Related Link: 'Peak Stupidity': The End Of The GameStop Short Squeeze Trade? As the stock rises towards/through those strikes the market makers need to buy increasingly more stock to hedge their short calls,” Lagator said. ![]() “Those short calls create a ton of short gamma for the market makers. When retail traders buy those calls, market makers and institutions selling those calls are essentially then short those upside calls. Lagator said retail traders are looking for stocks that have extremely cheap upside calls to buy. “That tended to be in names like Tesla, and it already was having an effect on those stocks by creating large areas of short gamma to the upside and contributing to those stocks' rise,” Lagator told Benzinga. These stocks typically represent companies that have extremely high valuations relative to their current underlying businesses. These call options are leveraged bets that an underlying stock will rise prior to the option’s expiration date.Īccording to CC Lagator, co-founder of Options AI, retail traders have been aggressively buying out-of-the-money call options in so-called meme stocks or story stocks for months now. The Option Market’s Role: On Monday, there were more than 32 million call options traded on the market, the second-most in a single day in history according to Bloomberg. In reality, the trading action has little or nothing to do with the long-term futures of these companies. ![]() (NYSE: BBBY) may seem like a dispute between bulls and bears about whether or not these companies have long-term rebound potential. (NYSE: DDS), BlackBerry Ltd (NYSE: BB) and Bed Bath & Beyond Inc. (NYSE: GME) and other heavily shorted stocks continued on Tuesday as a tug-of-war between institutional short sellers and online communities of retail traders carries on.įrom a distance, the volatility in stocks like GameStop, Nikola Corporation (NASDAQ: NKLA), Dillard's, Inc. The crazy trading action in GameStop Corp.
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