Brilliant Earth Surges 16.7% on Short Squeeze Momentum: Is This the Start of a Breakout?

Summary
• BRLT rockets 16.67% to $2.555, hitting 52-week high of $2.80
• Short interest drops 2.3% to 0.40% of float, signaling bullish sentiment
• Options volume surges 80,000+ contracts, with 2.5-strike calls dominating
• Intraday volatility sees price swing from $2.10 to $2.80 in 6.5 hours
Brilliant Earth’s stock has ignited a frenzy in the options market and retail trading community, surging over 16% in a single session. The move coincides with a sharp decline in short interest and explosive call option activity, suggesting a potential short squeeze is underway. With the stock nearing its 52-week high and technical indicators flashing bullish signals, traders are scrambling to position for a breakout.

Short Interest Decline Fuels Bullish Sentiment
The 16.67% intraday surge in BRLT is directly tied to a 2.3% monthly decline in short interest, which now stands at 51,000 shares (0.40% of float). This reduction in bearish bets has triggered a classic short squeeze scenario, where short sellers are forced to cover positions as the stock ascends. The low short interest ratio of 0.1 days to cover amplifies this dynamic, as minimal trading volume is required to exhaust short positions. Additionally, the stock’s 52-week high of $2.80 aligns with its intraday peak, suggesting short sellers are scrambling to limit losses as the price approaches critical resistance.

Options Playbook: Leveraging Gamma and Volatility for High-Conviction Bets
• MACD: 0.187 (above signal line 0.163) = bullish momentum
• RSI: 69.68 (approaching overbought territory)
• Bollinger Bands: Price at upper band ($2.527) = potential breakout
• 200-day MA: $1.635 (price at $2.555 = 56% above) = strong trend
• Key Levels: Support at $1.867 (middle band), resistance at $2.80 (52W high)

Top Options Contracts:
• BRLT20250919C2.5
- Type: Call
- Strike: $2.50
- Expiry: 2025-09-19
- IV: 224.70% (extreme volatility)
- Delta: 0.621 (moderate sensitivity)
- Theta: -0.0061 (moderate time decay)
- Gamma: 0.251 (high sensitivity to price moves)
- Turnover: 83,665 (liquid)
- Leverage: 4.25%
- Payoff: 5% upside to $2.68 = $0.18/share gain
- Why: High gamma and IV create explosive potential if the stock breaks $2.50. Liquid volume ensures easy entry/exit.

• BRLT20251017C2.5
- Type: Call
- Strike: $2.50
- Expiry: 2025-10-17
- IV: 213.12% (high volatility)
- Delta: 0.652 (moderate sensitivity)
- Theta: -0.0043 (lower time decay)
- Gamma: 0.174 (moderate sensitivity)
- Turnover: 148,530 (extremely liquid)
- Leverage: 3.19%
- Payoff: 5% upside to $2.68 = $0.18/share gain
- Why: Longer expiry reduces theta drag while maintaining gamma exposure. Massive turnover ensures no slippage.

Action: Aggressive bulls should prioritize the BRLT20250919C2.5 for a short-term gamma play, while the BRLT20251017C2.5 offers a safer, longer-dated alternative. Both contracts benefit from the short squeeze narrative and elevated IV, which could persist if the stock breaks above $2.80.

Backtest Brilliant Earth Stock Performance
The backtest of BRLT's performance after an intraday surge of 17% reveals mixed results. While the stock experienced a positive return in the short term, the overall trend was negative over longer time frames. The 3-day win rate was 46.76%, indicating that nearly half of the time the stock continued to rise in the three days following the surge. However, the 10-day win rate was slightly lower at 45.14%, and the 30-day win rate was 44.44%, suggesting that the positive momentum diminished over longer periods. The maximum return during the backtest was 0.06%, which occurred on day 1 after the surge, and the stock experienced a maximum return day of 1.

Breakout or Bubble? The Clock is Ticking on BRLT’s Short Squeeze
The 16.67% surge in BRLT is a textbook short squeeze driven by dwindling bearish bets and explosive call option activity. With the stock perched at its 52-week high and technical indicators flashing bullish signals, the next 48 hours will be critical. A close above $2.80 could trigger a cascade of forced short covering, while a pullback below $1.867 (middle Bollinger Band) would invalidate the bullish case. Meanwhile, the sector leader Amazon (AMZN) remains relatively flat at +0.0175%, suggesting the move is stock-specific. Traders should monitor the BRLT20250919C2.5 for immediate momentum and the BRLT20251017C2.5 for a longer-term play. Watch for $2.80 breakout or short-covering exhaustion by 9/19.