By Thornton McEnery
After gorging on shares of Wendy’s /zigman2/quotes/204070192/composite WEN -0.40% cheeseburgers and Frosties last Monday , meme stock pickers on Monday appeared to want to check their insulin, according to data from a popular social-sentiment tracker.
Shares of Senesonics /zigman2/quotes/209443072/composite SENS -4.00% , the maker of insulin monitors, were buzzing on Monday after its profile rose considerably on social media over the weekend with individual investors taking interest in the stock as a potential serious squeeze target. According to data from HypeEquity, mentions of Sensonic were up 600% on volume.
On both social-media platforms Reddit and Twitter, mentions of Senseonics cast a bullish air around the stock, with some users postulating that a retail push to $6 a share could create a “gamma squeeze,” in which the sellers of call options, to hedge their positions, buy the underlying stock. As the price of the stock rises, they need to buy more to maintain their hedges, creating a vicious feedback loop that can drive prices stratopshperically higher, creating a potentially painful dynamic for those short sellers betting against the stock.
Call options give buyers the right to purchase a specific stock within a certain time period. A buyer of the call option makes money when the stock rises in price.
Gamma squeezes are becoming increasingly popular on social media, with individual investors.
Senseonics, which specializes in the design and manufacture of insulin monitors, was part of the January surge in meme stocks and was up more than 460% by mid-February, trading at more than $5.25 after falling below a dollar between March, 2020 and Jan 13. By May, it was trading as low as $1.71 a share.
Short interest picked up on the stock, spiking at the start of June, according to data from Fintel, and individual investors noticed. The ratio of volume of shares that were being bet short in Senseonics jumped more than 30 points between June 3 and 4, and the stock price popped almost 42% that same day.
Since then, it has remained on the radar of retail traders and short sellers. But while some individual investors appeared to be gaining advantage at the end of last week, pushing the price over $4 for the first time since February, it now looks like the squeeze opportunity might be fading.
As social-media mentions swelled and the stock blasted off almost 12% at Monday’s open, Fintel’s short squeeze score on Senseonics –which measures the relative risk of an equity’s short squeeze potential on a scale of 0 to 99—was over 93 before the bell.
But news travels fast on social media. Senseonics short squeeze score dropped below 75 as the markets opened for the week. only to climb back up after the stock’s early pop.
At last check, its shares were up 4.9% near midday Monday.
Last week and through the weekend, chatter was high on a potential gamma squeeze on Clean Energy Fuels Corp /zigman2/quotes/207288774/composite CLNE -1.85% . Shares of that company were up nearly 12%.
Note: Senseonics makes insulin monitors, not insulin pumps. This fact was misstated in an earlier version of this story.