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The original was posted on /r/Superstonk by /u/Mojomaster5 on 2024-09-19 12:39:31+00:00.
Welcome back to another edition of Open Interest - the only GME price movement forecast dedicated to an analysis of the options market!
It’s been a grindy week the whole community and we didn’t get much of a reprieve yesterday despite the JPOW/Wells Fargo excitement. While we await the BOJ interest rate announcement to be publicized today and tomorrow (thus stimulating some additional potential f*qcery) less see what our options data can tell us!
Price Movement Recap
JPOW time is ALWAYS f*qcery time, but this time we got some free EXTRA f*q sauce dropped RIGHT on the day of the rate cut announcement. If we take a closer look at our price action during the day, we can see just how much yesterday’s infelicities were a product of atypical market activity.
A neutral-bearish list defined our early, mostly quiet trading which established itself in our lower VWAP channel followed by a 200k share dump to try to push the stock sub $20 and keep it there:
9/18 Trading Day 1-min Aggregation
Where did these 200k shares to dump come from? Anyone’s guess. No outsized trades appear on the Lit Trade Whale Scanner, so it wasn’t a large retail seller. Additionally, the period in which these shares were dumped was *conspicuously* absent any options trades over $1000 in premium. Take a look:
Like, nothing? *No* options trades? There’s no way those few hundred mixed sentiment Puts caused MM hedging algorithms to dump 200k shares in 3-4min out of nowhere. At that point in time as well, total options premium on the day was about evenly split between Bulls and Bears. So how can we explain this? I can only speculate that this was targeted conventional shorting with the intention of dislodging the price from MM gamma hedging support at $20. Except it didn’t immediately work, as the market responded with a good ol’ dose of 'I like the stock:
Traders saw a tasty chances to vacuum up shares sub $20 and walked the price right back up north of $20 were it was gamma pinned for the next hour. Got it. Time for plan B: DROP THE SHILL REPORTS!
Oh my gosh! Billionaire RCEO needs to pay a fine of less than $1mil for improperly filing trade paperwork… back in 2018? Well clearly the market isn’t gonna like this heh:
Except, basically no immediate reaction from traders except to buy the stock back up to VWAP at $20. Afterward we got the news report dropped four more times (in case you missed it) and another conspicuous series of non-options driven bearish volume that didn’t show up on any large lit-trade scanners:
Some bearish options flow began to chase some of these share pops, but not in large amounts. Nonetheless, with the price ‘pushed’ into the net negative gamma exposure zone sub $20, it was aided by some MM hedging action in sympathy with the share dumps. My only explanation here is that this was institutions dropping sizable quantities of conventional shorts in order to set up trades later in the day surrounding JPOW’s rate cut announcement. Surprise, surprise - we got an algorithmic vert candle right when JPOW announced the cut:
LOL look at that absolute scribble on the chart
How do we know this was algorithm-induced? Oh, just a suspicion… Anyway here’s SPY at exactly the same time…
OI Changes + Max Pain
But wait, how you know the options market didn’t flip bearish on the day causing this lower close and breach of $20 support? How we know this is institutional charades and that the options market isn’t signaling we should be preparing to leg even lower? Let’s see the OI data:
9/20 OPEX OI Changes 9/18-9/19
We do have a bit of volume on the Put Side at and below $20 which slightly negatizes our net gamma in that range. However, traders more so closed Long Put positions yesterday into tomorrow’s OPEX than opened new positions. This was not the case on the Call Side, where $20 was a particularly popular strike for new OI and whose trade sentiment was about even between BID and ASK volume starting the day off favoring the BID and shifting more toward the ASK toward the end of the trading day.
9/27 New OI did not look dissimilar to 9/20 OI Changes. Nothing crazy outsized save a bit of an uptick at $18. No OI position expanded by even 1,000 contracts or more:
At the same time, Max Pain is looking like it has not changed per ChartExchange and Swaggy. MaximumPain is suggesting that it has shifted to $20 for this week. It is difficult to tell which of these is the most reliable. I could see Max Pain having moved down to $20 given the amount of new Calls at $20 and Puts closed above $20.
Gamma Exposure
Our MM Gamma Exposure landscape and our current pre-market price position has us looking like we could easily return to our $20-$21 price range for an OPEX close between $20 and $20.50. $21 has now become so strong as a volatility suppressant level that price movement beyond that level looks like it would require a major buying externality to be stimulated basically today.
Next week’s gamma exposure is bit more equalized at $20, but by-and-large things are still set up for trading around that level:
Technicals
7/16-8/27 1-Day Aggregation with Doodle Projection
7/16-9/18 1-Day Aggregation Actual
Our technically-configured trading channel continues to narrow with the 50-day SMA slipping down to $22.85 and the 200-Day SMA barely moving up to $18.75. Notably after yesterday’s price action, the daily RSI (Current = 38) is slipping lower and closer to oversold territory (RSI < 30). The last time GME even *touched* RSI = 30 was the exact day of the 3.5-year price bottoming at $9.95. At our current position, a touch of the 200SMA at $18.75 would correspond to an RSI value of 30, should we happen to see it in the coming days. If we do, this will be a strong technical signal for major price reversal in the underlying.
IV Trends
This week’s IV flatline continued without too much of a plunge on the heels of yesterday’s whipsawing up and down the chart. In any case, without meaningful upside reversal we will continue to see this IV flatline and slight weekly decline.
Synthesis + TA;DR
Our OI and GEX data suggest we end the week close to $20 and slightly to the north side of that price point, though clearly interested parties who can afford to manipulate the board to their specific advantage will do so. Yesterday’s trading was a good reminder that, although there is a lot of useful information to take from our options data as regards our trading and investment decisions, there is still that outside factor, that ‘third thing’ that can come in and disrupt the structure enough to produce some unexpected results throughout the day. No bet is ever a sure thing - but there may be some major institutions coming to learn that lesson the hard way in the months to come.
Cheers
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