The first source of the incident was this. A "big brother in the lead" kept buying the call options of the game station and published his opinions and predictions on the forum. He believes that the stock price of this company will gradually rise in the future, and short sellers will be forced to buy back the stock, which will cause short-squeeze, when the stock price will skyrocket.
After that, he successively converted his options into a semi-option and semi-equity portfolio.
In order to increase the stock price, investors who follow buy not only raise the stock price by buying stocks, but also buy call options (paying relatively small royalties to obtain higher yields).
Subsequently, the share price of Game Station rose to nearly $20. At this time, the "big brother" light stock investment rose to $3 million in just one year, and there were more than $1 million worth of $20 call options.
The stock price did not stop rising when it rose to $20. When the share price of Game Station soared to $40, Citron saw the opportunity and jumped out to criticize the investors who bought the stock, saying they It will only be a "loser in the poker game", and I believe the stock price will soon fall back to $20.
Institutions such as Citron are usually short-selling. They are veritable wolves—they attack all over the world, and the six relatives do not recognize them. The companies that they are eyeing on are trembling, like a big enemy.
They are not fighting alone. They short-selling by combining relevant agencies and issuing short-selling reports, which induce a sharp drop in stock prices and make profits.
The short-selling routine of this group of people is basically divided into four steps: first, find the prey and lock the short target; second, investigate the short target (to verify or visit on the spot) and establish a short position; third, issue a short report and contact Other consortia interested in shorting the stock have completed their short positions; fourthly, they will liquidate their positions after the stock price drops and take profits.
And this time the prey targeted by Citron is the game station. They are aiming at this mediocre company but the stock price is skyrocketing. The company is ready to make a fortune.
In fact, their idea has a high chance of success. Citron's idea is very simple and clear. The share price of Game Station has risen by 800%. If it is priced reasonably, it will not be an exaggeration.
But this time, the owner of Citron Rifle soon discovered that their time-tested short-selling routine was not working, and he seemed to have taken the wrong script.
According to the usual routine, Citron first released a tweet to sing the game station, saying that investors who bought the game station would become losers, and the stock price would fall quickly and be cut in half. Later, Lifu, the founder of Citron, personally released a video, expounding in detail five reasons why he looked down on the game station.
Then Citron spoke again, continued to sing the game station, and let the buyer at his own risk.
The bearish public opinion has been created, and there is a basis for it. It is customary for the game station’s share price to fall sharply by this time, but something that Rifle did not expect has happened. On the day of the release of the video, the stock The increase unexpectedly reached 51%, and the total loss of the sky reached nearly 1.6 billion U.S. dollars in just one short time.
In the week when it was sung by Citron, the stock rose 83%.
But this is only the beginning of the madness. The epic short squeeze began, and the stock rose by as much as 140% at one time and triggered trading suspensions at least twice. The market value rose by more than 14 times in the month alone, reaching approximately US$20 billion, surpassing approximately one-third of the companies in the S&P 500 Index.
The sharp gains made the bears have to calculate the cost. The stock price continues to rise. Once the loss exceeds the bearable range of the shorts, they must take action to stop the loss. The most effective way to stop the loss is to buy the stock immediately. One of the side effects of this is to further push up the stock price.
Originally, Citron’s expectation was that the stock price would fall to $20 and go short at $40. As a result, the stock price rose to $300, which is equivalent to a loss of $260 to make $20.
This is simply a horror story for those who are good at calculating. Rationality and fundamentals are no longer there. Shorts are in a difficult situation and have suffered heavy losses because they have to buy this stock to get out. In the end, only a bunch of seriously overvalued stocks are left in their hands.
"What retail investors are going to wash hedge funds?" Feng Kui laughed. "You won't be naive enough to believe those reports on the Internet? This time it's actually just a huge loss caused by some hedge funds who misjudged the situation and reversed the direction. Have you seen the big short movie? There is a hedge fund manager with a fake eye. This time he is a long player in the game station. His fund bought 17 million shares of the game station, and the market value once soared. Fifteen times. The profit is huge."
"Big Short" is a biographical film about the 2008 global financial crisis. Several discerning investment ghosts on Wall Street saw through the illusion of the bubble and benefited greatly from shorting the subprime CDS, becoming one of the few who suffered a large number of financial disasters. The story of a profitable investment mantra.
The one-eyed name Feng Kui referred to is Michael Bray, a fund manager who became a legend on Wall Street because of his unique vision and huge profits during the 2008 crisis.
So there is no such thing as a hedge fund boss who is bloodbathed by retail investors, only winners who do the right thing. Of course, a large number of retail investors are rare among the winners this time.
There is actually a special prerequisite for this. For well-known reasons, a large number of Americans are trapped at home, unable to go out to do things, have no opportunity to spend money, and stimulus measures are issued to make these people richer. Enter the stock market one after another. The leader of the elder brother ascended the heights, and naturally, people gathered immediately.
"Actually, this time I was consistent with Citron’s opinion at the beginning. I also thought that the share price of Game Station would be cut in half. I originally wanted to go short. Fortunately, I suddenly realized that this view was wrong. The increase in Game Station’s stock price was fundamentally There is no need for rationality and fundamentals. It is actually a trend, or a movement."
"This is closely related to the current situation in the United States. Do you know why the American leader is so absurd and has such a high approval rate? Because now Americans have a high aversion to so-called elite rule."
Fu Hua smiled and said, "So you must have made a lot of profits this time?"
"It's so normal," Feng Kui said with a happily smile, "the funds in his hand have doubled a little more than four times, which is far worse than others."
"Then can you invest more in Zhaohui Group?"
"I have this willingness. For a private equity firm, I am actually more willing to do more stable and long-term projects than short-term projects such as game station, because this kind of project is too risky. A little careless. , You will lose all the games."