Idea: The markets never adjusted to $MRNA's price hike post-covid vaccine and the recent dip in price will be prolonged due to retail investor bullish sentiment causing a gamma squeeze.
For the evidence, I will be referring to both VoEx and the options layout on the stock.
Quick recap of VoEx:
VoEx is a measure of the price-directing forces on a stock. Usually theses forces provide either a balance to the stock, or are relatively negligable in their effects. However, occasionally they can cause a stock to become unstable and actually push a stock in various directions.
Since there are many price-directing agents in the market, VoEx was developed to encapsulate all of them, their effects, and then display it succintly on a graph! The first imagine is of SPY's VoEx.
VoEx-daily is magenta, VoEx-trend is tan, and the price is blue. There are also two horizontal lines: the top is known as the inhibition line, and the bottom is known as the propagation line. If VoEx is outside of either one of those lines, it is considered unstable, and conversely, if VoEx is held within those two lines, the stock is considered stable.
Looking MRNA, there are several prominent features to point out:
The first is that prior to the appreciable price jump around 2021-07, there was a steady appreciation in price with VoEx-trend maintaing its livelihood within the stability zone. A classic indication for long-term growth potential.
When the price of a stock rapidly appreciates, VoEx can demonstrate if the market is adapting to the new price, or if it is "holding out" until reversion. This accounts for both the retail investor and the option dealers. Typically, adjustment is noted by a decline in VoEx-trend with no discernable stop to the price's appreciation. A good example of this is $TWTR:
The major price jump at the start of 2021 wasn't met with any outrageous VoEx spikes, nor did VoEx trend run-up, in fact, in actually started to dip towards the propagation zone. But the elevated price experienced last year has largely remained, and VoEx has resumed its place inside of the stability zone, even with some turbulent waters inbetween.
Yet, that isn't what happened with MRNA: the price appreciation was met with a volitile VoEx that spurred above the inhibition line, and has only just falled below it, but in a dramatic fashion.
Additionally, if we look at the delta environment just prior to VoEx's most recent tipping point, there is something interesting to note:
On the 24th of September, there were 321,000 calls and 353,000 puts with a net delta of around 120,000. Yet, by the 1st of October, there are around 356,000 calls and 372,000 puts with a net delta of around -133,000.
Quite the change- a net delta change of almost -200,000.
If we assume that the majority of the puts were bought to open (dealer short) then the increase in puts (~20k) would account for (at most), 20,000 of that dealer short delta. This leaves 180,000 short delta remaining.
Even if we presume all of the new calls (~30,000) were dealer short (bought to open) that leaves still 160,000 short delta remaining. If you account for the puts that come ITM (100,000), presuming that they went of 0.2 delta to 1.0, that's 80,000 short delta leaving -still- 80,000 short delta.
So where did that extra short delta come from? Did existing dealer long calls go short? Or did dealer short puts go long? Hard to say. But what is interesting in these environments is they tend to start a bit of a feedback loop. As the price continues to call in a bullish-sentiment, more puts are purchased (hedging losses), more calls are purchased (anticipating reversion to upside), and the short delta compounds - aggrevating the gamma squeeze pushing the price lower. (Looking at you SPCE).
So with VoEx-trend dipping hard into the propagation zone, the reasonable anticipation for continued bullish sentiment that can compound the current gamma squeeze, I think it is reasonable to play some downside on MRNA.