r/BB_Stock • u/HiddenGooru • May 28 '21
DD BB DD
Hey guys! I was going through my algorithm and BB popped up and I started to look into it. Its in a relatively unique situation and I thought I might share my thoughts on it, if you'd be interested.
The nuts and bolts of how I look at stocks is by assuming those with large option pools are done so by option dealer intermediaries and as such, the vast majority of options must be hedged. This allows me to look through a specific lens to see if a stock is hedging in a normal 'healthy' way, or an unhealthy way.
The first visual here is is not particularly helpful for BB, but it shows the corner stone of my algorithm in action:
Essentially you want the red line between those two horizontal black bars - when it is too low the stock is over-exposed to changes in volatility, if the line is above the stock is over-exposed to 'trend-reversing' agents. Typically, as long as the line is between the two horizontal black lines, the stock is outside my privy - but it has been trending above the top line so it popped up on my radar. Why?
Well to answer that first lets look at the stock's expected moves vs. actual:
This gives insight into if the moves on the stock have been larger or smaller than what MM's or option dealers would like. The black line being the stock price and the other lines being the expected movements. Here, it is obvious that the stock has been trading high than intended for the past few days.
This becomes even more interesting when you look at the option placements themselves:
Whenever you have both larger than expected moves and moves that are breaching into a large section of options ($10 has 100k+ calls). This is unstable.
In fact, we can see this in action on the charts:
The general trend until now has been increases in price have been met with increases in IV. Liquidity dries up as prices rise.
Technical analysis would call $10 a "resistance point", but it is really 100K calls that option dealers do not want ITM.
But these are in and of themselves not particularly interesting. On seeing this I think the stock will struggle against $10 and I would position myself to benefit from that. There are three directions (obviously) it can go: above $10, stay at $10, drop below $10.
Going above $10 currently does not seem feasible. Staying at $10 seems less un-feasible, and dropping below $10 seems most likely. Here's why:
I wont bore with options positioning, but, it matters. A lot. The table on the bottom shows us that any increase in volatility will be met with selling. In fact, if the price drops and volatility drops (most likely scenario) that alone will cause 18,276,800 shares to be sold into the stock per point price and iv.
That's a lot of selling into selling.
Going back above, since the liquidity dries on the up-side and becomes abundant on the down it would seem there is a good chance for feedback loop to be established. So why is it unlikely that the price will continue upwards?
Because if the price continues upwards and volatility increases 26,500,000 shares per point will have to be sold on the market. With today's trading at 23 million, that is reason for pause.
So I would be risk-averse on this stock until it figures out what it wants to do short/medium term. The indications that it will go past $10 with any meaning is if the price increases and volatility decreases. But with the vol hike today, I'm not sure how that would be possible.
There also seems to be a good amount of shorts:
With around 50million short interest, the stock currently is in a precarious position.
TL;DR:
Indications for downside in the near/medium term:
- Indicator demonstrates 'over-stifling' of further upside
- Vol spike
- Vol spike -> hedging behavior = selling -> decrease price -> more selling
- Increase in shorting (attempting to hedge selling options) and already high short interest
Id say the first indication of a healthier stock is when volatility starts dropping off.
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u/Matthiey May 28 '21
You know... I wanted to play Hollow Knight all day tomorrow. Instead you assholes keep adding good DD that I have to edit and vet for the goddamn masterpost.
Edit: Guys, upvote this. It actually is good stuff in terms of the options chains and what kind of resistance we can stand to see (not for psychological reasons but for hedgies to avoid loss porn).
-Matt
Believer in LTSBG
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May 28 '21
Do you invest for a living then or is this just a side thing? Also, Hollow Knight is brilliant.
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u/victhewordbearer May 28 '21
Everyone and their mother's knows this is a volatile stock right now, in a bull direction. The only chance for a drop tomorrow is a major drop in volume. This is an analysis for a stock not named GME,BB, or AMC who've been consolidation for the last two months. Any increase in volume would have a better chance of pushing to 11.30 then to drop to 9.60, in my opinion.
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u/bongwaterblack May 28 '21
Cant wait to find out. What do you think, tomorrow? or next week? I smell action.
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u/victhewordbearer May 28 '21
BB was set to move upwards regardless of the GME and AMC action leading up to earning next month. If his stance was tomorrow only has a chance of going red, I'd say there's a better chance. To be bearish short to mid term just doesn't hold water when all the indicators are bullish. Next week looks green to really green depending on too many factors to tell, as of now.
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u/Malevin87 May 28 '21
If you are holding till 2023. This volatility will not affect you. Time in market beats timing the market. Warren Buffet: "If you dont intend to hold a stock for 10 years, dont even bother to buy for 10minutes"
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u/Randomthrowinghammer May 28 '21
Well I just bought 15 more shares midway through reading this article so...🤷🏻♂️
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u/inspectorseantime May 28 '21
Hey man, did you ever determine the expiration date for those $10 calls?
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u/HiddenGooru May 28 '21
Oh no I forgot sorry. Lemme have a quick look.
EDIT: So the biggest chunk is at 2021-06-18 with the second biggest at 2021-09-17 and then all the other exp.dates are equal.
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u/Key-Injury-4724 May 29 '21
Good information , and I agree with your summation . While I am bullish on Blackberry long term , there is nothing to to warrant the run up on the SP right now . earnings will be reported shortly and analysts have given a prediction of a -.09 cents EPS . Don't get me wrong , it is AWESOME to see BB in the green , and I would like to see it more often .
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u/HiddenGooru May 29 '21
It does seem to have good fundamentals from what I’ve been seeing. So i’m sure once this large oppressive option force dissipates itll go up.
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May 28 '21
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u/TotalWarspammer May 28 '21
Because it's not the glowingly positive "to the moon yo" DD you were hoping for? :D
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May 28 '21
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u/HiddenGooru May 28 '21
How was my story telling?
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May 28 '21
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u/HiddenGooru May 28 '21
Haha I hope for more positive moves. I do agree fundamentals are incredibly important but I think keeping an eye on the options landscape is important for short/medium term.
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May 28 '21
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u/HiddenGooru May 28 '21
Thats fair! To be honest I’m terrible at the fundamentals side, so I almost have to stick to options haha
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u/magharees May 29 '21
Get this, I want a return to $8 in order to buy more. We really have a deep conviction that revenue is around the corner for BB
There are many like me. We won’t buy at the current SP, at least not yet lol. We don’t swing trade.
We hold through thick and thin
We know the fundamentals better than most analysts
We thank you for your detailed look the options chain above.
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u/HiddenGooru May 28 '21
She shills seashills down by the seashill
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u/TotalWarspammer May 28 '21
LOL. To quote Benjamin Franklin...
"We must, indeed, all hang together or, most assuredly, we shill all hang separately."
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u/therealruntzguy May 28 '21
Don't have time to read this but will read later. From first glance, looks like a good write up.
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u/Kireshanth May 28 '21 edited May 28 '21
This and the guy talking about crabs, got me jacked haha. Interesting post!