You guys need some re-assurance or a reason to buy more AMC? Here's some dd. Last week and today AMC has had a very good rally, but this is just the beginning, now let me tell you why. (I know finance can be dense and complicated so i'll try to keep it simple)
– There's a lot of options between 30 and 40 being placed which causes market makers to buy more shares causing a Gamma Squeeze today and after hours. If more large option volume is placed tomorrow between 40-50 the Gamma Squeeze will keep going, continuing so on and so forth.
– Short holders will lose a lot of money as share price continues up, forcing them to buy more AMC to close their position sometime through the week.
The past few weeks have been great for meme stocks, but AMC is leading at the frontline of this rally outperforming the others like GME, BB, etc, boasting a 112% increase the past week. One of the reasons i've been able to hold confidence in, is AMC's option volume. A call is a promise to sell you 100 shares of a stock at a certain price. Behind this contract, are people called Market Makers. These are people sitting at Wallstreet, writing contracts for people to buy options if there is a lack of supply. Now let's look at the option chain for today expiring next week
If we look at the 3rd column from the right, that's the current volume of call options. Whenever people buy options, in order for market makers to minimize as much risk as possible, they buy stock in order to stay "delta neutral". Fancy phrase I know. A very basic explanation is that no matter where the stock moves, the market makers don't lose money. Their goal isn't to bet against you, their goal is to scalp the bid/ask margins. Now notice how the option volume is particularly high at 30, 35, and 40. As the price moves closer to these strike prices, market makers got to buy more shares in order to stay delta neutral. Now with this high volume, market makers need to buy A LOT more shares everytime the price goes up, which then snowballs larger and larger causing something called a "Gamma squeeze", which basically means STONK GO UP. Last week a similar phenomenon occured, now we can see it will especially rally up at the 30 (which it did), 35(which it did), and 40 mark (soon to come). Once we get closer to 40 hopefully tomorrow there will be more options being placed in order for the Gamma squeeze to continue, but until then we have the next phase…. the famous…. short squeeze…
Gamma squeeze is caused by an incrementation of options being placed which causes market makers to buy more shares to minimize their risk. Now that we've hit this point, the price has gone up a lot. Today alone AMC went up 40%. And. that. is. big. oh. no. to. short holders. Short holders are borrowing AMC shares in hopes AMC will go down so they can buy back the share at a cheaper price, luckily for us, these guys have not learnt their lesson! With AMC mooning from the Gamma squeezes, short holders will be hard red and and are forced to close out of their short position, requiring them to buy AMC driving the price up even further! This is what brought GME to it's peak of 400$/share. If we look at the short interest a month ago.
We can see here AMC was 20% shorted. Through the month short holders continued to close more and more causing AMC to go up and up. This drove the value higher and higher, and now AMC is busting 38$/share. Now notice that cute little tick at the bottom.
We can see here AMC short interest dropped to 16% but it looks like these short holders are doubling down and are increasing their short position. Today alone we busted 40% increase in AMC, if we can keep going we can make short holders force to close and climb even higher heights. 16-20% doesn't seem like much, but doing the math….
Total shares in circulation = 448m (taken from yahoo finance)
Float % = 18% (paid ortex subscription as shown above)
Shares shorted = 80.6million
80.6 * 37$ (current AMC share value at the time of writing) = $2.983b
…. needed to buy AMC. And that's before the AMC rocket takes off, it'll be even more while the rocket flies. So if any of you need any extra re-assurance, or a reason to put more money in, here ya go. If you guys want to continue the Gamma Squeeze, keep in mind the price needs momentum to carry up. Don't buy ridiculously far out call options like 70s or 80s because that won't give the stock an opportunity to climb up the 40s-60s range. It needs to be an incremental climb.
This is not financial advice, do your own research, and if you got any corrections for me please let me know! I'll edit my post or remove it completely if i missed/did something wrong
I'd be bs'ing you if i didn't say that this could go horribly wrong. The narrative i explained isn't guaranteed to work. In the case of bad news, or a large sell off, this can cause the price to fall or halt. Then the Gamma squeeze can't be sqoze which will then prevent the Short squeeze. Another point to keep in mind is we don't know exactly when the short holders will cover. They can double down and wait us out, but if we can keep the Gamma squeeze going, they'll have to close. To hold shorts you must pay a premium of 10% every year to hold onto the shorts. This fee can increase though, and it has been steadily increasing as the price continues to go up.
This is not financial advice. Please do your own research and please… don't bet more than you can lose in case of these events. As for me, i'm waking up at market open tomorrow and yolo'ing the rest of my 10k into more call options before the rocket blasts. 🚀🚀🚀🌑🌑🌑
I dont' want people to bag hold in case this thing pops like a lot of people did during GME. My plan to exit is to monitor when the volume on the option chain starts becoming low. You can check the option volume here. Once the option volume becomes thin, there's not enough potential for a gamma squeeze. If the short interest becomes low, there's no chance for a short squeeze. If any of these happens, that's when i plan to stop buying weekly calls and sell my shares. Or if robinhood decides to ban AMC trading again….
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