To The Moon

$GameStop(GME)$

The last post mentioned dealers exiting, but not fully. They took profits on the weeklies, but still have longer-dated positions like the $GME 20241018 13 CALL$ .

This October 18 expiry 13 strike call - why am I confident it's dealer positioning? Over 3,000 contracts is not an insignificant amount. At let's say $3 per contract, that's $9 million in premium. While longer-dated, the strike is still at-the-money and tradeable.

For a typical buy-to-open, you'd expect either a single large block trade or the 3,000 lots accumulated rapidly within a short time window across a burst of smaller prints.

However, when I scan for prints of that size - nothing. I had to keep lowering the filter to even smaller lot sizes, until I eventually found this position was bought 10 lots at a time, over the entire trading day.

Why would anyone go through such excruciating efforts to obfuscate and hide their tracks if not a dealer?

Option pricing is still inflated, but once volatility stabilizes next week, buying a lottery ticket call like this for pennies could offer an extremely attractive risk/reward. To be clear, I'd only view it as a longshot lotto play - my subjective odds of a GME revival are just 55%. The bread-and-butter remains weekly put selling on tech names.

$Faraday Future Intelligent Electric Inc.(FFIE)$

With the stock ripping to these levels, it's time to look at selling calls. The margin requirements are also quite cheap - at $10 per share, the upfront margin is just $1,000.

One key point when selling calls on meme names - don't use the strike price for margin calculation, have to account for potential blow-out moves higher.

To illustrate with GME, when selling the 100 strike call, you'd want to calculate margin assuming a $500 stock price, not $100. The margin is just to prevent getting margin-called, not a real expectation of being assigned. Meme stocks have no fundamentals anchoring them, so while they can rip tremendously higher, they can also come crashing down just as quickly. This separates them from typical put selling on quality tech names.

Trading meme stocks is really a mind game. I'm not dismissing the possibility of a 10x rip, but the notion of it sustaining those levels for any meaningful period - that's just lying to yourself. Play with meme lottery tickets by all means, but don't get emotionally attached.

Look to sell calls on any intraday 2x spike, something like the $FFIE 20240517 5 or 6 CALL$.

$NVIDIA Corp(NVDA)$

I don't expect a miss next week, so selling the at-the-money put like the NVDA 20240524 950 PUT. The meme stock rotations tend to be cyclical - this week's puts got smashed, so the call side has breathing room to run into next week. Stock likely settles 945-950, with a lower probability melt-up towards 980+.