Issue 102: These 10 Stocks Have All Redlined - Masters in Trading Digest

These 10 Stocks Have All Redlined

“I think we are sitting on quite the gold mine”

One month ago, Jonathan and the Team started discussing a new scan idea for the Wall Street Wiretapper Options Scanner…  The idea for the scan is best described through an analogy, because the idea is similar to that of a “short squeeze.” A short squeeze occurs when a stock moves higher and short sellers decide to cover their short positions or are forced to cover positions via margin calls.  As these short sellers buy the stock, the price rises, potentially creating a situation in which more shorts have to cover. Most are now familiar with the GameStop short squeeze, but do you realize how easy it was for anyone to discover that GME was sitting on a 97.75% short interest?

Short Squeeze Video GME Trading $4.25 Before the Squeeze

Now that you’re familiar with the short squeeze, we can get into the idea for our new scans.

Options have leverage, making them so much fun to trade.  Here’s a basic example that shows an options leverage.

  • ABC stock is trading at $10.
  • ABC 12 strike calls are $.50 with a delta of .2.

At expiration, if ABC trades above $12.01 long option holders from the 12 strike are now long 100 deltas.  

Long 100 deltas is the same as saying long 100 shares of stock.

When the option had a delta of .2, it was just 1/5th (or 20% of the stock).  

That’s the leverage.

Learn Option Greek Basics – Delta, Gamma, Theta, Vega, Rho

Here’s what we’re scanning for.

What if we were able to take all the Open Interest and remove its leverage?

This is like a short squeeze because what would happen if everyone who is short tried to cover?

We found out in GameStock; right?

Using that thinking – because options have gained in popularity so quickly, we started to wonder if Open Interest levels were getting too close to a stocks overall float.

After playing with the idea, a few days later Pablo shared the TOP 10 list with me… the TOP 10 list of names that have excessive OI relative to the overall float (like a short-squeeze trade)… 

These names were shared on July 7th, and are the Top 10 with the most excessive Open Interest relative to a stocks overall float.

Masters in Trading Digest - Issue 102

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These 10 Stocks Have Redlined

One month, average return = 76 freakin %… and that's NOT even with options, that’s just the stock.

This week we will share the next list of 10 names for all Wiretapper members to follow.

Last thought… This scan is still a work in progress but early results are attention grabbing.

Our core mission is to build incredible tools, and provide side by side support so everyday traders can make money trading options and futures.  

Keep it simple to reach your goals.

We are on the right path.

FINAL THOUGHTS

WHAT TO EXPECT IN THE NEXT MIT DIGEST

The next issue will be released on Wednesday. 

Until then, trade smart and always manage your tail risk.

Thanks for reading,
Jonathan Rose

P.S. You do not want to miss this >>>new video<<<.

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