Latest / Felix Nikolas Prehn's Podcast / The Gamma Squeeze Triggering a Market Crash + Stock Market News 29 May 2024

Transcript

The Gamma Squeeze Triggering a Market Crash + Stock Market News 29 May 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: If, pre-market stream, it's a day where I need some extra electrolytes.
• 0:04
  Speaker 1: That's how the day is starting off.
• 0:06
  Speaker 1: So, yes, markets are down and well, I could say I told you so even though that wouldn't be tremendously helpful, but I did.
• 0:17
  Speaker 1: But let me walk you through what this actually means and how we can actually make money out of this, because that is why you're here, I believe, not just for the excellent electrolyte demonstration.
• 0:32
  Speaker 1: That way I can actually see myself now Brilliant.
• 0:36
  Speaker 1: So my chief financial analyst this one here called Squeaks says don't worry too much, I'll explain it to you and we'll understand exactly what happened here, why it happened and why it was rather predictable, and how you can predict it next time.
• 0:52
  Speaker 1: That's the simple premise here Old banker sharing some insights.
• 0:56
  Speaker 1: So today is one of those learning sessions.
• 0:59
  Speaker 1: If you are allergic to learning new things, go away, and if you're not, then let me walk you through this step by step, okay.
• 1:07
  Speaker 1: So yes, we did warn you this would happen.
• 1:09
  Speaker 1: If you read our newsletter, you would have known this by now.
• 1:12
  Speaker 1: If you don't read our newsletter, let me share my screen, there it is.
• 1:16
  Speaker 1: Then you better start, because it's actually probably the only thing I ever read that really explains the market.
• 1:27
  Speaker 1: How do you get over that?
• 1:28
  Speaker 1: You go to goatacademysubstackcom.
• 1:36
  Speaker 1: Very simple, you already use Substack.
• 1:39
  Speaker 1: I know you can't read that, I'll make it blue for you.
• 1:41
  Speaker 1: Go over there.
• 1:42
  Speaker 1: There's a free version, there's a premium version, but you get tremendous value out of it.
• 1:47
  Speaker 1: I think and this is a screenshot from yesterday and we said we got a little taste of negative gamma.
• 1:54
  Speaker 1: Don't we use fancy language around here and we think that if the market closes, okay what?
• 2:04
  Speaker 1: It's a bad thing, right?
• 2:04
  Speaker 1: So 5,300 is the gamma flip and you go drop below that, things start to get a little ugly.
• 2:18
  Speaker 1: Now you might not know what a gamma flip is and I've put the wrong thing on here, haven't I?
• 2:24
  Speaker 1: Gosh, I'm a bit jet-lagged today.
• 2:32
  Speaker 1: Okay, go here, we'll get there in the end today.
• 2:40
  Speaker 1: Bear with me slightly jet-lagged, felix.
• 2:47
  Speaker 1: Yeah, felixfriendsorg slash gamma.
• 2:48
  Speaker 1: Okay, if you go there, you can download a full document that explains it to you in layman's terms so you can understand it properly.
• 2:51
  Speaker 1: But I will do my best to make this as clear as possible here as well.
• 2:56
  Speaker 1: So, what happened yesterday?
• 2:57
  Speaker 1: This is the S&P yesterday during the day the green line is 5300, which we said was the day.
• 3:07
  Speaker 1: The green line is 5,300, which we said was the line.
• 3:09
  Speaker 1: This is fee 5,300.
• 3:10
  Speaker 1: If we closed below it it'd be bad.
• 3:12
  Speaker 1: If we closed above it, it'd be good.
• 3:13
  Speaker 1: Now you saw that we broke through it here and there and then we really really tanked right, and that tanking here is institutional, or rather market maker selling, and you might not know what a market maker is.
• 3:30
  Speaker 1: That's also a completely fact.
• 3:32
  Speaker 1: Go and read the little document after this Felix Frenzel, dark slash gamma.
• 3:36
  Speaker 1: It will follow us around the chart so you know what to download and completely free off you know what.
• 3:45
  Speaker 1: What is the other thing that happened?
• 3:46
  Speaker 1: This is Nvidia.
• 3:47
  Speaker 1: Yesterday, and isn't she a beauty.
• 3:49
  Speaker 1: Nvidia just kept going up and up and up.
• 3:51
  Speaker 1: Now that's a gamma squeeze and that happens when people own a lot of call options above the current share price and the stock keeps going higher and higher.
• 4:03
  Speaker 1: It forces market makers to buy the stock.
• 4:07
  Speaker 1: They haven't got a freaking choice.
• 4:08
  Speaker 1: How do I know that?
• 4:09
  Speaker 1: I've got three market makers on my team, so I've got a fairly good insight into how that works.
• 4:14
  Speaker 1: But let's combine the two and you'll see a little bit better what actually happened here.
• 4:19
  Speaker 1: So the yellow line is the S&P 500, and the other squiggly line up here is NVIDIA.
• 4:31
  Speaker 1: So as NVIDIA grinds up, what happens?
• 4:37
  Speaker 1: The S&P crashes.
• 4:38
  Speaker 1: Why NVIDIA is such a big stock now?
• 4:42
  Speaker 1: That as it was going up, it was forcing market makers to buy more NVIDIA and I'll show you where you can look that up for the future.
• 4:50
  Speaker 1: That they probably had to sell everything else.
• 4:54
  Speaker 1: And if you look at yesterday's market here's pre-market not looking too pretty.
• 5:00
  Speaker 1: But if you look at yesterday's market, nvidia was up 7% and pretty much everything else sold off from the morning highs.
• 5:07
  Speaker 1: Right, finance, health, tesla, microsoft, meta, google and so on, apple losing early morning gains.
• 5:15
  Speaker 1: So NVIDIA is literally sucking the life out of the market at this particular point in time.
• 5:23
  Speaker 1: Now, how do you look that up?
• 5:25
  Speaker 1: How do you understand that?
• 5:27
  Speaker 1: Literally, go over to this document, which is called Gamma Squeeze, and you can get there at felixfriendsorg slash gamma.
• 5:34
  Speaker 1: I might just try and quickly sneakily upgrade that document that I had made, if I can.
• 5:43
  Speaker 1: Can I do that so quickly?
• 5:44
  Speaker 1: I don't know if I'm that quick really I'm usually that quick, but yeah, I think we probably can't.
• 5:51
  Speaker 1: We'll be able to download it and you know where to go.
• 5:55
  Speaker 1: So gamma, so download Spain with that black talks about himself in the third person, which I'm told is a worrying sign.
• 6:13
  Speaker 1: So let me download that.
• 6:17
  Speaker 1: Okay, brilliant Done.
• 6:20
  Speaker 1: And now we can actually pop that out here with the right.
• 6:26
  Speaker 1: Felix, friends at oxcom, you can download that with the right and I actually walk you through it so you can properly understand it.
• 6:38
  Speaker 1: I give you a real explanation for a beginner.
• 6:42
  Speaker 1: So if you know nothing about options, you'll still understand it and I can see about 20 of you already in here.
• 6:46
  Speaker 1: And then if you know a little bit more about this, then what you can actually look for is a high open interest on calls, just a lot of call options above the market.
• 6:58
  Speaker 1: And you can go to options watch and you can see that, and I highlighted it here.
• 7:02
  Speaker 1: So if you go into the chart here in NVIDIA, can you see that there are monstrous levels of call options here at $1,200?
• 7:08
  Speaker 1: That's what that green bar means.
• 7:10
  Speaker 1: And as we grind higher, the market makers essentially they're on the other side of the trade.
• 7:17
  Speaker 1: They're short the calls, they lose more and more money, so they have to buy more and more Nvidia.
• 7:21
  Speaker 1: That's the way it works.
• 7:23
  Speaker 1: So that's what drove yesterday's rally up.
• 7:26
  Speaker 1: I think nobody out there understands it.
• 7:28
  Speaker 1: Honestly, if you explain this to somebody.
• 7:35
  Speaker 1: Nobody understands it.
• 7:35
  Speaker 1: I thought you should understand it because this is actually what drives the market.
• 7:38
  Speaker 1: Now, as for the S&P 500, we think below 5,300 things are rather ugly, and I can open SPX here for you as well, moving the mic a little bit closer.
• 8:01
  Speaker 1: Thanks for the heads up there on sound being a little low.
• 8:06
  Speaker 1: So this is the S&P, and if we go into, like the end of month options here, we have here at 5,300, an almost equal number of call options and put options, and you don't need to be an options trader to make use of this.
• 8:23
  Speaker 1: That basically tells you the market gets sucked to 5,300.
• 8:27
  Speaker 1: You drop below 5,300, things look rather hideous.
• 8:31
  Speaker 1: Now.
• 8:31
  Speaker 1: Right now we are six points above 5,300, which isn't a lot.
• 8:38
  Speaker 1: But look at the live trade flows from institutions.
• 8:41
  Speaker 1: What are the latest trades?
• 8:44
  Speaker 1: It's all S&P and they're all sells.
• 8:47
  Speaker 1: They're all bearish trades.
• 8:48
  Speaker 1: So the institutions came to the same conclusion that we came to, which was, or rather, make money out of this as the market comes down.
• 8:58
  Speaker 1: Look, it's all bearish.
• 8:58
  Speaker 1: You see that so much bearish trades here.
• 9:00
  Speaker 1: It's all bearish.
• 9:01
  Speaker 1: Haven't seen that in a while.
• 9:03
  Speaker 1: Okay, so that's again something that you can look up in optionswatchio.
• 9:08
  Speaker 1: The link is down below in the description.
• 9:09
  Speaker 1: Yes, and you can get a 30-day free trial for that and it is fabulous.
• 9:13
  Speaker 1: So check that out too, and that way again, you have better insight than pretty much everybody else out there.
• 9:18
  Speaker 1: But for the moment and by the way, we have put out trades this morning, how we think we could make money out of this.
• 9:26
  Speaker 1: Again, if you go over to go to academysubstackcom, I'll put the link in the description here.
• 9:31
  Speaker 1: Check it out.
• 9:31
  Speaker 1: These are the two new trade ideas we put out like three minutes ago, how we could profit from what comes next.
• 9:38
  Speaker 1: We're feeling a little bit teeny, weeny, bearish here this morning.
• 9:43
  Speaker 1: This was our.
• 9:47
  Speaker 1: That's the World Trade Center, isn't it?
• 9:49
  Speaker 1: Yes, it is.
• 9:51
  Speaker 1: Why do people?
• 9:53
  Speaker 1: You know some like openings of old TV shows and stuff?
• 9:56
  Speaker 1: They got rid of the World Trade Center.
• 9:58
  Speaker 1: They thought somehow that wasn't politically correct or something.
• 10:00
  Speaker 1: They were there, I've been in them, they were there, they were a thing.
• 10:03
  Speaker 1: So I don't think we should erase history, but that's a different topic here altogether.
• 10:08
  Speaker 1: So check out.
• 10:09
  Speaker 1: On those trades, again, I put the link in the description, just here in the comments.
• 10:14
  Speaker 1: But what's the next trade?
• 10:16
  Speaker 1: Can you see this?
• 10:19
  Speaker 1: It's almost too big to make it out.
• 10:22
  Speaker 1: This here is NVIDIA, the golden poster child of AI, and that down there is the largest stock in the world Apple.
• 10:34
  Speaker 1: This is the performance over the last year.