Okay folks, we need to violently talk about this idea of short laddering and what the hell is going on with Amc. I want to talk about the chances of a Gamma squeeze and what exactly that is. and I want to talk about some violent things that we learned from yesterday's bounce in Amc and what that means for next week. And the only thing that I ask of you in return is that you hit that ravishing like button and also don't forget to subscribe either.

Okay folks, so if you've been following the Amc story, you know that short laddering is a big part of it. And to actually understand why short laddering is so effective, you actually have to understand how share prices are calculated. Now, of course, there are three different variables there. You have the buyers, the number of buyers, you have, the number of sellers, and then you have the number of available shares, more volume of shares being traded, and the more shares available to trade.

Harder, it is for any one buyer or any one seller to have an effect on the actual share price because you just become a small decimal in many, many, many, many different transactions. So effectively, the less buyers and sellers in any given stock, the more impact each buy and sell order has on an underlying stock. And short laddering is essentially when two or more hedge funds exchange tons of synthetic shares amongst each other at lower and lower prices, driving prices down and inducing artificial selling pressure. For example, let's go ahead and make up two different fun names that have no relation to actual funds.

Don't even think they do. There's nothing to do with actual funds. Just to be clear, the two funds that I just completely made up out of thin air are Frederick Capital and Hidadel. Let's go ahead and say that they decide to initiate a short ladder on Amc at say, fifty dollars, and this is especially effective during periods of lower volume.

Well, what would short laddering entail? Well, it would entail selling a ton of synthetic shares, artificially driving the price down, and then buying them back at the lower price of 45. They dump a ton of synthetic shares onto the market. It lowers the price, obviously because they're dumping shares. So that means you're having an attack of sellers, all of the selling pressure, and buyers trying to meet that selling pressure.

And because they're dumping it all at once, the selling pressure is going to outmatch the buying pressure. and so the price dumps just based on those synthetic shares that are being traded and dumped onto the market. But you're also probably getting some of the people who are also legitimate shareholders of Amc going and panic selling. They're like, okay, well, I see that the price is going down, so obviously I better sell too.

So they sell, and that adds even more selling pressure Then what happens while Frederick and Hitadel then go and buy back at a price of 45? They cover their short positions that they just shorted at 50 and they cover it at 45. then they can use the profits and capital from that last profitable trade to then go and once again dump more synthetic shares short at the lower level and thus apply even more selling pressure, once again, pushing it artificially lower, motivating some Amc shareholders to sell as well, making it look like Amc has gone down dramatically when in effect. It's just been two major parties dumping and slyly covering shares at a profit between them. Now keep in mind, and this is very important that most hedge funds that engage in this want to keep their synthetic shares out in the market for the least amount of time possible.

The longer they are out, the more risky it is. So ideally they keep pumping them back and forth. but sometimes if say, the stock price goes up, it makes it very difficult for them to get their synthetic shares back without locking in massive losses. So while in effect, they'd love to keep laddering down and the stock keeps going down and they keep getting in and out.

It becomes very, very difficult for them to do that when a stock like Amc goes up. Let me go ahead and give you a really, really easy analogy to understand. Let's say that you're in a neighborhood that has tons and tons of identical houses, all priced at one million dollars each. Let's say that in that neighborhood, there are five individual houses that are all on the market and each of the owners are selling it right for one million each.

And if you've never bought real estate before, real estate works in the way where you send an offer and then you have about a 40-day escrow between when you send the offer and when you actually get to close on the house and the house is yours. the deal can follow through. at any point During that time it can fail to deliver, your home, purchase can completely fail to materialize and fall through. And now let's say that you're a Frederick representative and you go and you knock on the door of one of these sellers and you say hey, Okay, I know that you're trying to sell this house for a million bucks, but I'm gonna go ahead and I'm gonna offer you five hundred thousand dollars.

I want you to accept that and go through the escrow process with me. And don't worry, I'll pay you a little fee for your time so that we can go through this escrow and we'll have the secret understanding that at the end of the day the escrow won't go through, we won't close on the house, you won't actually have to sell it to us for 500 000. We just want to put that offer out there and make sure everybody else knows about it. Well, if that homeowner accepted for all of the other homeowners in the neighborhood, it looks like they accepted an offer for 500 000.

And if Frederick goes and then does that to another house, all the other people, the other three homeowners that have it on the market, they're like, wait a second. Our neighbors just sold their house for half the price that we're selling it for. Obviously, our houses aren't worth as much as we thought they were, and then they start lowering their prices. All of a sudden, the whole neighborhood gets cheaper because all these houses are selling for cheaper, but in reality it's just fake offers.

These offers are basically exploiting the escrow period where they're just gonna fail to deliver on the offers. anyways. now all these homes are selling really cheap and Fudric Capital can then go and buy them for half price. And if the market ever realizes what happens, it doesn't even matter because they already made their money.

Now in the real estate example. Obviously, there's only five houses, and in reality it would be very, very easy for a small neighborhood to spot that kind of manipulation. But in the stock market with hundreds of millions of shares outstanding and many ways to execute buy and sell orders, it's easier for hedge funds to use these tactics and get away with it. Now, a better example.

if we're going to really get into the synthetic share part, here, is Frederick Capital going to this neighborhood of five homes trying to get the prices down by going and inventing homes that don't even exist, posting listings in this neighborhood for half the price that don't even exist, then buying it with other entities that it owns or other hedge funds that are in cahoots with that hedge fund for extremely low prices, and then because it's just a circle where it goes from Frederick to Frederick, the money and the fake house just goes in a circle. So nothing really happened except for lowering the price of the neighborhood. and then they can go and buy all of these homes for very, very low prices. Now, obviously, in real estate, it'd be obvious if you're selling a house that doesn't exist, but in the stock market, it's not so obvious because of all the different parties and shares and calculations involved here.

But in the stock market, this is done by dumping synthetic shares, buying them back at cheaper prices, and then Ritz and repeating and while you're at it, probably spreading some misleading pr across media and paying people off to say that Amc is the worst thing you ever bought in the world, making sure retail traders know that they're dumb money. And again, I'm not insinuating that any hedge fund would ever do this, and I never would insinuate that because hedge funds are really just out for us and our own good, that would not be something that Charlie would insinuate. Okay, now as you may imagine, there are some huge risks to this strategy if you're dumping and circulating tons of synthetic shares in order to manipulate the price. Well, what happens if a ton of buyers go and start buying up these shares to the extent that it cancels out your selling pressure? Well, then instead of going down the ladder, you get pushed up the ladder at the same time where you're betting for the ladder to go down.

Which means that you're continuing to stack on more and more losses. And eventually based on the stance of your fund and your risk management strategies, you're gonna start getting squeezed. and you're gonna have to start buying back in. And that's what we've been anticipating for a long time with Amc.

Okay, next I wanna talk about the concept of a Gamma squeeze. So let's back up a short squeeze. What is a short squeeze? A short squeeze is when shorts are forced to cover their positions, whether they're being margin called or whether they just don't want to take more losses. When you cover a position, you're buying back shares, which causes it to rally even faster.

So you're buying it because it's rallying and you don't want it to rally anymore. And screw your position so you buy it back and it goes up even faster. screwing the other short positions and causing them to have to cover as well. More shorts are getting squeezed, the more there is a run to buy shares, which of course causes it to run up even more.

It's a beautiful process. I love it. Everybody loves it except for shorts. But a Gamma squeeze, folks.

a Gamma squeeze. Well, a Gamma squeeze is a completely different thing. This is a different beast entirely. And it was a huge culprit of that hundred percent rally sawn Amc two weeks ago.

So what is the Gamma squeeze? Well, it's an options concept. Bear with me for a second. When you buy and sell an order, you're going through a market maker. When you buy and sell an option, you're going through a market maker as well.

And the market maker's main goal is to make the market provide the environment for ample trading on both sides. And Gamma squeezes can happen both to the upside and the downside. But we'll focus on the upside. When market makers sell call options two participants in the market in order to protect themselves from extreme losses, they'll often buy shares to basically cover those options.

If you're selling somebody an Amc call option, you're giving them the ability to buy shares of Amc at a certain price. So if Amc goes up 500 times. Well, if you're a market maker, you're not going to want to pay 500 times the price. So you're hedging your bet by buying the underlying share.

That way, no matter what price Amc goes up or down to, you still have that share. in your account. and if you need to, you can give the share to the person who bought the options contract from you. So basically you're hedging your bets and a call option.

The higher the Gamma, the better it is for the holder of that contract. So basically, if the Gamma's going up, it means that the probability of your contract getting executed is going up dramatically. So market makers see them. They're like, uh oh.

and if call options are winning, what does that mean? Well, it creates demand to buy even more call options and call options that are further out of the money. For example, if Amc rallies from 30, 40, 50, 60, it dramatically increases the amount of call options that are in the money at those 30, 40, 50, and 60 strike prices, and then creates tons of demand for even further out of money contracts 70, 80, 90 in strike price. So what happens when you create all this demand for contracts that had no demand before? Well, market makers have to make that demand. They want to service that demand because that's their job.

And in servicing that demand, what do they do? They hedge their bets in that demand. Buying shares increases the share price. Thus, you got the Gamma squeeze. The beautiful Gamma squeeze.

Okay, so what about the next Gamma squeeze? When could that happen? Could that happen next week? Because again, we saw that original pushing from the 30, 40, and 50 regions, especially post 40. That was the sweet spot a few weeks ago where we saw a gamma squeeze that skyrocketed demand for farther out of the money options and caused that 100 green rally day. But what about the next Gamma squeeze? What is the sweet spot this time And I'll be the first to tell you that hey, we can only really speculate on this. Like with a lot of things, damage squeeze is based on the demand created for options traders, which is largely based on the momentum given to the stock and is largely circumstantial based on how many people are deciding all to buy and mass at the same time.

as all of these other participants are like, okay, we want to buy options contracts, but if I was going to spitball areas in terms of probability, if we can get momentum back earlier in the week after Friday's bounce, something that gets us to 60 65, I think over 60 you have a very strong likelihood of some of this the elevating effect of a gamma squeeze coming into the picture. but I think that you'll find that the faster and stronger a push to buy a stock is, and the faster that momentum is realized like we saw a couple weeks ago, stronger the effect the Gamma squeeze is actually going to have, for example, rapidly hitting 6065 would definitely cause some custom inflows back into out of the money options of higher strike prices, but a quick 10 minute rise from 55 to 70. that would cause a massive massive shock and momentum to options contract pricing contracts going into the money and causing massive massive massive buying pressure in anticipation of demand for higher out of the money contracts. Remember, at the end of the day, the concept of a Gamma Squeeze is all about market makers being induced to buy shares of Amc in order to provide for the demand of call option buyers.

And in my opinion, if you're going to ask me based on speculation and spitballing and based on the data that we've had, I would say that a very fast rally to the 60s or a rally to the 70s would be the way to do it. In my view, that would create ample demand for out of the money contracts which would then cause and induce market makers to go and buy tons of shares in order to hedge those bets. Will that happen? Well, the story is still out and the story's still being written so we'll see and we'll keep you updated. but hopefully these concepts help you understand a little bit more about what's happening with Amc Anyways, that caps off the video.

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