Recently, I have made a few posts regarding the Meme Stocks and their likelihood for price improvement within the foreseeable future… I still believe this is true. However, I do need to mention for anyone getting terribly excited right now, the outlook for AMC (which is what this post will focus on) is much less good than for GME, so be cautious).
The purpose of this post is to specifically provide data on AMC (for those of you interested, I have already made a post for GME; you can find the link [here](https://www.reddit.com/r/wallstreetbets/comments/xh6725/doin_some_diggin/?utm_source=share&utm_medium=web2x&context=3), and intend to write up the same thing for BBBY. I should have this out no later than this evening, for anyone waiting). The data that this post will focus on most heavily is that of GEX and skew-adjusted GEX data. (For those of you unfamiliar with this information, or any other data that I make reference to, I will do my best to explain as we go).
– Chart Data
Before we get too deep into this dense topic, I want to mention AMC’s current position, according to the daily and 2-hour chart. It remains within a [consolidation pattern]([https://imgur.com/a/mYmBFZA) which is good because the consolidation pattern is strengthened by its decrease in daily volume; that is, until Friday for which it increased in volume and decreased in price. Despite this bad news, there are still a few positives to focus on, including the support line that continues to hold us up on these time frames, as well as the bollinger band compression that has been developing (I understand that the compression is relaxing following our sell-off on Friday, but stay positive!!!) as the stock remains within its consolidation pattern, indicating that it will likely experience an upcoming breakout. Further, AMC had a decent push back upward in the after-hours indicating that the fight isn’t over yet!!!
– What is Naive GEX/Skew-adjusted GEX?
Naive GEX stands for “Naive Gamma Exposure” and is a measurement of the market makers hedging and un-hedging. “Naive GEX” calculations assume that investors are primarily selling calls and buying puts (Market Markers buy the calls and sell the puts, then hedge their positive delta by shorting shares).The accuracy of Naive GEX on a given security depends on the validity of the base GEX assumptions, specifically whether investors are selling calls and buying puts.
Typically (in less manipulated or controlled stocks), it is safe to assume that market makers buy calls and write puts; however, for the “meme” stocks, this is likely less true. If you are interested in learning more, I am attaching another link describing this information [here]([https://www.financetldr.com/posts/research-predict-the-market-with-the-dark-index-and-gamma].
The first article also describes the “Dark Pool Index.” I argue that this is a good thing for everyone to read about considering it describes how, and for what purpose, market makers use dark pools during the hedging process.
– So, how do we get around this problem?
We use the “Skew-adjusted GEX” which adjusts the data to fit and describe the data more effectively.
A stock’s Call Skew influences the “Skew-adjusted GEX,” which changes to reflect estimated MM exposure. A positive Call Skew is common in stocks which have outsized speculative call buying. I have discussed this with respect to the meme stocks in a recent post, but suffice it to say that AMC’s [call skew is holding up](https://imgur.com/a/yxKuSmi)indicating that the activity remains bullish. Further, compared to its average call skew, AMC has increased by almost [1%](https://imgur.com/a/cALvhTn).
* Positive Skew Adjusted GEX: Daily movement subdued as Market Makers re-hedge by buying as stock price falls, and adding to their short as stock price rises.* Negative Skew Adjusted GEX: Daily movement accentuated as Market Makers re-hedge by buying as stock price rises, and adding to their short as stock price falls.
It is important that you understand that Naive GEX values are (generally) positive when skew-adjusted GEX values are negative…otherwise, the upcoming data will get very confusing.
Note – For the upcoming information, I want to reference you toward two legends describing how to interpret much of the information that I will be discussing [here](https://imgur.com/a/d0QLjDV).
– Back to the Action!
As is evident in AMC’s recent [IV chart](https://imgur.com/a/qrqiFTZ), despite an increase in IV (relative to where we were at before the run-up in August) , the price has remained flat, thereby lending credibility to the note in the legend that I referenced you toward a moment ago. For those of you that did not look at the legend, I am referencing the tendency for a stock that experiences an increase in IV but does not increase in price is often a prelude to to an underlying price movement, meaning that it is reasonable that this stock will experience a push upwards in the near future (I have discussed more about this in my previous posts regarding spring development and Wyckoff analysis).
As for AMC’s Naive GEX, it is starting to [increase again](https://imgur.com/a/hE8c6wE). Remember my earlier point that you need to remember regarding positive GEX values and negative skew-adjusted values? I hope so, bc [this](https://imgur.com/a/0199mji) screenshot represents the total gamma for AMC across all expirations (for the next 94 days anyway…) meaning that more positive values (i.e. bars on top) than negative values (bars on bottom) is indicative of an underlying potential gamma-squeeze. This is in contrast to the next few screenshots which show the [skew-adjusted gamma](https://imgur.com/a/972Id1B) for all expirations (for the next 94 days), for this next week (Sept 23rd), and for Oct 21st. The fact that we have so much negative net skew-adjusted gamma is a good thing, especially because so many of these strike prices are immediately next to one another, which could serve to facilitate a gamma squeeze.
However, I should note that not all of the positions for which we have higher gamma and more negative skew-adjusted gamma are immediately adjacent to one another. This is important because if we lose momentum in between these strike prices, it can certainly make for a difficult, and very frustrating experience. Critically, AMC is (very) close to its “GEX Flip” price. If we get pushed down to the area of $8.70(ish), the skew-adjusted value will flip from negative to positive, meaning that the market makers will move from buying stock as the price moves up to a position in which they buy on the way down and short on the way up, which would make our efforts more difficult.
Additionally, given that we are so remarkably close to the “GEX Flip’ price, and that there is so much net positive skew-adjusted gamma below this price, it is very possible that AMC will be gamma ramped in the downward direction if we cannot hold this line.
On a more positive note, AMC’s current [open interest](https://imgur.com/a/DuaZ1cA) indicates that if we make it above $10, our current call activity far exceeds that of puts which will serve to facilitate wild price improvement…we just have to make it there.
Ultimately, the two big things holding us back for these last few days include this volume shelf at $10.00(ish) and the fact that we are so close to the “GEX Flip” price. If we manage to breach above and remain above, we stand a reasonable chance of retesting $11.00 and potentially moving higher. If we test above $11 and manage to hold above for at least 15 minutes (I say 15 minutes because I anticipate that for the algos to kick in with any reasonable strength that this is the time necessary to initiate this feedback loop of buying activity), I expect that things will get very good, very quickly.
tl;dr: GEX and Skew-adjusted GEX are measurements of market maker hedging and un-hedging. After reviewing this information for AMC, it seems clear that we are in a “do or die” situation such that we will either gamma ramp or gamma ramp down.
Let me know if anyone has any questions; I am always happy to help. 🙂
Edit: I have just noticed that the market makers have started adding new expirations for the month of October (the only expiration before Friday was Oct 21st).
submitted by /u/kwsparks to r/wallstreetbets
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