[Deep DD] new data shows that SHFs lost their last stand with the Feb price drop because apes took over trading GME and now hold, maybe, 100 million MORE shares since Jan. (The price is wrong, just buy and hold, and hedgies are fuk.)
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| Author       | Source       | 
| :-------------: |:-------------:|
|  [u/Hhshdjslaksvvshshjs](https://www.reddit.com/user/Hhshdjslaksvvshshjs/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/p85ae3/deep_dd_new_data_shows_that_shfs_lost_their_last/) | 

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[DD 👨‍🔬](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22DD%20%F0%9F%91%A8%E2%80%8D%F0%9F%94%AC%22&restrict_sr=1)

§0. PREAMBLE

TL;DR This is the whole ball game, right [here](https://imgur.com/a/d13C6Vf) -- this should have your tits totally jacked because that trend going up is apes buying and holding. Using odd lot data from the NYSE TAQ you can see how retail investors overran GME. At the end of last year about 37% of trades were small retail orders in odd lots (under 100 shares), now an average of around 87% of GME trades are odd lots. I claim that this is driven by the general lack of liquidity and the fact that apes just keep buying more and more GME. Apes are the ones making most of the moves in GME and when you tabulate the net total increase in shares, apes could easily have bought (and held) 100 million *more* shares since Jan.

TA;DR Normal apes can't afford to buy big barrels of bananas, so to see how much apes are buying we should count up the numbers buying small bunches of bananas. Since January the number of small bunches being traded has gone into the treetops. After estimating how many apes are trying to buy bananas rather than sell bananas, it seems that apes have accumulated maybe 100 million bananas since January.

Disclaimer I am not a financial advisor and you shouldn't read anything in this text as investing advice. I've got a PhD, so I have a few wrinkles. But beyond a few intro to statistics classes in grad school, my brain's pretty smooth when it comes to analyzing stock market data. So please read this (if you can read) as a good faith effort to understand what's going on with GameStop. I hope you apes can find holes in the argument where I'm wrong, and build on this if I'm right.

* * * * *

§1. PREMISES

*Premise 1)* Retail tends to buy and sell in odd lots (i.e. orders of under 100 shares); institutions tend to buy in round or mixed lots (i.e. orders of 100 shares or more).

You have likely seen stories like [this one](https://www.cnbc.com/2021/02/13/why-retail-investors-are-here-to-stay.html), or [this one](https://www.nasdaq.com/articles/the-growth-of-the-retail-investor-revolution-2021-03-10), describing the growth of retail investors in recent years. A [Schwab analysis](https://www.aboutschwab.com/generation-investor-study-2021) concluded that 15% of stock market investors began in 2020. And [the FT notes](https://www.ft.com/content/7a91e3ea-b9ec-4611-9a03-a8dd3b8bddb5) that retail trading accounts for almost as much volume as mutual funds and hedge funds combined. Take a look at yourself -- *nosce teipsum* -- when did you start investing? I bet most of you only began recently, and as a *SuperStonk* member you're probably more informed and engaged investors than the average.

Hedge funds receive billions of dollars from "accredited investors" who have to have a net worth over $1 million [(17 CFR § 230.501(a)(5))](https://www.law.cornell.edu/cfr/text/17/230.501). These hedge funds aren't even allowed to advertise themselves to average investors [(17 CFR § 230.502(c))](https://www.law.cornell.edu/cfr/text/17/230.502). They then use leverage to multiply that amount they can invest to the point that they have [billions of assets under management](https://hedgelists.com/top-100-us-hedge-funds-2021/). Accordingly, these investment banks and hedge funds don't have to nickel and dime; they can afford to buy lots of shares in companies, and usually in orders of 100 shares at a time, or more. These are round-lot orders.

By contrast, individual retail investors don't have millions of dollars to throw around. They can't buy 100 shares here and 200 shares there. After all, 100 TSLA would set you back almost $70,000, and that's after a recent stock split! Heck, even if a stock costs $10, you'd have to drop a grand to get to a round lot order. I don't have that kind of money lying around on the regular. So, we buy in odd lots: 2 shares at a time, 10 shares, and almost always under 100 shares.

When you put these two phenomena together -- that retail comprise an increasing proportion of all trades and that retail tends to buy in odd lots -- you get [this phenomenon](https://imgur.com/a/OongaQz) outlined by the SEC [(source)](https://www.sec.gov/marketstructure/datavis/ma_stocks_oddlotvolume.html). The rate of odd lot trades is rising consistently (especially among more expensive stocks -- think TSLA) and the exchanges and data aggregators are scrambling to capture this new development. For example, the SIP only began reporting odd lot trades in 2013 [see readme file from NYSE TAQ](https://easyupload.io/temeaz) and the [Consolidated Tape Association](https://www.ctaplan.com/oddlots) is trying to figure out how best to relay this new data stream to users.

*Premise 2)* Retail tends to buy and hold GME (especially after the Jan Sneeze).

This is a qualitative assessment. I'm sure that some people are day trading GME, and members of this sub sometimes give anecdotes of their friends who sold out already. I would also wager that some of the January FOMO crowd have sold. But this analysis is primarily concerned with the months *since January* and I'm going to assume that most people buying GME since Jan have a fairly high risk tolerance and aren't a bunch of [paperhanded Portnoy bitches](https://twitter.com/Mediaite/status/1408151781926969346?s=20). Moreover, if you're buying GME in 2021 at a price of over $100 while the media is hammering you with "forget GameStop" articles then you're a special kind of ape. You're super bullish on the fundamentals of GME, which means you're holding. Or you are familiar with the DD (or trust someone who is) and believe that a squeeze is likely, which means you're not selling for a mere 50%-100% profit. Or, you're like me, and you're a combination of the two, and you can be damn sure I'm not selling any time soon.

*Premise 3)* Retail tends not to short GME.

To some degree this is a corollary of premise 2; if retail buys and holds, then retail isn't selling short. But we can be a little more precise here. Footnote 1 on p. 803 of this article by Eric Kelley and Paul Tetlock in *The Review of Financial Studies* [(2017)](https://www.jstor.org/stable/26166324) invokes NYSE data showing that only 2% of short sale orders are from retail. It should be noted that this doesn't account for retail orders that are internalized or filled through dark pools, and the number of retail investors has grown considerably since 2017. Eyeballing the odd lot volume data from above, odd lot trades in the middle decile by market cap has risen from between 8-10% in 2017 to 11-15% in 2021. Let's be conservative and say that since 2017 retail has doubled, and so if they keep shorting at the same rate as in 2017, retail maybe makes up 4% of shorts on the NYSE. If you add dark pools and internalization that might push the number up to -- let's be conservative again -- say 10%. When you add in the fact that there is a shared aversion to shorting GME among retail investors expecting a squeeze, any reasonable estimate must put the % of retail shorting GME as a fraction of the total trading it.

§2. DATA

I have been analyzing intraday [TAQ data from NYSE](https://www.nyse.com/market-data/historical/daily-taq), which compiles trades, quotes, the NBBO and the like for just about all US exchanges. I get access to this data through my university, so I imagine it will not be accessible to most readers. So, I've uploaded a copy of the [raw .CSV data file](https://easyupload.io/8s3guu) I've been using for my analysis. Now anyone can peer review and hopefully improve upon or refute my assessments.

[Here](https://easyupload.io/6do1th) is a link to the very messy .xlsx file I have been using to play with the data above. It's crude and as modeling is not my area of expertise, I worry that I may have made some elementary mistakes. I hope someone with patience will give it a look and correct any errors in my data use and/or my conclusions from the data.

I also make use of the short volume data compiled by the formidable [AnnihilationGods_Data_Project](https://twitter.com/Annihil4tionGod). I had been using fintel.io data to ascertain short volume, but [*The Daily Stonk 06-08-2021*](https://github.com/verymeticulous/wikAPEdia/blob/b5ce62daff2969556ee76f2951b9f4eb92afebca/Daily-News/Daily-Stonk-Archives/06-June/2021-06-08-Synopsis.md#the-daily-stonk-06-08-2021) relayed the inaccuracies in the fintel.io data as explained by Annihil4tionGod. They have been maintaining the data file since then and you can access the master file [here](https://twitter.com/Annihil4tionGod/status/1425445775929184265?s=20).

Note: I have been using easyupload.io to make data files available to download. However, their hosting expires after 30 days. I hope that someone more knowledgeable than me can backup or create mirrors of this info if it proves useful.

§3. ANALYSIS

*(a) Basic Volume Changes:* [Here's](https://imgur.com/a/OFOcwAJ) the chart of GME's price that you're all familiar with. (I love that slight up turn over the last few days!) And [here's](https://imgur.com/a/I7isUbp) the rise in odd lot trades over that same time period. Notice the huge spikes in odd lot volume with the Jan Sneeze and the first $350 price spike in March. Of course, these were periods in which the overall volume increased dramatically, so the reason that you're seeing more odd lot trades is because there are more trades *simpliciter*. You can see the similarities between the increase in odd lot trades and the increase in all trades as both have a similar shape [when plotted out](https://imgur.com/a/QwtEVJZ). Footnote 1.

Even so, it's notable that the most recent run to $350 at the end of May/start of June doesn't see nearly the same increase in retail trades as the previous run-ups. *Prima fascia* this suggests that something different is happening from May onwards compared to Jan-March. My initial thought is that this is evidence of the [March to Zero Liquidity](https://github.com/verymeticulous/wikAPEdia/blob/13fa1f654be676e295894cd2121fa6a554f5b3d1/Due-Diligence/2021-05-02-The-March-to-Zero-Liquidity.md) as large price swings are occurring without the order of magnitude increases in retail volume that we saw before May.

Additionally, note the asymmetry between the left and right of the total volume vs odd lot volume [charts](https://imgur.com/a/0qlwg9c). In August and October last year there were some spikes in total volume, but no appreciable increases in the level of odd lot buys. (I wonder if the August bump is from Ryan Cohen.) After the January spike, though, every increase in total volume is matched with a comparable increase in odd lot orders.

Of course, this might just be explained by the increase in the price of the stock. Last year DFV and others could buy GME by the thousands because it was trading in the single digits. Since Jan the stock has mostly stayed above $100 and never dropped below two digits. So, it makes sense that there would be a relationship between price and odd lot volume. But I'm not convinced that the price increase is the only factor. Here's [popcorn stock](https://imgur.com/a/6Ubuy0V) by comparison. Note the big jump in odd lot trades in January, even when the price is only $10-15. GME was trading around that price in October 2020 and there doesn't seem to be a big jump in odd lot buys in GME at that time, so it's not clear (to me at least) that prohibitive cost is driving the rise in odd lot trades.

*(b) Order Size and Odd Lot Rate:* [This](https://imgur.com/a/BC0UpcN) is where things get really interesting. Last August the average round lot order was between 275 shares and 375 shares. By contrast, round lot orders today are around 160-180 shares. This shows us two things.

-   First, there has been a steady decline in the average order size by institutions; they're buying (and shorting) smaller amounts each time.

-   Second, the variance between the average high and the average low order size was much greater a year ago than today.

In my judgment, this reflects the general decline in liquidity. As fewer shares are available, it's not possible to sell 200+ shares at a time. I suspect that this reflects a lack of autonomy on the part of institutions. Last year some swashbuckling SHFs could sell big chunks of GME in one go. Think, for example, of the married-put chicanery with MMs that would allow the SHFs to sell phantom shares. As these SHFs didn't have to locate these shares before shorting them, order size wasn't an issue. But things have changed since January, not least that there have been considerable rule changes by the DTCC, OCC, and NSCC. I speculate that more and more SHFs have to actually locate the shares before they short them, which is hard to do. So now all SHFs are all being constrained by supply and demand in similar ways, which is why they cluster around a much smaller order size.

We see a similar decline in odd lot order sizes over the past year: [chart](https://imgur.com/a/ht07Hjg). But you'll note that there is a more precipitous decline in order size as the price increases, which makes sense if retail is more price sensitive than wealthier hedge funds. We were consistently buying more shares at a time when the price was lower, so that demonstrates that price matters. But we haven't been deterred by the high price. We're still buying, just in smaller amounts.

This difference in order size is important because we can use it to see who is in control of the stock. We can use total average order size (so the average order size for both odd lot and round lot orders combined) as a proxy to see who is hustling the most and buying/selling more shares: retail or institutions?

-   If the total average order size is a round lot order, then institutions are in control. The shorts are running the show as they're able to sell big orders into the open market.

-   By contrast, if the total average order size a small odd lot order, then that means that retail are the ones who are making the moves. Retail is buying up shares here and there and they're not stopping.

And the data says that [retail is absolutely in control](https://imgur.com/a/RcJYv1n).

Last year the average order size basically corresponded with the average round lot order size. Sure, retail dragged the order size down slightly to 200-275 shares a time, not the full 250-350 in odd lot orders alone. But trades were big -- large numbers of shares being moved at a time. And there was high variance, with a spread of around 75 shares between the highest and lowest average.

Everything changed after January, though. The precipitous drop in order size we saw in the odd lot order size is clear as day in the total average order size -- so retail really had an effect on the order size. We pulled it down hard in January. And the average size hasn't regressed up to the mean before January. After the average order size was pulled down, it stayed down. Moreover, the variance in the order size diminished, too; only, say 10 shares difference between the highs and the lows.

So what explains this change in average order size? I think there are two things at play.

-   First, and probably to a lesser extent, SHFs are having a harder time locating shares because of rule changes and because apes buy and hold. As SHFs can't locate the shares, they can't buy them or sell them in big blocks. So now apes and SHFs are playing on the same pitch: we're both constrained by supply and demand. SHFs can't magic up millions of shares and sell them off in big orders, and apes can't buy big orders either. Apes are hodling like champions so there simply aren't enough shares to trade them in big orders.

-   Second, there are just so many damn apes out there. After apes piled in with their odd lot orders, they didn't leave. No matter how many MarketWatch articles or Jim Cramer interviews told us to "forget GameStop," we just can't quit it. Apes kept buying. *Price goes up, we buy a handful of shares. Price stays the same, 5 shares more. Tasty dip? Thanks, Ken, I'll take two.*

And the proof that apes aren't going anywhere is in the data. [Look at this.](https://imgur.com/a/d13C6Vf) This will be my first NFT after MOASS because it's just so beautiful. 80-90% of all trades are regularly odd lot trades. That's us. We're the ones buying in these odd lots. Several people on this sub have compared this GameStop saga to a horror movie for the SHFs. We're like zombies that keep coming and keep coming. They short it and we lap it up. The price rises and we lap it up. This chart is that movie condensed into 1 image. The SHFs must be terrified of us as we're scrambling to get another bite out of our beloved GME while they try to stop us.

Just [look](https://imgur.com/a/UtA0QAV) at what happened when SHFs made their last stand. They tried to take control again and increased their round lot orders to about 30% of the total for the day. That was when they pushed the price down into the $40s. But it was clearly unsustainable. Either too many apes kept buying in or they just couldn't get the shares to keep shorting. But as soon as they took their feet of the gas, apes just lapped it up again. Now these SHFs are just dead men walking -- they're the zombis. Apes are simply out buying them so their hole gets deeper every day.

Some on this sub may be looking for a whale to blast us off into space, or an NFT dividend as the catalyst that begins the MOASS. But this data shows that apes really are the fuel behind this rocket. Because we've each come to see the value of the company through conversations with each other or through our own research, we're buying in and we're not stopping. If this carries on, I'm convinced that we won't even need a catalyst. The march to zero liquidity from apes buying will be enough.

*(c) Buying vs Selling:* In the narrative above it may seem like I'm assuming that all odd lot orders are buys (and holds). And that is a premise of my argument (see §1) as it's credible to believe both that retail constitute most odd lot orders, and that since January retail tends to buy and hold. But we don't have to rely upon reasonable inferences as the data gives phenomenal insight into the shifting trading patterns from before to after the January Sneeze.

[GME Orders Before and After Jan Sneeze.](https://imgur.com/QL3ajz8)

The TAQ database uses the Lee-Ready algorithm to designate whether a trade is initiated by a buyer or initiated by a seller. I am going to assume that retail apes are not buying or selling any round orders -- maybe they're just institutions rebalancing with the ETF changes. So instead, let's focus on where apes may be buying and (yuck) selling.

On the highest extreme model, assume that the all odd lot buyers are apes and that they diamond handed everything. That means apes would have 831,099,331 more shares now than before the Sneeze.

On the lowest extreme model, where apes bought all the odd lots and paper handed everything, they would have a net increase of 45,591,791 shares.

These two numbers give us a sense of where the outer limits are. Let's add two further variables to make this model more credible:

-   First, let's not forget that there's been a lot of shorting going on. Approximately 434 million shares have been sold short. Let's be generous and assume that all of these shorts are with borrowed shares, so there are no new naked shorts. And let's assume that if they close their position, the shorts always buy back their shares in odd lots.

-   Second, although apes buy and hold, some retail purchases in odd lots will be by people less familiar with the details around GameStop. This subset of people may have bought, but also sold some of their shares over the last few months.

Putting these two together you get a: [Range of Retail's GME Ownership Since Jan Squeeze](https://imgur.com/a/XClwoHT)

Let's break this down. First assume that no shorts have covered (so all the odd lot buys are real buys, not covering). If apes/retail bought 80% of those odd lot buys and didn't sell much of them back (only 20% of those shares) then apes may have added 500 million shares to their portfolios. On the other side, if retail is a bunch of broke paperhanded Portnoys, we'd only have 33 million shares after buying 20% of the available shares and selling 80% of those back again.

Is 80% buying by retail an excessive estimate? Quite possibly. But recall the [the FT reporting](https://www.ft.com/content/7a91e3ea-b9ec-4611-9a03-a8dd3b8bddb5), that retail makes up the same volume of trades as hedge funds and mutual funds. Moreover, we shouldn't neglect the fact that few other stocks engender the same excitement as GME. Consequently, it wouldn't surprise me if apes are buying well over half of the available shares. We're just gobbling up what we can.

But, the number of shares available for apes to buy drops once shorts cover. If we assume that half of the odd lot buys went to close out short positions, then the range of ape ownership increase drops from about 400 million to 25 million. If all shorts were closed out of the odd lot buys, then the number of available shares for apes to buy drops further. If they bought 80% of those remaining shares, then the net increase in apes' positions could be as high as 250 million. On the lower end, if apes didn't buy much and sold most of it back, the increase could be as little as 16 million shares of GME.

§4. CONCLUSION

Odd lot trades can act as a proxy for retail investors: the more odd lot trades, the more retail investors trading a stock. When we look at GME, the number of odd lot trades has risen dramatically to an average of around 87% of all trades (up from about 37% at the end of last year).

Three explanations for this growth were presented: rising prices; decreasing liquidity; persistent buying by apes. In my estimation the latter two are the primary drivers here. There simply aren't many shares available to buy (numerator) and Apes just keep on buying [(denominator)](https://imgur.com/a/a2FuvKD) so the average trade size has dropped precipitously.

As the average order size is so low now and odd lots make up so many of the total orders, it's likely that institutions are reduced to odd lot trades, too. This reflects the weak trading position of SHFs as they cannot move the market with big sells like they used to. It also reflects the strength of apes: we just keep buying and buying -- we're running this show now.

By disaggregating buyers from sellers (using the Lee-Ready method), we saw how many of these small odd lot orders were initiated by buyers. Apes buy and hold and retail tends not to short sell. So, how much did apes increase their GME holdings by? We modeled a range of possibilities depending on some variations in covering and possible ratios of retail buys to sells in odd lots.

The main take away is that, even on a highly conservative estimate where all shorts since the January Sneeze closed their positions using odd lot purchases, and where retail buys only half of the available shares and day trades half of those back again (yuck), the net increase for apes is about 100 million shares.

.

Oh, and this data doesn't even include dark pool and internalized orders, where many retail buys are likely routed to. Hedgies are so damn ^fuk.

* * * * *

Footnote 1: A regression model of total volume against odd lot volume suggests that about 65% of the increase in odd lot volume is caused by the increase in volume *tout court* (r-square: 0.641). But the standard error seems quite large and one of the p-values is below statistical significance, so I'm not sure that this is a useful measure. I'm not a statistician, so I expect that I've bungled something somewhere, which is why I've put this as a footnote. Please correct me if you can!
