Saxo Bank analyserer den nylige, voldsomme spekulation i amerikanske short-aktier, herunder GameStop. Banken kalder spekulationen for sindssyg og er sikker på, at den type spekulationer bliver mere fremherskende. Den lette adgang til aktiehandler med f.eks. nye trading-apps gør det muligt med nye spekulationer, som kan føre til “gamma squeezes”. Det kan på ingen tid få markedet til at vælte, og derfor vil myndighederne utvivlsomt gribe ind for at redesigne markedet.
Historic short squeeze in US stocks and semiconductor constraints
Summary: Yesterday’s crazy moves across a large group of heavily shorted US stocks underscore the complex feedback loops have arisen across a new wave of retail investors, easier access to options trading, a fascinating stock forum on Reddit and the massive size of ETFs reducing float in equity markets. We uncover the events and try to discuss the implications for markets. We also discuss the rising evidence of more supply constraints in the global economy now also reaching alarming levels in the semiconductor industry impacting production of cars.
Yesterday was an unusual day in US stocks due to the multiple short squeezes in many of the most shorted US stocks. There is no single cause for these moves as they are likely driven by a complex interaction across many market functions.
But one force there has been mentioned is the stock forum r/wallstreetbets on Reddit where day traders discuss stocks where it seems an orchestrated move on the most shorted stocks including GameStop was engineered.
The trades were mostly done in weekly call options which if volume is large enough can cause what is called a gamma squeeze (read an explanation here) and something we covered back in September. The moves also forced the hedge fund Melvin Capital to raise $2.75bn from Citadel and SAC to survive the short squeeze.
The chart below tweeted by Robeco Asset Management shows the performance of the most shorted stocks in the US and how things structurally changed in 2020 and beyond. Any investor trading these markets and using momentum strategies will have to understand these concepts in order not to be wrongfooted.
What happened has been covered widely and we recommend readers to read through some of the links we have highlighted above. Now we will try to discuss what it means for markets and the future of regulation.
A lot of what is happening is driven by the easy accessibility of trading through trading apps such as Robinhood but also the easy access to options trading which temporarily can cause these gamma squeezes when done in large size and heavy put/call skew.
Large passive ETF holdings take out outstanding shares reducing the float in many names which causes liquidity constraints which can amplify the moves like the ones yesterday. High frequency trading can then amplify the moves even more due to chasing short-term momentum effects.
There is no single solution to many of these phenomena underscoring the rising complexity in financial markets, but our best guess is that we could see a spectacular blow-up in equity markets under the right conditions and that this event will be the necessary wake-up call for regulators to re-design financial markets. One thing is for sure, these topics will be discussed at length this year as we do not think it is over yet.
