At-the-money (ATM) options will tend to have a delta of around 0.50, and delta approaches 1 as the option moves deeper in-the-money (ITM). Delta ranges from 0 to 1 and represents the expected change in the options price if the underlying stock moves by $1. I'll only discuss the two that are most relevant here: delta and gamma. Options traders should be familiar with the Greeks, which measure the impact of different factors on pricing. Here's how options volumes are contributing to the enormous moves. For example, Bloomberg reports that there were a record 913,000 call options traded on Friday, well above the open interest (the total number of contracts that existed as of the previous day) of approximately 400,000. In addition to trading activity for the underlying stock, there has also been a surge in options activity.
But that isn't the only type of squeeze that's been driving unprecedented volatility. With short interest of around 140% (since shares can be loaned out multiple times), conditions were primed for a historic squeeze. That pushes the price higher, which can cause other shorts to bail on their positions, creating a cycle of intense buying pressure. Much has also been written about a massive short squeeze, where short sellers scramble to buy shares to close out their positions. The bullish thesis is that Chewy co-founder Ryan Cohen, who has accumulated a significant stake in GameStop as an activist investor and secured a seat on the board of directors, will be able to help engineer a turnaround and accelerate the company's digital transformation. Much of the recent activity has been attributed to WallStreetBets, a growing community of retail traders on Reddit. Trading on the stock was halted 9 times throughout the day due to volatility. Video game retailer GameStop ( GME -2.33%) has been experiencing breathtaking volatility throughout the month, particularly yesterday when the stock was up as much as 145% before dipping into the red by 6% and finishing out the day up 18%.
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