Analysis: With AMC shares sky-high, ‘gamma squeeze’ less of a driving force

Jun 4, 2021

Observations & Insight

Sheldon Cohen – Open Outcry Traders History Project – Part One
JohnLothianNews.com

Attorney Sheldon Cohen started out his trading career as a risk manager for Goldberg Brothers, a CBOT clearing firm that was later sold to LIT Holdings, and eventually began trading at the Midwest Stock Exchange. He bought his own seat at the Chicago Board Options Exchange (CBOE) in 1976.

Watch the video »

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Options Exchange Market Share — May 2021

Lead Stories

Analysis: With AMC shares sky-high, ‘gamma squeeze’ less of a driving force
Saqib Iqbal Ahmed – Reuters
The meteoric rise in shares of AMC Entertainment Holdings Inc may have diminished an important options market force that helped fuel its recent gains, analysts said.
Bullish options bets that would profit if AMC’s shares traded in the $40 to $70 range drew a huge influx of buying in recent days, with millions of contracts changing hands as the movie theater chain’s stock price rose by as much as 178% this week.
/jlne.ws/2TLVsmF

AMC Entertainment Share Price Rides Roller-Coaster in Mania for Memes
Matt Turner and Paul Jarvis – Bloomberg
AMC Entertainment Holdings Inc.’s wild week isn’t done yet.
The new king of meme stocks spent Friday gyrating between a 12% gain and a 6% drop, which counts as placid after a week in which the shares doubled and then crumpled. They rose $5.96 to $57.30 as of 11:32 a.m. in New York.
/jlne.ws/3uWvIR3

May jobs report: Economy adds back 559,000 jobs, unemployment rate fell to 5.8%
Emily McCormick – Yahoo Finance
The U.S. economy added back another more than half a million jobs in May, with employment accelerating from April but still missing estimates even as the jobless rate slid to a new pandemic-era low.
/jlne.ws/3pjISXo

Should You Buy AMC Stock? Even the Company Says Be Careful.
Connor Smith – Barron’s
Anyone tempted by AMC Entertainment stock’s wild trading this week may want to take a look at what the company has to say.
In a filing with the Securities and Exchange Commission on Thursday, AMC (ticker: AMC) disclosed a plan to sell 11.55 million shares at market prices. The company sold the shares at an average price of $50.85. But the initial filing also included a warning from the company regarding the recent volatility in AMC’s stock price. The company believes the recent run-up in its stock price—the stock traded as low as $37.66 and as high as $68.50 on Thursday alone—could reflect market factors unrelated to its business prospects.
/jlne.ws/3uU3W7X

Jefferies Blocks Short Sells in GameStop, AMC, MicroVision
Luke McGrath and Gillian Tan – Bloomberg
Jefferies told clients Wednesday its prime brokerage arm will no longer allow the execution of short sells in GameStop Corp., AMC Entertainment Holdings Inc. and MicroVision Inc., according to a memo seen by Bloomberg News.
/jlne.ws/3z4Up1e

Exchanges and Clearing

Cboe Global Markets Reports a Surge of 14% on Index Options ADV in May 2021
Futures’ average daily volume was up 99% over May 2020, as trading in IBIG futures hit an all-time high.
Felipe Erazo – Finance Magnates
Cboe Global Markets, a leading global market operator and trading solutions provider, published its trading volumes report for May 2021 today. The operator saw a spike in the average daily volume (ADV) on index options, with 2 million contracts traded, which is up 14% from the previous month and up 33% from the same period last year.
/bit.ly/3v12QYh

New Product Summary: Initial Listing of the Options on E-mini Standard and Poor’s 500 Stock Price Index Futures – Quarterly PM (European-Style) Contract – Effective June 28, 2021
CME Group
Initial Listing of the Options on E-mini Standard and Poor’s 500 Stock Price Index Futures – Quarterly PM (European-Style) Contract.
/jlne.ws/2SaTMSX

Cboe Global Markets Reports May 2021 Trading Volume
Cboe Global Markets
Cboe Global Markets, Inc. (Cboe: CBOE), a market operator and global trading solutions provider, today reported May monthly trading volume statistics across its global business lines.
The data sheet “Cboe Global Markets Monthly Volume & RPC/Net Revenue Capture Report” contains an overview of certain May trading statistics and market share by business segment, volume in select index products, and RPC/net capture, which is reported on a one-month lag, across business lines.
/bit.ly/3z2RHt3

Intercontinental Exchange (ICE) Reports Mixed May Volumes
Nasdaq
Intercontinental Exchange ICE reported mixed average daily volume (ADV) for May 2021. ADV of 5.5 million contracts per day increased 7.6% year over year due to higher volumes in Financials, partially offset by about 1% decline in Commodities.
Agriculture and Metals ADV of 0.3 million contracts increased 0.3% year over year. Energy volume declined 1.1% to 2.8 million contracts per day. Commodities ADV was 3.2 million in the month.
/bit.ly/2TGHOkC

Euronext announces the sale of Oslo Market Solutions
Euronext
Euronext today announced that it has completed the sale of Oslo Market Solutions (“OMS”) to Infront, a leading European provider of financial market solutions. OMS is an online market data, investor relations, portfolio and trading solutions provider in the Nordic region and was acquired in 2019 as part of the acquisition of Oslo Børs VPS. OMS generated c. EUR3.3 million of revenue in 2020.
The sale of OMS was implemented in the context of the conclusion of a strategic review initiated following the integration of Oslo Børs VPS and the decision to divest from non-core activities.
/bit.ly/2SWRWp5

Moves

Sterling Trading Tech Names Antonio Manuel Abad OMS & Infrastructure Product Manager
Sterling Trading Tech
Sterling Trading Tech (STT), a leader in trading technology solutions for equities, equity options, futures, and digital asset trading, is pleased to announce the appointment of Antonio Manuel Abad as the OMS & Infrastructure Product Manager. Mr. Abad is a seasoned financial technology executive with broad technical expertise in the full stack of technologies and infrastructure actively driving the modern trading environment specializing in high-performance computing and cloud-based architectures.
/jlne.ws/3ig4guU

Strategy

Time to Hedge Your Stocks?
Frank Kaberna – tastytrade
A thought many people have after things don’t go their way: I should have hedged! The key to hedging, unfortunately, is doing so when things ARE going your way. To use a sports analogy, bettors on the side of the Atlanta Falcons in the 2017 Super Bowl preferably would have hedged when they were up 28-3 and their opponent’s, the New England Patriots, odds to win were 11-1.
By the time Tom Brady won the overtime coin flip, you could buy the Falcons at lower prices than before the game started. This would be akin to your stock investment growing by 1,000% and falling back to below where you go in.
/bit.ly/3fNPnyu

Education

Explainer: What is a gamma squeeze and how did it drive up AMC’s stock price?
Saqib Ahmed – Reuters
Shares of AMC Entertainment Holdings Inc (AMC.N) surged to a record high this week in a blistering rally that again highlighted how an arcane options market dynamic known as a gamma squeeze can super-charge stock price gains.
WHAT IS OPTIONS GAMMA?
AMC’s rally was partly fueled by heavy trading of equity options. These financial derivatives give buyers the right to buy or sell shares at a fixed price in the future, depending on where the stock price is.
/reut.rs/3vOxDZk

Miscellaneous

AMC Comments on Inquiries on Topics Including ‘Synthetic Shares’ and Split Speculation
Josh Beckerman – MarketWatch
AMC Entertainment Holdings Inc. said it “has received a number of inquiries regarding so-called synthetic shares and fake shares.”
The company said it “has no reliable information about this, therefore we can make no comment in this regard.”
/jlne.ws/2SZ9QqW

London Traders Rebelling Against EU Moves Pose Staffing Dilemma
Harry Wilson, Steven Arons, and Stefania Spezzati – Bloomberg
Group of London-based JPMorgan traders quit rather than move; Other banks face similar issues as they try to move staff
When JPMorgan Chase & Co. asked a team of about 15 London-based equity derivatives traders to move to Paris, it didn’t go down well. Almost half of them chose to quit, several to avoid relocating. Other global investment banks have faced similar issues. Goldman Sachs Group Inc. and Nomura Holdings Inc. have had a hard time convincing some traders to leave London, people familiar with the matter said, asking not to be identified discussing private matters.
/jlne.ws/2SXPr5A

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Past Options Newsletters

The Spread – July 30, 2021

The Spread – July 30, 2021

Earnings season in full bloom; Options lead year-to-date derivatives volume; Robinhood’s IPO; John gets real with Get Real VR: Conflicting factors underpin volatility; Cboe cleared for fall European competition; and the Cboe Options Institute’s Kevin Davitt talks about vega in this week’s “Term of the Week.”

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