Is there hidden rationality beyond irrationality?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)
Now lets review 10 famous example in 2021:
1- NYSE:GME
2- NYSE:AMC
3- NYSE:BB
4- NASDAQ:BBBY
5- NYSE:NOK
6- NASDAQ:CLOV
7- NASDAQ:SOFI
8- NASDAQ:WKHS
9- NYSE:FSLY
10- NASDAQ:NAKD
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???
Reference Article:
www.yahoo.com
www.investopedia.com
