Hey trader,
EOSE sat at the top of my Ghost Prints watchlist this morning, so I pulled it up in the Console.
I expected a clean call-buying story. Instead, both sides of the chain were getting bought.
They took 8,000 of the $4.50 calls and 8,000 of the 5 calls, mostly at the ask. Then two fresh put trades showed up at $4.
That leaves dealers short options on both sides, which is negative gamma in both directions. Every move from here gets amplified instead of absorbed.
The stock sits at $4.70 with roughly $1.50 of room underneath it. Above, $8 is live.
Flow like that usually means I pass. Two-sided buying tells me a move is coming without telling me where it goes.
Then I checked the short interest, and this stopped looking like a coin flip.
Let me show you the mechanics underneath it, and the 23-cent option it handed me.
Negative Gamma Runs Both Directions
Somebody bought those calls. Somebody had to sell them.
That somebody is the dealer. Short calls leave him negative delta and negative gamma, which basically means every dollar higher digs his hole deeper.
He covers by buying stock into strength and selling it back into weakness. His hedging pushes the move along instead of absorbing it.
Then the put buying at $4 landed on top of that.
Now he carries short options underneath the market as well. The negative gamma runs in both directions, so a leg up gets fuel and so does a leg down.
That is a powder keg, and it can go off either way.
Flow like that usually ends my interest. There is no direction to hang a trade on.
The tie-breaker was one screen away.
The Short Float Tilts It Up
The Console put four squeeze bars on EOSE. Four bars normally point to short interest above 20%.
The real number came in higher.
31% of the float is short, on 4.14 days to cover. Days to cover is how many average sessions the shorts would need just to buy their shares back, and five days is high, so 4.14 is knocking on the door.
Short covering only pushes one way. That direction is up.
The gamma still cuts both ways here. The bias no longer does.
Now put levels around it. A pullback runs toward $3.60, which is about $1.50 of downside from where we sit.
The $4 strike helps on that side. All of today’s activity leaves heavy open interest there for the next three days, and that concentration works like a floor.
Above the price there is far more room. I think $8 to $10 is possible inside a week or two, and $8 could happen in a matter of days.
That range is not a guess. This stock ran from $4.50 to $7.68 in seven or eight sessions.
The 23-Cent Option
The reason I like this one is the price of admission.
Here is what I’m looking at:
- Setup. Buy this week’s $4.50 call, essentially at the money with the stock at $4.70
- Cost. $0.23
- Target. $6, which is live as soon as tomorrow if the upside break comes
- Edge. Short covering and dealer hedging both push the same way, with $1.50 of downside against $8 to $10 of upside
The two numbers in there are doing different jobs. $6 is what I’m playing for this week, and $8 to $10 is where the move can stretch if it gets a week or two to work.
Twenty-three cents for an at-the-money option on a stock this wound up is the whole thesis in one number.
What I’m buying is asymmetry rather than direction. The move can still go against me, and the payoff on each side is nowhere close to even.
What I Want To See From Here
My condition is an upside break with volume behind it. Once price separates from $4, the dealer hedging and the short covering start compounding on each other.
Until that happens, $4 is the level I’m leaning on.
That open interest only carries through the next three days. It gives the stock something to sit on for the rest of the week, and after Friday it stops doing the work.
So the clock matters as much as the level here. Short-dated gamma is the most explosive kind, and this is the stretch where it does the most.
That is the setup. Two-sided flow built the pressure, and the short float decided which way it points.
Trade Alongside Me In Block Hunter
Everything above came out of the Console. I loaded the day’s prints, sorted them, and clicked into the one that did not fit the pattern I expected.
Finding the print took a couple of minutes. Knowing that two-sided buying is not a dead end is the part that takes reps.
That is what I do with members every session. I pull up the Console live, walk the prints that carry real structure, and translate them into levels, targets, and timeframes while the market is still open.
Most mornings I send out my list of the prints I’m watching before the session gets going.
Block Hunter also comes with the library behind the alerts. The gamma material is where I would start if today’s mechanic was new to you.
The prints post every single day. The difference is whether you can tell which ones are worth your money.
Join me in Block Hunter and start hunting the flow with the Console.
Brandon Chapman, CMT
Creator of Ghost Prints
