A Wall Street Genius’s Final Investment Playbook
Chapter 181

"What on earth is this?"

Pareto Investment's PM, Laurent, frowned as he pointed at Gonzalez's desk.

Right in the center of the desk sat a strange object.

A printed document in a picture frame.

It was a prayer currently trending on WSB.

<In the beginning, WSB was overflowing with infinite swagger and excuses. Accounts were soaked in blood, and everyone survived on ramen. Then Sean said, "Let there be shorts,” and the poverty-stricken grasped wealth surpassing France's GDP. And Sean saw that their Lambos were truly good……>

Laurent sighed and shook his head.

But Gonzalez paid no mind and began carefully wiping the glass of the frame, as if it were a rare piece of art hanging in the Louvre Museum.

I tried to divert his attention and spoke.

"Let’s not worry about that. More importantly, what’s the situation?"

At my question, Laurent glanced at Gonzalez once more, then opened his mouth as if resigning himself.

"Valeant’s stock price has been rebounding since yesterday."

Tension was clearly visible on his face.

For us, who had taken a short position on Valeant, a decline in its stock price was not just necessary—it was a matter of survival.

But now, a rebound?

"After bottoming out at $67, it has recovered to the $69 range. It continues to rise as we speak."

"I see."

But I wasn’t particularly surprised.

‘Because I saw this coming.'

All this time, I had only highlighted Valeant’s ethical issues.

In other words, I had attacked the company’s image but left its actual business untouched.

That meant Valeant was still financially solid.

Revenue growth, product lineup, potential value—everything was flawless.

If a company like this experiences a stock crash, value investors would see it as nothing more than a buying opportunity.

So as soon as the downtrend subsided, they made their move, and as a result, the stock rebounded.

Laurent finally opened his tightly shut lips.

"Now… it wouldn't be strange if he made a move at any moment."

There was caution in his voice.

While Valeant’s stock was plunging, Ackman had made no moves.

He was waiting for the right timing to play his card.

And that time was drawing near.

"Market trends?"

I approached Gray, the execution trader.

On countless monitors, numbers were pouring down like a waterfall.

"A large buying force has entered."

Gray replied without taking his eyes off the monitors.

"It’s extremely aggressive. They're executing block trades one after another without even trying to hide it. The intent to drive the price up is clear."

He pointed at the transaction records with his finger.

Massive trades, in the millions of shares, lit up the screen like warning lights.

"Moreover, every transaction is being executed on the open market. They’re not using dark pools at all."

Typically, large purchases are made in dark pools to minimize price impact.

But someone was making moves this bold, despite the losses it could incur?

There was no need to question who.

It was Ackman.

“This is a declaration of war.”

Gray spoke with a hardened expression.

"‘We will raise the stock price no matter what. We don’t care about the cost'—that’s what this means."

He was right.

Ackman was now sending a clear message to the market through his unusual buying strategy.

"So it’s finally begun."

I heard Laurent's trembling voice from behind.

"Short squeeze."

A short squeeze.

It’s a strategy that forces short sellers to surrender by artificially driving up the stock price.

It might look like a simple investment tactic on the surface, but this is where it gets truly interesting.

The short squeeze is one of the most brutal and intense battles on Wall Street.

And the weapons of this war are only two.

Money and fear.

Now both sides would throw in all the capital they had.

If the stock goes up, Ackman will smile. If it drops, we will.

But this war isn’t won or lost by price fluctuations alone.

Ultimately, the side that surrenders first loses.

It’s essentially a test of nerve.

Who can hold out longer in this storm of massive money?

Who will raise the white flag at the edge of the cliff?

That’s what makes it exciting to watch.

Which means…the narrative has now entered the most dramatic and spectacular phase.

"Will we… be okay?"

Laurent’s voice was laced with anxiety.

Suppressing the urge to hum a tune, I put on the smile of an old Eastern sage for the first time in a while.

"We’d better be. We set this board, after all."

***

As signs of a short squeeze appeared, Wall Street buzzed with excitement.

“This is insane… Is it really a short squeeze?"

"Feels like this one could spiral into a major incident."

"Don’t tell me we’re about to see a repeat of the Porsche-Volkswagen fiasco?"

Excited whispers spread throughout the trading room.

Even veteran traders in front of their monitors widened their eyes and swallowed hard.

A short squeeze is a war that doesn't end until one side declares surrender.

The loser must endure devastating losses—it's the ultimate high-stakes game.

And no one could predict the outcome.

"Who’s gonna win?"

"Ackman probably has the edge. He’s got the name, and massive capital."

"But Sean is the public favorite, right? That side’s got no small capital either."

"Still, they’re just retail investors. They fall short in terms of organization."

"More importantly, what about us? Which side should we take?"

"Jump in too soon and you might get burned. Maybe better to wait and watch…"

Their conversations weren’t just idle curiosity.

A short squeeze inevitably brings a sudden shift in capital flow.

And if you ride that wave just right?

You could amass a fortune in a moment.

“They’ll start moving in earnest soon…”

Amidst all this, every eye turned toward Ackman.

At the center of the chaos, Ackman commanded his troops like a cold, calculating general.

“Our target price is $120.”

The one leading a short squeeze has only one goal: to drive the stock price as high as possible.

Valeant’s stock had already recovered to $70.

“By any means necessary, we must hit $120.”

The basic formula for raising stock price is simple.

Massive buying.

So Ackman had already begun openly executing large-scale purchases two days ago to push the price up. 

But this method alone had its limits.

The influence a single individual could have on the market was inherently limited.

"From now on, we bring in the market."

So now it was time to draw in the soldiers of Wall Street.

The real game was only just beginning.

Ackman and Ha Si-heon would each become ‘generals' and play a game of persuading and recruiting Wall Street's soldiers.

"Let’s begin. Make the announcement."

At Ackman's command—

—A bombshell report soon struck the market.

<Breaking: Ackman increases Valeant stake from 10% to 13%>

Ackman had declared that he would purchase an additional 3% stake in Valeant.

The market reacted instantly to the news.

71.29…

72.42…

Ackman, eyes coldly fixed on the monitor, spoke briefly.

"Make the next move."

Not long after, another shockwave hit the market.

<Breaking: Valeant announces $500 million share buyback>

A share buyback means a company purchases its own shares.

In other words, Valeant was joining the buying side.

Most companies avoid buybacks to preserve cash liquidity, but Valeant was different.

That’s because its largest shareholder, Ackman, had succeeded in persuading them.

73.34…

73.52…

74.34…

All eyes in the market were locked on the screen.

A giant like Ackman had declared a short squeeze and begun taking full-scale action.

If he won this war, the stock price would soar.

Investors betting on Ackman's victory had to join the buying spree now to secure their profits.

In other words, trust in Ackman was directly translating into buying pressure.

The question was, how many soldiers would take Ackman’s side?

"Current trading volume is 1.5 times the norm. Considering transaction speed and RVOL…"

"Still just value investors, I’d say. Let’s wait a bit longer."

Ackman remained calm.

Everyone else stared tensely at their screens.

And then it happened.

75.99…

77.39…

79.38…

The stock price, which had been rising gradually, suddenly picked up speed.

"Up 0.5% per minute… We've broken the $78 resistance! RSI has crossed 70 and entered the overbought zone! MACD golden cross confirmed!"

A trader breathlessly reported.

"Momentum and quant forces seem to be entering!"

A slow smile crept across Ackman’s lips.

Momentum traders and algorithm-based quant funds specialize in trend-following.

Once an upward trend is clearly confirmed, they instantly join the buying force.

And when making that decision, there were certain indicators they relied on.

Ackman's prior concentrated fire had triggered those indicators to simultaneously flash ‘buy' signals.

The result was perfect.

As momentum and quant troops joined in one by one, the upward curve steepened.

83.04.

85.20.

The stock price surged past $85 in a flash.

But Ackman didn’t stop.

If left alone, the rally would soon lose momentum.

Before that happened, more firepower had to be brought in.

"Switch to a gamma squeeze."

***

A gamma squeeze is a strategy that maximizes buying pressure using options.

The targets were not hedge funds—but options sellers.

In other words, the market makers.

"Strike at $90. Two-week expiry. Deploy $50 million."

At Ackman’s command, the team began large-scale call option purchases.

A call option is a contract that gives the right to buy stock at a certain price.

The strike price Ackman set was $90.

That meant he now had the right to buy Valeant shares at $90 at any time before expiration.

“Order filled!”

The orders went through.

Now came the waiting game.

86.23…

87.42…

89.10…

91.29…

Valeant’s stock price continued its steady climb.

But once it broke through $90, acceleration kicked in.

One trader couldn’t hide his smile.

“Hedging purchases seem to have started.”

That meant the market makers were moving.

In other words, Ackman’s strategy was working.

For the market makers, this situation was a near disaster.

If the stock kept rising and hit $100, they’d have to buy shares at $100 and sell them to Ackman at $90.

On a $50 million option contract, a $10 per-share loss would be a massive blow.

There was only one way to survive.

“As expected! They’re buying on the spot market!”

With the stock now at $90, they began buying it themselves.

That way, if the stock price rose further, they too could make a profit.

That profit could then be used to cover Ackman’s option gains, minimizing their own losses.

This was called a hedge.

A kind of insurance strategy.

And there was a standard formula for this hedge.

Depending on the delta and gamma values, they had to buy roughly 35 to 90 shares per one options contract to spread the risk.

Ackman had purchased 25,000 call option contracts.

That meant market makers now had to buy up to 2.25 million shares.

An enormous buying volume flooded into the market, sending the stock price skyrocketing.

The PM smiled in satisfaction.

“Our allies have increased.”

“Even if they didn’t want to be allies.”

The market makers weren’t on Ackman’s side.

They secretly wished for the price to fall, but thanks to their risk management system—like insurance—they were now unintentionally reinforcing Ackman’s firepower.

96.34…

97.09…

98.04…

But it didn’t stop there.

The market makers' buying pressure triggered a new ‘buy signal’ across the market.

And the same thing happened again.

Momentum traders and quant funds, detecting the new signal, flooded the market.

Their buying caused delta and gamma values to fluctuate once more, forcing the market makers to buy again, according to their ‘insurance formula.’

A chain reaction where buying begets more buying.

The stock price began a steady climb skyward.

99.02…

99.93…

100.21…

But.

This momentum couldn’t continue forever.

Eventually, the market would stabilize, and the rally would slow.

That couldn’t be allowed.

"Next strike at $103. Another $50 million."

Ackman precisely identified the slowdown zone and pulled the trigger again.

The market surged forward at a new pace.

“Again. Strike at $108. $50 million.”

To pull the trigger again, only one thing was needed.

Capital.

As long as there was money, the stock price could be pushed higher.

This truly was a ‘war of money.’

Ackman poured in funds without hesitation whenever needed, and each time, the stock price leapt higher.

After several days of fierce battle, Valeant’s stock price exceeded even his target.

125.23…

126.12…

127.09…

Just a week ago, the price had hovered around $67.

Now it had surged far past $120.

But the gamma squeeze was only the beginning.

Ackman turned to the execution trader.

“The feedback loop?”

The trader beamed and nodded.

“It’s begun.”

A satisfied smile spread across Ackman’s face.

There was no longer a need to inject capital.

The market had entered a new orbit.

What was about to unfold now was the ‘hellish feedback loop.’

Where fear breeds fear, and buying begets more buying in a vortex of destruction.

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