It is a race statement that no one has ever bet enough on a winning horse. In the options market, they keep trying.
Wet with winnings in stocks like GameStop Corp. and Tesla Inc., the smallest options trader, those that buy or sell 10 or fewer contracts at one time, have accumulated the highest bullish promises in the last three weeks. gone, adding nearly 60 million call options, according to data compiled by Sundial Capital Research. That’s 20% above the measure at the end of the summer, itself a time of unprecedented exile.
Swept up by chat room chatter and riding a hot climb for centuries, newbie day traders show no signs of going back in the bullish. It is a display of influence that draws daily warnings from the old guard.
“When you have a one-way market direction and everyone wins, it’s like when you go to Las Vegas for the first time. The house really wants you to win, so you think this is an easy game, ”said Richard Steinberg, chief market strategist for Colony Group. “Then you learn it’s not that easy.”
Career chart
Smaller traders have bought nearly 60 million call option contracts over the past three weeks
Source: Sundial Capital Research
Whether or not it gets harder, right now, it works. Consider GameStop, caught in a showdown between short sellers and an army of Reddit users. Shares of the brick-and-mortar video game vendor rose to 145% on Monday before bouncing back, adding to year-over-year gains of more than 300%.
A large buy of bullish options helped fuel the rally. 1 million GameStop call options were purchased on Friday, followed by another 500,000 deals on Monday. The scale of buying calls with a power date helped with a bullish feedback loop of all kinds, as the sellers selling the contracts had to buy the underlying stock to return the position to neutral.
Such The so-called gamma pressure hit in the run-up to last summer, as marketers had to domesticate. But a breaker can have a negative impact, which can lead to a worse downward movement.
“It just feeds on itself, and it creates these self-fulfilling purchase pressures,” Jason Goepfert, president of Sundial, told Bloomberg Television on Monday. “But at some point, for whatever reason, it will stop, and when it stops, all those hedges have to be bottomless, which means selling pressure. ”
Even with the frenetic call of buying, bears are not going back. GameStop stock equivalent to 139% of available shares was borrowed and sold short, according to data from financial analysis firm S3 Partners. At the same time, a bearish bet outperformed bullish ones for two days, after just six weeks of call volume clicks in higher than the buy volume.
GameStop isn’t the only one seeing more interest. Call buy-in BlackBerry Ltd. met. and AMC Entertainment Holdings Inc. high on Monday, when total U.S. trade with bullish option contracts rose 32 million. It was the second-highest for any day on record, data compiled by Bloomberg.
At the same time, interest in online forums – where many such trading ideas came in a few weeks ago – has also grown. One example is the WallStreetBets website, which now has more than 2.2 million members after nearly 200,000 hits over the weekend, according to Breakout Point, a data and analytics company.
Traders on the WallStreetBets forum appear to be “gambling” gamma to move shares with major shortages like GameStop higher, according to Charlie McElligott, cross-asset strategist at Nomura Securities.
“These people see their collective power and go after it,” McElligott said. “They understand that the seizure of short-term, deep-outside call options in stocks is packing a lot of sensitivity and hedge hedge sensitivity to a higher move in the underlying stock.”
– Supported by Claire Ballentine, Alix Steel, Guy Johnson, and Sarah Ponczek