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Thursday, June 3rd 2021

AMC Pops Helped By Options: ORATS Reuters Article

AMC calls are bought by retail investors and as the stock rises market makers are forced to buy the stock in what is called a gamma squeeze.

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Summary

Market makers are buying AMC stock to get delta neutral as short options get them short delta, leading to a gamma squeeze. This phenomenon is different from January's short squeeze and is being driven by retail investors buying calls. Susquehanna and Citadel are large holders of AMC stock.

Reuters Saqib Ahmed et al. quoted Matt Amberson of ORATS in a brief but essential phenomenon in the AMC exponential rise in its stock price: Market makers are chasing the stock. The Reuters article is here.

As gamma from short options gets them short delta, market makers will buy the stock to get delta neutral. 

 

The character of AMC in this time is different from January's short squeeze-fueled meteoric rise. We see this with the Borrow that ORATS implies from the options market seen below.

 

Susquehanna and Citadel are large holders of AMC stock according to Bloomberg. As retail buyers of calls get longer delta, market makers need to buy the underlying to keep delta neutral.

Picture from @MichaelGoodwell Twitter.

 

 

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The opinions and ideas presented herein are for informational and educational purposes only and should not be construed to represent trading or investment advice tailored to your investment objectives. You should not rely solely on any content herein and we strongly encourage you to discuss any trades or investments with your broker or investment adviser, prior to execution. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. Option trading and investing involves risk and is not suitable for all investors. For more information please see our disclaimer.
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