| Author | Source |
|---|---|
| u/yelyah2 |
| [Education 👨🏫 | Data 🔢](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Education%20%F0%9F%91%A8%E2%80%8D%F0%9F%8F%AB%20%7C%20Data%20%F0%9F%94%A2%22&restrict_sr=1) |
For anyone that follows me, I track total market delta neutral/gamma neutral prices using options data to help with trading. The gamma neutral price is the underlying price that creates a total market gamma of 0 across all GME options (all expiration dates). It is often associated with high volatility, and sometimes (especially in GME’s case), it’s associated with gamma squeezes.
The graph below summarizes the GME close price, Delta Neutral price (underlying where a total market delta is 0), and the Gamma Neutral price. You can see that a gamma neutral spike (at $7,387.08) occurred today for the first time since the 3/8 spike that started an 80% increase in a few days!
GME 9/22/2020 - 5/26/2021
I have a few more graphs below that zooms in on various sections so you can see how the gamma neutral price spikes can help signal increases.
GME 2/19/2021 - 3/31/2021
GME 1/4/2021 - 2/17/2021
Additional information for those interested:
Delta Neutral: price that creates a total market delta of 0 across all GME options (all expiration dates) for a given date. General observation is it acts like a theoretical floor (although the price can go lower, as seen in February). My theory is that as the underlying approaches the delta neutral, call options go on sale. As people buy call options, MM have to buy the stocks which increases the price. Most stocks like to hang out above the delta neutral, some dip below and create pressure that can shoot them back over the delta neutral (like what happened in February), and some like to hang out below (like the VIX).
Gamma Neutral: price that creates a total market gamma of 0 across all GME options (all expiration dates) for a given date. General observation is it acts like support/resistance between the delta neutral and the underlying, and typically bounces around between the two prices for most plan (like we have seen with GME since April). It also goes crazy in periods of high volatility (as you can see by the infinite spikes). It can either be a prelude to a big spike, indicate the end of a large increase, or it can go to zero and indicate the end of a big drop. It’s hard to say what it will predict, except that SOMETHING is going to happen when it goes off.
Comparison to other stock behavior: Delta Neutral DD Update
TDLR: Gamma squeeze could be coming!