SoundHound AI sees second straight day of options-fueled gains

Voice AI company — and retail trader plaything — SoundHound AI is up more than 40% over the last two days.

It’s the best two-day run for the heavily shorted shares since December, when a similar violent upsurge took control of the stock amid online chatter that a short squeeze was on. (There may have been some truth to it, as short interest in the shares fell from about 17% of the public float in late October to about 11% at year-end.)

But the short sellers just can’t quit SoundHound, with their share of the public float seeming to rise relentlessly over the last year to a recent high of just under of 35%. That trade that looks painful in the aftermath of SoundHound’s rally, which got rolling after the company published not-terrible results Thursday.

We don’t know if any of those shorts are throwing in the towel today. But we do know that there’s been a buying binge afoot in the options market, where purchases of calls exploded Friday and remain high today. (By just after 12 p.m. ET, more than 205,000 calls had been purchased. The daily average for last month was about 80,000. On Friday, a record of more than 575,000 calls were purchased.)

This is a familiar modus operandi for the cohort of retail traders who congregate around online message boards. They like to use the implied leverage of the options market, and the fact that it can trigger delta hedging from options market-making trading desks, to amplify the upward pressure on a stock. And if short sellers happen to get squeezed in the process — forcing them to repurchase the shares to exit their trades, adding to angle of ascent — all the better, from their perspective.