GSX has been mentioned here numerous times before, saying buy puts its a fraud etc. That is all true and much much more. It will go down as one of the historically most brazen stock frauds ever. Securities fraud, market manipulation, accounting fraud, wire fraud, fraudulent real estate transactions, large scale identity theft, and it goes on and on. Every day there is fresh skullduggery uncovered… it’s a fast moving case. If you aren’t familiar with this already just google it there is so much in depth information from so many different sources.
100% chance this thing is imploding. Nobody with a fully functional brain who did at least 10 minutes of research would disagree with that statement.
The question is when and how do you make money from this information.
You would think it would be easy to answer but it hasn’t been so far. The stock tanked from a high of 45 or so when the short sellers started piling in, down to 27 or so, and then mysteriously rocketed back to 42. Allegations are that GSX is just maxing out what cash they have left on repurchases, recalling class B shares, and a Chinese brokerage called Tiger pulled all borrow shares to prevent further short selling. Some combination of these things and momentum trading created a short squeeze, keeping this trash afloat a bit longer
Why not just buy OTM puts? That has a lot of merit because as the stock gained 60% in price, puts actually GAINED value (option market telling you what the equity market won’t). Problem is we just don’t know what expiry for said puts, since we don’t know how long it will last. Other major problem is when this hits the inevitable luckin coffee style 80% down in 5 seconds, it will be halted then our puts are halted too. Risk exists that puts can expire worthless in some combination of halting and delisting scenario.
Thats why shorting these shares is the way to go, especially if you are cash gang in any way. I didn’t believe the rally like the flamingest of bears that I am, so I kept a bunch of cash on the sidelines. I thought everything was crazy overbought, and the spike in corona cases of the lockdown lifting would plunge us again. Now it’s hard to jump back in at these valuations because you know the second you do top is in.
Shorting it is just getting on the waiting list for a 90% gain. Your number might be called today, or in a few weeks, or even in a month. But it will be called, and that is unmistakable. If you have your capital tied up in calls, thats cool, don’t change anything, every call is probably gonna be a 10 bagger whereas we are only looking at a slightly less than 2 bagger here. But for the cautious skeptic, potentially closeted bear cub, may 15 SPY150p type gang, who have money left on the sidelines, there is no reason not to.
This will disqualify many of you using robinhood, and some of you who are using real brokerages. There just aren’t many shares to short left. I check back every day to see if there are more available, and just keep adding and adding.
This is financial advice and it literally will go tits up (the China! fraud).
Positions: short 1400 shares GSX at 37.36
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.