Taming GME and AMC: Wall Street's Tactics Exposed — A Retail Investor's Call to Action.
The battle over GameStop (GME) and AMC Entertainment (AMC) has evolved into a financial warzone where retail investors face a system rigged against them. Hedge funds and market makers employ sophisticated tactics to suppress stock prices, exploit loopholes, and maintain dominance. Here, we’ll delve even deeper into the mechanics of this manipulation, exposing how these entities pin stock prices, deploy advanced strategies, and use the regulatory system to their advantage.
Stock Price Pinning: The Core Strategy
Stock price pinning is a deliberate effort to keep a stock’s price within a narrow range, often just below critical price thresholds (e.g., options strike prices or resistance levels). This manipulation is designed to:
1. Prevent options from being exercised ("keeping calls out of the money").
2. Disincentivize buying by making the stock appear stagnant.
3. Create the illusion of a “natural” trading range, discouraging retail confidence in upward movement.
How They Pin the Price
1. Options Price Suppression:
- Institutions monitor open interest in call options. If large volumes of calls are set to expire at a specific strike price (e.g., $25), market makers use naked shorting, synthetic shares, and high-frequency trading (HFT) to suppress the stock below that price by expiration.
- Example: On a Friday options expiration, AMC’s stock consistently closes just below key strikes like $20 or $25. The coincidence is anything but random.
2. High-Frequency Trading (HFT) Algorithms:
- HFT bots place thousands of trades per second, generating artificial supply to push prices down.
- For GME, institutions use HFT to create downward pressure by executing sell orders milliseconds faster than retail buy orders can execute.
3. Spoofing:
- Market makers place massive sell orders that create an illusion of high supply, discouraging buyers. These orders are then canceled before execution.
- Example: GME might show 100,000 shares on the sell side of the order book, but only 1,000 are real. The manipulation pushes the price lower without actual transactions.
4. Dark Pool Routing:
- Retail buy orders are diverted to dark pools (private trading venues) instead of public exchanges.
- By routing buys to dark pools while allowing sells to hit public exchanges, institutions ensure that buy pressure doesn’t affect the stock price.
Tactics Used to Control Stock Movement
1. Strategic Failures-to-Deliver (FTDs): Phantom Shares
When institutions short a stock without borrowing actual shares, they create phantom shares—essentially counterfeit shares that dilute the stock’s value.
- FTDs as a Tool:
- Hedge funds deliberately fail to deliver shares, forcing settlement delays and creating artificial supply.
- For GME, millions of shares regularly appear as FTDs, suppressing upward price momentum.
- Example: In December 2021, FTDs in GME reached over 2 million shares in a single week, representing hidden selling pressure that capped price gains.
2. Use of Synthetic Shares
Synthetic shares mimic actual shares through derivatives but don’t count toward the official float.
- By creating synthetic shares, market makers dilute the impact of retail buying.
- Example: In early 2021, AMC’s float was estimated at 513 million shares, yet trading volumes suggested over 2 billion shares were in circulation.
3. Insider Collusion via Market Makers and Hedge Funds
Market makers like Citadel Securities play a dual role as liquidity providers and active traders.
- Conflict of Interest:
- Citadel routes retail orders through its systems, giving them visibility into retail activity. This allows them to front-run orders, trading against retail investors.
- Hedge funds working with market makers can coordinate to time large sell-offs that coincide with retail buying peaks, suppressing momentum.
4. Gamma Suppression
A gamma squeeze occurs when rising prices force market makers to hedge by buying shares, amplifying upward movement. Institutions suppress this by:
- Shorting the stock at key gamma thresholds.
- Flooding the market with synthetic shares to offset buying pressure.
- Example: In March 2021, GME approached $350, a critical gamma squeeze level. Short sellers increased naked shorts, pinning the price under $350 and preventing an even larger run-up.
The Role of Media and Psychological Warfare
Wall Street’s manipulation extends beyond the stock market to the court of public opinion. By controlling the narrative, they manipulate retail sentiment.
Media Propaganda
Hedge funds leverage mainstream financial outlets like CNBC, Bloomberg, and Reuters to spread Fear, Uncertainty, and Doubt (FUD):
1. Articles labeling GME and AMC as “dying businesses.”
2. Analysts issuing dire price targets like $1 for AMC to shake retail confidence.
3. Financial experts warning retail investors of “inevitable losses.”
- Example: In March 2023, CNBC ran multiple segments claiming AMC was on the verge of bankruptcy, despite the company’s improving fundamentals.
Coordinated Social Media Campaigns
Hedge funds also deploy bots and paid influencers on platforms like Reddit, Twitter, and YouTube to:
- Spread FUD.
- Create divisive narratives within retail communities.
- Promote “paper hands” by encouraging early selling during price spikes.
Dark Pools and the Hidden Game
Dark pools are private trading venues used by institutions to execute large trades away from public exchanges.
- Why They Use Dark Pools:
- To mask buy and sell activity.
- To manipulate volume data visible to retail investors.
- How They Affect GME and AMC:
- Retail buy orders are routed to dark pools, ensuring they don’t impact the price.
- Over 40% of daily trades in GME occur in dark pools, compared to an average of 10-15% for most stocks.
Failure of Regulatory Oversight
The SEC and other regulators have failed to address these issues, partly due to systemic conflicts of interest.
- Weak Enforcement:
- Despite multiple reports and data proving manipulation (e.g., naked shorting, synthetic shares), the SEC has levied minimal fines against offenders.
- Example: In 2021, Citadel paid a $22 million fine for misleading clients—pocket change compared to the billions they profit from these schemes.
- Revolving Door Politics:
- Many SEC officials have previous ties to Wall Street firms, creating a bias against retail interests.
Why This Matters
This isn’t just about GME and AMC—it’s about a financial system rigged to favor the few. Wall Street’s manipulation undermines market integrity, destroys public trust, and widens the wealth gap.
How Retail Investors Fight Back
1. Hold and Resist Selling:
The greatest counter to manipulation is holding shares, reducing the pool of available stock for short sellers.
2. Educate and Expose:
- Share information about manipulation tactics.
- Demand transparency, such as real-time reporting of FTDs and dark pool activity.
3. Advocate for Reform:
- Push for tighter regulation of derivatives, naked shorting, and dark pools.
- Support independent investigations into Wall Street’s practices.
The Bottom Line
Wall Street’s web of manipulation is vast, but retail investors have the power to expose and challenge it. By understanding these tactics, staying united, and demanding accountability, we can force transparency and fairness back into the system.
The fight isn’t over—stay vigilant, stay informed, and never stop pushing back.