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1/ I actually bought 1 more share of $GME in AH for $206. At first I was just in it for the lulz and memes, but the more I think about it, there is no reason this can't 100x or more from here. Yeah, it sounds crazy, but the problem is
2/ The brokers allowed people to short gamestop without requiring sufficient hedging. If I short 100 shares of a company I'm always going to also buy an OTM call option so my losses are limited. Instead, what the brokers allowed is for the suits to short 100 $GME & long 100 $SPY
3/ And figured that was a good enough hedge. No way they could both move against them continuously at once right? Well, that's exactly what started happening yesterday. The suits were losing money on their longs and their shorts.
4/ Miscalculating correlations is exactly what happened in 2008. No one could have possibly imagined housing prices all across the country could go down at the same time, but that's exactly what happened.
5/ So the brokers accidentally gave the shorts infinite leverage by allowing them to short without sufficient hedges. Now in come the robinhooders/wsb and they discover the "cheat code" of continuously buying OTM calls on a stock which provides infinite leverage to the upside
6/ So there's a battle going on between potentially infinite levered shorts and infinite levered longs. The brokers are on the hook for any shortfall in potentially unlimited losses by either the longs or the shorts, so yesterday they decided to shut it down to CYA
7/ It's also why you're seeing headlines out there right now of Robinhood and other brokers scrambling for new credit lines. They could go bankrupt if things get too far out of hand due to their foolish risk management.
8/ Potential solutions I see 1) there needs to be an upper limit to stock prices. Just like $0 is the lower bound - 100x sales/MC should be the upper limit or some sort of rule and 2) Leverage needs to be restricted on both the longs and shorts so this doesn't blow up everyone
