Implied Volatility - The markets forecast of future price movements. Plainly, the amount a stock moved around over the past year. Historic Volatility - The annualized standard deviation of a past price movements. There are two types of volatility we will be talking about here It is simply the amount a securities price fluctuates.
#WHEN THE RIVER RUNS DRY ACOUSTIC DRIVERS#
So let's discuss these primary drivers of basket stock price performanceĬontrary to popular belief, volatility is not based on directional trend in a stock. This can be distilled even further down two primary factors. Large trading ranges due to active index fund trading and wide bid/ask spreads. They have larger numbers of FTDs per unit of volume traded They have a liquidity release mechanism, either ETFs or warrants They have significant insider/retail/institutional ownership or smaller shares outstanding. They have relatively high implied volatility in those options (50%+) They have robust and liquid options chains (except KOSS & DDS, I'll explain later) These are traits found among almost all basket stocks: This once would have been a simple task, the assumption was that they simply needed to be retail stocks that were shorted hard during the pandemic or long-term targets of predatory shorting. So let's try to classify all the stocks in the basket based on some simple metrics. So I had to step back and look at what makes the basket of stocks that GME correlates with so different from all the stocks on the exchange and specifically of the stocks in the basket, why does GME outperform? As for retail they'll jump into anything that is up 10% on the day and bag-hold it forever (DOGE, ATER, MMAT, BBIG, DWAC, etc.). Some stocks have greater ownership of their float by insiders and employees that continue to be shorted such as DDS. There is still zero evidence of outstanding short positions (barring derivatives like total return swaps that are unaffected by the current or future price of GME). There are other stocks with retail interest. Is it idiosyncratic risk? Is it overleveraged naked-short positions? DRS? Retail interest? So the question I wanted to answer is, why? it outperforms in almost every metric since 2020. Even when compared to other stocks in the basket like AMC, BBBY, etc.
There is no doubt that it's behavior remains abnormal. Even for me, after all this time it is hard not to place GME on a pedestal. To view GME from it's importance in the macro environment you need to shed a lot of false assumptions about it's relevance or potential as it is viewed by many who invest in it. A step back is sometimes necessary to improve objectivity. It was important for me to try to look at GME in a different light. Without the pressures placed on the research process from the investor community that surrounds this stock. I wanted to approach analysis of GME from a place of neutrality again. It's not that the DD is done, it never is.īut, I wanted to be sure of some things I have thought for a long time before I presented anything. Originally on the fraught Gold Afternoon Fix album, this subtly recrafted version is from El Momento Descuidado.It's been a while since I last wrote anything extensive on GME. It's rethought and reclaimed on El Momento Descuidado.Ī languid reinterpretation of their Top 10 hit of '90. The Church disowned their first hit of '81 en route to becomming a planetary force. They swore they'd never, so of course they did. Includes these brief write-ups on the Church tracks:
#WHEN THE RIVER RUNS DRY ACOUSTIC SERIES#
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