GameStop (GME) Option Bears Show Their Face

GameStop Corp. puts were popular on Wednesday

by Karee Venema

Published on Dec 26, 2014 at 10:15 AM
Updated on Aug 5, 2020 at 10:17 AM

It's been a tough year for GameStop Corp. (NYSE:GME), with the shares off 31.4% to trade at $33.79. More recently, the equity has been pressured lower by its 20-day moving average -- currently located at $34.58 -- since an earnings-induced bearish gap in late November. Against this backdrop, options traders on Wednesday scooped up puts over calls at a 4-to-1 ratio, betting on the equity to continue to churn south of this trendline, and extend its negative price action into the new year.

Daily Chart of GME Since October 2014 With 20-Day Moving Average

Specifically, GME's February 35 put saw the most action in Wednesday's holiday-shortened session, and by all accounts, the majority of the 4,353 contracts traded were bought to open. Based on GME's present price, these puts are in the money. However, in order for the put buyers to profit at the close on Friday, Feb. 20 -- when back-month options expire -- GME must be sitting south of breakeven at $31.93 (strike less the volume-weighted average price of $3.07).

From a wider sentiment perspective, Wednesday's put-skewed session marked a change of pace in GameStop Corp.'s (NYSE:GME) options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 1.31 ranks in the 69th annual percentile. Simply stated, calls have been bought to open over puts at a faster-than-usual clip in recent weeks.

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