Highly Speculative Rally
run away $SUPER MICRO COMPUTER INC(SMCI)$
elaine benes running GIF by HULU
Highly Speculative Rally. However, what's driving shares of SMCI appears to be highly speculative. The stock has seen a surge in implied volatility levels over the last several weeks, climbing to more than 100%.
Its call volume has spiked, suggesting that a large amount of what has been driving the shares higher has been part of a gamma squeeze, which is when traders essentially bet heavily on a stock rising by buying a large number of call contracts, helping to create the mechanical hedging flows needed to drive the stock price higher.
The problem is that when implied volatility gets too high, the cost to trade call options becomes too costly. Call volume begins to decline, and as call volume declines, the stock price usually falls with it as hedging flows are unwound.
SMCI has an average implied volatility of 158.81% for options expiring Mar 01, 2024 (8 days). Beware .... this thing has an extremely high implied volatility and is highly likely to crash
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