Call Traders Go Wild as GameStop Corp. (GME) Nears Lows

GameStop Corp. (GME) is failing to capitalize on rumors of a potential investor stake

Oct 17, 2016 at 1:51 PM
facebook X logo linkedin

According to Trade-Alert, options traders are flocking to GameStop Corp. (NYSE:GME) due to rumors of a possible investor stake. Yet, the stock is failing to capitalize on the buzz, last seen 2% lower at $24.86 -- and a stone's throw from its three year-low of $24.33.

As alluded to, options activity is running hot, particularly on the call side of the aisle. Digging in, 11,000 GME calls have been exchanged, or seven times the expected intraday rate. The most active strike by a mile is the out-of-the-money October 26 call, where fresh positions are being opened. However, it's unclear whether the bulk of the contracts are being purchased or sold. For potential buyers, the goal is for GME to rally past $26 by this Friday's close, when the series expires, whereas potential sellers expect the strike to act as a short-term ceiling.

It's currently an attractive time to purchase premium on short-term GME options, too -- whether puts or calls. After all, the stock's Schaeffer's Volatility Index (SVI) of 36% ranks in the low 14th annual percentile, hinting at relatively muted volatility expectations at the moment. Meanwhile, the GameStop's Schaeffer's Volatility Scorecard (SVS) of 83 suggests the options market has tended to underprice the shares' ability to make outsized moves in the past year.

Elsewhere on the Street, sentiment is pretty mixed. On the bearish side are short sellers, whose pessimistic bets account for over 29% of GME's float. At the stock's average trading rate, it would take more than three weeks for these positions to be covered. On the bullish side, 90% of analysts rate the shares a "buy" or better, with not a single "sell" opinion to be found.

As alluded to, though, GameStop Corp.'s (NYSE:GME) technical performance leaves much to be desired. On a year-over-year basis, the retail stock has surrendered a brow-raising 45% of its value. From a contrarian perspective, this leaves the shares vulnerable to a round of downgrades, which could lead to even more selling pressure down the road.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI