WallStreetBets does it again. Are these traders secretly market savants or really just degenerate gamblers?
If you are not familiar with Reddit’s r/WallStreetBets, then your jaw may hit the floor when you visit the Sub-reddit for the first time. These guys, or “autists”, as they prefer to call themselves are a group of stock options gamblers making large bets in this high-stakes game. The risks? Big money, sometimes bets upwards of $100k USD on stock options. The rewards? Sometimes hitting it big with a “10-bagger” as they like to call it -essentially winning their initial bet amount 10 times over. The strategy? Betting on stock options contracts that expire within days to a week either making colossal gains or inevitably going to zero.
The sub-reddit started to gain lots of hype and new users, “normies” as they call them, toward the end of 2019 and early 2020 when popular YouTubers began to mention the forum on various platforms. “What stonks should I buy?” some of them asked. The forum has gained popularity and now has nearly 2 million users, one of Reddit’s largest groups and only gaining in popularity. What started out as a small sub-reddit with only thousands of users where members could post about their stock gainz and losses has quickly become a mainstream options “strategy” hangout with millions of users posting hundreds of thousands of comments per week.
But are these guys really just throwing darts attached with big bets at various tickers or is there some reasoning behind the madness? This website, SwaggyStocks, tracks WallStreetBets’ sentiment behind each ticker. Are they buying calls and going long? Or buying puts and opening a short position? Perhaps their account is going to zero because some wise-guy decided to buy SNAP puts before they crushed the earnings report. SwaggyStocks tracks every ticker mentioned in the comments and what positions or sentiment is associated behind the comment, then logs it over time versus the stock price.
Check out the WallStreetBets sentiment for Snapchat (SNAP). What we take from this chart is that SNAP wasn’t really popular among the sub-reddit’s conversation with average comment volume almost less than 1% of total comments. After they reported earnings and the stock price shot up 30% it was very quickly to be the most talked about ticker on the forum at nearly 23% of all comments relating to Snapchat. The kicker in this scenario is that generally WallStreetBets likes to follow trends, but in this exception the users didn’t believe in the rally as they continued to be “jacked to the tits”, as they like to call it, in PUT options as the stock price climbed higher. Will they hit it big or will this play expire worthless? Only time will tell.
