AMC to the MOON!

[txwWrestling]

Under $50=bought 3 more shares lol  

[keylime]

1 minute ago, txwWrestling said:

Under $50=bought 3 more shares lol  

This is the way!!!

[keylime]

I had to jump in too. I just bought 1 share to celebrate 4th of July! And my soon to be Financial Independence!!!

Let the MOASS fireworks begin! Ha!

[jg1]

43 minutes ago, bkeiller said:

 

Ready to pounce from the sidelines. Cheers!

Its Friday, payday, and buy day!

[txwWrestling]

Great bought 2 more just now due to you guys lol... GO AMC! Happy 4th Weekend everyone!!!!!

[pokerplayer]

We got them on the ropes now Apes !! Bought 18 more shares @ 49.99.

 

   I'm sure their sweating big time now !!

 

   pp

[rw.sutton]

Just bought 10 at 49.37

[boomhand86]

The wife got paid today and said I can get fireworks or another share.. I just ordered another chicken tendie..Ps .. I'm getting fireworks too lol

[txwWrestling]

Just now, boomhand86 said:

The wife got paid today and said I can get fireworks or another share.. I just ordered another chicken tendie..Ps .. I'm getting fireworks too lol

Nice call boom! Have a great 4th! 

[md11fr8dawg]

You guys might enjoy this article.

 

Total Alpha  Amber Hoobyar July 2nd, 2021 

•  
•  

Meme Stock Gamma Squeeze

We discussed how to trade with the smart money by understanding options open interest and max pain here.

Today we will discuss what happens when the smart money is trapped by looking at Reddit’s favorite meme stocks. 

More specifically we’ll talk about how Gamma Squeeze can lead to outrageous volatility. 

 

Conditions for a Gamma Squeeze

For a Gamma Squeeze to occur, certain conditions must be present. A Gamma Squeeze is a short squeeze but on steroids.

1. First, we need a high short interest in a stock. 

For a squeeze to occur, sure market participants must be stuck, in this case, stubborn shorts. A squeezing stock can continue to do so until stubborn shorts can no longer take the pain and forces out of their position. 

Short interest of over 10% gets my interest, but anything close to 30% or above can fuel a significant move.

2. Second, we need options activity. 

A Gamma squeeze is also fueled by options activity— this is what gives the short squeeze added “juice”. 

It works like this: People who are short the stock hedge their positions by buying out of the money call options sold to them by market makers. As we wrote about yesterday the smart money has every incentive to have the options they sold expire worthless to pocket the premium. 

For the most part, they can do this. After all, if they are the house and well, the house should win most of the time. The fun starts when the smart money gets trapped, and a vicious cycle ensues.

A Vicious Cycle

Occasionally when there is so much demand for a stock, market makers who sell options end up fueling the rally. 

Let’s use AMC ENTERTAINMENT (AMC) as an example. AMC had a short interest of around 20% so our first criteria is met. Now as buying came into this stock a vicious cycle ensued.

Now to help explain this vicious cycle, let’s define the psychology of market participants. Short sellers were short AMC because, in their mind, it was a dying business, and their valuation is at a lower price than where AMC is currently trading. 

Thus as AMC moves higher, they begin to short more as they believe it is going down more over the longer term.

Also, new short-sellers who see AMC going higher pound the stock short because they see the move as irrational expecting it to go down. As we’ve already stated, to control their risk, they buy out of the money calls to hedge their short position. 

So as new shorts enter selling the stock short, there is also added out-of-the-money call buying when the stock goes higher against them.

This is where things can get out of hand. Once the market makers who have sold calls at levels of high open interest can no longer hold the price below that level to collect their premium, they must hedge their short call sales by buying back the stock.

So for example if there is 30k of open interest at $30 calls, once price holds above that level market makers are buying stock to hedge those calls sold. 

But then new shorts come in and buy the $40 calls to hedge. Once price gets above $40 market makers are forced to buy stock to hedge the calls that they sold, sending it even higher.

To add fuel to the fire, you have speculators who understand this rare situation and buy out-of-the-money calls and shares. It puts even more pressure on shorts and market makers— with substantial open interest in calls that cannot be contained for the time being.

This vicious cycle can continue longer than most participants think and usually goes on until a lot of short sellers are forced out of their positions, pushing prices even higher as they cover at any cost or sometimes a hedge fund or big trader blows up. 

Sharks smell blood in the water and usually will not stop until stubborn shorts can no longer take the pain. We have seen occur this in TESLA INC (TSLA) , TILRAY INC (TLRY), BEYOND MEAT INC (BYND), GAMESTOP CORP (GME), AMC ENTERTAINMENT (AMC) and CLOVER HEALTH INVESTMENT (CLOV) in recent memory 

Bottom Line

Stocks with high short interest can have outsized moves as demand from new buyers fuels added demand from shorts covering. 

These moves can become even more extended as the short squeeze turns into a Gamma squeeze where added demand for stock comes from market makers who are forced to buy even more stock to hedge the calls they sold. 

By understanding these mechanics traders can find good setups during the squeeze and also lower risk by using advanced options strategies.

[markb57]

saw a vid last night that said AMC is wanting to create 25 million more shares to sell. How can't they create stock out of thin air????

[txwWrestling]

https://www.reuters.com/business/amc-shares-down-after-research-house-signals-short-position-2021-07-02/

[txwWrestling]

Interesting....

 

"At some point in time, I don't know when that'll be, inevitably there has to be some type of mean reversion with AMC. I don't think it can permanently sustain a 45 times EBITDA multiple," he said.

Iceberg gained attention in 2015 for highlighting what it called aggressive accounting practices at Hong Kong-based Noble Group. Commodities trader Noble denied the allegations but subsequently saw its profits collapse and was forced to sell most of its assets.

[Gypsygirl11]

Bought 9 more shares...

[jg1]

1 hour ago, markb57 said:

saw a vid last night that said AMC is wanting to create 25 million more shares to sell. How can't they create stock out of thin air????

We, the share holders, have already voted on that. Doubt if they got their wish. Dont know the outcome yet.

[markb57]

where would you have voted? AMC.com?

[keylime]

35 minutes ago, markb57 said:

where would you have voted? AMC.com?

If you had any shares before June 2 your broker sends you a link to vote. 

As far as the 25 million they're looking for. They're not using them until 2022. And 25 million is nothing anyway except to help strengthen the company's bottom line. But MOASS will be way before that. I voted yes because I plan on buying back in and want them to be as strong as they can be.

[pokerplayer]

Trying to figure out now what a good sell point is. keylime any thoughts I can chew on ?

 

  pp

[Dinarrock]

26 minutes ago, pokerplayer said:

Trying to figure out now what a good sell point is. keylime any thoughts I can chew on ?

 

  pp

100K and not a penny less!!! Lol… I will have my entire investment recouped when the stock hits 1K personally and then I will sell 10% of my stock for every 10K it goes up and once it reaches 100K I will still have around 3000 shares left it looks like but I will have also banked about 188 Million selling 10% of my remaining shares every time the stock raises 10K!!! So my last 3000 shares would be sold above 100K if we get there!! I know this is all theory of course and who knows maybe the stock will raise so quickly when the MOASS happens I can’t sell every 10K since it jumps faster then that we can only hope right!!! No one knows what will happen other then it will be halted every 15 minutes once the stock raises a certain percentage to trigger the halts but hopefully in between the halts the stock raises massively!! 

Edited July 2, 2021 by Dinarrock

[keylime]

22 minutes ago, Dinarrock said:

100K and not a penny less!!! Lol… I will have my entire investment recouped when the stock hits 1K personally and then I will sell 10% of my stock for every 10K it goes up and once it reaches 100K I will still have around 3000 shares left it looks like but I will have also banked about 188 Million selling 10% of my remaining shares every time the stock raises 10K!!! So my last 3000 shares would be sold above 100K if we get there!! I know this is all theory of course and who knows maybe the stock will raise so quickly when the MOASS happens I can’t sell every 10K since it jumps faster then that we can only hope right!!! No one knows what will happen other then it will be halted every 15 minutes once the stock raises a certain percentage to trigger the halts but hopefully in between the halts the stock raises massively!! 

It's good to be you. Lol!

Sounds like you got a plan. 

100k and not a penny less!

[keylime]

58 minutes ago, pokerplayer said:

Trying to figure out now what a good sell point is. keylime any thoughts I can chew on ?

 

  pp

I'm watching the rise past 25,000 and how quickly it may go to 50,000 plus. But my personal sell goal is 10 shares for 25,000. 100 shares for 100,000. And hold for gold anything above 250,000. This thing is going to be a money pogo stick. And I can catch on the way down from the higher heights of 500,000 plus then buy back in at various floors and right back up for more Tendies. 

This is the way for me personally. 

But that little pinch of 10 shares at 25,000 will give me all I need to wait for the Gold. 

[boomhand86]

I'm going to sell 1 share at 10,000.. lawnmower!!!!

[pokerplayer]

Um, you know what ? Week-ends suck.... lol

 

Hang in their Apes, it's showtime !!!

 

   pp

[Dinarrock]

19 minutes ago, keylime said:

I'm watching the rise past 25,000 and how quickly it may go to 50,000 plus. But my personal sell goal is 10 shares for 25,000. 100 shares for 100,000. And hold for gold anything above 250,000. This thing is going to be a money pogo stick. And I can catch on the way down from the higher heights of 500,000 plus then buy back in at various floors and right back up for more Tendies. 

This is the way for me personally. 

But that little pinch of 10 shares at 25,000 will give me all I need to wait for the Gold. 

Agreed and yes personally I hope my plan gets blown out of the water and the stock just keep rising then yes I will hold for longer I would rather sell 10 shares to recoup my investment vs the 100 shares I panned on!! Let’s go Baby, Let’s GetRDone, To the Moon and Beyond!!!!

[markb57]

I only have 20 shares so it's 100K for me.