Quiver Quantitative - In a resurgence of speculative fervor reminiscent of the 2021 meme stock rally, GameStop (NYSE:GME) is once again the focal point of traders' bets, as indicated by the surging volume of options trading. A specific call option for GameStop, set to expire on December 8th with a strike price of $20, witnessed a remarkable trading volume of 17,500 times by midday in New York. The nature of these trades, predominantly newly opened positions in small blocks, suggests that retail traders are driving this wave of optimism.
GameStop's position as a darling of the Wall Street Bets community, particularly during its staggering 2,700% surge in early 2021, is well documented. This new wave of interest, although seemingly smaller in scale, echoes the frenetic trading of that period. However, Daniel Kirsch, the head of options at Piper Sandler & Co., views the likelihood of a repeat performance skeptically. Despite the affordability of the Dec. 8 call options, priced between 6 to 21 cents each, Kirsch doubts a surge akin to the pandemic-driven boom.
The timing of these option trades is notable, as they precede GameStop's earnings report slated for December 6. The options market currently anticipates a 12% movement in GameStop's shares, a prediction that falls significantly short of the leap required for the Dec. 8 call options to be profitable. This gap between market expectations and the traders' bets on a 50% rally in GameStop's stock adds an element of high risk to these speculative positions.
The flurry of activity around GameStop's options trading highlights the ongoing allure of meme stocks among retail traders, even as market experts remain cautious about replicating past success. This episode serves as a reminder of the volatile nature of such investments and the unpredictable dynamics that can emerge in the trading of high-profile stocks like GameStop.
This article was originally published on Quiver Quantitative