Swinging GameStop shares whiplash rate for Roaring Kitty options position By Reuters
Written by Saqib Iqbal Ahmed
NEW YORK (Reuters) – The clock is ticking for Keith Gill, the stock promoter known on YouTube as “Roaring Kitty,” to lock in gains on his options position in GameStop (NYSE: ) as the company’s stock prices fluctuate and expire. the day of contracts is approaching.
Gill helped launch the meme-stock phenomenon in 2021. The value of his top GameStop holdings dipped slightly into the red on Tuesday when the stock fell nearly 8%. Their value rose later as GameStop rose to end the session up 23% at $30.49.
The stock has lost nearly 36% since Friday’s high of $48, when Gill’s first live broadcast in three years failed to lift shares after the company announced a surprise stock offering. On Tuesday, GameStop said it had completed an “on-market” offering of its shares to raise approximately $2.14 billion.
The sharp price movement led to a large swing in the value of the major options disclosed by Gill earlier this month. A screenshot posted on June 2 showed Gill holding 120,000 GameStop call options on June 21 at a strike price of $20, which cost $5.6754 per contract or $68.1 million in total. The screenshot also showed that he owned 5 million GameStop shares worth $115.7 million on June 2.
The price of the options contracts rose to $28.41 on Friday — putting their value at $340.9 million — before Gill went on a live stream in which he reiterated his reason for working at GameStop.
On Tuesday, the options contracts traded as low as $5.05, putting the value of Gill’s position at about $60.6 million, down about $7.5 million from their purchase price, according to Trade Alert data. The contracts last traded at $11.25 each, valuing Gill’s position at about $135 million.
Gill said he is a long-term investor in GameStop and trusts the company’s CEO, billionaire Ryan Cohen.
But the nature of the short-term options contract may mean Gill will have to make moves in the short term to capture the gains.
The calls expire on June 21, and lose value at a rapid rate as that date approaches in a process known as time decay.
Gill can also exercise his options and put up stock, meaning he would have to put up $240 million for 12 million GameStop shares.
“Guys are in a race against time,” said Henry Schwartz, global head of client relations at Cboe Global Markets (NYSE: ).
So far, there is nothing in the listed options market to indicate that Gill has been able to take a profit or set a limit, Schwartz said.
“I think everyone is watching those contracts like a hawk,” he said.
MARKET BUILDERS
Another factor that could affect GameStop’s near-term value is how market makers — typically large financial institutions that facilitate options trading but want to remain neutral in the markets — will react if the stock continues to slide.
The market makers who sold Gill his phone contracts are likely to add risk to their books by buying GameStop shares.
If the stock price falls below the contract’s strike price, market makers will have less need to remain hedged and may be in a position to sell the stock, which may exacerbate weakness in the stock.
“Traders will be anticipating the stock possibly going up to $20 if it starts moving that way,” said Cboe’s Schwartz, noting that the market’s position before this will add more volatility to the stock.
