GameStop (NYSE:GME) saw a surge in trading in short-dated option contracts that suggested that Keith Gill, also known as “Roaring Kitty” may have sold some of his options position in the company, according to a Reuters report.
A call option involves a contract where the seller grants the buyer the right to purchase the underlying asset at a pre-specified price (strike price) by a specific date (expiration date). A short-dated call option strategy allows a trader to focus on a specific risk within a set time frame.
Roaring Kitty’s GME Call Options
Gill, a key figure in the 2021 meme-stock surge, posted a Reddit screenshot on June 2 showing his large GameStop holdings. This screenshot showed that Gill had 120,000 call options with an expiration date of June 21 at a $20 strike price, bought for $68.1 million, and owned 5 million shares valued at $115.7 million.
The report stated that on Wednesday, around 93,000 of the June call options were traded in large chunks of 5,000 contracts or more. Reuters couldn’t verify whether the call options were sold or if Gill was involved in the trades.
Indeed, the TipRanks Options tool shows that around 93,000 of the June call options with a strike price of $20 were traded. Assuming Gill sold his 120,000 call options at a closing price of $6.40 per contract, his sale would be valued at $76.8 million. This is $8.7 million higher than when he bought the call options.
According to the report, the contracts were traded at an average price of $7.65, citing Trade Alert data. Additionally, with many trades below the bid price, it suggested a seller was offloading the contracts.
A bid price indicates the highest price a buyer will pay for a security.
Additionally, Trade Alert data indicated that GME’s options volume jumped to 1.2 million contracts on Wednesday, which is 66% higher than the average daily volume for the stock’s options over the last month.
Is GME a Good Stock to Buy Right Now?
Analysts don’t seem to consider GME stock a Buy and only one analyst has covered it over the past three months, rating it as a Sell. Year-to-date, GME has soared by more than 40%, and the average GME price target of $11 implies a downside potential of 56.8% from current levels.
