WEBVTT - Benn Eifert Explains How Retail Trading Is Rocking Markets like Never Before 0:00:11.119 --> 0:00:14.600 Hello, and welcome to another episode of the Odd Thoughts Podcast. 0:00:14.680 --> 0:00:18.799 I'm Tracy Halloway and I'm Joe. Wisn't thal Joe? Remember 0:00:18.800 --> 0:00:21.599 when you said game Stop was a value investment? Crazy, 0:00:22.280 --> 0:00:27.200 You're you're, you're, you're skewing my words. Not really, I said, 0:00:27.880 --> 0:00:31.680 and this was the wake of our recent interview with Rod. 0:00:32.240 --> 0:00:34.920 It started off as a value investment, which is true. 0:00:35.320 --> 0:00:39.159 I would not in any sense characterize the recent trading 0:00:39.760 --> 0:00:44.920 from probably like fifteen to four eight and now back 0:00:44.960 --> 0:00:47.560 to one seventies seven after hours last time I checked, 0:00:48.159 --> 0:00:53.080 is a failure investing. I will admit that's not value investing. Okay, 0:00:53.320 --> 0:00:55.840 I think we're both agreed on that point. But you 0:00:55.880 --> 0:00:59.080 mentioned the episode we did with Rod. We talked a 0:00:59.080 --> 0:01:03.440 lot about the business case for game Stop. He was 0:01:03.480 --> 0:01:06.360 looking at a lot of fundamentals in the business that 0:01:06.480 --> 0:01:09.840 made him bullish on it as a company. That was 0:01:10.000 --> 0:01:13.400 one part of the whole game Stop saga. The other, 0:01:13.720 --> 0:01:16.880 of course, was what was going on in technicals with 0:01:16.959 --> 0:01:19.920 both the short squeeze and the gamma squeeze. And I 0:01:19.920 --> 0:01:23.080 think we need to devote an entire episode to just 0:01:23.200 --> 0:01:27.280 talking about those, yes, exactly, because the story really has 0:01:28.000 --> 0:01:29.520 I'm kind of been thinking of it. It It has it 0:01:29.560 --> 0:01:33.080 has like three parts. The first part is guys like 0:01:33.240 --> 0:01:36.480 Rod and the Roaring Kitty and some of these other 0:01:36.640 --> 0:01:40.120 Michael Burry like make the value case. Then it kind 0:01:40.120 --> 0:01:44.600 of gets into this short squeeze, redded frenzy, gamma squeeze, 0:01:44.600 --> 0:01:46.600 call buying and everything that that, and I think that's 0:01:46.600 --> 0:01:49.120 what we're gonna talk about today, I noticed. And then 0:01:49.160 --> 0:01:52.600 there is like the third part, which is everything that 0:01:52.680 --> 0:01:56.800 this taught us about market structure and robin hood and 0:01:56.840 --> 0:01:58.600 stuff like that. And maybe we'll get into a little 0:01:58.600 --> 0:02:00.200 bit of that today because I think our guest knows 0:02:00.240 --> 0:02:02.520 that stuff well. But we really like what we're gonna 0:02:02.560 --> 0:02:05.040 do today is going from part one to part two, 0:02:05.080 --> 0:02:08.680 which is like when it entered the Reddit retail flywheel, 0:02:09.320 --> 0:02:13.400 what the hell happened? What does that say about the market? Overall? Right? 0:02:13.560 --> 0:02:15.959 The squeezes are how we got to, you know, an 0:02:16.000 --> 0:02:18.800 increase of two thousand percent in the space of less 0:02:18.800 --> 0:02:20.640 than I think it was less than two weeks something 0:02:20.680 --> 0:02:23.440 crazy like that. All Right, So I'm really happy to 0:02:23.480 --> 0:02:26.200 say that we have the perfect person to talk about this. 0:02:26.480 --> 0:02:31.440 He's a four time all thoughts guest, which might be 0:02:31.520 --> 0:02:35.440 a record or might match another record. It's Ben Eiffort 0:02:35.600 --> 0:02:39.080 from QVR Advisors and he has all about options and 0:02:39.200 --> 0:02:43.960 the big Gamma squeeze. So Ben, welcome on again. Hey guys, 0:02:43.960 --> 0:02:45.600 I'm so happy to be back. It's always a lot 0:02:45.639 --> 0:02:49.480 of fun. I'm trying to think where to start, but 0:02:49.840 --> 0:02:54.120 maybe just to begin, you know, in options land, how 0:02:54.200 --> 0:02:59.160 crazy has the past week been for you? So it's 0:02:59.160 --> 0:03:01.880 certainly been been wild. I mean, as you guys no 0:03:01.960 --> 0:03:06.440 doubt have seen, there's been enormous amounts of option volume 0:03:06.480 --> 0:03:10.400 going through in some of these popular retail names, you know, 0:03:10.480 --> 0:03:14.040 gm E being an obvious one, um you know, on 0:03:14.040 --> 0:03:16.720 on some days nearing the types of typical volumes you'd 0:03:16.720 --> 0:03:19.680 see like in SMP Options or in you know, Tesla Options, 0:03:19.680 --> 0:03:22.200 which is pretty spectacular for a company that. I mean, 0:03:22.240 --> 0:03:25.079 what was the market cap of gm EU six months ago? 0:03:25.600 --> 0:03:29.160 You know, it's it's it's been quite wild. But I 0:03:29.160 --> 0:03:32.960 think this again that this was particularly crazy week. But 0:03:33.080 --> 0:03:36.240 I think, as you know, we've been emphasizing, this is 0:03:36.320 --> 0:03:39.920 really the culmination, you know, or the current state of 0:03:40.160 --> 0:03:42.960 a trend that's really been building for for quite some time, right, 0:03:43.040 --> 0:03:47.520 really start late from starting in late with surging volumes 0:03:47.520 --> 0:03:51.000 across a bunch of different brokerages platforms after the you know, 0:03:51.120 --> 0:03:53.800 Robin Hood initiated and a bunch of other brokers started 0:03:53.800 --> 0:03:57.240 matching you know, zero commission options training. So I remember, 0:03:57.280 --> 0:04:00.320 I think the last time we talked to you time 0:04:00.400 --> 0:04:03.560 late last summer, maybe it was like October or something 0:04:03.600 --> 0:04:06.600 like that, and it was kind of like taking stock 0:04:06.920 --> 0:04:09.960 of this sort of retail options booms. And there's a 0:04:10.040 --> 0:04:13.520 number of charts that you have showing the rise of 0:04:13.560 --> 0:04:16.560 one week call options and the rise of call options 0:04:16.560 --> 0:04:21.280 in general, and the rise of small orders that indicate 0:04:21.760 --> 0:04:23.960 that so much of this option activity really has taken 0:04:24.000 --> 0:04:28.880 place at the retail level. Just flash forward to today. 0:04:28.920 --> 0:04:32.880 How much crazier overall is the market. You know, we're 0:04:32.920 --> 0:04:37.800 recording this February one, February one, versus say, last September, 0:04:37.920 --> 0:04:42.599 October whenever the last time we talked. Yeah. Absolutely, So 0:04:42.680 --> 0:04:45.480 you know, if you think of what those charts looked 0:04:45.480 --> 0:04:50.279 like of growth of option contract notional traded by small traders, 0:04:50.680 --> 0:04:54.680 growth of option premium traded, you know, they looked totally 0:04:54.720 --> 0:04:57.640 parabolic at the time, and now it's just like you 0:04:57.760 --> 0:05:00.440 zoom out and that parable is just kept going at 0:05:00.480 --> 0:05:03.080 the same kind of you know, exponential growth rates. So 0:05:03.160 --> 0:05:06.040 it's been really impressive. I mean, I think there were 0:05:06.160 --> 0:05:08.680 was lots of noise over the last few weeks. You 0:05:08.720 --> 0:05:10.760 saw some of that data of just making new record 0:05:10.800 --> 0:05:14.120 after new record after new record. Um, you know, seeing 0:05:14.680 --> 0:05:18.000 just incredible numbers. You know, twenty million, thirty million, forty 0:05:18.000 --> 0:05:20.520 million calls traded in a week by by this segment 0:05:20.560 --> 0:05:23.599 of the market, and you know, tens upon tens of 0:05:23.600 --> 0:05:26.279 billions of dollars of option premium and you know, very 0:05:26.360 --> 0:05:29.320 very leverage types of types of trades. So this this 0:05:29.400 --> 0:05:32.640 trend has continued, you know, at this to grow at 0:05:32.640 --> 0:05:35.680 these kind of rates, you can speculate about where this 0:05:35.839 --> 0:05:40.120 growth has to taper off, but it hasn't yet. So 0:05:40.240 --> 0:05:43.440 let's talk about how that all that retail options activity 0:05:43.680 --> 0:05:47.160 can actually lead to buying momentum for a stock like 0:05:47.440 --> 0:05:50.360 game Stop. So one of the things that we saw 0:05:50.560 --> 0:05:53.520 last week when game Stop was rising was there there 0:05:53.520 --> 0:05:56.200 were some people out there going, oh, this possibly can't 0:05:56.240 --> 0:05:59.719 be this, I can't talk. There were some people out 0:05:59.720 --> 0:06:04.359 there going, this can't possibly be just retail investors because 0:06:04.560 --> 0:06:06.400 the stock is moving so much and they don't have 0:06:06.400 --> 0:06:09.120 a lot of money. But you've spelled out quite clearly 0:06:09.160 --> 0:06:12.320 in your research and on previous episodes with us just 0:06:12.520 --> 0:06:17.359 how smaller amounts of retail options buying can actually translate 0:06:17.440 --> 0:06:20.839 into larger amounts of money flowing into the underlying stock 0:06:21.120 --> 0:06:24.440 and a lot more leverage. Could you explain exactly how 0:06:24.480 --> 0:06:30.599 that works? Sure? Absolutely so. Well, there's a couple of 0:06:30.720 --> 0:06:34.920 related components to this. So the first is just the 0:06:35.080 --> 0:06:40.040 synthetic leverage that's embedded in options, and then the second, 0:06:40.080 --> 0:06:43.360 which will come to in a bit, is the convexity 0:06:43.480 --> 0:06:46.159 or the gamma and like the dealer hedging dynamics. But 0:06:46.279 --> 0:06:48.919 so just focusing on the first for a minute, and 0:06:48.960 --> 0:06:51.360 there's lots of different examples that you can go through. 0:06:51.839 --> 0:06:54.960 But you know, backing up a month or two to 0:06:55.160 --> 0:06:58.640 two calmer times where you know, before Jimmy implied volatility 0:06:58.680 --> 0:07:03.440 was you know, a small investor could could buy a 0:07:03.440 --> 0:07:07.000 call option on GM with maybe call it one week 0:07:07.800 --> 0:07:12.800 to expiration, and it might for example, you know, GM 0:07:12.960 --> 0:07:15.920 might have been trading at you know, around twenty bucks 0:07:16.080 --> 0:07:18.120 and they might have been able to buy a call 0:07:18.160 --> 0:07:21.320 option for you know, a very small fraction of that 0:07:21.760 --> 0:07:24.400 um you know, maybe a dollar or maybe fifty cents 0:07:24.400 --> 0:07:26.040 that was somewhat out of the money that was going 0:07:26.080 --> 0:07:30.160 to be expiring in a week. That leverage that's embedded 0:07:30.200 --> 0:07:32.800 the fact that they might get when but when they 0:07:32.840 --> 0:07:37.920 buy that option, say twenty five or the sensitivity to 0:07:37.960 --> 0:07:41.680 the underlying stock price, but for only you know, a 0:07:41.760 --> 0:07:45.240 couple percent, one percent, less than one percent of the 0:07:45.280 --> 0:07:49.880 actual cash outlay. That creates a big amount of leverage 0:07:49.880 --> 0:07:52.440 to the to those kind of trades, right, So a 0:07:52.520 --> 0:07:55.720 retail investor might get ten to one, one fifty to 0:07:55.800 --> 0:07:59.200 one leverage effectively by speculating on the direction of the 0:07:59.240 --> 0:08:02.640 stock using those those call options. And that's not just 0:08:03.040 --> 0:08:06.840 you know, a theoretical concept, right, because when that retail 0:08:06.880 --> 0:08:09.280 investor goes out and buys that call option that has 0:08:09.280 --> 0:08:13.000 a thirty sensitivity or thirty delta to the underlying stock, 0:08:13.480 --> 0:08:15.520 he buys it from a market maker, and that market 0:08:15.520 --> 0:08:17.560 maker sells him that call option and then goes and 0:08:17.600 --> 0:08:20.280 buys that stock in order to hedge the directionality of 0:08:20.360 --> 0:08:22.760 the position. So that's real trades that go out and 0:08:22.800 --> 0:08:26.000 are executed in the underlying stock, you know, in lieu 0:08:26.080 --> 0:08:28.520 of in lieu of the what the investor is doing. 0:08:29.200 --> 0:08:31.960 Now the second component of that, you know, on top 0:08:32.000 --> 0:08:35.240 of just the huge amount of of notional dollar exposure 0:08:35.280 --> 0:08:37.439 that that a small amount of premium out lay creates 0:08:38.120 --> 0:08:41.520 is the fact that when those call options, as particularly are, 0:08:41.559 --> 0:08:43.839 are brought to the upside. So let's, you know, again, 0:08:43.920 --> 0:08:45.839 go with that case of a twenty five or thirty 0:08:45.840 --> 0:08:49.760 delta call option that only has twenty five or sensitivity 0:08:49.800 --> 0:08:52.439 to the underlying stock price. Right, stock goes up a dollar, 0:08:52.520 --> 0:08:55.880 the option should only go up thirty cents. As the 0:08:55.920 --> 0:08:58.800 stock goes up and up, it gets closer and closer 0:08:58.840 --> 0:09:02.440 to that strike price, and the strike price the delta, 0:09:02.520 --> 0:09:06.200 the sensitivity of the option to the underlying stock grows 0:09:06.240 --> 0:09:08.840 and grows and grows as the stock goes up. And 0:09:08.920 --> 0:09:13.000 so that dealer who had initially bought equity to hedge 0:09:13.040 --> 0:09:15.440 that position is now going to buy more and more 0:09:15.480 --> 0:09:18.320 and more equity to buy to hedge that position as 0:09:18.360 --> 0:09:21.720 the stock rises. Right, And that's this notion of of 0:09:21.760 --> 0:09:25.440 a gamma squeeze or an acceleration effect where if you know, 0:09:25.520 --> 0:09:28.760 retail is buying or or anyone is buying very large 0:09:28.800 --> 0:09:33.840 quantities of short dated upside call options that accelerates the 0:09:33.920 --> 0:09:36.199 movement of the stock of of a stock to the 0:09:36.280 --> 0:09:39.520 upside because of this virtuous cycle where dealers are buying 0:09:39.559 --> 0:09:43.920 stock because the stock is going up. So someone buys, 0:09:44.400 --> 0:09:47.679 say a hundred call options. The dealer doesn't go out 0:09:47.720 --> 0:09:50.880 and buy a hundred shares. They buy some fraction of 0:09:50.920 --> 0:09:55.600 that initially because of course they don't assume necessarily that 0:09:55.640 --> 0:09:57.360 the stock is actually going to hit the strike and 0:09:57.360 --> 0:10:01.000 that they'll be on the hook. But basically as the 0:10:01.040 --> 0:10:04.640 stock gets closer, as the underlying gets closer to that strike, 0:10:05.200 --> 0:10:08.120 there then on the hook. You know, the odds that 0:10:08.160 --> 0:10:09.920 they're going to essentially have to pay out the bed 0:10:10.760 --> 0:10:13.840 go up and they have to buy more stock to 0:10:13.880 --> 0:10:17.920 pay to be headed. Yep, that's exactly right. Think of 0:10:17.960 --> 0:10:20.280 it as you know once call it once the stock 0:10:20.320 --> 0:10:23.719 has gone up so much that the probability that it's 0:10:23.720 --> 0:10:25.560 going to be in the money by the time you 0:10:25.600 --> 0:10:28.800 reach expiration is really high. At that point a dealer 0:10:28.840 --> 0:10:31.560 will will be hedged on a full notional. In other words, 0:10:31.600 --> 0:10:35.360 to your point, an option contract has a one multiplier, 0:10:35.400 --> 0:10:37.679 So if they own a hundred contracts, that's like owning 0:10:37.720 --> 0:10:41.040 temp that's like exposure to ten thousand shares. At that point, 0:10:41.440 --> 0:10:43.920 the dealer would just be short ten thousand shares. Again, 0:10:44.120 --> 0:10:46.240 I would sorry, would be long ten thousand shares against 0:10:46.240 --> 0:10:49.240 the hundred option contracts that they're short but day one 0:10:50.040 --> 0:10:52.280 if the delta is only twenty five. In other words, 0:10:52.280 --> 0:10:54.679 the sensitivity of the of the option to that stock 0:10:54.760 --> 0:11:00.559 price is there's an implied probability of percent, but that 0:11:00.640 --> 0:11:02.360 stock is going to end up in the money. The 0:11:02.440 --> 0:11:05.760 dealer would only be long shares and maybe buying and 0:11:05.800 --> 0:11:08.160 buying and buying as the stock rallies up to that 0:11:08.280 --> 0:11:12.400 maximum of ten thous So one of the reasons I 0:11:12.440 --> 0:11:15.240 find this story so interesting, and I also think it's 0:11:15.520 --> 0:11:18.600 different to people, you know, pumping up the stock on 0:11:18.679 --> 0:11:22.680 message boards in the late during the tech bubble, is 0:11:22.760 --> 0:11:26.079 because of the role of options, and specifically the fact 0:11:26.120 --> 0:11:28.280 that there were people on Wall Street bets who were 0:11:28.320 --> 0:11:33.120 targeting specific options contracts that they thought could have the 0:11:33.160 --> 0:11:38.119 biggest impact on the underlying stock. And that's, from my perspective, 0:11:38.160 --> 0:11:41.880 really sophisticated behavior and probably something that we're more used 0:11:41.920 --> 0:11:45.880 to seeing from, for instance, a hedge fund than a guy, 0:11:46.040 --> 0:11:48.480 you know, trading out of his basement or something like that. 0:11:49.240 --> 0:11:51.920 How how surprised were you by that or how much 0:11:51.960 --> 0:11:57.479 did that play a role in forcing the squeeze. Absolutely, 0:11:57.720 --> 0:12:00.280 So you know this, I think a lot of people 0:12:00.880 --> 0:12:05.520 perhaps underestimated the sophistication of at least, you know, some 0:12:05.559 --> 0:12:08.520 of the folks within a Redditt Wall Street bets type 0:12:08.520 --> 0:12:10.560 of community, you know, that are that are leading this 0:12:10.640 --> 0:12:14.439 type of charge because of how unfamiliar their language sounded, right, 0:12:14.520 --> 0:12:17.320 because of the the you know, the rocketship emojis and 0:12:17.360 --> 0:12:18.760 all of this kind of stuff. But if you go 0:12:18.800 --> 0:12:22.640 in and read some of the original posts about the 0:12:22.679 --> 0:12:25.760 potential for example, for a short squeeze in g M 0:12:25.840 --> 0:12:28.320 e um, you know, some of the long form you 0:12:28.320 --> 0:12:31.839 know writing there, Um, these are very sophisticated people, right. 0:12:31.960 --> 0:12:35.679 They understand the dynamics of you know, short interest and 0:12:35.760 --> 0:12:39.400 float and how shares have to be covered. They understand 0:12:39.480 --> 0:12:43.120 the mechanisms you know of option delta hedging by dealers, 0:12:43.160 --> 0:12:45.440 and they understand you know, the short data options have 0:12:45.720 --> 0:12:47.760 you know, by far the highest you know gamma and 0:12:47.760 --> 0:12:51.680 the most convexity have that it makes this acceleration effect largest, 0:12:52.080 --> 0:12:54.560 you know, and and other little cues, I mean, just 0:12:54.559 --> 0:12:58.120 just silly stuff. But for example, that original short squeeze 0:12:58.160 --> 0:13:01.400 post had a little mentioned of something about you know, 0:13:01.920 --> 0:13:05.800 I love z Mass and that's that's that's something that 0:13:05.920 --> 0:13:09.440 only an institutional derivatives trader would say because the you know, 0:13:09.520 --> 0:13:12.040 the the inside joke and derivatives markets is that they're 0:13:12.120 --> 0:13:14.959 run by French quants and that's kind of a little 0:13:15.000 --> 0:13:19.040 ha ha about about you know, coming back to that 0:13:19.080 --> 0:13:22.200 dig right, So again, that's not that's not somebody who 0:13:22.280 --> 0:13:25.320 that's somebody who's been in the markets in an institutional role. 0:13:25.559 --> 0:13:28.520 I I missed that whole thing. So I guess what 0:13:28.640 --> 0:13:31.760 you're Another way of saying this is if you're a 0:13:31.800 --> 0:13:35.880 short seller, like I don't know, Citron Research, you may 0:13:36.160 --> 0:13:38.679 not want to, like rate wave the red flag in 0:13:38.720 --> 0:13:41.040 front of that community thinking that they're just going to 0:13:41.160 --> 0:13:46.160 fold at the first mentioned that this dog is overvalued. Yeah. Absolutely, 0:13:46.200 --> 0:13:49.679 I mean I think that you know, one thing, uh, 0:13:49.720 --> 0:13:53.360 that one one little little discussion that we had must 0:13:53.400 --> 0:13:55.200 have been six months or eight months ago at this point, 0:13:55.240 --> 0:13:57.440 and I think it was about Tesla actually at the time, 0:13:57.960 --> 0:13:59.959 you know, was that you know, there were some folks 0:14:00.040 --> 0:14:03.640 who are making fun of the of the Tesla lawnss right, 0:14:03.679 --> 0:14:05.600 and of some of the video videos that you know, 0:14:05.679 --> 0:14:09.240 some of the enthusiastic fan base of of Tesla was 0:14:09.480 --> 0:14:12.360 describing what they thought about the stock and my point 0:14:12.360 --> 0:14:15.560 what and they were saying, Oh, this is the perfect counterparty, right. 0:14:15.800 --> 0:14:18.640 That is not That is not how a smart how 0:14:18.640 --> 0:14:21.800 a trader thinks. Right. The perfect counterparty is someone who 0:14:21.880 --> 0:14:24.880 is weak hands and can be pushed out, squeezed out, 0:14:25.040 --> 0:14:27.720 can is leveraged, can be forced out of their position. 0:14:28.080 --> 0:14:31.880 The worst counterparty in the world is a big kind 0:14:31.920 --> 0:14:36.040 of ignorant or or otherwise right, but unleveraged counterparty that 0:14:36.120 --> 0:14:38.480 doesn't that's not going to be pushed out of their position, 0:14:38.560 --> 0:14:41.120 and that's really excited about their position. Right. So I 0:14:41.160 --> 0:14:43.120 think that this is actually really important. You wave a 0:14:43.120 --> 0:14:44.800 red flag in front of those folks, you get them, 0:14:44.840 --> 0:14:46.760 get them mad at you. You're the you're the weekends 0:14:46.880 --> 0:14:49.480 right when you're short of when you're short of stock 0:14:49.560 --> 0:14:52.480 because of a stock. You know, we talked about gamma. 0:14:52.560 --> 0:14:55.960 A short position in the stock is a short gamma position, right, 0:14:56.000 --> 0:14:58.720 because you have if you short a billion dollars of 0:14:58.760 --> 0:15:00.800 the stock and it doubles, now your short two billion 0:15:00.880 --> 0:15:03.120 dollars of it, and your risk has doubled. And then 0:15:03.160 --> 0:15:05.120 if it doubles again from there you're gonna lose twice 0:15:05.160 --> 0:15:07.280 as much money as the first time that it doubled. Right, 0:15:07.480 --> 0:15:10.360 so you have unlimited loss. You're the week, You're the 0:15:10.400 --> 0:15:29.520 week the week you know, party at the table. So 0:15:29.640 --> 0:15:31.880 one thing I've been curious about is when you were 0:15:31.880 --> 0:15:36.440 watching the flows around jim last week, how much of 0:15:36.480 --> 0:15:42.320 it was fundamental buying and selling versus the gamma or 0:15:42.360 --> 0:15:44.520 the short squeeze. Is there a way of measuring that? 0:15:46.560 --> 0:15:49.640 It's hard to say exactly what fundamental what is fundamental 0:15:49.680 --> 0:15:52.360 buying and selling in that in that kind of environment, Right, 0:15:52.440 --> 0:15:57.200 you can certainly model how much of stock volume do 0:15:57.240 --> 0:16:00.440 you think is dealer hedges on new option position and 0:16:00.600 --> 0:16:04.880 dealer hedges on existing option positions? Um, it's certainly material, 0:16:04.960 --> 0:16:08.280 you know, in the double digit percentages. But so many 0:16:08.360 --> 0:16:11.080 different things were happening last week, right, I mean, I 0:16:11.120 --> 0:16:14.760 think it's worth mentioning. First of all, of course, volumes 0:16:14.760 --> 0:16:18.920 were off the charts. Second UM last week, even though 0:16:18.960 --> 0:16:21.800 it was the culmination of this you know, of this 0:16:21.960 --> 0:16:25.400 parabola in GM ME in both in Gimmy and the 0:16:25.440 --> 0:16:27.880 other you know m C and n b U, I, 0:16:29.320 --> 0:16:33.920 you actually saw relatively balanced flows from the retail community. 0:16:34.000 --> 0:16:38.520 In share transactions in most stocks. So there was probably 0:16:38.560 --> 0:16:41.320 a lot of new buying from you know, new enthusiastic 0:16:41.600 --> 0:16:43.960 you know, members of the of the group. But there 0:16:44.040 --> 0:16:47.680 was also a lot of selling, uh, you know, probably 0:16:47.720 --> 0:16:51.480 some combination of profit taking and other things, um, which 0:16:51.520 --> 0:16:54.160 tells you that a lot of the big explosive price 0:16:54.200 --> 0:16:57.040 action to the upside um, you know, in combination with 0:16:57.080 --> 0:17:00.400 when you look at the rapid deleveraging and deep grossing 0:17:00.400 --> 0:17:02.200 and the headpund community, a lot of that was forced 0:17:02.200 --> 0:17:06.399 shortcovering and then cascades of of forced shortcovering by by 0:17:06.480 --> 0:17:09.440 big institutions. So you know, I think if you were 0:17:09.480 --> 0:17:13.560 to look at you combine forced short covering and degrossing 0:17:13.600 --> 0:17:17.480 among hedge funds and forced in some sense or mechanical 0:17:17.520 --> 0:17:21.040 trading of dealers in the underlying stock, you know, some 0:17:21.040 --> 0:17:24.879 some very significant percentage of underlying share volume you know, 0:17:25.000 --> 0:17:28.120 was being driven by those technical factors. You know, we're 0:17:28.160 --> 0:17:33.080 talking about ways that this particular market is different from 0:17:33.240 --> 0:17:37.800 the late nineties, and Tracy mentioned um. You know, of 0:17:37.800 --> 0:17:40.680 course we've been talking about the call options buying that 0:17:40.880 --> 0:17:43.600 is very new. You know, it also seems like a 0:17:43.680 --> 0:17:48.200 new dynamic or an emerging dynamic that might not go away. 0:17:48.320 --> 0:17:52.560 Is just like the way social media encourages um like 0:17:52.600 --> 0:17:57.199 buying impacts, Like suddenly everyone is just focused on Jimmy 0:17:57.320 --> 0:18:02.160 or everyone's just focused on jimy AMC and Nokia. How 0:18:02.280 --> 0:18:05.960 new is this not just the explosion of options trading overall, 0:18:06.400 --> 0:18:09.600 and not just the leverage that comes with options trading, 0:18:09.640 --> 0:18:14.040 but in so much potentially concentrated in a very short 0:18:14.080 --> 0:18:17.080 period of time, in just one name or a small 0:18:17.119 --> 0:18:21.960 handful of names. Yeah, I mean, certainly the extent to 0:18:22.080 --> 0:18:24.399 which that is true or seems to be true in 0:18:24.400 --> 0:18:26.600 this environment I think is new or it's really it's 0:18:26.640 --> 0:18:28.640 taken it to another level. I mean there there are 0:18:28.680 --> 0:18:31.520 elements of it, you know, which which go back a 0:18:31.560 --> 0:18:33.760 long way, is right? I mean you think of how 0:18:33.800 --> 0:18:38.560 did what were the coordinating factors behind retail investing trends 0:18:39.160 --> 0:18:41.000 over the last ten or twenty years, And you could 0:18:41.000 --> 0:18:43.720 point to like, you know, Cramer on CNBC or something 0:18:43.800 --> 0:18:46.040 like that, right where like what were there the really 0:18:46.080 --> 0:18:48.680 cool things and the really cool themes? And Cramer would 0:18:48.680 --> 0:18:50.640 be up there saying he loved the stock and you'd see, 0:18:50.960 --> 0:18:55.560 you know, huge retail flows for the time retail flows 0:18:55.600 --> 0:18:57.879 you know, are obviously much bigger in the over the 0:18:57.920 --> 0:19:00.840 last couple of months, but you know, so so part 0:19:00.880 --> 0:19:02.800 of that element was was always there. But I think, 0:19:02.840 --> 0:19:06.040 you know, social media has been uniquely powerful in coordinating 0:19:06.400 --> 0:19:10.639 rapid action across abroad, you know, a large community of people, 0:19:11.119 --> 0:19:13.800 you know, not just within finance obviously, and in other 0:19:13.880 --> 0:19:16.960 areas as well, and I think that's going to be 0:19:17.040 --> 0:19:21.159 part of the landscape going forward. For sure. There's all 0:19:21.240 --> 0:19:24.240 manner of you know, it raises all manner of questions 0:19:24.280 --> 0:19:26.679 from a regulatory perspective that I don't think it I 0:19:26.720 --> 0:19:29.359 don't think anybody has very clear answers too, and I 0:19:29.359 --> 0:19:31.840 don't think you know, the regulators have very clear answers 0:19:31.840 --> 0:19:34.399 to either. Right, This is a it really is a 0:19:34.400 --> 0:19:37.400 new dynamic for the SEC to look at and understand 0:19:37.400 --> 0:19:39.040 how they think about it in the first place. And 0:19:39.080 --> 0:19:42.080 you know, I've I've I've had conversations with you know, 0:19:42.160 --> 0:19:44.840 with friends in regulatory seats you know, who look at 0:19:44.840 --> 0:19:47.520 this type of thing closely, and I don't think it's 0:19:47.720 --> 0:19:50.280 there's any simple and obvious answers as to you know, 0:19:50.280 --> 0:19:51.720 where where this is going to go in the near 0:19:51.800 --> 0:19:55.880 term from a regulatory perspective. So I mean, on that note, 0:19:55.880 --> 0:19:58.120 I know you just said there aren't any easy answers, 0:19:58.200 --> 0:20:00.800 but um, some of the comment area we've seen over 0:20:00.800 --> 0:20:05.159 the past week has been suggesting that this could pose 0:20:05.280 --> 0:20:09.200 some sort of threat to the stability of financial markets. 0:20:09.200 --> 0:20:12.920 So if we see this type of swarming behavior that's 0:20:13.000 --> 0:20:15.840 capable of knocking out a hedge funder two and maybe 0:20:15.880 --> 0:20:19.399 causing problems for brokerages at robin Hood and making us 0:20:19.440 --> 0:20:22.159 all think about you know, settlement issues and collateral and 0:20:22.200 --> 0:20:25.520 things we haven't thought about since the financial crisis, really 0:20:26.280 --> 0:20:29.560 that maybe that's a bad thing that would probably fall 0:20:29.680 --> 0:20:33.359 under Joe's definition of a bad take. But certainly that 0:20:33.400 --> 0:20:36.360 conversation has been out there. How are you thinking about 0:20:36.400 --> 0:20:40.520 the financial risks or the systemic risks of this new behavior. 0:20:42.680 --> 0:20:44.800 So so it's a very good question, I mean, and 0:20:44.840 --> 0:20:48.040 I think that's where that's where it becomes. There's there 0:20:48.040 --> 0:20:51.640 really are two separate issues, right, One is securities laws 0:20:51.640 --> 0:20:55.520 and regulation around trying to protect retail investors and so forth, right, 0:20:55.600 --> 0:20:58.080 and then the other and around manipulation and the other 0:20:58.119 --> 0:21:02.679 set of issues around around financial financial stability. And you know, 0:21:03.200 --> 0:21:07.440 I think that ultimately when you look at for example, 0:21:08.160 --> 0:21:11.400 what happened in a lot of the retail brokerages, especially 0:21:11.440 --> 0:21:15.400 the smaller, less well capitalized private brokerages like robin Hood 0:21:16.520 --> 0:21:20.160 this week. You know, you saw the whole modern regulatory 0:21:20.200 --> 0:21:25.360 apparatus and apparatus of collateral and credit management you come 0:21:25.359 --> 0:21:28.800 into play right where there was this huge surge in 0:21:29.000 --> 0:21:32.600 dollar volume traded net dollar volume traded by clients of 0:21:32.640 --> 0:21:35.640 brokerages like robin Hood in these particular stocks that we're 0:21:35.640 --> 0:21:38.840 moving in a very volatile fashion, and so the you know, 0:21:38.920 --> 0:21:41.240 systems that we put in place as part of Dodd 0:21:41.280 --> 0:21:46.760 Frank right where there are central clearing houses that unsettled 0:21:46.880 --> 0:21:50.680 trade risk lives at in the charge of credit haircut 0:21:50.920 --> 0:21:54.120 on you know, on that dollar risk that turned into 0:21:54.160 --> 0:21:56.240 these huge margin calls you know to robin Hood that 0:21:56.240 --> 0:21:59.200 they had to meet. Um, it was a scramble because 0:21:59.240 --> 0:22:03.240 this all holded so quickly. But ultimately, you know, robin 0:22:03.240 --> 0:22:05.400 Hood went out and raised three billion dollars of new 0:22:05.440 --> 0:22:08.520 capital plus right in a couple of days, and most 0:22:08.600 --> 0:22:11.560 other you know, most of the other brokerages have also 0:22:11.600 --> 0:22:14.359 been able to reopen trading in these names. And like 0:22:14.440 --> 0:22:16.840 the purpose of that system right is to put guard 0:22:16.960 --> 0:22:21.240 rails around around the collateralization of brokerages so that you 0:22:21.280 --> 0:22:24.320 don't have unexpected failures and to have an insurance pool 0:22:24.320 --> 0:22:27.639 that's large enough across the brokerage system. Right, and you know, 0:22:27.680 --> 0:22:30.480 this was a good stress test, right what you know? 0:22:30.520 --> 0:22:33.560 The the question is how much crazier could it? Could 0:22:33.560 --> 0:22:36.280 it be? And could it happened too quickly? Right? But 0:22:36.720 --> 0:22:38.560 the I think those are the kind of issues regulators 0:22:38.560 --> 0:22:40.320 are going to be thinking about. I don't think that 0:22:40.480 --> 0:22:42.960 regulators in of itself, I don't think that they would 0:22:43.000 --> 0:22:46.639 have great concerns about some particular microcap stocks having you know, 0:22:46.720 --> 0:22:51.080