Gama Squeeze Happens between Quadruple Witching Dates
When stock prices experience rapid shifts, the conditions may be ripe for a squeeze. In this scenario, investors may find themselves buying or selling shares of stock outside their normal trading pattern in order to minimize losses. A gamma squeeze is an extreme example of this, in which investor buying activity forces a stock’s price up. Gamma squeezes are often associated with options trading and they can be problematic for investors who don’t fully understand how they work.
A short squeeze is a specific type of stock squeeze. With a short squeeze, an increase in stock prices can force people who shorted the stock to buy back their shares.
How a Gamma Squeeze Works
Certain conditions have to be met for a gamma squeeze to manifest in the market. It starts with investors making assumptions about a particular stock’s price. Specifically, they assume that the stock will rise in price.
This leads to buying short-dated call options in the stock on a large scale. A call option’s value increases when the underlying stock it’s associated with increases in value. Meanwhile, this puts the institutional investors selling the options in a short position.
If this pattern continues with investors sinking more money into call potions, that can force institutional investors to buy more shares of the stock. This is a necessary step for hedging against the short position they now find themselves in.
The gamma squeeze happens when the underlying stock’s price begins to go up very quickly within a short period of time. As more money flows into call options from investors, that forces more buying activity which can lead to higher stock prices. Investors who purchased call options and sell when stock prices are high can reap sizable profits but the institutional investors who had to cover their short positions might see significant losses. (1)
As you see all these spike patterns happened between Quadruple Witching Dates!
What Is Quadruple Witching? Quadruple witching refers to a date on which stock index futures, stock index options, stock options, and single stock futures expire simultaneously. While stock options contracts and index options expire on the third Friday of every month, all four asset classes expire simultaneously on the third Friday of March, June, September, and December.
Quadruple Witching Dates 2021 March 19, 2021 June 18, 2021 September 17, 2021 December 17, 2021
I believe a new round of Squeezing has just started and VLDR and GOEV, two of the most shorted stocks are just the tip of the iceberg.
GOEV: Short Percent of Float 32.48 %, 32.3M, 10 days to cover..!
VLDR: Short Percent of Float 16.06 %', days to cover 4.5
Do you know Which stocks have the potential to be the next Short or Gamma squeeze???
I’m a fundamentals investor, or at least it’s my goal to be. I’ve written a couple of papers on the topic of “short sale myths”. I’m a huge supporter of the Apes, proudly call myself one too, the great deed they’ve done for our capital markets is immeasurable.
As for AMC, I have a small holding in solidarity with the retail movement. My perspective from a fundamental point of view is that short sellers’ liability to acquire shares have created an asset belonging to shareholders of anywhere between double the market capitalization to 8 times the market capitalization. Of course, we will never know the true number, but my own guess is 3 times the market capitalization at least, based on anecdotal information I have gleaned. Short sellers have broken the system by creating a compulsion to buy, essentially blackmailing themselves. There will be a trigger, maybe very very soon, and they will have to meet their obligations to settle their liability. It remains to be seen how this is practically resolved but the price will no doubt appear silly, when in fact it is not, not in terms of the mechanics set up by short sellers. I personally hope it ends up with some big knob perpetrators going to jail, not only for justice for AMC shareholders, but to save our market.
vazzal
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so now you're on board after hating on AMC a couple months ago, welcome aboard lol
We closed red today on AMC. Probably not expected. I am looking at the comments here. How many people did not trade smart and blew their account up today?
Moshkelgosha
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@UGotOptions, my trailing stop triggered at 44, +18% in 2 days!
UGotOptions
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@Moshkelgosha, This is good indeed for sure. Congrats my friend.
marinik
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didn't believed you when you said WSB drove MSFT higher last week, but after yesterday rose from meme stocks AMC, GME, BB, i really believe in the manipulation of low and medium-priced stocks!
thanks for your very smart analysis, learning a lot, as a beginner (swing) trader!
brushenas
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Great article & analysis. You make us smarter traders every single day with your knowledge. Thx
Moshkelgosha
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@brushenas, Thank you so much everyone for putting trust in me, i can’t be happier. i have learned so many things in this Journey
biky33
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Hey mosh u wrote 10 days to cover for GOEV.... can u please explain what it means???
As for AMC, I have a small holding in solidarity with the retail movement. My perspective from a fundamental point of view is that short sellers’ liability to acquire shares have created an asset belonging to shareholders of anywhere between double the market capitalization to 8 times the market capitalization. Of course, we will never know the true number, but my own guess is 3 times the market capitalization at least, based on anecdotal information I have gleaned. Short sellers have broken the system by creating a compulsion to buy, essentially blackmailing themselves. There will be a trigger, maybe very very soon, and they will have to meet their obligations to settle their liability. It remains to be seen how this is practically resolved but the price will no doubt appear silly, when in fact it is not, not in terms of the mechanics set up by short sellers. I personally hope it ends up with some big knob perpetrators going to jail, not only for justice for AMC shareholders, but to save our market.