The volatility hit GameStop shares once again.
The stock closed about 18.5% higher on Thursday, after a turbulent session in which negotiations were interrupted several times due to the sudden movements. GameStop rose more than 100% on Wednesday after the company announced that its chief financial officer would step down.
Jim Cramer, host of CNBC’s “Mad Money” program, said there may be only one way to justify GameStop’s share price:
“One of the things … that we saw Square do – it initially looked ridiculous, but it was okay; PayPal, the same thing – you became a crypto dealer. Now, last night on Nvidia’s incredibly good call, like a side note, they talked about March. [They’re] will have some real cards just for encryption. It won’t really be important for Nvidia, but it could be important for a place like GameStop. If GameStop were to become an introduction to the encryption of 5,000 stores, make them sell $ 1 billion in stock … and buy the encryption with it, and then make it an international gaming place where you earn bitcoin, I think you can justify the stock price. I couldn’t think of anything else, but it works. And it doesn’t have to be bitcoin. We can make it cryptographic. But turn it into a crypto palace and you’ll have games all over the world, without latency, you play and suddenly [GameStop investor and Chewy co-founder] Ryan Cohen – then you can start to believe him. Well, CFOs, they tend not to have bitcoin on their balance sheets. Possibly [resigning GameStop CFO] Jim Bell, this is what he didn’t want. Ryan Cohen is a great thinker. I have a feeling that this is the way to increase the stock. I can’t think of any other way. “
Alma Angotti, a former lawyer for the Securities and Exchange Commission, anticipated more interest from regulators:
“It is important to remember that the securities regime is a disclosure regime and people can place speculative bets on shares and they can lose a lot of money. And maybe in the minds of some people, that ice cream tweet was related to the CFO’s resignation tweet and they think the company will be fixed and brought to the digital world quite successfully. It is hard to say. But … I think both Congress and the SEC will be studying this balance between orderly markets and allowing people to invest whatever they want for whatever reason they want to invest, even if it doesn’t make sense to us. “
Jon Najarian, the co-founder of MarketRebellion.com and a CNBC contributor, tracked peak option activities under three names powered by Reddit:
“This is volatility with steroids. And at the end of last week, it’s the normal February due date. Three stocks really stood out for us, both because of the increase in Reddit posts, and [a] increased purchase of options, and these were GameStop, AMC and Blackberry. So, when we saw that, it was built at the end of last week … and then it disappeared, and probably because GameStop was bouncing a little bit on Monday and on Tuesday it dropped to about 55,000 contracts on the call side. This is very low. [On Wednesday], it answers 270,000 calls. In other words, a five-fold jump in volume [Wednesday]. Similar leaps at AMC, which exceeded one million call contracts, from a low of around 155,000 last Friday, and then at Blackberry as well. And all three saw extraordinary movements. In the case of GameStop in particular, … it was just incredible. [On Thursday], they were buying $ 200 call options and were trading up to $ 46 for a $ 200 option up to about $ 12 before we went live. So, there is a lot of rumors and a lot, I am not trying to denigrate them, but a lot of amateur negotiations chasing those so high with only one day of trading ahead, because obviously these options expire tomorrow, February expires tomorrow with a warning $ 200. Just crazy. But this is what happens. You get a big herd movement there – if they get it right, … they can make a lot of money, and if they don’t move fast, they will have less and less time to get out. “
Michael Darda, chief economist and market strategist at MKM Partners, cautioned:
“I think we’re all a little bit confused. Talking to relatives and friends, I’m getting a lot of questions about the actions that are the focus of these Reddit forums and also of cryptocurrencies. So, all I’m saying to retail investors who are friends and family members just be careful. Speculate if you want to speculate, but it should be a tiny portion of your portfolio and don’t expect any of this to be a one-sided bet. So care is certainly necessary here. “
Disclaimer