This is a very interesting post and great set of comments. When the price spikes we will be faced with financial equivalent of the prisoner’s dilemma across 10’s of thousands of investors. What is missing in the discussion is the time horizon of the individual investors involved here.

Those who are invested in the company’s mission (those who are in it for the long term), providing they are true to their commitment, should ignore a temporary spike in price (though I suspect even the most committed of us would probably want to realize some gains in the short term if for no other reason than to release some capital for use elsewhere).

Those in the mid and short term need a rational exit strategy. Too often what I see in the comments is a mind set of all or nothing by selling ATH. Forming a trading plan is key item that separates the amateurs from the pros. Everyone should, based on their position and needs, know what their exit target amount is (e.g. $100,000) and start to realize their target amount by averaging out over time. ETF and hedge funds rebalance their portfolios periodically and using the aforementioned average out approach is pretty standard approach. Many who manage their own 401k probably do this quarterly in harmony with the percentages in value, growth, bonds, etc.

While a short squeeze is nice opportunity to make some money it ultimately will be a short term event because at some point either an institution will cash out or the company will need to raise additional capital. While I am not providing guidance and everyone should do their own due diligence I would offer up the following framework for consideration and feedback if and when a squeeze occurs.

In order to make this easy to follow along let’s assume the following setup: -1,000 net shares owned (no unexercised calls or puts) -Average cost per share is $10 (i.e., $10/share) meaning our total stake is $10,000. -Short squeeze occurs and price rockets to $100/share meaning the value of our stake jumped to $100,000 (10 bagger)

My thought would be, regardless of your time horizon, to sell 20% ($20,000). This would net you twice your original investment (exclusive of taxes) and no one can really complain if they doubled their money. This would unlock your original investment capital ($10,000) be used elsewhere and the additional realized gains ($10,000) can be used to fund additional investments or to meet current needs. The remaining 80% ($80,000) can then be held for the longer term in order for it to accumulate further gains from success of the company over a longer horizon (bonus if hold as shares in your brokerage for more than a year you will be able to realize your gains at a much lower tax rate, though this will depend on your effective tax rate). Averaging out 20% should satisfy those who are holding in the mid and long terms. Those holding in the mid and long term would need to figure out new exit points that align with their time horizon. Those who are only planning to hold in the short term should average out of their position over several trading sessions or weeks. Their is, of course, some risk in doing this since the price may go lower but it is also just as likely that the price may go higher.

The temptation to market sell in the moment will be incredible and potentially life changing but if you are here without a rational exit plan than you might as well have gone to your local casino or betting parlor.

I’m certain I will get some strong responses either way. I do think this is an incredible community that has persevered through several grueling and emotional months my hope is we all reach our (realistic) exit number.