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The original was posted on /r/Superstonk by /u/Mojomaster5 on 2024-10-04 12:07:33+00:00.
Edit: Today from 10:45-11:15am is Computershare recurring buy, so if the setup is there, that might be gamma ramp fuel/catalyst.
Welcome back to another edition of Open Interest - the only GME price movement forecast dedicated to an analysis of the options market!
"It’s a bubble! I mean… the oooooffffffiiiiiice…"
We’ve had some exciting Fridays four out of the last five weeks in a row. With the same sort of bearish manipulation we saw approach our $2 jump on the Friday of September OPEX, could we see another type event catalyze during today’s trading? Let’s find out!
Price Movement Recap
Yesterday’s trading - with the exception of an early bit of dynamism that bound itself to exactly one standard deviation (Σ) above and below VWAP, overall trading volume and volume in the options market was quite light with only 4.66mil shares traded and less than $6mil in premium traded on options. For reference, this was thus the lightest trading day we have seen since Wednesday, 8/27 or the date I drew my very first technical doodle projection.
10/3 Trading Day 1-min Aggregation
What little premium was traded was modestly biased in favor of bearish trades, though with so little actual volume on the day, the slump effect was accordingly mild.
OI Changes + Max Pain
Again, even though the options premium imbalance was slanted to the bearish side, it was so light that our Max Pain strike into today’s weekly expiry did not shift. We are still sitting pretty at $21.50. Despite our light volume over all, however, there were some strikes which stood out in terms of OI Changes:
For this week’s expiry, we saw some mild contraction on both sides of the chain outside of our trading range with new OI concentrated between $20 and $23 with $22 standing out as a salient strike on the Call side. While total volume on the day was about dead even in terms of bearish and bullish premium, it does look like one or more traders decided to open new positions at the ASK and MID just prior to small dip into the close:
Good luck, brethren! May your legal tender be plentiful.
New OI has started to pick up a bit for 10/11 expiry, but it is still light overall. Perhaps - and perhaps not - it will pick up during today’s trading. 10/18, even though it too was rather light on the volume, did feature some curious OI changes:
10/18 OPEX OI Changes 10/3-10/4
The two strikes of note were $21 on the Call side and $18 on the Put Side. On the Put side, it looks like our Bear from yesterday (lol fuq u dude) may have cashed out his Put position on exactly the little dip we saw toward the latter half of the day. Weirdly, despite the large change in OI (over 4000 contracts sold to close), UW reports almost no detectable volume on this contract. The same goes for our contracts at $21. If these contracts were bought to close, as likely was the case for the puts, then one wonders if these traders viewed their opportunity to for profit in these cases - tracking with downside volatility - as tapped out in the time that remains to them.
Gamma Exposure
As we take a look at our gamma exposure chart for today’s trading, the cause of our little dip before yesterday’s close comes into focus. With those 2000 $21 10/18 Calls closed, $21 negatized in terms of its gamma hedge pull. If MMs were short these calls (likely), then having them closed allowed them to unwind their shares hedges and pull the price down toward $21. Remember that all the OI with the nearest expiry exerts the highest proportional effect on MM gamma exposure, future expiries also have an effect on a given day’s intraday hedging mechanics.
Although this negative gamma position at $21 is still decently large, we still do not have sizable negative gamma accumulation in the $20.50-$20 range. Maybe this develops and gets built out into next week and 10/18 OPEX if we stay completely flat today. However, looking at today’s gamma structure, it is not a foregone conclusion that we do.
Looking at today’s structure I could see traders/institutions allowing the price to get pulled into $21 off the open, letting it lie flat for about an hour, and then somewhere between 11:30-1pm, once dealers have shed their long hedges for their short Call positions at $22, $22.50, and $23, an institution or retail whale comes in with a pile of cash and pops another gamma run all along the smooth-transitioning, net positive gamma strikes we have from $21.50 basically all the way up to $23.50. In this case, if we are able to trace down to $21, the high amount of negative net gamma at this strike might act as a slingshot like it did two weeks ago for 9/20 OPEX. Essentially, we’d a have a situation where traders would start selling puts to cash in on the downside volatility forcing dealers to close their short share hedges. This would create upward pressure from the negative gamma zone at the same time that it would build into hedging pressure from call-buying and spiking IV on price reversal to create another highly profitable gamma squeeze.
I will offer caution here, as we have had two gamma squeeze Fridays in a row and four in five weeks. If the right people are profiting, they might likely see little reason *not* to keep rinsing and repeating this tactic. However, its worthwhile to be wary of a fake-out despite the tantalizing possibility of another Friday Funday.
Technicals
7/16-9/19 1-Day Aggregation with Doodle Projection
7/16-10/3 1-Day Aggregation Actual
So, the real question for today’s expiry is “are the big boys going to come to play again or are they chilling until October OPEX?” At this point, a $2 Friday gamma squeeze still does not jeopardize our technical paradigm (just as it did not last week or Monday) and might allow yet another cycle of call shorting into 10/18 OPEX as institutions play with options pricing algorithms on rapid IV wiggle. It still looks like, on the macrotrend, the price will continue to retrace to the $20.50-$21 area into October OPEX. However, it doesn’t have to do so on a straight line to continue to adhere to high predictability scenarios.
IV Trends
My free AlphaQuery subscription has ended, so now it looks like this. Still gets the job done, but perhaps not as pretty. Fluctuations are pretty modest and synchronize with price action quite closely. Outside of a major upward volatility or news event, this will not change radically.
Synthesis + TA;DR
Volume from a major player will tell the story today. If institutions frame our early trading properly (slow, boring dip down to $21) and a Bullish Whale steps up to bat today, we do have potential for another gamma ramp event. However, with such events occurring now on 4 out of the last 5 Fridays, it’ll be important to keep an eye out for the fake. We still look to continue our technical trend to stay between the 50-day and 200-day Simple Moving Averages (transposed up by a dollar). However, a whale that comes in and try to ignite another $1-$2 gamma squeeze won’t jeopardize the integrity of that trend.
Edit: Today from 10:45-11:15am is Computershare recurring buy, so if the setup is there, that might be gamma ramp fuel/catalyst.
Good luck out there!
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."
Thanks again to everyone else as well for making this an excellent spot to share information, discussion, and community as we all try to learn more about the market and GME! My thanks especially to everyone who has voiced support in the comments, reached out directly, or bought me coffees to fuel these regular writing sessions before market open!
ADDITIONAL CLARIFICATION/DISCLAIMER: These posts are NOT intended as exhortations to buy and hold options contracts. I RARELY trade long options positions. When I do, I never hold more than 1% of my portfolio in long options and these days it is more like .01%. Options are structured to favor the DEALER. If you are randomly long options contracts because ‘you feel it’ll work’ and you do not have a very well thought out and tested method for restructuring probability in your favor, you will lose. It is an iterative statistical ce…
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