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The original was posted on /r/Superstonk by /u/Mojomaster5 on 2024-09-16 12:52:03+00:00.
Welcome back to another edition of Open Interest - the only GME price movement forecast dedicated to an analysis of the options market!
With $20 holding steady last Friday and volume slowly drying up after our earnings hype, our outlook into the next two weeks in decidedly more upwardly stable, though how dynamic that upward stability will be is a question of OPEN INTEREST (roll credits). Let’s actually take a look though.
Price Movement Recap
Friday’s price action largely kept to the higher probability scenario I outlined premarket, namely neutral play between $20-$21 into the weekly close. Volume levels still haven’t returned to their mid-late August lows prior to the GME Q2 Earnings Reporting Date Announcement, but total volume was still too low to make serious push below our huge total gamma position at $20:
9/13 Trading Day 1-min Aggregation
Intraday, the major reversals oriented themselves about $21 as our nearest high net-positive gamma exposure position, which was established early as our VWAP + 1Σ level. The 200-min SMA kept pretty closely coincident with VWAP itself as we see above and traders used these levels for their main intraday moves.
OI Changes + Max Pain
With the outsized 9/13 OI from earnings about to wipe and yield to 9/20 as the Options Chain dominating our MM gamma hedge structure, traders made some interesting adjustments to their positions heading into this week’s trading and September OPEX. Take a look:
The most conspicuous modification to the chain is the retreat of Put OI into this Friday at $18.5 and $19. Long positions at these strikes were built out to potentially capitalize on a continued downward move to the 200-day SMA at around $18.50. You’ll recall that on Friday I pointed out the conspicuous increase in OI at $18.50 during Thursday’s trading, noticing it was almost entirely at the ask and spread out between three trades. It looks like most of that OI was built out by a single trader who, after seeing Friday’s unwillingness to even test $20, closed almost 6,000 contracts in the span of a few minutes:
I guess dawg didn’t get the Ape community memo that Bear r f*q and had to eat that 50% loss. Sorry, bro :/ Them Long contracts’ll getcha, like, instantly…
All fun and would-be options-trader caveats aside, the bear hope for a slip beneath $20 has been diminished heading into this week, although the large amount of OI at and around $20 - Call and Put OI - does look to have slid our Max Pain strike down the chain a bit for now. Last Friday ChartExchange had us at $21 for 9/20 OPEX. ChartExchange has yet to update as of the time of writing, but Maximum-Pain has our new Max Pain at $20.50 at least for the start of this week. That being said, most of our new OI is Call-focused and skewed bullish overall on strikes from $22 and below.
Up to this point I’ve been mute on our 9/27 OI largely because overall volume has been low. It will start to pick up a bit more this week, so we can take a look at Friday’s trading to get a sense of where we are starting off with it this week. Most of Friday’s trading was Call-focused and aimed at building out the OI chain from $20 up to $23.50. What’s key to observe for us here is that there was very little activity below $20 in Calls or Puts. So far, this suggests traders are anticipating both this week and next week that the stock price remain above $20 for the remainder of September.
Gamma Exposure
Our $20-$25 trading range post Mid-July (and post DFV’s likely T+35 share settlement completion) is now much more clearly delineated and book ended heading into this week’s OPEX with two large net-positive gamma exposure positions at $20 and $25 serving as Call Walls. With respect to our current price position $20 looks to serve as a very strong floor and downside support, whereas $25 serves as a strong resistance on upward price mobility. This is obviously a wide trading range that anybody could ballpark with the eyeball test, but the GEX data does backup the estimate by letting us know that the bulk of traders have identified and solidified these price levels as high-confidence trading range boundaries. They are thus, in bulk, likely Long Calls at $20 and Short Calls at $25.
With the range in question primarily positive in its gamma exposure orientation, this suggests that most traders are prepared to see some manner of bullish recovery into this week’s OPEX. The most likely outsized move I could see would be a test of the sizable positive gamma position of $21 followed by a move up to $23 following a successful breakthrough. I could see a news report of the completed ATM coming in as the stimulus on a move that would trigger said breakthrough. For those of you who ascribe to ‘gap fills’ this would be the ‘gap fill’ from our 9/10 close before earnings and our 9/11 opening the day after.
If we take a look at the GEX structure into next week’s expiry, the currently anticipated hedging landscape also encourages and frames such a move to take place, though with a decidedly lower upward bound to that speculative upward recovery move:
Technicals
7/16-8/27 1-Day Aggregation with Doodle Projection
Everybody’s favorite doodle is back and our daily chart is still more or less following its directional archetype. Much to my delight our price action has been skewed slightly to the upside as I ideally sketched it in my doodle at the end of August before our earnings reversal got into full swing. This has meant our upward volatility extended as far north as $25.02 about $1.50 above our 50-day SMA and our lower bound has so far not gone below $19.31, so not quite as low as our 200-day SMA at ~$18.50 (now rising).
With this being said, the 50-day SMA has moved down to about $23 as these two moving averages have continued to narrow. If upside reversal and post-earnings recovery is in our future, the options indicated price target of $23 does look to be coinciding with what technicals (and ‘gap-fill’ theory, I guess) would project. There’s no suggestion as to *when* this might occur, but our support at $20 suggests some point over the next two weeks while that large positive gamma exposure position at $20 is still in place.
IV Trends
The post-earnings IV depreciation is still in full swing, though there is still some juice left in our overall IV levels from earnings heading into 9/20 OPEX. We can still expect to see our typical weekly fluctuation pattern with the Monday following a gamma exposure wipe necessarily implying elevated volatility. The OPEX wipe itself after Friday’s trading might also keep IV levels higher than they might otherwise be before the resume an overall net downtrend back to mid-late August levels come the beginning of October.
Synthesis + TA;DR
Any downside in our price looks limited to $20 over the next two weeks barring any major negative externalities. In terms of OI, GEX, and TA, we are also likely looking at a recovery up to $23 with the announcement of the ATM completion as a likely catalyst for said price action to occur. Otherwise, we are looking at a neutral-slightly bullish outlook over that span as volume trickles off and IV continues to flatten out. We’ll have to see what that means for our October destiny in the days and weeks to come.
Cheers
“The VW Squeeze peaked on 28 October 2008. 29 October 2024 is National Cat Day. Happy Cat Day everybody!”
"Dreams are Messages from the Deep."
Post Scriptum: A special thank you once again to our award-donor: our most consistent HostIntelligent. Host has now sent over his THIRTIETH consecutive award (and a coffee) in total. Today’s coffee while writing, however, came by courtesy of Stereo-soundS! That double espresso really helps get her done :) Thank you guys for your support.
Thanks again to everyone else…
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