Hey trader,
CRML faded most of the day…
Yet, the calls kept getting bought anyway.
My Console alert on the name fires when a single strike trades 2,000 contracts or more.
It tripped at 9:52, roughly 22 minutes after the open.
Of today’s call volume in CRML, 44% filled at the ask against 20% at the bid.
The easy read is somebody buying the dip. I think this flow is more specific than that.
They bought short dated calls above the money on a stock carrying 15% short interest and a 63 million share float. That combination decides what the dealer has to do next.
CRML sits at $8.
The trade on the tape points at $10 by Friday. That leaves two and a half days for a two dollar move.
What does this buyer see that makes those odds worth paying for?
I’m going to walk you through the print, the hedge it forces, and the level that decides all of it.
The Print That Pulled Me Into CRML
The alert gets me looking. It doesn’t tell me who’s on which side.
It flagged 832 contracts, at least nine of them filled at the ask, plus three squeeze bars on the name. Those contracts were being opened.
So I clicked into Location and filtered the time and sales for 100 contracts or more. Prints came through at 376, 172, 272, and 222.
One 500 lot may have been sold. Everything else leaned to the buy side.
ThinkOrSwim gave me the cleaner read on composition. That 44% at the ask against 20% at the bid runs about 1.6 times the average call volume for this time of day.
Filling at the ask means the buyer paid up to get in. Basically, they wanted the position more than they wanted a better price.
I’d like that ratio higher. Three or four times average is when it starts screaming.
The stock was down on the day while those calls were being bought. That divergence is one of my confirmations.
The Dealer’s Side of That Trade
Somebody bought those calls. Somebody else had to sell them.
That somebody is the dealer. He’s now short calls, which leaves him negative delta.
Every dollar CRML rises costs him money on that position. He offsets it by buying stock.
Being short those calls also leaves him positive theta and negative gamma. Negative gamma is the piece that moves price.
Essentially, his hedge has to chase. He buys more stock into strength and sells it back into weakness.
Today that ran downhill. The fade pulled those long stock hedges back off.
The same mechanic runs the other way once price turns. That’s the reason I’m watching this name into Friday.
Why $10 Is on the Table
CRML carries 15% short interest on a 63 million share float. The short ratio is 3.64 days.
Short ratio is days to cover. It’s how many average volume days the shorts would need just to buy their shares back.
At a float this size, over 10% short interest is high to me. Five days is high on the ratio, so 3.64 sits in moderate territory.
That mix earns CRML three squeeze bars in the Console.
Short covering only pushes one direction. That direction is up.
Below the price, the 7.50 strike holds about 1,500 contracts and acts as the put wall. Price can ease back there and stall.
Above the price, there’s very little open interest standing in the way until $10.
That’s where the target and the timeframe come from. Ten dollars by Friday, about two and a half days out.
I’d call that a low probability move. The conditions for it are ripe.
How I’d Structure It
Here’s the idea I came up with. This is a lottery ticket trade, and the reward relative to the risk is what makes it worth a look.
The $8 call goes for 40 cents. The 8.50 goes for 20 cents, putting break even at 8.70, which sits a little above today’s high.
Stretch out nine days and that 8.50 costs about 40 cents. Break even moves to 8.90.
I’d rather buy deep and wide. That means a four strike vertical.
A vertical means buying the 8.50 call and selling the 10.50 against it. The short call caps my upside at $10.50 while cutting what I pay to get in.
- Setup: buy the 8.50 call, sell the 10.50 call, nine days out
- Trigger: CRML holding above $8
- Target: $10, driven by the call buying already on the tape
- Cost: 30 cents at the mid
- Edge: negative gamma forces dealer buying into strength, with heavy short interest and open road above $8
- Exit: a move to 9.50 inside nine days, where the spread is worth roughly a dollar
Paying 30 cents to make 70 on that exit is better than 200%.
None of that guarantees the move. It tells me what has to happen, and what the dealer is obligated to do once it starts.
I’m watching $8. That line decides whether this print turns into a squeeze or fades into Friday.
The Console flagged that CRML call buying at 9:52 this morning, well before the stock told anyone what it was doing. That’s what it does every session.
Yesterday it flagged the same setup in UPS. I walked members through a 105/107 vertical, closed it the same day for a 60-something percent gain, and that spread is worth $1.33 today.
See exactly how Block Hunter catches institutional positioning before the crowd catches on.
Brandon Chapman, CMT
Creator of Ghost Prints
