Robinhood Enters Into A Gamma Squeeze As Bernstein Strategic Decisions Conference Nears

As Robinhood HOOD CEO and Co-Founder Vlad Tenev prepares to talk at the upcoming Bernstein Strategic Decisions Conference (BSDC) on June 2, 2023, $HOOD has developed into a gamma squeeze.

Fueled by a recent surge in the amount of Dealer Short OTM Calls (out-of-the-money calls that the retail trader has purchased), and the amount of Dealer Long OTM Puts (out-of-the-money puts that the retail trader has purchased), $HOOD’s new gamma squeeze points towards a growing downside potential as BSDC approaches.

Both of these option types give $HOOD a hedging environment wherein options dealers must sell shares if the price falls, and conversely, must purchase shares if the price rises. This dynamic can create strong and noteworthy movements in price – especially if occurring due to or around a major news event – that can exceed the market’s expectations (in other words: gamma squeezes often create a situation where realized volatility becomes greater than implied).

Once a gamma squeeze has developed on a stock, the average change in price is a drop of 5%, prior to recovery. This means that a gamma squeeze usually causes a stock’s price to decline – and rather sharply, rather than rise.

$HOOD’s gamma squeezes are no different, despite being a relatively new stock: calculating all of $HOOD’s gamma squeezes from their start until the lowest point prior to recovery, $HOOD sees an average move of -1.86% (median: -0.60%). This can be visualized with $HOOD’s price graph, colored red for when $HOOD is in a gamma squeeze, and blue for when it is not.

As the BSDC nears, it will be important to keep an eye out on the developing hedging environment. Should more short option positions start opening, then the downside potential instigated by the developing gamma squeeze will increase substantially – regardless of what news comes of the event.

The author has no positions in $HOOD.

Deep Dive Stocks serves to provide statistically significant data about the stock market, including daily updates to the number of gamma squeezes and hedging environments for the majority of equities throughout the market. More information can be found at https://deepdivestocks.com.