Puts Hot as GameStop Sinks Into Single Digits

GME put volume has already surpassed the daily average

by Karee Venema

Published on Apr 3, 2019 at 10:01 AM

It's another volatile earnings reaction for GameStop Corp. (NYSE:GME), with the shares down 7.8% at $9.31. The stock is reacting to the video game retailer's fourth-quarter revenue miss, while the company also warned of a current-quarter loss on weakening sales and said it would not provide a full-year forecast. This is offsetting a better-than-expected adjusted profit of $1.60 in the fourth quarter.

Bearish analyst notes have already started flooding in, with Credit Suisse and Wedbush lowering their GME price targets to $10 and $12, respectively. The majority of analysts were already skeptical of GameStop ahead of last night's earnings event, with six of seven in coverage maintaining a "hold" or worse recommendation. Plus, the average 12-month price target of $11 was just an 8.9% premium to last night's close at $10.10.

Put volume is running hot out of the gate, too, with 12,000 contracts traded already -- already more than the average 10,000 contracts that typically trade in a single session. Most active are the weekly 4/5 9- and 10-strike puts, where almost 7,100 contracts have been exchanged, though it's not clear if these now in-the-money strikes are being opened or closed.

Today's downside move is part of a larger trend for embattled GME stock, which hit a then 14-year low in yesterday's trading. Earlier, the shares tagged $8.82 -- their lowest mark since November 2004 -- and have now shed almost 43% since their mid-January peak at $16.90.

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