Newsflash: The Great GameStop Saga of ‘21 is actually closely related to … my Facebook page?
Allow me to explain …
When I look at my Facebook newsfeed, I see what all my friends, annoying lovely neighbors and crazy relatives are up to.
But in between dance recital pics and cat memes, Facebook sends me ads like this one:
Here’s a question?
Aside from my impeccable taste for winners, how does Facebook know I like Villanova basketball?
The answer …
Facebook’s technology can follow what I’m writing, what I’m talking about and what I’m clicking.
Kind of creepy!
But this is the same technology that’s messing with the big Wall Street hedge funds right now.
There is clearly a large number of retail traders buying GME and AMC.
The volume is YUGE.
Earlier in the week, GME traded over 190 million shares.
There are 2.8 million members of Reddit’s Wall Street Bets forum.
If 50 percent of them bought 100 shares, that would only be 140 million shares of stock.
Well, far fewer than half are buying GME. And the average purchase isn’t anywhere near 100 shares.
So where exactly is all of this volume coming from?
Dance to the Algorithm
The answer involves the same technology that sent me the Villanova Basketball ad.
While short-selling hedge funds have been in the headlines for getting absolutely rocked during this mess, there is a different kind of fund out there making BANK.
These are typically high-speed hedge funds that employ “news reading algorithms,” or algos for short.
The traditional news reading algos monitor breaking news and buy or sell S&P 500 futures based on that information.
This type of algo doesn’t merely read news, though, it also measures “excitement” and senses for momentum.
When GME began blowing up on Wall Street Bets, the news reading algos knew exactly what to do.
No, they didn’t show Wall Street Bets members an ad for the new Zelda game … they sent an order to the market and bought GME.
And not just 100 shares …
They bought A LOT of it … I’m talking MILLIONS of shares.
Option Pit Technology
My team and I built technology similar to the algos above for our incredible new Robinhood Trader tool that launched just the week.
You’ve probably seen some of the gains flying around — 548%, 103%, 93%, 45%, 46% in just the past few days.
And it was mentioned in Friday’s Wall Street Journal.
(By the way, all the details on how to get this proprietary tool for yourself are right here.)
The Robinhood Trader looks for excitement and activity from retail traders that are using Robinhood to buy stock and options. It does this by tracking increases in Robinhood rank matched with increases in volume.
It then — and this is really important — looks to see if institutional dollars from hedge funds are buying options in the same direction as Robinhood accounts.
Because without the institutional dollars, GME doesn’t go to $500, it goes to $50 … maybe.
Understanding this will help you differentiate between, “Hey, there is a lot of chatter on this no-name penny stock,” and GME going to the ionosphere.
In the end, while Robinhood/Wall Street Bets is a great underdog storyline … it’s the big money that sends stocks into orbit.
And at Option Pit, we can tell you when it’s coming.
You Only Option,