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The original was posted on /r/Superstonk by /u/Mojomaster5 on 2024-10-01 13:18:17+00:00.
Welcome back to another edition of Open Interest - the only GME price movement forecast dedicated to an analysis of the options market!
Yup. We will do some thinking today back to the time right before this gem popped up!
The first day of our new weekly options expiry period is in the books and that means we’ve got some new intraweek trading condition reconfigurations to take a look at as we try to forecast our course over the coming four trading days before said expiry.
Additionally, for today’s title, I want to go ahead and thank user Metareferential who asked about whether I would be interested at some point in the near future in doing a meta-analysis of the options data around the time of DFV’s return in comparison to our recent options data. While the full analysis would take a lot of hours, I did take a peak at some of the historical data leading up to Keith’s twitter return and discovered an interesting parallel trend as regards MM gamma exposure ratios over time. I’ll talk about it down below as we get to our usual rough and tumble. Let’s go!
Price Movement Recap
Yesterday I mentioned that our immediate trading range on the day, based on our MM gamma hedging landscape was likely set to take shape between $22 and $23 with a good bit of play between these two strikes given the lack of accumulated call gamma at $22.50. This is what we got off of the open:
9/30 Trading Day 1-min Aggregation
I also mentioned we had two main likely pathways ahead of us. Judging from technicals, GEX data, and historical price action, our path of least resistance over the next three weeks indicated something of a neutral-bearish potential retrace down to around $20.50-$21 as an absolute downside end range. However, I also mentioned that the options market was set up for decently determined bullish options premiums to beginning to ladder our price up to new whole-dollar trading ‘brackets’ intraday - e.g. $23-$24. With very sizable bullish options flow coming in throughout the day - likely buoyed by some MM T+1 Settlement purchases since January Whale kept the 9/27 $22 Calls ITM - this bullish laddering is what occurred after the first hour or so of trading.
Only at about 2pm with our price extended up to our daily high of $23.64 did bearish volume pick up in force and attempt to slam the price sub-$23 and return us back to trading in the lower $22-$23 bracket. Bulls responded in turn thereafter and the rest of the day was a bull-bear battle to keep the price either above or below $23. With the price finishing right below the $23 mark, the options market thus has set up a form of sentimental dilemma heading into today’s trading - will bears catch an edge and push us into the lower bracket, or will bulls have another day?
OI Changes + Max Pain
Max Pain has notably shifted up for this week’s options expiry per Maximum-Pain from $21 to $21.50. This was likely in large part due to the new Put OI built out for this week at $22:
Call buying, as mentioned above, was substantial yesterday, especially in our early trading session. This has resulted in a significant number of new weekly calls being inserted throughout our newly elevated trading range - from $23 and up. We can see, also, that at $22.50 and below, Call OI saw a net contraction indicating that traders with positions established in prior weeks for these strikes took profits and repositioned during yesterday’s trading.
10/18 OI was comparatively light - enough that 10/4 has surpassed it as our largest gamma expiry (to be expected) - though OI continues to accumulate. The one notable detail for 10/18 activity, however, was the contraction of Call OI at $30 by about 10%. This looks to have occurred all in a single trade right when our late day dip occurred as part of a trailing stop-loss or something similar:
Gamma Exposure
And now the main event! First we’ll look at today’s new gamma exposure landscape and then I’ll spend some time talking about the Call/Put GEX ratio trend I spoke about in the title:
The first element that stands out is our $23-$24 positive gamma bracket. With our price hanging out just below $23 in premarket trading, we could see a replica of yesterday’s price-action model, namely some bullish options flow walking us up the $23-$24 range with $23.50 has a smoother transition point. There is still too little call gamma accumulated at $24.50 for any upward volatility (barring a major information externality) to take us to $25 yet. However, this can and likely will develop if trading can keep to the $23-$24 range enough.
At the same time, bears and traders short volatility will be gunning for a retrace down to about $22 in the short term with the hope of coaxing traders to insert more put gamma below $22, as we can see started to develop yesterday around the $21 mark. You can see from this respective price action that traders of differing quantities and capital commitments are preparing for the potential of both our neutral-bearish slow retracement and bullish ladder-up scenario to unfold in the coming weeks.
Whether one or both unfold is a day-to-day question that requires close observation to forecast with any increased reliability. I will say, however, that an interesting trend has been developing recently in our Put to Call Gamma exposure ratios. I don’t often talk about this, so let’s take a closer look:
As we can see, the P/C gamma ratio has been trending downward (a lower number) over time. This is a bullish indicator, as it implies Dealers are increasingly required to accumulate shares as a result of increasing Options Market call buying. This also corresponds to general stable, volatility suppressant price action conditions in the case of the underlying, which attracts investors and traders of decidedly lower risk tolerance.
But the numbers, Mason, what do they mean?
Let’s take a look at some samples of P/C GEX trends. How about August:
We can see that, prior to the Nikkei crash, GME P/C GEX ratio was trending upward and actually spiked the Friday before the crash (which hit bottom in the premarket on Monday 8/5) before trending down as the price recovered.
Okay, so how about on our mid-July run which may/may not have been connected to DFV’s T+35 June share settlement? Let’s see:
We can see the ratio dropped as the price laddered up above $25 and toward $30. The ratio bottomed on 7/16 - the day before the price itself peaked at $29.99 on 7/17 and then worked its way back up again as the price dropped sharply below $25 on 7/19 in time for the $25 7/19 calls to expire OTM (RIP Lenarius + Crew who didn’t exit their long calls at the peak and banned themselves).
Okay, so what did these ratios look like right before DFV came back on the scene? Good question, Ape! Let’s look with our seeing eyes:
As we can see here, the ratio was CRAZY bearish and Put GEX heavy heading into 4/19 OPEX. This was the week that the stock price bottomed sub-$10. However, in the week thereafter, Call GEX started SHOOTING up. This is likely the effect of DFV’s call-buying, which quickly put the P/C at the sort of levels we are actually seeing now in the data.
What did the ratio look like thereafter into Sneeze 2.0?
We can see here that GME’s P/C GEX ratio continued to dip (with one three day bump in the road) and remained between .22 and .33 until 5/10 - the day after DFV liked the Run Lola Run post. Notably, this ratio changed not from an expansion of Call Gamma, but from a large contraction in net Put Gamma.
The price action took the following shape across these days:
While these ratio changes don’t predict ‘day of print’ intraday highs (lower vs higher), this GEX ratio trend did correspond to a 100%+ price change over the period before DFV even said a word on twitter.
The summary here? We have not seen a sustained low P/C GEX ratio (1/3 and below) trend emerge like the one we are experiencing now since the two-week period leading up to DFV’s retu…
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