This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
GameStop's implied volatility explosion based on a single tweet from a r/wallstreetbets veteran adheres to the purest form of a mania-like phenomenon that is unfolding before our eyes today.
For the benefit of those who might not be aware, Keith Gill, who goes by the moniker Roaring Kitty on Reddit's r/wallstreetbets thread, played a pivotal role in unleashing the meme stock mania of 2021 by predicting a massive short squeeze in GameStop's shares at the time. The OG meme stock veteran also pocketed a sizable windfall from that saga, to the tune of around $30 million.
Roaring Kitty's Intricate GameStop Moves
Gamestop saga is back.. data showed us back in 1st May a substantial increase in far OTM CALL options up to C20
Stock price moved more than 100% since.. pic.twitter.com/VwciF4IdXM
— Trading Mindset & Data (@MindsetData) May 13, 2024
From the 30th of April onwards, someone has been accumulating out-of-the-money calls on GameStop, targeting strikes all the way to the $20 price level.
This accumulation becomes very evident when one looks at GameStop's 25-delta put-call skew. As can be seen in the chart above, the implied volatility of 25-delta (out-of-the-money) calls has been surging of late, suggesting sustained buying pressure.
— Roaring Kitty (@TheRoaringKitty) May 13, 2024
Fast forward to Sunday, when Roaring Kitty returned to X after a hiatus of almost three years, posting a picture that indicated he was getting ready for action.
Bloomberg: GameStop Surges as ‘Roaring Kitty’ Return Adds Fuel to Rally
Here we go again, call gamma 🚀 pic.twitter.com/mXQf9vxZAk
— Menthor Q (@MenthorQpro) May 13, 2024
This has translated into a full-blown melt up in GameStop shares today, with call gamma exploding ahead of the regular trading session.
At the time of writing, GameStop shares are up around 80 percent, with at least two volatility-based trading halts already under the belt.
$BIG Big Lots short stats alongside $GME & $AMC $AMC still appears to be surging with $GME...Big Lots should be surging more than $AMC 💩 pre-market imo
Big Lots is:
- More shorted
- Significantly smaller float (~29m vs ~300m shares)
- More institutional and insider ownership pic.twitter.com/Nv9kInnGK2— BigLotsShortSqueeze🥒🏴☠️ (@GMEshortsqueeze) May 13, 2024
As of the 30th of April, GameStop had a short interest of around 27 percent of its float. We convey our sympathies to the stock's short-seller's today.
News Corp. is currently the smallest company in the S&P 500 index, bearing a market capitalization of just around $14.65 billion. On the other hand, GameStop is currently sitting at a market cap of $9.64 billion. This means that a mere ~52 percent pump from the current levels will allow the meme stock to start eclipsing the market-based capitalization of S&P 500 members.
Update 1
GameStop, $GME ’s, entire option chain was JUST in the money.
Literally every chain for the most recent expiry was ITM as the stock was up to $36. pic.twitter.com/H8m2K0HNbG
— unusual_whales (@unusual_whales) May 13, 2024
GameStop's entire option chain for the most recent expiry has entered in-the-money territory!
🚨BREAKING: People are reporting that Robinhood has shutdown the purchase of GameStop $GME shares (again)pic.twitter.com/2PJFDnhvp1 https://t.co/D0tLFb5sKW
— Financelot (@FinanceLancelot) May 13, 2024
And, just like that, Robinhood is apparently again placing restrictions on the trading of GameStop shares.
Update 2: GameStop Short-Sellers Are Now Sitting On Steep Paper Losses
GameStop shorts are down in estimated $1 billion in May paper losses with todays +50% pop in early trading. @S3Partners multi-factor squeeze risk score has been registering a max of 100 every day since May 3rd. @ihors3 @TheRoaringKitty $GME pic.twitter.com/Z0iBELlUPr
— Matthew Unterman (@MattUntermanS3) May 13, 2024
According to S3 Partners, GameStop short-sellers were sitting on paper losses for the month of May of around $1 billion in early morning trading when the stock was up around 50 percent. As of 14:56 ET, the stock is up around 75 percent, which means even steeper losses for the short-sellers.
