Bears Cheer as Holiday Sales Drill GameStop Corp. (GME)

GameStop Corp. (GME) is on pace for its worst one-day performance since November

by Alex Eppstein

Published on Jan 12, 2016 at 11:44 AM
Updated on Jun 24, 2020 at 10:16 AM

GameStop Corp. (NYSE:GME) reported weak holiday sales this morning, prompting the retailer to cut the top end of its fourth-quarter per-share earnings estimate. As such, the stock is imploding, down 6.3% at $27.54 and fresh off a two-year low of $26.31. While this is bad news for shareholders, it's likely being received differently by option traders and short sellers.

During the past 10 weeks across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GME has racked up a put/call volume ratio of 0.96. While this ratio indicates long calls edge out puts on an absolute basis, it nonetheless outranks four-fifths of comparable readings from the prior year. In other words, traders have been buying to open puts over calls at a faster-than-usual pace in recent months.

It's a similarly bearish landscape among short sellers. In fact, nearly half of GME's float is sold short, representing nearly three weeks' worth of trading activity, at typical volumes.

As alluded to, it's a brutal day for GameStop Corp. (NYSE:GME) shares. To put things further into perspective, the stock is on track for its worst single-session percentage loss since gapping lower in early November, following a bearish brokerage note.

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