GameStop store in the Herald Square area of New York.
Photographer: Gabriela Bhaskar / Bloomberg
Photographer: Gabriela Bhaskar / Bloomberg
Frantic options trading. A sea of actions short sold. Wars of reach of the chat room. Almost everything with the potential to launch an action in the stratosphere was at stake at GameStop Corp. Friday.
“GameStop is a real animal,” said Steve Sosnick, chief strategist at Interactive Brokers. “It’s a rare convergence of short squeeze combined with some key news and an army of quick money brokers.”
If anything explains the histrionic, it is as follows: GameStop shares equal to 141% of its available shares were lent and shorted, a bearish position showing mark-to-market losses of more than $ 1.74 billion, from according to data from the financial analysis company Parceiros S3. (A single stock can be sold multiple times.) Earnings generate earnings when sales are under that kind of pressure, forcing them to buy back the shares as they go up.
In the options market, where the dealer hedge also has the potential to fuel rallies, a record 913,000 GameStop calls traded from 3:43 pm on Friday, with a confrontation between short seller Citron Research and hordes of day traders of Reddit ended with the stock rising by as much as 79%. A GameStop withdrawal contract with a $ 60 strike price due on Friday was the most traded option on the exchanges, according to Bloomberg Contact info. It jumped 2,700% to about $ 1.97, from just $ 0.07 on Thursday.
GameStop’s physical presence, often based on malls, has made it a favorite with short sellers for years – it has rarely left the list of its top targets on the New York Stock Exchange. This, coupled with its relatively small fluctuation, made it tempting for crowdsourcing chat room employees who naturally seek out shares traded on a single dollar.
What GameStop used to do, but it doesn’t do anymore. At $ 57, the shares are now traded for 50 times the annual profit next year, according to analysts, which will be profitable – in fiscal year 2023. But the trades heated up on Friday, with more than 175 million shares changing hands during the session, 21 times daily. last year’s average.
The GameStop frenzy came after a tweet from Citron on Tuesday, in which the short seller wrote that “buyers at these levels are the suckers in this poker game” This generated a wave of adverse reactions on Reddit’s r / wallstreetbets forum , with 1.9 million members, prompting Citron managing partner Andrew Left to say on Friday that the company will stop commenting on the shares.
In the midst of the battle, GameStop rose up to 116% this week, with Friday’s high triggering a stock stop and marking its most volatile 10-day period ever recorded. The stock has soared more than 200% so far this month.
Traders are also looking for these gains in the options market, according to Chris Murphy of Susquehanna International Group.
“It’s an epic mix of retail traders looking for momentum in a highly sold stock,” said Murphy, the company’s co-director of derivatives strategy. “These investors may be looking at the $ 60 January calls for a maximum loss of about $ 2 as a better way to express their opinion than buying the stock for $ 58.”
– With the help of Bailey Lipschultz and Lu Wang
(Updates the fourth paragraph, updates with volume statistics, adds the fifth and sixth paragraphs)