Before continuing we share a recent tweet from Chris Cole at Artemis Capital. Speculative investors will buy call options, which give them the right to buy the stock at a specific price known as the strike price. Replies (1) Options Top. A gamma squeeze can happen when there’s widespread buying activity of short-dated call options for a particular stock. I've read estimates that 10-15M shares worth of calls expires ITM on Friday. Short squeezes aren't anything new to the markets. if we push it to $8.01 by Friday, we have the Gamma Squeeze Apes. Monday and Tuesday will likely be the short squeeze. I don't know if anyone else noticed, but Friday was kind of a big one for GME. Simply put, they will buy a small number of shares in order to neutralize their position, so that they are neither bearish nor bullish. Tweet . The creator of the site, neither as e wants to hurt the feelings of believers, sexual minorities and other groups of users. Think of it as the Sisyphus of squeeze trading as the buyers continue to rotate back and forth between buying stock and buying options. If you add up the call volume from $30 to $42 strikes, you get over 150,000 call options traded today! It's very simple. That was fucking wild, even for this autist's dream of a stock. This aggressive forced stock buying adds to the stock price moving steeply upward and pushes the stock price higher as market makers scramble to buy incrementally more stock at rapidly increasing prices. Since there are far far far fewer shares floating over the next 2 trading days, though, a squeeze on Monday or Tuesday could utterly destroy Melvin and the other shorts. Evan Niu, CFA (TMFNewCow) Jan 26, 2021 at … But in this case, it is the stock pushing options until the options push the stock. How can we tell this is a gamma squeeze? That was fucking wild, even for this autist's dream of a stock. Read More: Bob Lang writes for Real Money on why short selling is necessary. More stock buying encourages more far out-of-the-money call option buying, which requires the market maker to buy stock to protect themselves, which pushes the stock even higher. But until then, I believe simply avoiding shorting small cap or low-float stocks will be enough to avoid trouble. Please note that none of the above movement relates directly to the short squeeze... but it will. Because over the weekend the house will need to deliver and settle over 115.000 option Contracts simple math : 115000 contracts x 100 shares = 11.500.000 shares to be purchased right away. Think about his powerful statement for a second. First up – Earnings, Earnings, Earnings… 19 Berkshire companies reported through 9:00AM - 1.29.2020. The most pressing question on many investor's minds is, or should be, how do I avoid getting caught in a gamma squeeze? The thing is, a stock has a fixed number of shares available to trade. Replies (1) 6 0. Casual Friday: Earnings + "Gamma Squeeze?” – January 29th, 2021 . I will have exclusive materials and stock picks as we move forward and my own stock Read More: Bob Lang writes for Real Money on the mechanics of short squeezes. According to "KitrosReddit" that is a possibility if GME hits $800 per share by Friday, because that price would trigger the "Mother of all Gamma Squeezes" as call options sellers would be … Gamma refers to the second derivative of the option’s delta. This is what caused the absurd spike from $50 to $75 in just an hour and a half. That's the gamma squeeze that everyone has been talking about, where MM's couldn't cover fast enough. Call Buying & Gamma Squeeze. As Martin Shkreli said, keep your eye on the borrowing rates, not the short interest. If all the same you felt hurt, I'm sorry. Tim Collins is a regular contributor to Real Money, TheStreet’s premium site and provides options trade ideas each day on Real Money Pro, our sister site for active traders. After all, for every buyer, there needs to be a seller. To do that, they have to buy on the way up and sell on the … Exxon Explodes Higher On Massive Gamma Squeeze Earlier this week, we showed why the energy sector in general, and the largest energy company in particular – Exxon – were set for a major melt up: simply said, the gamma melt up that dominated the tech space had shifted to energy stocks. Share. Posted by 24 days ago. This involves the relentless, high-volume buying in low-priced far out-of-the-money call options to drive a stock price higher by forcing the market maker to purchase the stock as protection against their selling the calls, assuming they can’t find another party to take the risk. In short, the market makers wrote a LOT of OTM calls last week, and then had to buy shares to cover when those calls went ITM around noon. … UI set everything up for a gamma squeeze and need the price to close above $50. No rights reserved. It ripped face from $43 up to $75 in the morning session. The easiest way to avoid getting caught in a gamma squeeze and the subsequent fall is to not short stocks, not short options and not buy a stock in the middle of a gamma squeeze after a huge run higher. The last two months, however, has seen a volatility rise connected to a market rise 25% of the time, more than … For you, who love fun and laughter. The intuition is simple: gamma squeezes are more dangerous to the short-gamma party than to the long-gamma party. Discussion. There is no moderation when adding content. Battle will start shortly before the market closes. Repeat. That makes the market makers short gamma. It's a situation where the tail wags the dog, then the dog wags the tail and it cycles back and forth. A gamma squeeze is a short squeeze taken to the next level; here’s why they’ve become more common and how to avoid them. HF know and don't want that to happen and keep shorting the shit out of GME to keep it below $50. Covering leads to squeezing. The potential for gamma squeezes is likely to remain in this market for some time now that we have weekly options on many stocks. The stock price moves higher, which draws in more buyers because they see the price rising. its possible we see similar action on AMC (not as high due to only ~69% short interest compared to GMEs ~138%) but big gains could happen in the next few trading days if buy volume increases. Typically, settlement is on a Tuesday. You might be thinking who would be on the other side of that $150 call? First off, I am actual retard with a terrible trading history, and some form of mental disability. Rinse. 3.0k. We're unlikely to see them in large caps and companies with large share floats that are moderate- to high -priced, which means they aren't single-digit stocks. It ripped face from $43 up to $75 in the morning session. If too many people borrow (short) the share, then a large number of buyers will flood the market attempting to buy the stock, pushing the price way up in what’s known as a “short squeeze.” Since there are no limits to how high a stock can go, it also means there are no limits to how much an investor can lose if they short a stock. Don't short a stock and don't short call options. First we'll start with a brief description of what a gamma squeeze is. There Are No Villains in GameStop Frenzy: Rogoff (Click on image to enlarge) How long before Robinhood is taken offline? Gamma squeeze. The basic idea behind a short sale is an investor borrows a stock and sells it to someone else. Because there are now 10-15M shares tied up in the clearing houses, there are now even fewer shares to be borrowed. Share. The Gamma Squeeze on Friday actually means that there are about 12.5 million fewer shares on Monday and Tuesday for shorts because those shares are now tied up in clearing houses u til Tuesday. And that starts Sisyphus. This involves the relentless, high-volume buying in low-priced far out-of-the-money call options to drive a … But market makers want to make markets, not hold or short option contracts, so they will take action to remain "neutral." Gamma is a term used among options traders but it adds a wrinkle for even non-option traders that is worth understanding. I predict a similar, though not as significant squeeze as GME for AMC. Click here to learn more and get great columns, commentary and trade ideas from Jim Cramer, Helene Meisler, Mark Sebastian, Paul Price, Doug Kass and others. But there’s another level of danger to the gamma squeezes. Eventually that investor will have to repurchase the stock. The rest is history, GME closed at $65, and every single call that expired yesterday was ITM. Close. After AH trading today, the only call still OTM expiring this Friday is $9c. Now, with about 20% of the total float committed to the fucking clearing house as they sort out Friday's shitshow, I expect it’s closer to 500%. Take a look at the TODAY’s call options volume for Feb 12 expiration (this Friday): 30,633 at the $40 strike calls; 6,810 at the $41 strike calls; 62,786 at he $42 strike calls; That is nearly 100,000 call options. But there's another level of danger to the gamma squeezes. If that's the case we'll just get an infinity squeeze in smaller chunks infinitely. For some analysts, Friday’s … After all, technical and momentum traders love to buy stocks moving up. Usually, when the market rises, volatility falls — since 2006, this has happened 90% of the time. Given this activity is a source for significant volatility and instability, it is worth exploring. Back to top. © 2021 TheStreet, Inc. All rights reserved. The shorts are going to have their positions closed whether they like it or not if this continues (which it will). The borrowing rates make the hedge funds nervous and is ultimately a huge factor for them having to cover. That was fucking wild, even for this autist's dream of a stock. As signs of froth and bubble warnings abound, stock markets may be setting up for an intense gamma squeeze, according to Susquehanna International Group. If the stock continues to rise, the market maker's delta position also becomes increasingly negative at a faster rate due to gamma, which is why this phenomenon is known as a gamma squeeze. The entire saga really hasn't disappeared, but … Demand for GME will continue to pump on Monday. Both sides waiting for the other one to do something. Others have already commented on why this has happened, but I'll summarize for the dunces in the … Said otherwise, the same “gamma squeeze” dynamic we observed in mid/late August when Masa Son’s SoftBank ended up buying billions in call spreads, sparking a meltup in tech names is back and just like in August, liquidity is dismal which likely means that SoftBank is back for round three (after a failed attempt to squeeze the Nasdaq higher two weeks ago). In order to begin to understand the movement in GME, you need to understand the concept of a “gamma squeeze.” This is a type bullish feedback loop that can generate big movement in a company in a short period of time. January 26, 2021 9:40 AM January 27, 2021 6:31 PM Braden Maccke 13 Comments Gamestop, Gamma Squeeze, GME, r/WallStreetBets, WallStreetBets. The stock loan isn't permanent. People seem to … This was also the same day the GME squeeze went crazy from 90 -> 300. Read More: 7 High Short Interest Stocks That Could Break Out. It's a cultural event now, where every lay person can be a modern-day Robin Hood. And if there isn't a seller, then the market maker will step in as the seller, at least until they can find another investor to take the other side of the trade. Again, this is fucking retarded. I bought into AMC 3/12 15Cs on Thursday and Friday because of what I noticed. How Friday's GME gamma squeeze may trigger a short squeeze on Monday and Tuesday. one with a strike price significantly higher than the current stock price -- that will expire in the near term, maybe the end of the week or the next week. It's not simply the options that cause this type of squeeze; it's the cycle. However, when you get the crazy volume of tens of thousands of contracts being traded as we saw with GameStop, there simply may not be enough contract sellers to take the other side of the trade. Remember remember the 5 th of Febvember. All of the GameStop options issued (with a high strike price of $60) were in the money on Friday (1/22/2021), trigging a gamma squeeze as institutions who had written the options rushed to cover their positions. BlackBerry has potential for a large gamma squeeze this Friday Discussion. By Tim Knight - 4 months ago (19, Oct 2020 1:53:57 PM) From our friend at ORATS: The last two months of market and volatility action is unparalleled. The numbers were large on Friday as well. What is Gamma Squeezing? The MMs want to stay neutral. BlackBerry has potential for a large gamma squeeze this Friday Discussion. The change we're seeing in the market is that an investor can now buy a low-cost, far out-of-the-money call option -- i.e. With the introduction of options, specifically weekly call options, a short squeeze can be taken to another level called a gamma squeeze. A gamma squeeze is a short squeeze taken to the next level; here’s why they’ve become more common and how to avoid them. This post was edited on 1/23 at 10:49 pm. For instance, on GME, there were people buying call options giving them the right to buy GME at $150 per share when the stock was trading at $75 per share, and they only had a few days until the contract expired. Over the next week or two, we're going to hear the term "gamma squeeze.". Site content is 18+. A “gamma squeeze” can occur when a trader or group of traders purchase call options in bulk, causing market makers who sold them these options to buy the stock as a hedge. If RC even opens his twitter app this weekend, it's over. The technical story is just that these two factors—a short squeeze and a gamma trap, if you like—combined to push the stock up rapidly on Friday.