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Technical-Analysis/Financial-Indicators/Beta-Part-II.md
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Beta Part 2: Extremely abnormal negative beta as indirect evidence of the risk management of shorts that have not covered
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=========================================================================================================================
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**Author: [u/animasoul](https://www.reddit.com/user/animasoul/)**
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[DD](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%22&restrict_sr=1)
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Yay, I just noticed that the mods only require an account to be 30 days old now, so this is my first post in [r/GME](https://www.reddit.com/r/GME/). It is also intended to complete my first post about beta, originally posted in [r/Wallstreetbetsnew](https://www.reddit.com/r/Wallstreetbetsnew/).
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I will start with the Disclaimer: This is not financial advice. This is for educational and entertainment purposes only. *It is also a thought experiment, a working hypothesis.* Let's have fun with this apes. Feel free to poke holes in it. You proceed at your own peril.
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Introduction
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In my first post about beta, I tried to explain the concept of beta in as simple and general a way as possible. I basically said that since the beta of a short position is by definition the opposite of the beta of a long position, it is possible that the extremely negative beta of GME (around -2 to -8 by different estimates) is connected with short selling. In that post, I made a very general and intuitive point. The intuition gave me my hypothesis.
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For this second post, I will try to deduce logically why the beta is so negative, why it wasn't negative before, what this means for the market and what this means for a potential short squeeze. It also requires me to go beyond the very general description of beta that I gave in my first post. So now I will go into the concept of beta on a deeper, more technical level.
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Background theory -- what is beta? Beta expresses a stock's sensitivity to market risk
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When we say that a stock cannot have a beta of less than -1 we are not talking about the movement of the price. I didn't make that clear in my first post. *Forget about the short squeeze for now*. *But don't worry, I'll come back to it later*. If we are looking at a stock's beta only, *this is* *not* *a reflection of the volatility of its* *price*.
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Let's get fancy and use the symbol for beta -- ß. It's less typing too.
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The reasoning behind why ß is correlated with the market is because ß reflects the market risk, also called the systematic risk.
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Remember -- no risk no return. Your expected return is your compensation for exposing yourself to risk. If there was no risk, there would be no return. That's the game.
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This comes from the theory underlying the Capital Asset Pricing Model (CAPM), which tells us the return on a stock that you should expect. It is therefore not about pricing as such although by knowing what the fair return is, CAPM can help us to assess if a stock is underpriced or overpriced in terms of the relationship between its risk and its return. Example: Two stocks might have the same risk and expected return but one could be hyped and people are willing to pay a higher price for it while the other is flying under the radar at a lower price. The price is just what you or I are willing to pay for a stock which has that level of return (i.e. cash flow), among all the other factors that influence why I might be willing to pay a certain price for a certain stock.
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The elements that go into computing the expected return on a stock are:
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The risk-free rate -- this is the return I can get for an investment with no risk at all, usually the return on a T-bill because it is considered for theoretical purposes that the US government will never default. If a security has more risk but the same return as a T-bill, it doesn't make sense to take the riskier security when you could get the same return on the risk-free investment.
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ß -- this is the sensitivity of the security to the market
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The expected return on the market -- this is the return we expect from investing in the market (i.e. if I bought every stock in the entire market, it would be the return on my market portfolio).
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I will now quote Wells Fargo because I think their description of beta is very nice. The added emphasis is my own:
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*'The beta of a stock or portfolio is a widely used* *measure of risk* *- capturing the* *sensitivity* *of the security to "market wide movements:' Regardless of* *the source of the movement of the market**, this measure captures* *what the market and the security have in common**. A security that has low beta is described as having low sensitivity to the market and vice versa.*
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*It is important to remember that what this measure actually captures is* *the commonality* *between the factors that drive the market and how these same factors affect the security in question.* *Since what drives the market changes over time, the beta of a security will also change over time**. The below chart shows that the beta of the average oil stock was low during the credit crisis but has risen more recently, indicating that the movement of this sector has more in common with what is driving the market than it did during the prior decade. Also shown in this chart is the beta of the bank sector-high during the credit crisis but much lower recently.*
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*Because what drives the market changes, the beta of securities will, by definition, also change over time -* *even if the line of business and strategy of the company itself does not change**. If a new factor arrives in the market, there is no guarantee that the beta of a security will remain unchanged - or indeed, there is no guarantee that a low-beta security will remain low beta.*
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*One measure of the rate of arrival of new factors is the correlation of betas over time. If the factors that drive the market are unchanged, then the beta will continue to be stable and unchanged. In contrast****, the arrival of a new factor has the potential to dramatically change the beta of securities****, resulting in low correlation between the betas from one period to the next -* *if beta is measured over a short enough period to reflect this change**.'*
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Source: <https://www.wellsfargoassetmanagement.com/assets/public/pdf/insights/investing/analytic-the-betas-they-are-changing-apac-emea.pdf>
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Wells Fargo describes very nicely why the driver of the beta must come from the market, and not from the security, if the company and its business have not changed.
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Here's the historical beta again from Zacks, measured month to month. You can go to Zacks and look further back in history, I have just gone as far back as October 2020:
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02/28/2021 -2.183
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01/31/2021 -2.196
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12/31/2020 1.404
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11/30/2020 1.423
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10/31/2020 1.028
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Source: <https://www.zacks.com/stock/chart/GME/fundamental/beta>
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A pretty dramatic change in January right? Now we know that nothing really changed about GameStop fundamentally except Ryan Cohen's joining and some future hopes and expectations related to this. That is not something that should flip the expected return of GME like this to the negative. So, as Wells Fargo explains, the driver of the change must be coming from the overall market. So what is the new factor in the market that arrived in January? And which has not gone away because the beta is still negative?
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Yahoo Finance put out an article on 17 March, the day after my first post, saying that the beta "flipped from a negative to positive correlation on Wednesday". But on the date of my first post (16 March), there were apes on the Bloomberg terminal reporting that Bloomberg was reporting a beta of around -8. I have not seen another source except that Yahoo Finance article saying that the beta is now positive. Nasdaq is still reporting a current beta of -2.09. Even the Yahoo Finance free website is still showing a beta of -2.07.
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So what is the commonality between the market and GME?
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Let's say it is apes buying and holding as of Jan 2021, as some apes have been suggesting. Remember that ß does not have anything to do with price volatility. Optimists buying may raise the market price but cannot raise the expected return itself or change the drivers of the market's expected return. It's a bit like the price/earnings ratio. You can pay a high or low price but that won't change earnings.
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So then why is the correlation with the market suddenly -8? Some apes might raise the Indian professor who showed in response to my post that the beta of GME is positive. But he had to do that manually, by drawing his own chart and picking and choosing his data points to produce a beta that made sense to him. That raises the question -- so why does GME need a manual chart? Why is the normal formula good enough for other stocks but not for GME? I am interested in why -- within the theoretical framework of the CAPM -- the ß of GME is -8. I am not interested in how to get away from the -8 to get a normal beta.
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What changed in the drivers of the market? The hand of a giant squid? A manipulation across the whole market universe? A new systemic risk? -8 defies all logic. This forces me to depart from the real world. To step, like Alice, through the looking glass.
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[](https://preview.redd.it/ky613adr1oo61.jpg?width=206&format=pjpg&auto=webp&s=ed7454a49f7e86014c55e4cd6ba7a61f04f3dd08)
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Stepping through the looking glass into the alternative world of the shorts
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*Curiouser and curiouser***: If long GME is -2 ß, then short GME must be +2 ß**
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If I take this a step further logically, if the beta of a long position in GME is negative, then the beta of the short is positive. The positions must per se be opposite because shorts and longs on opposite sides of this trade are not both winning or both losing. Their risk position must be the opposite for one side to win/lose. If I go long, I expose myself to the market risk (ß). If I go short, then my market risk is the opposite (-ß). That's why short positions can be used to hedge long positions. One cancels out the other.
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If the normal calculations are showing that GME long is -8 ß, then the shorts have somehow changed the real world, they have flipped the two worlds on either side of the looking glass. A short with a positive beta sounds crazy, as crazy as a long with a -8 beta, but by the logic of financial theory, this is the conclusion I am forced to come to. Whatever it is that the shorts have done, they have created the effect of giving their short a positive ß and the long a negative ß.
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*'The beta of a short position is the negative of the beta of a long position...and is hence* *normally [emphasis added]* *a negative number...Because of the negative beta of short positions, rational investors will often be willing to accept a lower return than they otherwise would, possibly even a negative return.'*
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p. 81 in 'Short Selling: Strategies, Risks and Rewards' edited by Frank J. Fabozzi.
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<http://www.dmf.unisalento.it/~straf/allow_listing/fabio/fabio3.pdf>
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What this implies about ETF shorts and GME
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ETF shorting is a common risk management method. ETFs have always been shorted since forever. The book edited by Fabozzi has a brilliant chapter on ETF shorting and how market makers can create/redeem trillions of dollars' worth of ETF shares at the drop of a hat. This is nothing special. And with the market as a whole seeming to be in a decline (note since around the time the GME drama started), probably everyone and their mother are now shorting ETFs to hedge their longs.
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*'Most ETF short sales are made to reduce, offset, or otherwise* *manage the risk of a related financial position**. The dominant risk management/risk reduction ETF short sale transaction* *offsets long market risk* *with a short or short equivalent position. Unlike the aggressive skier or surfer, the risk manager who sells ETF shares short is nearly always reducing the net risk of an investment position. In contrast to extreme athletes, the risk managers selling ETFs short are more like the ski patrol or lifeguards:* *They sell ETFs short to reduce total risk in a portfolio**.'*
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p. 38 in 'Short Selling: Strategies, Risks and Rewards' edited by Frank J. Fabozzi.
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<http://www.dmf.unisalento.it/~straf/allow_listing/fabio/fabio3.pdf>
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But hang on -- shorting ETFs reduces the total risk in a portfolio and offsets long market risk. If GME short has +2 ß, then a market downturn is a good thing for the GME short seller. When the market goes down a bit, the expected return associated with the short position benefits. The short seller certainly has long positions in his portfolio too. Those can be hedged against a market downturn by selling a market ETF short.
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But what about the short squeeze?
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Understand that the above is a risk management strategy. They would not need this risk management strategy if they had covered their shorts. And they did not need this risk management strategy prior to January 2021 before apes starting buying and diamond handing GME.
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It is only the natural job of a hedge fund to hedge and to protect its overall portfolio. This risk management strategy is helping them to stay afloat, or as Mark Cuban said -- never to cover their shorts. But I am guessing that it is very fragile. And it also depends on the overall market being down because their beta is positive. I suspect that the narrative about the market falling, bond yields rising, etc. causing a fall in equity markets might be a mass-scale FUD campaign. I don't want to go into that here but I have seen financial commentators who disagree with what the mainstream media is saying about bond yields and inflation.
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This is a good point to remind ourselves -- what is a short squeeze? It's pretty simple:
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*'Implicit in the technician's view is the risk of a so-called "short squeeze," in which prices move up very quickly as short sellers are forced to cover.'*
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p. 234 in 'Short Selling: Strategies, Risks and Rewards' edited by Frank J. Fabozzi.
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<http://www.dmf.unisalento.it/~straf/allow_listing/fabio/fabio3.pdf>
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So a short squeeze has nothing to do with the beta necessarily. It is just a situation where prices rise and shorts are caught and squeezed. The beta is a fundamental. The price -- not always. The smaller the short interest, the less likely a short squeeze can happen. What does the negative beta of -2 to -8 imply? IMO that they are doing a crazy level of risk management to protect an enormous short position. And they are possibly f---ing with the market to achieve the downturn required to benefit from the +2 or +8 beta they have given to their short position. They would only need the market to fall a bit to benefit x2 or x8.
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We know that Citadel is the market-maker for practically all traded securities so it is not as if they would not have the wherewithal to make the market as they see fit. By coincidence or not, the market downturn and associated pessimistic narrative started around the time GME became popular with apes. This would mean that the -8 beta is true. In my first post I thought no way, can't be, it must be distorted, but by my updated logic, it is not. It would connect many dots across the whole picture.
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TLDR of working hypothesis: While the -8 beta is not directly caused by short selling -- which is why the beta was still positive at the end of December 2020 -- the entry of Citadel, making this kind of risk management possible at the necessary time of apes buying and diamond holding, coinciding with the dramatic change in the beta, would indirectly indicate that shorts have not covered. But what do I know. I am just an ape. I have never worked in a hedge fund. Any errors are entirely my own.
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[](https://preview.redd.it/q2c6e7gu1oo61.jpg?width=201&format=pjpg&auto=webp&s=1aa9e56cf415414d3461299b3a89ae491e3368c9)
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Stepping back into the "real" world of the market and the longs
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EDIT: Before I go to bed I just want to say thank you for all the awards, karma and generous, warm words, for my first beta post as well 😭 😭 😭 😭 I really didn't expect so much appreciation for my DD, but then I never knew that GME apes are the REAL MVP. And how cool is it that we all just want to get rich? That's like the best community haha
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@ -0,0 +1,42 @@
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Why GME's negative beta is meaningless and tells us nothing one way or the other about whether the shorts have covered
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======================================================================================================================
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**Author: [u/Beartholomew](https://www.reddit.com/user/Beartholomew/)**
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[DD](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%22&restrict_sr=1)
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TLDR: GME's negative beta doesn't mean anything, it's caused by the stock's huge increase from December to January and the way that beta is calculated.
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This is a response to [a post claiming that GME's negative beta is evidence that the shorts have not covered](https://old.reddit.com/r/GME/comments/m6i4z2/the_mythical_unicorn_aka_extremely_abnormal/). On the face of it, this isn't the stupidest thing that I read today, but it seemed like a reach at best:
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> About GME specifically
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>
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> Here is the historical beta of GME:
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>
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> 02/28/2021 -2.195
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>
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> 12/31/2020 1.404
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>
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> 09/30/2020 1.084
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>
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> 06/30/2020 1.038
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>
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> 03/31/2020 0.4512
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>
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> You can see that GME's beta has only been negative since end of Feb 2021. Before that it had a very normal beta of over 1, meaning when the market was doing well, then its business did well too, i.e. people have money to spend on games, etc. Even during most of the lockdown its beta was still quite a bit above 1. But at the end of Feb, it suddenly went all the way down to -2.195. What happened at that time? The massive crash down to $38. Plotkin himself said that the rapid rise in price was not due to shorts covering right? But have they covered since one way or the other? The beta would indicate no because now the beta is even lower, at -2.09. Since Yahoo confirms Nasdaq, I think the FT is sus and in the best case just doesn't update its data. -1.7413 is still remarkable though.
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>
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> [...]I don't know how the beta is calculated by these news outlets but I think it must be done automatically by the bots and even if FT were a shill and not simply inaccurate, the beta of -1.7413 is still crazy.
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What struck me, however, is that GME's beta supposedly didn't go negative until February. Wasn't GME shorted to shit well before February? Why would beta only plunge in February? The worst part, though, is that the commentary reveals that the writer of the original DD ([u/animasoul](https://www.reddit.com/u/animasoul/) ) didn't look into how beta is calculated. How are you going to start attributing meaning to a number without understanding where it comes from?
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So I looked into how beta is calculated, and sadly GME's negative beta is entirely meaningless, an artifact caused by an outlier. Here's what do you need to know:
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1. Beta is easy to calculate. You can do it yourself with Excel following [these steps](https://investexcel.net/how-does-yahoo-finance-calculate-beta/).
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2. The beta reported by Yahoo Finance et al is calculated using only 36 monthly data points. This is not very many, which means the calculation can be skewed by outliers fairly easily.
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3. There is a [HUGE OUTLIER in January that wrecks the whole calculation](https://imgur.com/a/JMEaUZ0). This is why the beta suddenly went negative in February. Basically, when looking at monthly pricing, GME went up 1625% from December to January, while the benchmark went down -1%. This completely warps the beta calculation but wasn't caused by any kind of shorting activity, because the offending data point is one where GME's stock price is RISING, while the market is falling. If you remove this outlier, [GME's beta is POSITIVE 1.58](https://imgur.com/a/iYjrBR3). If the market had risen 1% instead of falling 1% that month, [GME's beta would have been 1.06](https://imgur.com/a/SOTHAG3).
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Long story short, GME's negative beta isn't a story about whether or not the shorts have covered, it's a story about a stock going to the moon (+1625%) in a month when the rest of the market went down slightly (-1%) and how that single data point warped the 36 month average because the stock's upward movement was so pronounced. The stock's beta could remain negative for three years, until the outlier falls out of the 36 month calculation period, or it could revert to positive if there's another massive swing in the stock price that is positively correlated with the market, offsetting the January outlier. While the outlier was caused by the FTD/gamma/short squeeze (or not, if you subscribe the theory that nothing has squoze yet), since then, none of this has anything to do with whether the stock is currently being shorted, or whether the shorts are covering.
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Anyone with a spreadsheet and an internet connection could have come to this same conclusion, so do a little research before believing everything you read, even if it's long, supports your preconceptions, and ends with diamond hand emojis.
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@ -0,0 +1,53 @@
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MACD on GME is showing bullish signs...
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=======================================
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**Author: [u/himynameshassan](https://www.reddit.com/user/himynameshassan/)**
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**[Source](https://www.reddit.com/r/Superstonk/comments/mu5m16/macd_on_gme_is_showing_bullish_signs/?utm_source=share&utm_medium=ios_app&utm_name=iossmf)**
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[Education 👨🏫 | Data 🔢](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Education%20%F0%9F%91%A8%E2%80%8D%F0%9F%8F%AB%20%7C%20Data%20%F0%9F%94%A2%22&restrict_sr=1)
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Hello fellow apes!
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*Obligatory, this is not financial advice, I have looked into this on my own accord and with any TA around GME it's not by any means fullproof. GME does what it does when it does, no TA on GME will ever 100% predict it's trajectory so take this post with the tiniest of grains of salt.*
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I wanted to share some data around MACD in relation to GME. For anyone that's unfamiliar with MACD it's a TA indicator that can be used to find good times to buy/sell a stock. Here's a brief summary from [Investopedia](https://www.investopedia.com/terms/m/macd.asp#what-is-moving-average-convergence-divergence-macd) which explains it better:
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> Moving average convergence divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a security's price. The MACD is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA.
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>
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> The result of that calculation is the MACD line. A nine-day EMA of the MACD called the "signal line," is then plotted on top of the MACD line, which can function as a trigger for buy and sell signals. Traders may buy the security when the MACD crosses above its signal line and sell---or short---the security when the MACD crosses below the signal line. Moving average convergence divergence (MACD) indicators can be interpreted in several ways, but the more common methods are crossovers, divergences, and rapid rises/falls.
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Now onto the juicy part. MACD has been a pretty good indicator showing the rise and fall of GME, from all the way back in January you can see whenever the two signal lines intersect we see upward/downward trend of the stock. More importantly when the blue signal line overlaps the yellow.
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[](https://preview.redd.it/2qq98ve6v5u61.png?width=525&format=png&auto=webp&s=e68d276ba61f53b91da53ec0813f6ffb15f783bf)
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MACD for January squeeze
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As you can see, at the beginning of January the two signal lines intersected which then caused the gradual increase of the stock price to the 300/400 range it ended up at before intersecting again at the beginning of February where it began it's decline to the 40s.
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The lines began converging again at the end of February shown in the below image.
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[](https://preview.redd.it/k16ddsevv5u61.png?width=478&format=png&auto=webp&s=b568dc77a880aa0f91aa978ce148e1ffbcc65db2)
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MACD throughout February into March
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As we had our second build up to 300 the lines crossed again with the stock moving upwards only to come back down around the 3rd week of March where the lines intersected once again causing the downard push of the stock price.
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Okay, you've thrown some images at me with some pretty colours and lines but what does this mean for the near future? Well fellow ape, this means good things. Here is the current situation of the MACD for this month.
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[](https://preview.redd.it/rnvr3utew5u61.png?width=434&format=png&auto=webp&s=82b14e947c9f3abeff65e8f07d275f6bc6b29aa6)
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MACD from March till now
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As you can see the 2 signal lines are converging once again. We've had downward pressure of the price since the end of March and once that blue line overlaps we should see a push upwards and from how close those lines look, it could be soon. In reference to MACD this is what is called a [Reversal](https://www.investopedia.com/terms/r/reversal.asp), I want to preface this by saying one of the downsides to MACD as an indicator is that although it shows bullish signs, sometimes it draws false poisitives as explained again here on [Investopedia](https://www.investopedia.com/terms/m/macd.asp#limitations-of-macd):
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> One of the main problems with divergence is that it can often signal a possible reversal but then no\
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> actual reversal actually happens---it produces a false positive.
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>
|
||||
> "False positive" divergence often occurs when the price of an asset moves sideways, such as in a [range](https://www.investopedia.com/terms/t/tradingrange.asp) or [triangle pattern](https://www.investopedia.com/terms/t/triangle.asp) following a trend. A slowdown in the momentum---sideways movement or slow trending movement---of the price will cause the MACD to pull away from its prior extremes and gravitate toward the zero lines even in the absence of a true reversal.
|
||||
|
||||
So with any TA, take this with a pinch of salt and GME is a wild stock to apply TA to but historically the MACD for GME has followed the pattern pretty closely. This also nicely fuels my confirmation bias which is always welcome.
|
||||
|
||||
TL;DR - MACD for GME is converging on the daily chart which in the past has been a bullish sign which has pushed the stock price upwards, both in January and February when we had the squeezes the MACD crossed over and we had upwards momentum of the stock for several days.
|
||||
|
||||
Thanks for reading this has been my TED talk.
|
||||
@ -0,0 +1,63 @@
|
||||
# Negative Beta And VIX / GME
|
||||
|
||||
**Author: [u/Kikanbase](https://www.reddit.com/user/Kikanbase/)**
|
||||
|
||||
Good morning my fellow Apes. I just woke up and decided to open Twitter and see what miss Alexis Goldstein had to say and boy did I like what I read.
|
||||
|
||||
https://twitter.com/alexisgoldstein/status/1380378197464858628?s=21
|
||||
|
||||
What does this have to do with GME you say?
|
||||
|
||||
I will try to make it short and sweet.
|
||||
|
||||
Someone is betting the VIX will go up soon! (Catching on yet?)
|
||||
|
||||
On Thursday there was a $40 million bet against the market using VIX.
|
||||
|
||||
“The VIX closed at 16.95 on Thursday, its lowest close since February 20, 2020, just before the coronavirus pandemic spooked investors and roiled global financial markets. “
|
||||
|
||||
“Given that big rallies in the options-based index tend to come during turbulent periods for stocks, the trade could represent a bearish outlook for equities.
|
||||
|
||||
The S&P 500 closed at a record high on Thursday helped by a rise in technology and other growth stocks.” -
|
||||
|
||||
Source Reuters
|
||||
|
||||
https://www.reuters.com/article/us-usa-stocks-options-vix-idUKKBN2BV37U
|
||||
|
||||
Last I checked (today in bed) the SP has a strong bearish divergence all indicators points to it going down. (I’m a dum ape and idk how to post a picture of the divergence on my phone) . Price keeps going up with lower volume and MACD going down.
|
||||
|
||||
Now what is VIX?
|
||||
|
||||
Well it’s the Volatility Index on the market.
|
||||
|
||||
“The Volatility Index, or VIX, measures volatility in the stock market. When the VIX is low, volatility is low. When the VIX is high volatility is high, which is usually accompanied by market fear.”
|
||||
|
||||
“If the VIX is high, it's time to buy" tells us that market participants are too bearish and implied volatility has reached capacity. This means the market will likely turn bullish and implied volatility will likely move back toward the mean. The optimal option strategy is to be delta positive and vega negative; i.e., short puts would be the best strategy. Delta positive simply means that as stock prices rise so too does the option price, while negative vega translates into a position that benefits from falling implied volatility.”
|
||||
|
||||
"When the VIX is low, look out below!" tells us that the market is about to fall and that implied volatility is going to ramp up. When implied volatility is expected to rise, an optimal bearish options strategy is to be delta negative and vega positive”
|
||||
|
||||
Bearish strategy is to be DELTA NEGATIVE!
|
||||
|
||||
Source Investopedia
|
||||
|
||||
https://www.investopedia.com/articles/optioninvestor/09/implied-volatility-contrary-indicator.asp
|
||||
|
||||
Now what is GME current negative beta? Well that answer depends wether or not you trust Bloomberg terminal. Some say -8 and up to -24!? And recent -36??? Wth
|
||||
|
||||
https://www.reddit.com/r/GME/comments/m6mje0/gme_beta_from_bloomberg_and_ownership_update/?utm_source=share&utm_medium=mweb
|
||||
|
||||
https://www.reddit.com/r/GME/comments/mfhszf/gme_adjusted_beta_23735_bloomberg_terminal/?utm_source=share&utm_medium=mweb
|
||||
|
||||
GME go BRRRRRRRR when VIX goes up! IM JACKED TO THE TITS!
|
||||
|
||||
With all the positive news on GME 4/20 and 6/9, you know what I mean.
|
||||
|
||||
It all correlates within the time frame of the VIX bet. If anything MB is right and this should bring down more than just the market because it correlates to everything else as well!
|
||||
|
||||
https://www.reddit.com/r/DeepFuckingValue/comments/mn9j91/michael_brrrrrrry_warnings_of_the_upcoming_market/?utm_source=share&utm_medium=ios_app&utm_name=iossmf
|
||||
|
||||
TLDR; Million dollar bets on VIX going up soon. VIX goes up GME go BRRRR due to high negative beta. 🍌🍌🍌🍌🍌🦍🦍🦍🦍🦍👐💎👐💎🚀🚀🚀🚀🚀🚀🚀🚀 Thanks for coming to my Ted talk.
|
||||
|
||||
Disclaimer
|
||||
|
||||
I do not provide personal investment advice and I am not a qualified licensed investment advisor. I am an amateur investor. All information found here, including any ideas, opinions, views, predictions, forecasts, commentaries, suggestions, or stock picks, expressed or implied herein, are for informational, entertainment or educational purposes only and should not be construed as personal investment advice.
|
||||
@ -0,0 +1,120 @@
|
||||
THE MYTHICAL UNICORN AKA EXTREMELY ABNORMAL negative beta of GME evidence that shorts have NOT covered by U/Animasoul
|
||||
=====================================================================================================================
|
||||
|
||||
**Author: [u/Animasoul](https://www.reddit.com/u/Animasoul/)**
|
||||
|
||||
**Posted by: [u/PIanetary](https://www.reddit.com/user/PIanetary/)**
|
||||
|
||||
[DD](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%22&restrict_sr=1)
|
||||
|
||||
I am NOT the author. All credits go to [u/Animasoul](https://www.reddit.com/u/Animasoul/). Their account can't post in GME just yet because of age.
|
||||
|
||||
TLDR - the effect of short selling on a positive-beta stock will be to give the stock a negative beta. Otherwise, in normal situations, there cannot be a negative beta stock because it is only theoretically possible, not actually possible. What is GME's current beta? Depending on the source:
|
||||
|
||||
Financial Times: -1.7413
|
||||
|
||||
Yahoo Finance: -2.07
|
||||
|
||||
Nasdaq: -2.09
|
||||
|
||||
UPDATE: BLOOMBERG currently at -8 (Insane.) <https://www.reddit.com/r/GME/comments/m6mje0/gme_beta_from_bloomberg_and_ownership_update/?utm_medium=android_app&utm_source=share>
|
||||
|
||||
At 16 March 2021.
|
||||
|
||||
This is CRAZY. I am currently writing my dissertation for an MSc in Finance and Financial Law. I learned in Corporate Finance that a negative beta stock is like a mythical unicorn, so when I noticed a few weeks ago that GME's beta was -2.01, I interpreted this as some sort of perversion around what is happening with the stock right now but did not understand what it really meant. I have since been investigating this in my own time instead of my actual dissertation topic and this is what I have found - that short selling can create a negative beta - and now GME's beta has fallen even more to as much as -2.09 according to Nasdaq.
|
||||
|
||||
Background theory - IMPORTANT
|
||||
|
||||
What is beta? Beta is a number that reflects the correlation between the price movement of a stock and the movement of the overall market. We do not have the data of the "real world market" so the "market" of GME is going to be the S&P500. Basically the "market" is the universe in which we and all stocks exist. That is why a negative beta is normally not possible. It is like saying that a certain species of animal will thrive and prosper the more the health of the Earth as an environment deteriorates. Yeah, it could happen in an abnormal situation, like an atomic bomb and the cockroach population coming out the winner, but it is not something normal as we all depend for our growth on the market/the Earth.
|
||||
|
||||
A beta of 0 means that there is no correlation between the market and the stock.
|
||||
|
||||
A beta of 1 means that the stock moves exactly the same as the market, e.g. if market is up 10%, the stock is up 10%.
|
||||
|
||||
A beta of more than 1 means that the stock amplifies the market's movement by that much, e.g. if market is up 10%, then a +1 beta stock would go up, e.g. 15%.
|
||||
|
||||
A beta of -1 is a perfect negative correlation, so the stock moves exactly the opposite of the market, e.g. if market goes down 10%, the stock goes up 10%.
|
||||
|
||||
A beta of less than -1 means this negative correlation is amplified, e.g. market goes down 10%, stock goes up 15%.
|
||||
|
||||
An easy online source:
|
||||
|
||||
'Negative beta: A beta less than 0, which would indicate an inverse relation to the market, is possible but highly unlikely. Some investors argue that gold and gold stocks should have negative betas because they tend to do better when the stock market declines.'
|
||||
|
||||
<https://www.investopedia.com/investing/beta-gauging-price-fluctuations/>
|
||||
|
||||
About GME specifically
|
||||
|
||||
Here is the historical beta of GME from Zacks:
|
||||
|
||||
02/28/2021 -2.195
|
||||
|
||||
12/31/2020 1.404
|
||||
|
||||
09/30/2020 1.084
|
||||
|
||||
06/30/2020 1.038
|
||||
|
||||
03/31/2020 0.4512
|
||||
|
||||
You can see that GME's beta has only been negative since end of Feb 2021. Before that it had a very normal beta of over 1, meaning when the market was doing well, then its business did well too, i.e. people have money to spend on games, etc. Even during most of the lockdown its beta was still quite a bit above 1. But at the end of Feb, it suddenly went all the way down to -2.195. What happened at that time? The massive crash down to $38. Plotkin himself said that the rapid rise in price was not due to shorts covering right? But have they covered since one way or the other? The beta would indicate no because now the beta is even lower, at -2.09. Since Yahoo confirms Nasdaq, I think the FT is sus and in the best case just doesn't update its data. -1.7413 is still remarkable though.
|
||||
|
||||
Here is a quote from an academic source by Fabozzi - the author whom I credit with helping me the most to prepare for my Corporate Finance exam - anything he writes is gold and written very clearly with no academic posturing or arrogance:
|
||||
|
||||
'So far the implications of systematic risk have been ignored. The beta of a short position is the negative of the beta of a long position, and is hence normally a negative number. In the capital asset pricing model, the required rate of return for an investment depends on the correlation of the return from the investment with the other securities in the portfolio, a characteristic that can be measured by its beta.'
|
||||
|
||||
<http://www.dmf.unisalento.it/~straf/allow_listing/fabio/fabio3.pdf>
|
||||
|
||||
See also this author:
|
||||
|
||||
'Although the data used in this research consist of net short positions and the tax regulation in the Netherlands is different from USA regulation, a small negative beta is expected to account for end of the year, tax-motivated short selling.'
|
||||
|
||||
<https://essay.utwente.nl/66633/1/Klamer_MA_MB.pdf>
|
||||
|
||||
Both authors mention this very casually and by the way because it is so obvious to them. Logically, if the true beta is, say, 1.4 then its beta when shorted must be a negative number. This is very significant for apes who like GME because they keep telling us that there is no more short interest, here's the data, etc. but they can't manipulate the beta. I don't know how the beta is calculated by these news outlets but I think it must be done automatically by the bots and even if FT were a shill and not simply inaccurate, the beta of -1.7413 is still crazy.
|
||||
|
||||
For comparison, this academic says:
|
||||
|
||||
'Every time I have found a negative beta in practice, there was either a data error or the sample size was too small for the negative beta to be statistically significant...But now there is an interesting real life case of a negative beta stock: Zoom Video Communications, Inc....A better example of beta changing dramatically (going from around two to negative and then back to around two) within a few months without any change in the business mix of the company would be hard to find. *Negative betas may be a once in a 100-year event [emphasis added]*.'
|
||||
|
||||
<https://jrvarma.wordpress.com/2020/08/23/negative-beta-stocks-the-case-of-zoom/>
|
||||
|
||||
To me, this is all very strong evidence that the shorts have not covered and are desperate. Due to the absence of reporting requirements for short positions and the other myriad and innovative ways that HFs may be shorting GME that we cannot see, no one has hard numbers for the actual short interest in GME, but *the beta cannot lie*. Since HFs have been shorting GME since forever and the beta was still more than 1 even during the pandemic, it must have been safe for them *so long as a large number of investors were not buying up GME and holding*. I am planning another post summarising what Fabozzi says about why, under realistic assumptions, optimists set the price, not pessimists (i.e. short sellers).
|
||||
|
||||
FREQUENTLY ASKED QUESTIONS - *I know this is a very long DD but please check the edits if you have any questions. I notice that most of the new questions are variations on the edits.*
|
||||
|
||||
EDIT 1: To clarify because it is coming up in the comments, a negative beta which is less than -1 is not very unusual and it means that the stock is resistant to a market downturn but doesn't actually go as far as doing the opposite of the market, i.e. -1 or less. But -1 is considered not to exist, although academics never like to say never.
|
||||
|
||||
EDIT 2: Also in response to comments - a negative beta does not mean that the stock never ever goes down when the market goes up. It is a general trend and is also only backwards looking - it doesn't predict what will happen. If things change the beta will recalculate.
|
||||
|
||||
EDIT 3: The overall market does not need to crash for GME to go up. GME's true beta is around 1.02. That's why the negative beta strongly indicates short selling. Until the beta returns to normal, GME is probably still being short sold. I am not promising the moon apes, although I hope for it. This is all just maths, we don't know what will actually happen, we can just make our own best decision and then we have to accept the outcome of our decision. But I am personally 💎🤲
|
||||
|
||||
EDIT 4: If you would like to know the beta of any stock, you can easily google this. Financial news websites like Yahoo will give this to you for free under the price chart. I also found beta figures on Nasdaq.
|
||||
|
||||
EDIT 5: My future post summarising Fabozzi's research on why, in realistic situations, optimists set the price and not pessimists will offer an explanation of why the previous short selling did not affect the beta and why short selling looks like it has increased sharply as reflected in the very negative beta since apes started diamond handing. I also work and am not only a student so this might take me some time but I think it is super important, I was also floored when I read this and want to share with other apes.
|
||||
|
||||
So long story short 💎🤲
|
||||
|
||||
Disclaimer: not financial advice, etc. This is not my post. It's by [u/Animasoul](https://www.reddit.com/u/Animasoul/)**. Thank you to everyone for the awards and upvotes on their FT post, it warmed this ape's heart. Tendies to all!**As always, HOLD and BUY. Godspeed.
|
||||
|
||||
Proof WSB mods are corrupt/extremely questionable if not outright bought out.
|
||||
|
||||
I posted this to wsb right after posting here on gme. They removed it within 10 minutes or less.
|
||||
|
||||
[](https://preview.redd.it/vgk7mq7p6hn61.png?width=1603&format=png&auto=webp&s=c3760781076c415f151b4e4f93e7ec2aec15dafe)
|
||||
|
||||
Exhibit A
|
||||
|
||||
This repost by someone else was also deleted with a very questionable stickied comment. You can see how the sentiment and reception is very telling. Either way, GME holds and buys.
|
||||
|
||||
[](https://preview.redd.it/w3bwfigv6hn61.png?width=935&format=png&auto=webp&s=6901288dd26ae634748c20da46eea8359c77d5b0)
|
||||
|
||||
Exhibit B: sus af
|
||||
|
||||
VINDICATION 5 HOURS LATER:
|
||||
|
||||
The post got unbanned and I guess the 3 day old mod was acting too blatant and not being lowkey enough for their higher ups.
|
||||
|
||||
[](https://preview.redd.it/1571x7sd0in61.png?width=909&format=png&auto=webp&s=ab633566849ba39eb7dbe8daab52cdcf19d65974)
|
||||
|
||||
Exhibit C: Vindication
|
||||
@ -0,0 +1,90 @@
|
||||
The real price of GME is currently around 900-1k RIGHT NOW BASED ON OBV
|
||||
=======================================================================
|
||||
|
||||
**Author: [u/jarofmy](https://www.reddit.com/user/jarofmy/)**
|
||||
|
||||
[Possible DD 👨🔬](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Possible%20DD%20%F0%9F%91%A8%E2%80%8D%F0%9F%94%AC%22&restrict_sr=1)
|
||||
|
||||
FIRST OF ALL, I AM NOT A FINANCIAL ADVISOR. THIS IS NOT FINANCIAL ADVICE. THESE ARE JUST MY OPINIONS AND INTERPRETATION. MATTER FACT, I AM JUST POSTING PICTURES OF CRAYON SCRIBBLES.
|
||||
|
||||
Since I can barely read/write myself, I'll keep this short and get straight to the point. There are way too many DD's out there, written by apes way wiser than me, with DETAILED explanations of everything I'm talking about. SUCH AS THIS SUPER IN-DEPTH DD REGARDING OBV IF ANY SMOOTH BRAINS WANNA DEVELOP A FEW WRINKLES BY [u/Cuttingwater_](https://www.reddit.com/u/Cuttingwater_/) : <https://www.reddit.com/r/GME/comments/mdyfpc/gmes_price_continues_to_be_artificially_deflated/>
|
||||
|
||||
For anyone else who's been here for while, we all know what the fuck OBV is at this point right?
|
||||
|
||||
HERE'S A QUICK SYNOPSIS:
|
||||
|
||||
All you need to know is that "On Balance Volume (OBV)" is a technical indicator that uses volume changes to make price predictions. This indicated is based on REAL data that has already happened, and therefore cannot be manipulated. It's literal purpose is to show how the price is moving. OBV TL;DR: If the price closes higher than the previous price, OBV goes UP. If the price closes below the previous price, OBV goes DOWN.
|
||||
|
||||
Now I'm a fucking illiterate, so naturally I am a visual learner. I've pulled the charts of a bunch of random ass stocks, including: AMC, APHA, APPL, CHWY, MVIS, PLTR, SNDL, TSLA, and WFC to compare and show how their OBV's trend according to the price moves.
|
||||
|
||||
[](https://preview.redd.it/jngn5rgrjms61.png?width=1646&format=png&auto=webp&s=51c61c7a3c7c525df85f1b626bcd4f10cd88b3a7)
|
||||
|
||||
AMD, cool looks normal
|
||||
|
||||
[](https://preview.redd.it/op3rxqgrjms61.png?width=1642&format=png&auto=webp&s=5f97c1750c35bb4d2f7b8e3a1e1adcdc0c1abc1c)
|
||||
|
||||
APHA, cool looks normal
|
||||
|
||||
[](https://preview.redd.it/7p534rgrjms61.png?width=1646&format=png&auto=webp&s=c01e07bf71e8b7e4f5520f6e0869f7aa897162a1)
|
||||
|
||||
APPL, cool looks normal, that red candle crazy tho lmao
|
||||
|
||||
[](https://preview.redd.it/4m5f7tgrjms61.png?width=1647&format=png&auto=webp&s=7bd43b4b8d3be0c260f61c24e178192d3f1aa957)
|
||||
|
||||
CHWY, looks great Papa Cohen
|
||||
|
||||
[](https://preview.redd.it/91vggsgrjms61.png?width=1648&format=png&auto=webp&s=499a5738d2014cf6a0a11e7632b9bd56d8db8d4a)
|
||||
|
||||
MVIS, looks normal
|
||||
|
||||
[](https://preview.redd.it/fci1jugrjms61.png?width=1647&format=png&auto=webp&s=75d642d359675064410767e2415121e51fbf834a)
|
||||
|
||||
PLTR, looks normal here Mama Woods
|
||||
|
||||
[](https://preview.redd.it/7m3o8tgrjms61.png?width=1644&format=png&auto=webp&s=49670b8a075a80ae3a80da8a2cd65369bb5cdd13)
|
||||
|
||||
SNDL, looks normal, RIP
|
||||
|
||||
[](https://preview.redd.it/bz17psgrjms61.png?width=1643&format=png&auto=webp&s=fa77b0dd8c6bc17e0b2649d759145c894d06a4ab)
|
||||
|
||||
WFC, wow crazy... looks normal
|
||||
|
||||
Ok now look at GME... LMAO
|
||||
|
||||
[](https://preview.redd.it/i5qd6ueakms61.png?width=1642&format=png&auto=webp&s=d7bdcb74a95265457975d5a0e01675e8d0a688a2)
|
||||
|
||||
GME, looks.... normal...? LMAO
|
||||
|
||||
The OBV for GME is absolutely artistic looking. As we all know, the price of GME is heavily manipulated. The OBV during January, specifically when the price was $482, the OBV was around 356.22 million. The current OBV of GME is roughly 730.11 million. And just doing a quick rough estimate with these numbers, based on percentage proportions, I believe that GME's current real price is actually somewhere between $800-1k.
|
||||
|
||||
TL;DR: OBV is generally used to confirm price moves, and is more than 2x the OBV in January's peak, which leads me to believe the suppressed REAL price of GME is currently somewhere between $800-1k.
|
||||
|
||||
I MEAN, I DON'T REALLY KNOW ANYTHING AND COULD BE MISUNDERSTANDING THE CONCEPT OF OBV ENTIRELY. IF THAT'S THE CASE, PLEASE JUST FLAME THE FUCK OUT OF ME IMMEDIATELY. OTHERWISE...
|
||||
|
||||
MY TITS ARE ABSOLUTELY JACKETH RIGHT NOW!
|
||||
|
||||
THAT'S ALL FOLKS, BUY AND HODL FOR THE INFINITY SQUEEZE
|
||||
|
||||
EDIT 1: FORGOT TO ADD AMC BUT LOOKS LIKE AMC HAS THE SAME ANOMALY AS GME HMMMMMMMMMMMMMMMMM
|
||||
|
||||
[](https://preview.redd.it/e5ffyi095ns61.png?width=1637&format=png&auto=webp&s=dd513b16948046db8b5c7c1ffe4fc96a5c7a5ad7)
|
||||
|
||||
AMC LOOKING KINDA THICC
|
||||
|
||||
I WANTED TO KEEP THIS POST AS BASIC AND EASY TO UNDERSTAND AS POSSIBLE, BUT AS FELLOW APE [u/Criand](https://www.reddit.com/u/Criand/) HAS SAID:
|
||||
|
||||
> OBV = OBV + Volume; if price goes up
|
||||
>
|
||||
> OBV = OBV; if price stays the same
|
||||
>
|
||||
> OBV = OBV - Volume; if price goes down
|
||||
>
|
||||
> OBV on normal stocks will look roughly like the price chart. But GME is unique. We tend to have price go down significantly with little volume, but always price goes up with large volume days. You shouldn't see that. Large volume days should have some days where price drops, but that has yet to happen for gme.
|
||||
>
|
||||
> So now we see OBV continuing to rise, which screams manipulation. The true price should be following the obv more or less, resulting in OPs $900+
|
||||
|
||||
EDIT 2: THERE HAVE BEEN QUESTIONS ABOUT OBV NEEDING AH/PRE-MARKET INFORMATION AS WELL, WHICH MAY BE SEEN HERE, THANK YOU [u/wardenelite](https://www.reddit.com/u/wardenelite/) <https://www.youtube.com/watch?v=CQH6zn-B6Dc&t=5216s>
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My take from this is: despite there being a dip in AH, the OBV that is shown to still CURRENTLY higher be at a higher level than it was in January. Like I've said, I'm not sure what this all means, but I guess we can at least add this as another anomaly related to GME that doesn't occur it any other stock.
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Additionally, PLEASE STOP GIVING ME AWARDS! USE YOUR MONEY TO BUY THE STOCK THAT YOU LIKE!
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