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@ConwayYen - Conway

With respect to Mr. Karp of $PLTR @PalantirTech , it isn't as simple as blaming short selling behavior when it comes to understanding why a stock moves the way it moves. If you look at how PLTR trades on the market, we see that speculative short selling behavior has actually been in decline for months, with the latest short ratio reading at ~0.25 and the trendline of short ratio in decline since the middle of last year. Short interest stands at appx 5.24% of float (short float screenshot from FinViz. All other data shown from @_deepdivestocks ) But price has been relatively stagnant for a short while now, initially finding a ceiling at around $25 and encountering repeated rejections, whereas a recent catalyst briefly sent the stock higher than that before coming back down a bit. The stock is currently exactly $25.00 at time of writing. If we look at the options activity, it starts to become clear why this is: - there is a lot of gamma acting like a magnet at this $25 level in the form of a large number of call options, most of which have been sold to collect premium, as well as a decent amount of put options - most of the activity over the past month has been in the form of non-dealers selling OTM call options to earn income while also spending money to purchase ITM put options for downside protection - in combination, we can think of this type of activity as synthetic short selling due to the hedging requirements it places on the market makers that take the opposite end of the trade. Selling calls is not necessarily an outright bad or bearish thing, and neither is purchasing downside insurance. In fact, from an options perspective, the data suggests that this is a long term bullish thing — if you're a bull, you might actually want to see people selling covered calls when the time is right, and potentially even buying puts for some insurance when appropriate (OTM puts that don't have a whole ton of delta). The decay over time of these types of positions is very stabilizing, provides some passive bid if prices fall, provides some organic selling for smooth liquid markets if prices rise, and is overall very resilient to drawdowns. Alternatively, if we take our cues from the broader market, when market participants are selling puts, they load the dealer up with additional gamma while also introducing a purchasing-requirement that can help push prices up. This is also sometimes referred to as a [dealer] positive gamma environment. If you're a short seller, trying to short a resilient stock like this is a lot like trying to bash your face into a brick wall. The potential problem for bulls comes from who is doing this, how they're doing it, and how they're maintaining and managing these positions. How is the net gamma flow changing and affecting the local hedging environment? This is PLTR's latest gamma hedging heatmap, minus today's trading activity (which still needs to be calculated and quantified. New reports are released at ~8PM ET). You'll notice that this is the exact opposite of the resilient, healthy stock describe above. More specifically, this is the heatmap of a stock that is in a gamma squeeze, which is a stock that is in (or approaching) a [dealer] negative gamma environment. While technically this means that purchasing pressure can lead to more purchasing pressure, which can lead to unstable but parabolic upwards moves, gamma squeezes also mean that drops in price can lead to even more forced hedge-selling, which leads to even sharper declines in price. Gamma squeezes are almost always a bearish state to be in. If you've ever found yourself in a position where you keep buying a dip but the price keeps dipping, the above may be a reason for why that is. As the name implies, the reason is due to gamma hedging. Shares have no gamma. Only options do. Long options have long gamma, and the data tells us that the most stable configuration is when dealers (market makers) are long gamma. And if you calculate all of this, factor in liquidity, volatility, and more, we can see from Deep Dive's VoEx metric (magenta line, and the gold colored trendline) that the stock, while in bullish-until-proven-otherwise territory, is unstably so, and therefore at risk of a pullback. So it's not just short sellers. It's the options market too, and in this case it is the destabilizing mixture of activity and hedging forces. Without having done more research, especially daily monitoring of options activity, experience tells me that there's probably a lot of near-dated call-selling going on. Near-dated options have more gamma, and call-selling carries an initial hedge-selling-requirement. Repeated, regular, near-dated call-selling is a pattern we see on stocks that are the target for downwards price movement, essentially mitigating the stabilizing upwards drift of the decay mentioned earlier. The inverse of this activity offsets it, but carries its own decay [downwards]. I have no position directly or indirectly in PLTR, nor do I intend to take a position. Hopefully this post has brought some clarification to things that have been going on. None of this is a recommendation or solicitation to engage in any particular type of trading or investing activity. For educational purposes only. Trade/hedge/invest at your own risk.