would say that it's safe to assume that Ryan Cohen won't be selling any of his 9M shares any time soon, ETFs have specific rules and dates to do their rebalancing, market makers are holding shares for hedging, and many big whales are holding shares for the long run, and don't really care for the "mood swings" of the market. All this will significantly contribute to the squeeze, as the short seller must buy back a larger portion of the shares that are available on the market, at the very least, this will significantly raise the price of the 70M most expensive shares, and thus increase the peak of the squeeze.

But what if the entire float is held by someone who refuses to sell?

The diamond handed apes are what separates GME from anything previously seen in the history of squeezing. We have already established that the most expensive shares will determine the peak of the squeeze, and just holding shares will definitely contribute massively to the squeeze. But if all the shares outstanding were held by truly diamond handed apes (together with insiders like Ryan Cohen, ETFs, and possibly some funds and long whales), who simply refuse to sell their shares, THAT is when the short sellers would be in REAL trouble! This would mean that there would be less shares available than they need to cover, and they would be forced to buy every single remaining share, no matter the price, and would still not be able to cover! This is often referred to as an infinite squeeze. This would truly be the Mother Of All Short Squeezes (MOASS), I'm even willing to put a few extra MO's in front of that! If you really want to squeeze those Shits, this is the scenario you should aim for.

Is the infinite squeeze a realistic scenario?

I cannot factually answer this question. There are just too many factors involved, and too little reliable data to accurately estimate these factors, the most important factor being how many shares are actually held by retail investors, and how many of those actually have true diamond hands. (Unfortunately, this is a scenario many apes out there are already taking for granted, like in this post which is trending today, but this is dangerous thinking!) In my opinion, a literal infinite squeeze can never happen. At some point, the price will reach levels where even the most diamond handed ape, insider or investor would sell. So the infinite squeeze is more like an utopia than a realistic scenario, if you ask me.

But in my last DD titled "The MOASS is inevitable!" I argued that even with very conservative estimates, it seems very likely that retail does own the entire float, quite possibly even all shares outstanding. We can't say for sure how much retail owns, and we can't say how diamond handed the average retail investor will be when this starts to squeeze. But apes don't need to own everything, and the short interest does not have to be several hundred percent, for this to squeeze extremely hard. In fact, what I sincerely believe is that this will squeeze harder than anything we've ever seen! The squeeze will just keep going as long as retail continues to control the float, by holding. And every share with a "ridiculous" price target will increase the peak of the squeeze!

And there's one important thing to notice here: this does not really depend that much on how big the short interest is! A higher short interest simply means that more shares must be bought, but the infinite squeeze could happen with just a single share sold short! The most important factor is how many shares that are held by diamond hands!

What did we learn?

This will squeeze harder than anything we've ever seen! Even by conservative estimates, the numbers say we're in for a massive squeeze!

Still, you can't just "name your price", the 70M most expensive shares will never be bought. If you set your price at 1 trillion, you simply won't get to sell.

🚀 What is the best exit strategy?

One of my favorite movie scenes is from "A Beautiful Mind" when John Nash (Russel Crowe) realizes that "the best result will come from everyone in the group doing what's best for themselves AND for the group". This "Equilibrium Game Theory" is highly relevant here. If all apes acted to maximize the gains only for themselves, everyone would just try to sell before everyone else, because in the end, 70M shares will not be bought, and nobody would want to be left bagholding any of those. The result would be that this would never squeeze at all, and nobody would get any tendies. On the other hand, if nobody thought of themselves, nobody would sell, but keep holding to maintain the squeeze, and even if this would become the biggest squeeze ever, nobody would get any tendies, because nobody sold. The point is, if apes want max tendies, apes need to find the middle ground between looking out for themselves, and looking out for the group.

I can't tell you what to do with your money, and your shares, and you're ultimately on your own when it comes to the decision to sell. What I can say is that this squeeze will only reach its full potential by holding as many shares as possible for as long as possible. The peak of the squeeze will be determined collectively, and all apes will benefit the most from collectively holding on to all shares as long as possible.

💎💎💎My theory is that apes collectively will maximize their profits if they aim to keep holding most of their shares to the very end, and only sell off a small fraction of their shares AFTER they believe it has peaked! 💎💎💎

We know that the more shares that are kept off the market, the harder this will squeeze. It will be tempting to start selling off shares quite early to secure some profits, cover the original investment, etc., but if all apes do this, it will significantly reduce the squeeze! By continuing to hold on to all shares, the squeeze will probably peak literally more than 10 times higher, which means that apes can sell less than 10% of their shares for the same number of tendies, and apes will still have more than 90% of the shares left to keep the squeeze going! I mean, instead of selling 10 shares at 100k to get 1M, it is FAR BETTER for both you and for other apes if you sell one share at 1M and have 9 shares left! This will maintain the squeeze for much longer, and make sure all apes get serious tendies! With the 90% remaining shares, each ape can then wait to see if it squeezes even higher, or slowly sell on the way down, without causing the price to plummet, or just keep them because the ape already got tendies, and the ape likes the stock!

Say the price peaks at 1M, and an ape with 10 shares sells 1 share at 1M, and then one share every time the price is halved, the ape will then end up with (1M + 500k + 250k + 125k + ...) ≈ 2M! That's a doubling, using probably the most relaxed strategy there is, and without causing any harm to fellow apes!

Even if you don't completely buy my theory, I believe there are some general guidelines that will benefit both you and all other apes when the time comes to sell:

Never sell on the way up! Selling on the way up will take fuel from the rocket, reduce the squeeze, reduce the peak, and ultimately reduce your own returns. Every share you sell before the true peak is reached will reduce the peak. Only start selling when you believe the peak has been reached! Be prepared for some turbulence! The way to the highest peak will probably not be a straight line, and dips are to be expected even after the rocket has launched. (Just imagine what it would look like if a major whale decides to cash in at a point. The price would stagnate or even dip significantly, but the squeeze won't be over until the apes say it's over!)

Never sell all at once! If you sell off your entire position at once, not only will you ease the squeeze, and contribute to a plummeting price, you may also miss out on the true peak. Sell as slowly as you can! If you sell only a small fraction of your shares at a time, you will help maintain the peak of the squeeze for as long as possible, and help your fellow apes get some tendies as well.

Believe in the MOASS! Lack of faith is what causes paper handing and panic selling. The squeeze is a self-fulfilling prophecy. You decide when to stop squeezing using your shares!

Trust your fellow apes! Apes together strong! In the end, squeezing those Shits is a collective effort, and the peak of the squeeze will be determined by the collective effort of all apes. If you trust that your fellow apes are holding, you will hold too!

Don't listen to anyone saying the squeeze is over until it is over! The MSM, maybe even our subs, will be overrun by people telling you to "cash in before it's too late", or anything that will convince you that the squeeze is over, and all other apes are selling. Don't you dare believe them! Stay calm, stick to your plan, and follow all the above guidelines. This is not over until it's over!

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alien_observer 2 points ago +2 / -0

so tl;dr, set an eight digit limit order and sit on your hands?

HighFrequency [S] 2 points ago +2 / -0

If you cant bother to read three minutes worth of really helpful info on this as a vested and interested party...

...then sure, you can do that. Maybe it will hit. Or not. Crapshoot for you.

Dunno about your platform but Schwab wont let me set limit orders that high.

alien_observer 1 point ago +1 / -0

well I had to read your info in order in order to summarize it, and it seems like if all apes followed my suggestion, they'd do pretty well. technical difficulties notwithstanding