$GameStop (GME.US)$ from 20 to 35, the open interest for cal...

BabaNana5 : aren't they worthless if orice falls below $20?

ISmellMoney OP BabaNana5 : Yes, of course, they are worthless. But this is trading, and there are higher odds of winning. Its all about the odds

102776209 BabaNana5 : Unless the call expired or the price too low, it won't be worthless

Jay Lak : Can anyone explain to me how options work? Why stock price will increase when options are exercised? I thought people just buy more share at $20 (for example) after exercised? If share buy at same price, how price increases?

Ken Griffin Charity Jay Lak : You’re right. It doesn’t just work like that. This theory only makes sense if the assumption is that most or none of the calls have already been covered. And seeing as the stock messiah RK was already holding on to those $20 calls when the price soared to $60, it’s safe to assume that whoever sold RK those calls have already hedged their positions.

Those spikes in the past month were likely caused by both by the retail buying frenzy, and what is known as a gamma squeeze, in which the writers of call options are forced to buy shares to hedge the calls that they sold because of increasing delta (how much the price of an option moves relative to the underlying stock).

If this is all too complicated, it’s all for the better because options aren’t meant for new investors.

ISmellMoney OP Jay Lak : It increases because the option sellers are “naked.” This means selling the option without having the share in hand. If someone exercises the call option, the sellers must deliver the stocks. If they do not have enough stock, they will have to cover it from the open market . Hence the “squeeze”

Jay Lak ISmellMoney OP : Thanks for explaining dude

Jay Lak Ken Griffin Charity : Thanks for explaining dude