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The original was posted on /r/Superstonk by /u/bobsmith808 on 2023-12-09 04:57:12.
hi everyone, bob here.
edit: yes i’m drunk and writing dd again. and yes, i wrote 12/18 instead of 12/8 in the title. it’s ok though, because it’ll be the same fucking bullish AF story by then too. fuck the hedgies. I’m going to buy more.
I thought I’d share some thoughts and data, sexy, moist data, I have on GME and its price action this week.
I, as many of you know, play with fire options on a regular basis. Why? because my parents were neglectful and I like the things it does to stuff… fire that is. Options are great too - for my portfolio, and exceptionally great at giving me insight into what a stock might do if it’s being manipulated by options.
Before we start, here’s some foundational knowledge you will need to know about.
- yelyah2 (may the reddit gods rest her beautiful soul) originally developed a statistical model for understanding the underlying (heh) cause of market movements. here’s one of her prevous posts that explains it a bit, which i will do in my own words here as well. [1]. Holy shit - about 2 years ago, she was kind enough to work with me to help her model take the next steps, so its something I have the honor of maintaining and furthering to this date.
- Some terms to know for the DN Model include:
- Delta Neutral (DN): This represents the underlying price that would create a total market delta of 0 across all options (all expiration dates) for a given date and symbol. In general, it acts like a floor to the underlying price, but if the price drops below the delta neutral, then it tends to shoot back up above that line.
- Gamma Neutral (GN): This represents the underlying price that would create a total market gamma of 0 across all options (all expiration dates) for a given date and symbol. In general it acts alongside DN as a support/resistance channel. A great example of this observed behavior is on SPY lately.
- Vega Neutral (VN): This represents the underlying price that would create a total market vega of 0 across all options (all expiration dates) for a given date and symbol. In general, it acts a floor of floors for most stocks, and a buy signal when stocks dip below it, as that means they are usually outside (the low end) of the model values. On ETFs, which are primarily driven indirectly (by options and balancing operations) you will see VN and GM at the top of the model, and they act as resitance.
- Gamma Max (GM):- This represents the underlying price that would create the maximum gamma across the market. The GM seems to act like a ceiling, but fun things happen when the underlying crossing that threshold!
- Delta Sensitivity Test (DS+ or DS-)- This is basically a gamma test, and represents the % change in the total market delta associated with a 5% increase in the underlying stock price. Significant spikes represent unusually large hedging patterns based on the options mix, and can indicate the potential for significant buying / selling power on the underlying symbol.
Example of DN model on SPY lately:
What’s GME doing now?
Enhance
OK now before we continue, let’s recap.
GME has ripped the fuck up, smashing through resistances all the way BEYOND what is supported by options and hedging activity. It has since retraced and the options activity has repositioned, allowing room for more growth. during that repositioning time, we had some hyper-aggressive shorting activity that i posted about earlier this week, some people paper hands🥒 that are actively trying to confirm their bias through convincing others to paper hand too 🙄, and AGGRESSIVE BUYING ACTION sending the price RIGHT BACK UP, and UP SOME MORE.
Short us after earnings and spread fud? How’s about a ~20% intraday move, bitch?. get your mayo, get your bedpost, and prepare your ass for MAXIMUM CARNAGE.
Ok, back to the data, but damn that felt good!
bobsmith808 getting ready to dismantle something that irritates him.
Our day-end Options Data:
Essentially, what I’m seeing is bullish. There is a pull back on short dated puts. When these are pulled back and/or closed, the dehedging action is BUYING MORE GAMESTOP SHARES. I’m also seeing further accumulation of longer dated calls. But don’t believe me, here’s the data:
GME Options OI Δ 3/5 days 12/8/2023
This chart shows the aggregated options interest by strike, along with volume for today. Notice the layering of shorter dated options versus longer dated ones. there is a lot of activity today around the current spot price, but most of the longer dated positioning volume is bullish calls. Note: we need to compare open interest on Monday to see if the volume was opening or closing positions.
GME options Volume 12/8/2023& OI
If you noticed increased volatility around $16 mark today, you’d be observing the effect of High Frequency Trading (HFT) activities in hedging and re-hedging the gamma risk at that strike. The higher gamma means that the move between 16-15 would result in a significant drop in delta (and need to hedge shares by buying). likewise, the same drop in hedging sensitivity is observed when pushing PAST 16. so that was a battleground for sure today. Good news is, it should be smoother transition on Monday, unless there are large changes to the options chain on open, allowing delta hedging to again be a primary mover in that price range, rather than gamma volatility.
GME Options chain Gamma weight by strike 12/8/2023
Speaking of delta hedging, this is what you are looking at. come Monday, there is actually an increased hedging requirement at $16, which should help draw us nearer and nearer to the critical points in the chain (around 17.5-18) that will launch us into the magnet of delta positivity at $20.
GME Options Delta Weights By Strike 12/8/2023
I know, i know. options are bad because they are confusing … but I encourage every one of you that has been confused at all by this post to check my profile. I have some pins in there … the “its all greek to me series” that go over how options work and give some examples of practical uses. I’d link, but i believe it to be against the rules (some mod tell me otherwise please so i can make it easier for people to educate themselves).
If you don’t like options, great! they’re not for everyone. I know some people that invest without them and do fine. They are just a part of this big fucking casino, so i want to understand them and share my knowledge fwiw.
Now, on to the DRS question…
I’m not going to speculate on shit… that’s not my style. my style is eating crayons and looking at spreadsheets. in the spirit of being a fucking nerd. lemme show you something:
When the DRS number came out flat again i was like, yeah, i guess that’s legit… then, like many others, i realized it WAS THE EXACT SAME FUCKING NUMBER…
yeah, the same number… exactly. TO THE FUCKING EXACT.
So i was like. what is the probability of that? in a market where there are 158 MILLION participants? I a stock that has 304 MILLION shares to be traded (officially), with a rabid community of degenerates apes in the hundreds of thousands… Sure some sold, but many bought as well over the last quarter. what are the odds that the selling and buying flows were EXACTLY THE SAME???