Jim Cramer: How Do You Pull Off What GameStop Buyers Did?

How do you even pull off what the buyers of GameStop (GME) did in the last hours of trading and beyond? How is it possible to have that kind of concentrated buying to get a stock going like that?

First, I have never done it, so I am not sure it would work. Second, the actions I am describing could easily be found to be illegal by any prosecutor under the broad powers of the Securities and Exchange Act of 1934. Third, there might be myriad other ways to do this, but here's one that could conceivably have been used. Again, because we are in the Vast Conspiracy moment of this market, I don't know this was done, it is strictly theoretical.

In order to get a stock to move you need to get people who are making orderly markets, the options markets, to be caught off guard.

They have to be able to lay off their risk at the time of buying so they don't get caught short without a hedge.

So what happens if all day Tuesday and Wednesday you and your friends quietly came in and bought the March 95, 100 and 105 way out of the money calls.

You bought them small enough that the market makers didn't take it seriously and didn't think to lay off as much risk.

Then in the last two hours of trading you come flying in and started buying the March 60s and 70s as well as the April 60s and 70s AT THE SAME TIME as you blitzed the common through multiple brokers. Again, keep in mind that an aggressive prosecutor could find that you fomented activity but nobody in the government seems to be paying much attention.

What would the market makers do? They are short these way out of the money calls that are now deep in the money. They are still being hit with out of the money call buys from even higher strikes. They have no choice. They can't risk being this exposed.

So they sweep.

They take every share imaginable to be sure they aren't put out of business by some sort of initiative that takes GameStop to its rightful place of wherever these zealots think it can go.

Remember, the buyers spout that Ryan Cohen has a plan and it takes the stock much higher than $350. So why not buy these calls early and often,

The sellers of the calls can't hedge with other calls as they are being blocked by buyers who want everything they can get.

And you get a blitz of a squeeze like we had.

They can't protect themselves.

I am sure there might be other ways. But I can see that's how it would be done.

Historically the government does not like this kind of activity. I have seen them go after someone who orchestrated a raid like this on the old Dayton Hudson many years ago. The guy broke everyone in his path.

But then then the government broke him.

In the meantime, though, wow, it was incredible - and that was a raid to the downside. Same way I described.

Never did it. Never participated. Saw it done though. It worked until the government put an end to it, or him for that matter.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no position in the stocks mentioned.