A good read for the lost sheep
The Anatomy of a Gamma Squeeze
Hope everyone enjoyed their weekend and is just as excited as I am to see that volume AH. There are a lot of people on here who do a great job of breaking down the Fundamental's and the Technical Analysis on BBIG, so I don't think it's necessary for me to go into that. With that being said I wanted to put out a piece of education material, reason for that being is I believe that more knowledge in the tool box only makes for a better trader, and I'm not sure how experienced people are with interpreting the Greeks on the option chain and how they essentially impact price action. So as I've said before and u/widowmakerlaser has pointed out, BBIG has a really nice setup for a mean gamma squeeze. In my opinion, the short interest data (FTD's,CTB, SI, Utilization) is the dynamite and the option chain is the fuse (I know corny analogy), I'm looking at the 01/21/22 expiration by the way, just because as of now it has the most volume, obviously that is subject to change and most likely will increase.
I know most people are aware, but for those who are not, a high level synopsis of the two Greeks I'm concerned with right now, Delta, measures the sensitivity of an option's theoretical value to a change in the price of the stock. Gamma, measures the rate of change in the delta for each $1 increase in the stock price. Typically market makers need to be delta hedged (Protecting their position with risk associated with price movements in the stock, by offsetting long and short positions). So what is a Gamma Squeeze? Well when you look at the chain here, you see there is a decent amount of open interest (Volume) (Mind you, this volume will more then likely change) all the way up to the $24 strike. As we stand right now, just solely looking at the $4.50 Strike, there is roughly 23,692 open interest, if they were to run in the money we are looking at roughly (23,692\*100)\*.24 (Gamma) = 568,608 shares to be bought to remain delta neutral just for the $4.50 Strike. Now you can run this math all the way down the chain, but note, as the OTM calls start to run ITM, Gamma increases, therefore increasing Delta exponentially. In addition, the call volume starkly outweighs the put volume. This setup combined with fomo, once we get the PR we need, I think will really put the shorts into pretty tough spot. Just reiterating, as OTM calls run ITM you will see Gamma increase rapidly, making those shorties buy back that many more shares.
Courtesy of joeyc1989, Reddit
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