The sell-off in GameStop shares on Wednesday was notable for its intensity, particularly in the afternoon trading session. This sell-off coincided with a surge in trading volume in call options that are owned by the meme stock leader known as “Roaring Kitty“, whose legal name is Keith Gill. The revelation of Gill’s portfolio on Monday night indicated that he still held 120,000 call options contracts with a strike price of $20 and an expiration date of June 21.
On Wednesday, there was a significant increase in trading volume for GameStop calls with the exact strike price and expiration as those held by Roaring Kitty. A total of 93,266 contracts were traded, which was more than nine times the 30-day average volume of 10,233 contracts. The price of these contracts experienced a steep decline of over 40% during the trading session, while the stock itself plummeted by 16.5%.
While it remains uncertain whether Roaring Kitty was directly responsible for the high trading volume, options traders have theorized that he may be involved due to his substantial holdings of these contracts. There is speculation that Gill may need to sell his calls before the expiration date or roll the position into another call option to avoid having to come up with a significant amount of cash to exercise them on June 21. Wall Street analysts are closely monitoring any signs that Gill is offloading his position, as this could potentially impact the stock price.
In order for Gill to exercise his calls, he would be required to have $240 million to acquire custody of the stock, which amounts to 12 million shares purchased at $20 each. This is a considerable sum that surpasses what he has publicly disclosed in his E-Trade account. The decision to exercise these calls or not could have far-reaching consequences not only for Gill personally but also for the broader market dynamics surrounding GameStop.
The recent events surrounding the GameStop stock plunge and the surge in trading volume of call options held by Roaring Kitty highlight the speculative and risky nature of investing in meme stocks. The actions of individual investors such as Gill can have a significant impact on stock prices and market sentiment, underscoring the need for cautious and strategic decision-making in the volatile world of stock trading.
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