The cabal at WallStreetBets has selected a new target for a short squeeze — long-range lidar manufacturer MicroVision Inc. (NASDAQ: MVIS).
The month of April began disappointingly for the company. From April 1 to April 20, MVIS experienced a period of sustained selling and declined nearly 40% in under three weeks, from $17.07 to a monthly low of $10.08.
But on Wednesday, April 21, the astute minds at Reddit got another idea and began rabidly purchasing shares and call options, boosting the stock 21%, from $10.42 to $12.49.
The next day, MVIS rallied as high as $14.93 before a period of afternoon profit-taking saw the price decline and close back down at $13.14.
Today, the mob came roaring back in perfect harmony, as insatiable buying drove the stock up another 40 percent, reaching intraday highs of $18.
Meanwhile, the MVIS option chain for May — the end game target of much of Reddit’s “gamma squeeze” crowd — saw call prices increase up to 200% intraday.
As speculators continue to pile bets into MicroVision, let’s examine what exactly they do and why the internet is so excited about it.
A Look at Lidar
The key to understanding MicroVision’s business lies in having a basic grasp of lidar technology. Known so far primarily for its topographic applications within electric vehicles, lidar is used by many automakers to provide their vehicles with a sense of sight.
The technology acts as “the eyes” for many electric vehicles, and this may be the most crucial component of the entire blueprint, as you can imagine how hard it would be to drive with a blindfold on.
Lidar systems consist of a laser, a scanner, and a GPS receiver. The laser’s beam is projected across the vehicle’s surroundings, while the scanner can interpret surroundings, interacting with the GPS receiver to map any nearby obstructions or necessary changes in direction.
However, this application is somewhat controversial, as Elon Musk has claimed “Anyone relying on lidar is doomed. Doomed! [They are] expensive sensors that are unnecessary. It’s like having a whole bunch of expensive appendices. Like, one appendix is bad, well now you have a whole bunch of them, it’s ridiculous, you’ll see.”
The way lidar is eventually used at scale may be largely outside of the electric vehicle space.
According to the company’s website, MicroVision is currently developing three major separate applications for the technology: interactive projection engines (think holographic YouTube and the ability to project on Google Glass), a three-dimensional “consumer LiDAR sensor” for smart home applications, and finally the aforementioned automotive lidar sensor.
MicroVision seems to be more focused on in-home consumer products than widespread electric vehicle applications.
All About the Squeeze
But ultimately, just like GameStop, Koss, and AMC, the maniacs at Reddit don’t care as much about what this company does as they do about the gains they can accrue from the stock.
The potential for a “gamma” or “convexity” squeeze, where so many calls are purchased that market makers are forced to buy shares of the underlying stock to cover their positions, can be seen in the MVIS option chain for May.
Today, between the $15 and $35 strike prices, a staggering 106,000 call options were traded by 2 p.m. EST.
If this sort of volume continues into next week, the possibility of an even more explosive move remains, but traders should be extremely cautious when considering dabbling in the anti-fundamental, exceptionally frothy MVIS mania.
Featured image credit: Marcus Krauss / Shutterstock.com