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Meme Stocks Melt-Up: 'Gamma-Squeeze' Sends AMC Into Orbit

Tyler Durden's Photo
by Tyler Durden
Thursday, May 27, 2021 - 10:30 AM

Update (1400ET): Well that escalated quickly...

While GME is fading modestly on the day...

AMC shares have literally exploded higher - now up 50% on the day near $30 - blowing past January's previous record high...

The combination of a massive short position and ripeness for a 'gamma-squeeze' have combined by an armada of retail Reddit traders to rout the shorts. Deep OTM Call-buying is dominating the action...

With the $39 calls that expire tomorrow exploding higher...

And the June expiration $40 calls screaming higher (look at the implied vol for a measure of demand)...

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As we detailed earlier, two days ago, when we observed that the Reddit squeeze mania was back with a vengeance after the February frenzy, we pointed out that even though the short interest in many meme stocks had declined (as some hedge funds learned their lesson the hard way), it had exploded in others hitting a record high at Reddit favorite movie chain AMC, and suggesting that another round of the infamous WallStreetBets squeeze was on deck:

Shortly after our tweet, S3 Partners’ Ihor Dusaniwsky echoed out observation, adding that on a scale of 1 to 10, AMC’s and GameStop Corp.’s short-squeeze scores hover at 10. A rally in AMC this week “pushed the possibility of a short squeeze even higher,” he said, adding that “losses are the primary impetus for a short squeeze in crowded stocks.”

Fast forward to today, when with WallStreetBets forums abuzz with positive sentiment about the two original meme stocks, AMC and GME...

... this morning AMC stocks has soared more than 16%, rising for the sixth day in a row and last seen above $23 as it hits a market cap of $10 billion for the first time ever.

Today's surge takes place one day after the volume of its traded options tied for an all-time high.

The same call buying frenzy also boosted Ford Motor, which posted the best day since June amid an options frenzy, while a meme-stock basket jumped by the most since March.

Commenting on the surge in call-buying, Bloomberg notes that if an earlier spike in call-option activity was fueled by a round of stimulus checks, "Wednesday’s day-trader action seemingly came on the absence of news -- with the exception of Ford, which said during its capital markets day on Wednesday it can successfully transition to an electric-vehicle space. Whether the comeback of the retail crowd is here to stay is anyone’s guess, but it’s already fraying the nerves of of short sellers betting the Reddit-pumped stocks have jumped too far, too fast."

Nerves are also being frayed for shorts of that other poster-child of the reddit frenzy: after slumping in premarket trading, Gamestop is also now green for the day, as is Beyond Meat which climbs as much as 15% to the highest since April 16 after Jim Cramer on Mad Money named the company along with Roblox and Ford as potential short squeeze targets for retail traders (according to S3, 27% of BYND shares available for trading are currently sold short).

So now that the retail army has awoken again, and hunt for most shorted names is back on, we expect to update our list of the most-shorted names later today.

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