It's time for 'Roaring Kitty' to lock in profits as GameStop price drops


NEW YORK (Reuters) – For stock influencer Keith Gill, known on YouTube as “Roaring Kitty,” the time to profit on his options position in GameStop is getting closer, as the company’s stock price fluctuates and the contracts’ expiration dates draw closer.

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

The recent decline has cut into the profitability of a large options position disclosed earlier this month by Gill, who helped launch the meme stock phenomenon in 2021.

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

The price of the options contracts rose to $28.41 on Friday — increasing their value to $340.9 million — before Gill held a livestream during which he reiterated his argument for being bullish on GameStop.

The total value of the disclosed options rose to $81.9 million, with the contracts closing at $6.81 per share on Monday, with the company's underlying shares declining.

“He had a chance to do something,” Brent Kochuba, founder of analytics service SpotGamma, said during Friday’s livestream, referring to the surge in the value of Gill’s options positions. “But at the end of the day, you know, he wasted it.”

Ukraine - 2021/02/19: Keith Gill, known on Reddit by the pseudonym DeepFuckingValue and as Roaring Kitty, can be seen on an excerpt from a YouTube video shown on a smartphone screen in front of the GameStop logo. (Photo illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)Ukraine - 2021/02/19: Keith Gill, known on Reddit by the pseudonym DeepFuckingValue and as Roaring Kitty, can be seen on an excerpt from a YouTube video shown on a smartphone screen in front of the GameStop logo. (Photo illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)

Keith Gill, known on Reddit by the pseudonym DeepFuckingValue and as Roaring Kitty. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images) (SOPA Images via Getty Images)

Gill has said he is a long-term investor in GameStop and has full confidence in the company's CEO, billionaire Ryan Cohen.

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

The calls expire on June 21, and their value decreases rapidly as they get closer to that date in a process known as time decay. Additionally, contracts with strike prices that are closer to the underlying stock's trading price become even more sensitive to price fluctuations.

“That person is in a race against time decay…I think everybody is looking at those contracts.”Henry Schwartz, Head of Client Engagement at Cebo Global Markets.

Gill can also take delivery of the stock by exercising his options, meaning he would have to put up $240 million for 12 million GameStop shares.

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

Schwartz said there is nothing in the listed options market so far to suggest Gill has been able to take profits or establish an offsetting position.

“I think everybody is looking at those contracts,” he said.

Market Maker

Another factor that could influence GameStop's near-term share price is how market makers — typically large financial institutions that facilitate options trading but seek to remain market-neutral — will react if shares continue to fall.

The market makers who sold call contracts to Gill would have hedged their risk by buying shares of GameStop.

If the stock price drops below the contract's strike price, market makers will have less need for hedging and may be in a position to sell shares, further exacerbating the stock's weakness.

“If the stock price gets closer to $20, traders will likely be betting on this,” CBO's Schwartz said, adding that such a move would likely lead to more volatility in the stock because of the market conditions before it.

(Reporting by Saqib Iqbal Ahmed in New York; Editing by Ira Iosebashvili and Matthew Lewis)

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