r/MarketMechanics

ONDS is a drone and defense company most people have never heard of, and 44% of its float is sold short. 235 million shares, per the latest FINRA data. Other drone names run 5 to 21%.

Here's what the shorts are betting against: revenue up 13x last quarter to a record $83.8 million, and full-year guidance just raised. The stock ran past $10 on earnings, then faded back to $9. The market clearly hasn't picked a winner yet.

So that's the setup. A business growing that fast with that many shares bet against it means somebody is about to be very wrong. And if it's the shorts, 235 million shares all need to find the exit at once.

Bonus from the options chain since someone will ask: there are 2.4 open calls for every put on this thing. 1.25 million call contracts on a $9 stock, and over 90,000 of them sit at the $10 strike, one dollar overhead. The dealers who sold those calls have to buy stock as the price climbs toward $10. So a move through $10 has two forced buyers behind it at once: shorts covering and dealers hedging. That's how squeezes compound. (CBOE data, OI as of yesterday's close.)

Also the weirdest line in the whole chain: somebody owns 118,000 January 2028 $5 puts. It's the single biggest position in the name, and it is not retail-shaped. Make of that what you will.

Reddit officially joins the S&P 500 before tomorrow's open, but the buying happens today. Index funds track the switch by buying at the last close before it, so roughly $2.9 billion of forced RDDT buying (about 3x its normal daily volume) lands in the 4pm closing auction this afternoon. Zero discretion involved.

It seems the "inclusion pop" trade is mostly gone sadly because the stock is getting clapped today.

However, here's the part that doesn't die: once you're in the index, every 401k contribution in America buys you on autopilot forever. Passive funds pulled in $951 billion last year and they never sell unless the index kicks you out. A chunk of the float basically leaves circulation for good. The chart is also still holding the trendline it's respected since IPO.

The event is priced in. The standing bid mostly isn't. Pretty decent place to be optimistic about the future!