Options Traders Play GameStop Stock After Earnings, Revenue Miss

Calls and puts are incredibly popular today

Deputy Editor
Sep 10, 2020 at 10:02 AM
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The shares of GameStop Corp. (NYSE:GME) are deep in the red this morning, last seen down 9% at $6.69, after reporting first-quarter losses of $1.40 on revenue of $942 million -- both of which were well below Wall Street's estimates. Digital sales, however, increased nine-fold from the previous year, while comparable-store sales fell 12.7%, due to the increase in store closures during the coronavirus pandemic.

On the charts, GME is gapping lower just a few sessions after breaking above the $8 level and scoring an annual high of $8.45 on Sept. 3. If you wanted an explainer for today's breather, look no further than the equity's 14-day Relative Strength Index (RSI) of 74 last night, which sat firmly in "overbought" territory. Despite today's negative price action, the equity is up an impressive 46% year-over-year.

In the options pits there is a strong preference for calls. GameStop stock's 50-day call/put volume ratio of 2.78 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 96th percentile of its annual readings. This suggests there is an extremely healthy appetite for long calls of late.

Options volume has exploded today. In just the first hour of trading, over 28,000 contracts have changed hands, volume at five times the average intraday amount and pacing for the 100th percentile of its annual range. Leading the charge this morning is the January 2021 20-strike call, while there is sell to open activity detected around the September 6 put.

 

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