The Squeeze of the Year: Citron Finds Themselves On the Wrong Side of a Trade

As investors and traders, we find ourselves constantly hoping that a well known short-seller does not announce that they are short one of our holdings. We have seen this time-after-time these last few quarters as stocks continue to move in multiples.

Citron Research has ruined the party for many young investors after Andrew Left comes out announcing he is short certain companies he believes are overvalued or fraudulent. This time, the young investors fought back. Andrew Left came out attacking a community’s most prized position, GameStop. GameStop has seen a miraculous recovery and a blast to a new all-time-high. This market has never seen a more organized attack on an activist short-seller; Andrew Left announced he was going live on Twitter to give his reasoning behind his short and why “GameStop is going back to $20”. He found himself in quite the dilemma when he attempted to do so; the community, WallStreetBets from Reddit, spammed Andrew’s twitter to the point where he was not able to move forward with his live stream. To make matters worse, shares of GME continued to go parabolic as he struggled to give his presentation.

Andrew later came out with a video on Youtube and provided his reasoning behind his short position and said that this was “not a short squeeze”. Seemed like WallStreetBets took this comment into offense and they were ready for a response; on Thursday, the community page went private as they meticulously organized what might be the greatest short squeeze of the century. It was an exciting day for everyone who was trading during Friday’s session as we witnessed the spectacular short squeeze on multiple stocks. Shares of PLTR, BBBY, AMC, GME, NNDM and BB all saw jaw dropping returns and many were left wondering how retail investors could cause this.

This short squeeze was caused by what is known as a gamma squeeze; WallStreetBets organized themselves in a manner where they would all spam Call Options that would force the underwriters to purchase shares of the stock in order to hedge their sold positions. This gamma squeeze in combination with the short squeeze led to an explosive move on GameStop which saw an increase of nearly 80%. Bad day to be on the opposite side of this trade. Returns on call options were astronomical, $100 on the $60 call option expiring same day at open would have seen returns of $80k! Goes to show the power of options and why this market has witnessed a wave of investors.

A rough day for Andrew Left and Citron Research who later made a press release stating that he would no longer comment on GameStop after his family and himself were harrassed. Moral of the story? Maybe retail traders do have an affect on the market after all. The power of community and organized trading can most definitely move markets; best not find yourself on the opposite end.

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