GME has become a hedging tool and should be owned by anyone invested in the markets for risk mitigation

This is a smooth brained 🦍sharing my thoughts, not financial advise. I hodl GME with more confidence now than ever before and get hyped thinking of RC and the wise words of Bruno Mars - "I'm a dangerous man with some $ in my pocket" after that flawless share sale and a fresh $550 milly. That, however, is not the purpose of this post. Even if I didn't believe it the stonk, I would still be hodling GME, and think it is wise for anyone with exposure to the stonk market to have an allocation, much like boomers love to allocate a portion of a portfolio to gold to protect them when SHTF.

To understand this, realize GME is not in a vacuum and very much integral to everything happening in the market this very moment. GME is being talked about all over the world and despite the most powerful entities in the world trying to kill interest and shift apes focus elsewhere, it remains one of the first things apes think about when they wake up in the morning. That hype has value, and the paradox is the more they try to stop it, the more fuel they add to the hype. Plenty of DD out there showing how GME is still one of the most searched tickers in the world to this point.

One of the entities behind things is the infamous shitadel, which is deeply entangled in all aspects of the market today and controls more daily trading volume than any other single entity. They are TOO BIG TO FAIL, as a shitadel blow up would be magnitudes worse than the Lehman failure in 2008. As a reminder, they recently infused Melvin capital with billions, and from the DD I've seen regarding Melvin it seems they are now all but insolvent and may no longer even exist. Supposedly you can't reach them on the phone, via email, anything (I haven't tried, as I trust my fellow apes, but please comment if this isn't the case). My theory is shitadel has taken over, thinking they can leverage their size, HFT, and MM to salvage their Melvin investment after they realized it was a bad investment.

I spent years working on a trade floor (oil), but want to give 🦍 a better idea of what happens in a professional trading institution. Risk management is super important to all institutions, and value at risk (VaR) is calculated daily and typically represent a 95% confidence in max portfolio drawdown based on historical volatility, usually taking into account the last 90 days. The problem with VaR models is their backward looking nature and even the most sophisticated risk management systems were not built to handle 10 sigma + moves (like winning the lotto twice in a lifetime). GME has had these types of moves. What does that mean? VaR doesn't work for GME, especially if you have a large short position that is a ticking time bomb. So what are the options to handle such a position if you have millions or billions of $ on the wrong side and can't get out without causing the MOASS? Here's the typical playbook when trying to unwind a huge, losing position -

1. Close out the position slowly as liquidity allows, typically in smaller trades rather than large blocks which quickly move price.
2. Hedge directly, as liquidity allows, with derivatives. Options can work, but also can cause MOASS via a gamma squeeze. Large institutions have access to other derivatives your broker will never let you touch, i.e. swaps, CFDs (contracts for difference, involved in Archegos blow up), CDS (Credit default swaps), just to name a few. These types of derivatives can cause systemic risk because other large entities take on the exposure and can quickly become insolvent if losses become exponential as the MOASS initiates. After the Archegos failure, all institutions have taken a second look at these types of derivatives and my feel is there are very few willing to enter new contracts right now, especially with GME.
3. Indirect hedging and using "pair" trades. This is critical to understand. Institutions using this type of risk management strategy rarely let themselves have "flat price exposure" which means for every long position, there is an offsetting short that is closely correlated in price movement, giving an exposure to the "spread" between the two. In the commodity world, such a trade could be going long RBOB (gasoline) and short WTI (oil). Many have noted how GME moves the same as other meme stonks, and I believe this is a major reason why. By a movie theater stonk to offset a GME short.
4. Trade your way out of it. GME is part of many ETF's and one of the largest names in the Russel 2000. With deep pockets, and HFT algos, sell large blocks of ETF's or futures on the russel to quickly tank the market. After the sale, buy back the largest stocks in the ETF or index to offset the block trade, and use the lower price to trade out of the undesired short, in essence creating a BTFD situation you have full inside knowledge of when and how far the dip is going to go. Also use it as an opportunity to shake out paper hands. Big reason I advise against using a "stop loss" with GME. If you have a max loss price in mind and want to sell, I'm not going to call you a paper handed bitch, I get there is real money at play here and everyone's situation is different, but don't use a stop loss - set price alerts and then assess the situation, don't panic sell or fall victim to HF price manipulation. Since I haven't included any pics yet, just take a look at these charts and you can see these tactics at work. The 2 other stonks are the #1 and #2 holdings in the Russel 2000 -

​

IWM is russell 2k ETF, yellow circles highlight block trades of interest

If you feel a wrinkle starting to form in your smooth brain, I want to touch on the main point - GME has become critical as a hedging tool against market chaos, which is why it has a negative beta, signifying it moves in the opposite direction as the overall market. If you have money at risk in the market, GME will save your portfolio if/when things crash. I believe shitadel is TBTF, and the powers that be will not allow them to fail, but there are plenty of other HF and shorts that are still caught on the wrong side of things. These positions will need to be unwound. Russell 2k longs being used to hedge will be sold. GME will be bought. Long positions will be liquidated. Other highly shorted stocks will need to be covered. The MOASS can/will cause systemic risks, and banks with derivative exposure will sell off/need bailouts. The can has been kicked for months, time is running out, and new regs coming into affect are making it harder to kick the can. True 💎🖐 are completely desensitized to the attempts at killing morale and buy every dip, and previous paper hands are learning from prior mistakes. GME has half a bil in new capital at the disposal of one of the savviest MFers in the world with RC. The fact shorts were only able to get the price down to $150 with a true 3.5 million shares being sold is incredible and shows the feverous demand for GME shares. GME has regained momentum after breaking the 50 day MA. Stay strong fellow 🦍, and even if you hate GME, consider the idea an investment portfolio with no GME exposure currently has more risk than one that does. Make your own investment decisions, this is not financial advise.