The Gamma Squeeze Trading Strategy (in $AMC)

In this video, learn the Gamma Squeeze Trading Strategy. A firm prop trader shares in step-by-step detail The Gamma Squeeze Trading Strategy, from a recent trade in the hottest stock in the market- $AMC. Let’s get to work on sharing these important trading lessons so you can grow your trading account.

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in this video learn the gamma squeeze
trading strategy
hi i’m mike bella fury co-founder of smb
capital and we’re a proprietary trading
firm located in midtown manhattan
and i’m also the author of the trading
classic one good trade in the playbook
in this video a firm prop trader shares
and step-by-step detail
the gamma squeeze trading strategy from
a recent trade in the hottest stock in
the market
amc let’s get to work on sharing these
important trading lessons
so you can grow your trading account
[Music] this is a gimmick tweeze set up on amc
from about a week ago
some of the things we’re going to talk
about is how there’s so much edge in the
setup but when not traded properly
can put you in a pretty deep hole uh
some of the things we’ll talk about
best candidates for a gamma squeeze a
trade strategy um the pulling setup
some executions reading the tape and how
we can improve
hey can you just get right into
explaining what
a gamma squeeze is yeah
um so
there are certain conditions that have
to be met for a gamma squeeze to
um a scam squeeze slightly differs from
a short squeeze
as it adds another layer of intensity
because of the
stock’s underlying a lot of time we’ll
money flowing into the call options from
investors which forces more buying
activity which can lead to an increase
of volatility and range
so for some of the things that we need
to see for gamma squeeze to happen
is it has weekly options and then within
these luiki
options you want to see lots of out of
the money call buyers
near expirations um you want to see the
stock and play high
our vault sector strong so we’ll see
like the in this
trade setup is uh the wall street bet
names are all running like gme
amc and a few others
and then smaller flow stocks like
microsoft or apple or floats are pretty
so you want to have names that can have
some really large
weekly volatility maybe over 15 percent
in a week expr gme and triple b
wise an example of this and then high
shore interest
and we’ll get to more of this
specifically within how it worked within
the trade
amc and is there something that you
use to screen for unusual
call buying yes a lot of this
i think i can find on twitter there is
scanners you can pay for
um i can’t listen to the names on top of
head but a lot of time as i look through
at the end of the day at twitter and i’m
looking for what is getting a lot of
options activities
and i’ll hear from other traders this
that’s great but you might want to be
thinking about
hey how do you get some of that
information delivered to you more
readily as opposed to
one offs or chatter or in sort of a
in in this non-systematic way i mean if
this is something that
can be so powerful i’d want to know more
of that
well with this i’m actually looking at
the open interest so i can just pull up
like the option chain and look at which
strike prices have the highest open
and so that’s the the main way i’ll
actually use that data
is maybe not the inflow at the current
time but what’s been happening from the
past two days
or more importantly the weekly calls
which has the highest interest
or yeah open interest so with poland
setups you want to
look it’s your entry is really based off
your risk is of what you’re willing to
risk and
what level you want to you enter in
let’s say you see an inflection point
and you see a larger timeframe or a
solar timeframe trend you want to get in
at as close as you can to that price and
prior to entering the trade
and you want to know exactly where your
risk is and ideally when price is
pulling into this
you want to see decreasing volume as it
pulls into support
and then reason to sell reversal candle
breaking emas a lower high
or a breaking trend a lot of time with
these setups
it might be better to be selling into
the break of new high days or into an
extension as you can be
getting really good exit prices another
reason to sell gets below v
wap and then a change in character in
the tape
thin on the bid and you can see that
seller control
as price is stepping down as in in
regards to risk this trade
should work right away as entries need
to be based off clear and defined levels
stop is determined before the trade is
if you want to learn three more real
world setups that our traders use
including the simple setup that we teach
all of our new traders and the setup
that turned one of our traders into a
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than from years of online education so
mike this is where we’ll talk about
um why the options or the underlying is
so important
um and this is really determined by the
strike prices so
when gamma squeezes happens there’s
three major players
of why this can create so much range
it has to be a large increase in buyers
in this case
wall street bats or and other popular
online forums which create a large
imbalance of retail involvement on this
certain day there is a 20
increase in amc ticker sediment
um so this was one of the largest
increase from the past few months
and that really caught my attention
the second part of this is with these
retail buyers they
are likely to be purchased the out of
the money weekly calls near expiration
which forces the market makers who are
selling the calls to delta hedge
one way they are delta hedging is by
buying common stock of amc
thus creating even more demand and as
the stock price
increases the more they have to hedge
this is really important
as price moves higher and higher the
more and more large
larger buy orders are needed to to be
to hedge against this call buying thus
a vicious cycle and why these moves can
get so parabolic
and then thirdly we had um 23
short float um so they had to cover when
price was moving against them
um when uh shorting is basically when
the individual has to buy back the stock
and that creates more demand
and when these three mechanics are
working together at the same time
it creates a similar effect to putting a
microphone up to a speaker
and things can get amplified very
okay let’s talk about social media
sentiment data
there’s a new regime change in the
marketplace right now what is it
buying calls out of the money calls
these uh these meme stocks
are catching a bid and running right
the talk of the market is these
meme stocks
like your amc’s like your bb like your
triple b
y uh like your doge
are running agree gma
running agreed agreed yep so a lot of
retail participants
the stocks they’re interested in are
really running that is the big picture
of the marketplace if we’re writing the
nightline news copy for cnbc that’s got
to be in it
these stocks are running so
social media sentiment data
in this regime right now more important
and something we really want to be
paying attention to and learning how to
incorporate into our trading
so it seems as if you’re using wall
street bets ticker sentiment
why don’t you just spend a little bit
more time what you’re doing there where
you’re getting that from
how that’s potentially helping you with
your trade decisions
yeah so this website is called swaggy
stocks um you just do a google search
and you can find it
basically how i use this is i go on the
website and i see which stocks are
most trending on the day according to
wall street bets
what it does is it scans their website
and sees and it looks for
is their positive sediment is their
negative sentiment and what is the
overall activity
in this name so when i’m watching these
names i’m gonna see
what’s what name has the most retail
volume and on a day like today we see
climbing up the list some days amc will
be higher than gme
and some days blackberry would be above
and i want to be involved in the names
that are at the top three of that list
as they are most likely to be in play
and it’s going to have the greatest
amount of retail involvement
which can lead to a very large gamma
as we saw here where there was a 20
increase in activity
in amc which um in hindsight did lead
to a gamma squeeze on this day good i
really encourage you to continue looking
for data sentiment and incorporating
that into your trading so there’s
there’s other data sentiment that you
can use there’s other social
media sentiment that you guys can get
your hands on some of that is
potentially in cloud quant but keep that
that’s super important particularly
the big picture for the marketplace is
retail trading participation
all right so really good work there all
right and then this is some bigger
picture stuff
uh amc is breaking out a larger time
frame wedge
uh and the interesting thing to see here
is when the wedge was breaking out
it was on increased volume and we did
get a pull in
back into its weekly range on decreased
and then moved back over the highs on
increasing volume
per each day which validates this move
having really good strength and then
some 15 minute technicals leading to the
so the daily breakout happened four days
and then we see continued strength and
we are not able to fail
and i think the important thing to look
at this is to really see visually
if the gamma squeeze is happening is how
price is accelerating
as um we’re moving higher um see in this
like 13 range we’re very consol
we were consolidating we did have a
decent range but as price reaches higher
into the six teams into the 18s
um it really starts to a ramp and that’s
the mechanics of a gamut squeeze
starting to
play out and you can see here this was
that when it was stock was at 1850
and i think right now is up near in the
60s so
price really expands when prices start
to break out and get higher
so on this particular morning this was
the first real pullback we saw in
so this was going to be on lower volume
i was thinking that oh this gap down in
the morning could be a
could be a trap for shorts um as like
this would be the first red day
and what would confirm my long thesis is
if we did hold these pre-market levels
and the pre-market trend
for a continuation move higher which
just move a trap more shorts
which would lead to a more aggressive
and then a little more zoomed in
pre-market this is on a one minute
so right on the open the first 15
minutes we developed a range
we also had a false breakdown which
actually add convict adds conviction to
my trade because that means
price moves lower but it was quickly bid
back up that could be
buyers coming in because they’re really
interested or shorts hitting in and then
when price breaks up and reclaims the
range them having to get squeezed out
um so that really piqued my interest for
the long thesis
about 30 more minutes into the day we do
break out of this
range and it is confirmed by strong
so we pulled into that lower 1850 range
the bids held
and then we break out of the 30 minute
range and this is confirmed by
consistent and buying volume and as
price continue to move higher people
getting squeezed out
and this is uh naturally how the gamma
squeeze would take place
and as price developed we see it
developed a trend
and we continue to break higher and we
had a consolidation
false breakdown trap more short sellers
and then rip them
rip re-bid rip them out and move back
into the highs
um and then i want an important thing to
take notice of is
on um all the upticks there’s increased
volume and then the down ticks it’s
decreased volume
we didn’t necessarily see a blow-off
candle and there is consistently
throughout the day buyers in
in control i just want to show a full
picture of the day i didn’t catch the
second leg
but i just want to show that how this
relative strength worked and how this
squeeze played out for the rest of the
so we consolidated for about two hours
and then we broke out of its range
and yet again we had volume strength and
a continued squeeze higher
um for the rest of the day and then
there’s a one inflection point i really
want to show on the tape
um mike you talked about uh the see it
moment and then i just wanted to show
this part
right here so this was the pre-market
trend this white um
line right here and this is an
inflection point of um 18
like 18 1842 level uh this was a level
from pre-market and the previous day
and i would what i noticed was price was
pulling into this level
in on decreasing volume so this is a
ideal pull-in setup this is what got me
as there was confluence of pre-market
trend and
previous a previous day’s level
so right there i put my order in and
this gave me a
an obvious level of risk off of which
was that 1850 level i wouldn’t
risk low a day on this because that was
a shakeout
um and that if price does get down there
then that is actually true weakness and
what i want to see here is this 1860 to
1855 level hold
and we do see that as the bids are
stacked at 1860 and then we’ll
eventually see it stacked at 18.55
and then coming off this level we want
to see expansion of volume and the
speeding up of the tape
and we see that right about here
yeah right there we see people hitting
the ask and then we pull up
above 86 1870 and when 1870 lifts then
volume really starts to
pour in and this confirms the pull-in
and now i’m able to risk that wick low
of 18.55
so right now now i’m already in the
money and
now i just have to wait for my reasons
to sell
you just need to hold it until 76. sell
it at 70 yes
it’s hilarious that this that you’re
showing this in the 18
i mean it’s great that you are tipping
off a potential really good trade
around 18 when as we speak right now a
couple of sessions later
the stock traded up to 76
traded down uh this morning into the 40s
and is now trading above 60 as we talk
right now at this moment
and so you know this is a signal
that is worth studying um i i do want to
and i and talking about that see it
moment super important
for you guys as you’re growing as
traders super important if you are an
elite trader
so yesterday i was chatting with shark
about amc and the range was 42
to 39.50 and you know when it got below
i chatted shark and said well the
intraday the intraday
momentum is now to the downside but what
is it couldn’t really trade below 38.80
so the stock
should have gone down a stock that has
no business being up in the 40s
i don’t look i don’t mean that to be a
dream killer to anybody it just isn’t
where it’s trading it this is a
phenomena it’ll eventually will go back
if you’re long and you want this to go
to 100
not rooting against that happening in
any way
and that may happen hey it may go higher
than that
crazier things have happened um but you
at some point this is going to make some
sense and it’s going to pull in and it’s
going to be a
a single it’s going to be in single
unless something unless there’s an
intervening factor
and again i’m not trying to kill
anybody’s dreams but uh
yes sir so we were talking about that
and and so the momentum
was to the downside intraday for stock
had run from the the teens all the way
back up
up to the to the 40s way too quickly and
it just wouldn’t get below 38.80 and so
for that see it moment if you go back
and you look at yesterday’s trading
go look at how that stock when it got
important support really couldn’t push
very much lower
and couldn’t uh push below 38.80 and so
when you have a stock
that’s up way too much and should go
and gets below intraday support and
cannot go down
and that level is tested multiple times
and cannot trade lower
something irrational that’s not going
will trade higher and can trade much
and if you go back and look that was
that see it moment
for yesterday’s trading would have been
a great open-minded
long to get long from that 38 80ish
and the stock did really go to 76
uh closed in the 60s but that’s the
importance of of waiting for those
uh ca moments and you know one of the
that uh is super interesting is look
there are guys in the desk who are elite
who are trying to get bigger and they’re
trying to get better
and some of them in this amc
have gotten themselves in trouble by
a short thesis with a lot more size
and we’ve been talking about
how to offer them the best guidance and
some of these elite traders
saw and see this amc is a really big
trading opportunity to downside
particularly where it is now
and are stretching themselves to
trade with more size but and i wrote a
tweet about this today
maybe making more and being bigger as a
is more about improving your
and your patience and so you could have
been sitting there saying hey
amc is worth six bucks it’s at 18
this thing should go down but if you’re
open-minded and you see that buying
at that level maybe it’s a pretty easy
long for you
as a trader and
you know i was i was talking with super
successful trader who was one of the
primary co-participants in starting
one of the great hedge funds in the u.s
in history
and on this topic
you know he was saying that uh he’s not
a big believer in
outsized risked for certain trades
that that really works and that some of
biggest traits start out as these
innocuous ideas and
it’s very easy trade see it trades
you’re just sitting at your desk you’re
being open-minded
you’re watching the data you’re watching
the price action and and you just
develop this idea that this is a very
easy long
you see it those can be
and often are really effective trades as
opposed to
sitting around saying i really believe
that amc must go down i really
believe that this is a big opportunity i
need to
put on more risk with this huge
opportunity and risk
more because it just doesn’t make any
being at 18. it doesn’t make any sense
being at 42
it doesn’t make any sense being at 60
all of those statements would have
gotten you in a lot of trouble right
and so um love your thought
about love you’d love love your thought
that see it moment and the importance of
it and uh just sharing
this is this has been a crazy stock this
during crazy times and
who’s to say where this is going to go
who’s to say
so the initial entry is at that
pre-market low
and then here’s another moment where i
think i could have put more size on was
the break of this opening 15-minute
which would be an opening range break
but i would have to treat that as a
completely different trade
as there’s different variables at that
moment different levels of risk
different ways of exiting
but instead of taking part partials off
at this
previous day close and some resistance
there i could be uh
holding and then just stair stepping my
stop up
along the way as the price action and
the volume develop here was just a
an expansive move under over 21
selling in the strength um here’s
into 2250 selling into some more
strength and then this lacks
exit with small size extremely small
size was that was the
trend break one way to improve is
using 15 to 30 percent of my size to add
on dips and cylinder rips
uh basically trading around the core to
mask maximize
my wrists or my r’s and
um and controlling risk when price and
volume are confirming my thesis
creates more cash flow and it keeps me
engaged with the tape
and um i just have to keep in mind that
i’m never going to have the perfect
exits but my job is
is to minimize the gap between exiting
too early and exiting too late
um because perfectionism is ego driven
and i cannot get the perfect exit
this is done by focusing on the trade
setup and executing based on the
developing variables not my emotion
all right great and hey important trade
to point out
don’t know how long this new regime is
going to be in place where the retail
traders are really running stocks and
are super important
in determining price
it lasts for for a long time great that
will adjust to that new pattern and
trade accordingly things will go up too
uh and then offer a loud opportunity for
some for some good shorts too
some good long some good shorts hey go
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