GME Calls Target Massive Gains Despite 35% Share Drop

Key Points:

• Options traders targeted a rise in GameStop despite share drop.
• “Smart money” had a significant role in Wednesday’s trading activity.
• Some investors faced losses due to GameStop’s volatility.

Despite a recent drop, GME calls targeted massive gains with $100 and $128, as per BBG. However, the high volatility led to significant losses for some.

Despite a significant drop in GameStop Corp.’s shares on Wednesday, some options traders were still targeting a substantial rise this week.

Meme stock options on fire: GME calls target massive gains

Among the most popular call options were contracts with $100 and $128 strikes. These contracts suggested a potential near tripling or even quadrupling of the underlying stock by Friday.

Previously, the $128 contract had no open position, and the volume of the lower strike surpassed the number of existing positions.

Throughout the week, traders leaned towards more moderate contracts, aiming for around 15% increases rather than 200% rallies. However, Wednesday saw shares slump by as much as 35%, trimming some of the week’s early gains.

The Wednesday activity in far out-of-the-money calls was driven by a combination of buying and selling, according to Susquehanna International Group. These trades were mostly in small lots.

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The High Cost of GameStop’s Volatility

The traded 11,000 contracts of $128 calls cost buyers about $375,000 in total premium, even with only a few days until expiration and a large jump needed to make them worthwhile.

According to Lookonchain, not all investors profited from GameStop’s volatile circumstances. Some individuals lost tens of thousands of dollars due to buying GameStop shares when prices were surging and panic selling after the price dropped.