$INDI Semi-Conductor, stock

YuQing1688
2021-09-23

$Indie Semiconductor Inc.(INDI)$

an unknown deSPAC with Low IV, Gamma Ramp, Low Float

# 1. About INDI

Indie Semiconductor, Inc. provides automotive semiconductors and software solutions. It offers its solution for advanced driver assistance systems, including light detection and ranging, connected car, user experience, and electrification applications.

EV stocks such as TSLA, LCID, and NIO are mainstream yet not much focus is put on the providers of components and tech related to them. It is important to look also into the companies that provide all these essential components and $INDI is the perfect company for this. **More importantly, is that INDI is providing a seriously good setup that seems too perfect to have gone under the radar.**

# 2. The Set-up

# To summarize INDI:

* INDI is a deSPAC. deSPACs have unique characteristics that give them great risk:reward profiles.

* With high OI relative to its new float

* Only about 250,000 shares are available to borrow. This is low relative to INDI’s float.

* Very few shares are available to borrow.

* Order flow has been very bullish. Right now INDI is up about 20% in the past month. Price has been steadily rising with consistent buy flow.

* IV is mispricing the potential move INDI can experience. Right now INDI has an Implied Volatility of 76.8%, and most options have a 60% IV. For example, IRNT had a similar setup and it has IV in the range of 150-200% for ATM options. VLTA, with an identical setup, has an ATM IV of 100-150%.

* There is currently no discussion of this stock on any of the [investing subreddits](https://www.reddit.com/r/MillennialBets/wiki/index/stocks/indi).

* The Market Cap is currently at 1.5 Billion.

**IV is not priced to expect any of these circumstances. It’s as if Market Makers don’t know about INDI being a deSpac.**

# 3. deezSpacs:

**Risks/Rewards -**

There is currently lower gamma but growing OI as the volume has steadily crept up over the past 5 days. This is what is causing the options to be cheaper. Due to the low float it is likely to see significantly increased volatility which will increase the IV on the options. You can see evidence of the low float with the price action between yesterday and today relative to the low volume. Today $INDI is up 10% yet the IV has barely moved up by 11% to the 60% range on the October calls with an expected movement of $1.2 in either direction. The main risk is a smaller gamma ramp, but given the MMs do not seem to be hedging properly, I think this acts as a solid “arbitrage” play.

A lot of people ignored VLTA because it had a "high float" of 10,277,713 shares relative to the grab bag of deSPACs out there. Yes, compared to IRNT (\~1.3m), TMC (\~2.7m), OPAD (\~3.4m), 10m is a bigger number. But there's also a significant amount of OI to make up for and like we all know, what really matters for gamma is the ratio of OI to float. So currently, if we take the redemption proceeds and current float data from Ortex, we can calculate the following:

**Float Calculation (Approximate):**

$400M Proceeds - **40M Shares Proceeds**

96M Shares \* 5274% Free Float = **50.76M Shares**

~~**Final Float: 50.76M - 40M = 10.76M Shares Free**~~

UPDATE: as u/kft99 pointed out, the actual float is as following:

>The deal was supposed to raise $495M, and it merged before the high SPAC redemption era (merged in June), so I assume the redemptions were minimal. So PIPE+trust=49.5M shares (PIPE unlock is already done).

So **FINAL FLOAT: 49.5M**. Not as small, but still a decent play. I think for a deSpac it’s large but for a regular stock, this is still a small float.

# The Implied Vol

Why isn’t IV on IRNT as high as other deSPAC stocks? Let’s take a look at other deSPACs that have been popular on reddit and compare INDI’s IV to theirs:

**INDI IV is around 65% for ATM options.**

* GENI, IV \~100%

* AMC, IV \~130%

* BKSY, IV \~140%

* VLTA, IV \~150%

* IRNT, IV \~200%

* RKLY, IV \~220%

* SDC, IV \~250%

* TMC, IV \~250%

INDI 10/15 ATM calls are sitting at around \~65% IV right now. Even further OTM, $17.50's are sitting at \~100%. This is still a low IV compared to ATM options on the other deSPACs. Most plays like $VLTA also had a higher IV before the play was known of.

**For INDI, high price acceleration is not currently priced in, which again, does not make sense considering INDI shares the same properties as many other deSPACS mentioned. Given retail movement and most other deSpac plays getting hedge preemptively by MMs, this one seems to have flown under their radar, but not mine.**

# Order Flow & SI Stats:

The past few weeks have shown very strong buying pressure. Today INDI currently sits at over an 8% gain. Since August, INDI is up about 30%. Options flows are also very strong, with volume picking up drastically on October calls.

Looking at Ortex, **we see SI of about 2.78M, which means SI % of float is about 26%.**

**Additionally, there is a 56% utilization rate, indicating a skew towards INDI being heavily shorted.**

I have tagged [u/pennyether](https://www.reddit.com/u/pennyether/) in the comments so that he can potentially provide Gamma Ramp statistics that are key to this play.

# Positions:

So how do I trade this? Like all trades, this has risk. However, based on the data, it is highly likely that the rewards outweigh the risks. With the current price action we are seeing in deSPACs, INDI is a very smart bet, especially considering INDI is up 8% today and has decent gamma, yet IV did not change. For that reason, current positions are a mix of shares and options. INDI has a strong core business model, which suffices the shares. For the technical deSPAC trade, options provide a massive risk:reward.

* Shares

* October 12.5c, 15C, 17.5C 10/15/2021

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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