GameStop Price Falls, ‘Time Decay’ Hammers Roaring Kitty Option Position

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – Time is running out for Keith Gill, the stock influencer known on YouTube as “Roaring Kitty,” to lock in gains on his options position in GameStop as the stock price of the company is faltering and the expiration date of the contracts is drawn. closer.

GameStop shares fell 12% Monday to $24.83. It was the second consecutive session of losses for the video game retailer, whose shares fell 40% on Friday after Gill’s first livestream in three years failed to boost their price following the announced a stock offering of more than $3 billion.

Recent declines have reduced the profitability of a large options position that Gill, who helped launch the meme stock phenomenon in 2021, revealed earlier this month.

On June 2, Gill posted a screenshot showing a position of 120,000 June 21 GameStop call options at a $20 strike price, purchased at $5.6754 per contract, or $68.1 million of dollars. The screenshot also showed that he owned 5 million shares of GameStop worth $115.7 million on June 2.

The price of the options contracts soared as high as $28.41 on Friday – bringing their value to $340.9 million – before Gill led a live broadcast during which he reiterated his reasons for ‘be bullish on GameStop.

On Monday, as contracts closed at $6.81 each, the total value of options disclosed stood at $81.9 million, down with the company’s underlying shares.

“He had a chance to do something,” said Brent Kochuba, founder of analytics service SpotGamma, referring to the rising value of Gill’s options position during Friday’s livestream. “But in the end, you know, he kind of ruined everything.”

Gill said he was a long-term investor in GameStop and had confidence in the company’s CEO, billionaire Ryan Cohen.

But the nature of short-term options contracts could force Gill to take short-term action, especially if the stock continues to fall.

Calls expire on June 21 and lose value at an accelerating rate as that date approaches in a process known as time decay. Additionally, contracts with strike prices close to the underlying stock price become even more sensitive to price fluctuations.

Gill can also exercise his options and take delivery of the shares, meaning he would have to pay $240 million for 12 million shares of GameStop stock.

“This guy is in a race against time,” said Henry Schwartz, global head of customer engagement at Cboe Global Markets.

So far, there is nothing in the listed options market to indicate that Gill was able to take a profit or set up an offsetting position, Schwartz said.

“I think everyone is watching these contracts like a hawk,” he said.

MARKET MAKERS

Another factor that could influence GameStop’s stock price in the near term is the reaction of market makers – typically large financial institutions that facilitate options trading but seek to remain neutral to the market – if shares continue down.

The market makers who sold Gill his call…

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