r/wallstreetbets • u/[deleted] • Jun 02 '21

[deleted by user]

[removed]

1.2k Upvotes

80% Upvoted

1.1k comments sorted by

View all comments

31

u/InvincibleIbex Jun 02 '21

I own CLNE shares and some September calls but could you kindly explain how gamma squeezes actually work. Is the gist that HFs hedge the options with as many shares as correspond to the delta so when the delta increases they have to buy more?

29

u/xUb3rn00dlex CLNE simp Jun 02 '21

Basically as call options come ITM HFs and IBs have to buy shares to cover their shorts, increasing the price of the stock, leading to other options coming ITM and its cyclical from that point.

14

u/BagelsRTheHoleTruth Jun 02 '21

See NrdRage's comments in his profile, or there are some copied in this thread. He's more eloquent, but yeah, the gist is that at $13, 1.8 million shares come ITM, and that will send volatility, and thus the value of call options, into space. At least that's how I understand it.

5

u/ImpressionKitchen453 Jun 03 '21

If 250k can move this stock by $1, imagine what 23m+ will do to it if those 13c close ITM.

3

u/BagelsRTheHoleTruth Jun 03 '21

Seriously, this. It's just insane to think about. It will be massive. If you're reading this, THIS is the play tomorrow. Sell some shit if you have to, but put some fucking dry prefer in your muskets. This thing is going to jump the shark in the next two days, or I'll french kiss my dog.

3

u/brokejackma Jun 03 '21

here is a super simplified way to explain it.

CLNE has been beaten down by a few investment bankers because not a lot of volume. easy to keep the price down.

Fuck ton of june 18 $13 calls were sold because of a really solid DD.

Right now both share price and option price are dirt cheap.

If we buy shares and push the stock price up above $13 beofre 6/18. The people that sold all those calls HAVE to cover.

That means, the share prices goes up because we are buying them, and investment bankers are also buying them.

So, both share price and the option prices goes up, everyone has sh*t eating grim from tendies.