GOOD GOD THE GAMMA SQUEEZE

Good day RIGD readers.

Today is one of the 12 magical days a year where 0dte and monthly expiry options collide, so expect fireworks.

We told you this week would be max fuckery and it certainly lived up to it. Traders were positioned heavily to the downside for today and after looking like we’d see some downside after Tuesday’s close it’s been straight up up up and away. The stock market is rigged and likes to fuck max participants so we’re not sure why you’d expect anything else to happen.

Yesterday was the biggest gamma squeeze in 9 years on the Nasdaq pushing it to a new 52-week high.

Basically a gamma squeeze is a feedback loop where traders buy call options and market makers like Citadel need to hedge their position (remain neutral) so they need to buy the underlying stock. If the additional buying causes the price to go up and more traders continue to buy call options, then the chance of these options going into the money goes higher, then dealers need to hedge (buy more shares) and then boom green hulk dick straight up pray for the people on the other side of the trade.

Thursday can be the best time to purchase options. They’re 1DTE (one day to expiry), so theta is mostly gone and you can get a lotto ticket at a reasonable price (aka 0dte convexity). Traders went in on popular names like NVDA, AI, TSLA, UBER, META and MSFT all seeing +50% volume. These names are down today at the open because that’s how the market works.

[ spotgamma ]

Of course the 1DTE of yesterday is the 0DTE of today, which means Fridays is the best time to trade options if you have no directional bias and prefer to follow the flow and price action (aka make money). It’s expected in v2 of RIGD AI that we’ll enable the algo to find these opportunities.

Smart people are saying if the call wall holds at 4200 (dealers will protect this line) then downside is possible but we’ll likely see a widening of the percentage trading range.

Wide range. Volatility. Yeehaw partner let’s go.

[ zh ]

Zero-Day Options Change The Market (Or Not)

Zero days are all the craze.

Since the contracts are so new, it’s still unclear how they behave and affect the broader market. That’s why we’re building RIGD around them.

A new study from the University of Utah found the following:

Translation: there are volatile moves in each trading session, even when the SPX stays in the same range (like the last 30 days until Wednesday).

RIGD: intraday volatility means there are opportunities to take profitable trades each session.

Translation: when a big sweep order hits the block, it moves the market.

RIGD: we’ll alert you immediately when these trades occur so you can fade or follow.

Translation: longer dated options do not matter as much when there are same day expiry contracts

RIGD: we don’t want to think about next week or next month. we don’t listen to macro podcasts or do forecasting or draw lines on charts. we follow the flow and make trades based on the smart (or at least big) money.

Overall if 0DTE was going to cause “Volmageddon2.0”, then it probably would have happened already.

Now that the media is starting to push the narrative that these derivatives are safe, look for CBOE to roll out zero day for high volume retail names like AAPL, TSLA and NVDA.

What could possibly go wrong?

Keep reading: The 4 Things We Already Knew About 0DTE Trading

[ bloomberg ]

RIGD REPORTS on $SPY

Action has been muted thus far today, probably because the lizard people are waiting for retail traders to bail on their call positions before pumping the market up. We don’t see how this thing ends in any way other than a mid-day red dip before a ramp that starts around 2pm EST. Red Fridays are simply not a thing in 2023.

We saw a massive $SPY put debit spread opened today at 9:33.

5/19:
- Sell 20,000 $420p
- Buy 20,000 $418p

It was likely the same institution that put on this trade as well.

6/16:
- Sell 20,000 $410p
- Buy 20,000 $420p

There’s a lot of green gex out there with the highest negative level (magnet) at the 422 strike, thought it’s small at only 40 million.

The big tech names traders fomo’d into yesterday (+50% volume) are getting crushed this morning, the move won’t happen until these pick a direction or revert to their default behavior of going up and to the right.

We’re watching, waiting and algo tweaking.

Have a great day and weekend. We’ll talk to you again on Monday!

First time receiving The Report?

Check out what is RIGD AI

thanks for reading THE REPORT by RIGD AI

we’re building tools for the modern degen investor

follow us on twitter @rigd_ai