The 8k has just released:
This also makes about 70% of the float shorted too which is a good magnet for retail to pump it.
Just saw this on twitter so the SI could actually be higher.
4 Likes
As far as I understand it is pretty much what you said. So if they redeemed their shares they can’t change their mind and undo it if the stock changes price/outlook. Which is good in the case of a pump/squeeze because the free float cannot magically increase due to reversals.
3 Likes
Based on the numbers provided above, if the stock price continued to trade above $12.50, existing OI that is ITM is 43.87% of the float.
4 Likes
Would need to see continuing accumulation of OI on the 10c and 12.5c and the price to stabilize for this to ramp I think. Will defer to others who are better at analyzing that.
4 Likes
There is a big question when looking at OI as an indicator of squeeze potential. Have MM’s have adjusted the way they handle OI ramps and their need to hedge since last year? Especially on retail-led tickers.
Personally I think so. I’m not an expert and am only using anecdotal evidence, but there have been plenty of SPACs that have come and gone since ESSC with high ITM OI (100%+), but for whatever reason did not squeeze.
Now at a certain point MM’s probably have to hedge regardless. But it’s not like they just sit on their ass and wait for the stock to hit their breaking point. They have methods of keeping a ticker under a key price strike. I remember on $SST and $BBAI it was theorized that MM’s would buy deep ITM calls and exercise immediately to get their hands on shares without raising the stock price. Then, they would sell them to tank the price and hit stop-losses.
If MM’s have time to understand the situation and prepare, they can certainly avoid hedging an OI ramp.
My point is basically if this hits a certain ITM OI percentage it doesn’t mean it will be a free squeeze. There are more factors than a nice OI ramp and MM’s will do absolutely anything and everything they can to not hedge a ramp.
Personally, I think short interest relative to free float size is a better indicator of squeeze than an OI ramp. Of course this also is only really a useful indicator if for whatever reason shorts are pressured to cover (positive ticker news, big short losses, etc.)
Whatever the case, this has a small free float and meme potential so it’s a good start. It has also will have much bigger retail interest than a no-name ticker which I think will help as well.
4 Likes
I think the way to play these now is to be out before the last week of opex, think the Tuesday of opex is when they start dumping. ESSC, THCA, RDBX all played out pretty much the same. SST had a second pump I believe on the Wednesday of opex but then dumped on the Thursday, Friday.
There’s a thread on the education section about gamma squeezes incase some people weren’t aware.
6 Likes
I wanted to put together some of the recent squeezes so we can have an idea of what to expect, although with that run in AH to +60% makes me think that this might play out differently. Safest to exit at the Friday on 3rd Week of opex.
Large volume on the deep ITM calls has been the exit signal we’ve used recently.
ESSC december run.
Essc January run.
SST April run.
RDBX june run. (This one is a little different as they halted options on it on 15th/16th June.)
THCA April Run.
1 Like
UW reporting that there was apparently 250k premium paid for 2.5 and 5c on Friday from floor traders which is odd. Doesnt show up on Yahoo finance or IBKR.
Is it big boys getting involved or hedging?
https://twitter.com/unusual_whales/status/1550605203920916480
1 Like
One of the known ways to manipulate a stock price is to exercise deep ITM calls and then sell the shares to drive down the stock price. Not sure if that is the reason for the purchase, but I guess my point is be careful.
5 Likes
Yeah a lot of low-float squeeze plays have these deep ITM calls bought at some point. Buying shares straight up raises the stock price (exemplified on low float stocks), but buying calls and exercising doesn’t. So it’s usually someone getting their hands on shares without raising the price just so they can dump them later. My guess is it is MMs preemptively making sure they have shares at their disposal to keep the price down and kill momentum.
Although it is interesting that they were bought before the free float was released. Maybe they were anticipating a small float ahead of time? I would doubt this if it were a no name ticker, but $FAZE is pretty famous so maybe the possibility of a low float was already on their radar.
2 Likes
There is a lot of good info on these type of plays in the $SST and $BBAI threads. They were 2 very similar plays to this one, one worked and one did not. You can see the different theories people had as they played out in real time.
Looking at the SST thread, this is the kinda volumes that were on the deep ITM calls that were around the time it dumped.
I remember on SST deep ITM calls were being bought as far out as 3 weeks before the squeeze. It was being dumped hard EOD for like days at a time. The play was really considered dead in my mind at that point and MM’s were in control.
However, a day or two before the squeeze SST had a really bullish earnings report and that’s what put it over the top. A mix of short covering, new investors, and good press on top of the already jacked OI chain helped ignite the squeeze.
Which kinda goes to my point that bullish news > everything else.
So while I wouldn’t consider these calls the death of a play, I do think they signal that MM’s are watching and won’t be blindsided.
3 Likes
I wanted to note that Reddit may be beginning to take renewed interest in FAZE. So bear this in mind when looking at volume and OI moving forward.
https://www.reddit.com/r/SPACs/comments/w6lif2/faze_30day_pipe_lockup_is_7x_the_current_float/
1 Like
Is there any info on what exchange these traded on? SST had several weeks of deep ITM purchases on the PHLX exchange specifically, most likely as Phil pointed out a way to get shares without affecting the price. So if these trades were also on this exchange we could be seeing the same thing here.
My question is, isn’t this just passing the buck to MMs? Shorts will get their “shares” but now MMs would be on the hook for them
Will be curious (for personal reasons, as I am a holder) to see what happens with the warrants. They spiked to a high of $5.50 on the day of DA back in October, and held just under $1.00 in March/April.
On one hand, similar to ESSC, this is a low float pump and no one should expect the warrants to have any real value (in terms of being redeemable) any time soon, and shorts covering (or MMs hedging) don’t directly affect warrant pricing.
On the other hand, the warrants trade very thin (consistently a 0.05-0.10 spread even during the trading day), they are “undervalued” relative to the warrants of other recent completed SPAC mergers (e.g., PSNY warrants trade at $1.70 when the underlying stock is $9.00), ASTS warrants trade at $2.00 when the underlying stock is $6.50) and BRCC showed us that with a sustained retail pump, getting and staying over the $18 warrant redemption threshold is a real possibility, which would result in the warrants beginning to reflect intrinsic value at $5.00 or more. There is a PIPE unlock coming soon but as on other tickers, it will take a while for it to get registered.
Not necessarily recommending a trade, but I wonder if, with IV jacked on the options, warrants might be the best bullish play.
Full disclosure: I have a bunch at $0.61 basis.
Going to try to find how many public warrants there are outstanding. Edit: Looks like only 5.7 million public warrants outstanding.
2 Likes
I don’t know the exchange, my brokerage app doesnt show any volume on those strikes. Maybe @Kevin can see on his UW?
2 Likes