Cutting straight to the chase, let's look at the top closing trades today:
$GME 20240517 12 CALL$ -20,263 lots
$GME 20240517 11 CALL$ -11,588 lots
$GME 20240517 15 CALL$ -6,295 lots
Yes, that's right - the suspected market maker positions I highlighted in my first post, those weekly 11 and 12 strikes, were closed out today. We can declare this week's upside ambitions officially over, and the field has been ceded to the bears.
Looking at put open interest, strikes are concentrated heavily below $20. This needs to be viewed in context with the remaining call OI:
Based on the current call OI distribution, a move below $20 would effectively kill off 80% of the remaining upside exposure. However, as the chart shows, breaking $20 also risks triggering a put gamma squeeze, potentially catalyzing a waterfall decline. Expect put opening flow below $20 to explode into the close.
At-the-money option implied vols remain stratospheric. At Wednesday's close, the GME 49 CALL had a 568% implied vol, pricing an annualized 3033.98% to sell.
The GME 39.5 PUT had a 587.45% implied vol, pricing an annualized 3130.22% to sell.
Given the current dynamics of high IVs and put gamma risk, two strategies stand out:
Sell far out-of-the-money calls strikes like 70+, any expiration. If not this week, look to take profits before Friday's close to capture IV crush.
Buy longer-dated far out-of-the-money puts like the GME 20240621 15 PUT, speculating on a potential put gamma squeeze causing a capitulation sell-off this Friday. Whether it happens or not, look to take profits before Friday's close.
While dealers may try to spark another round of pre-market volatility with seeds like the $GME 20240524 12 CALL$ & 20 CALL, the lack of any substantial new call OI makes another run towards $70 unlikely to sustain. Just like this week, upside recoveries will be futile.
Not much point covering AMC, the flows mirror GME's.
Comments