Sept 1 2020 - GameStop Short Squeeze: Part II

Summary

I look at current events.

I also look at optimal option pricing.

This is a historic squeeze.

Intro

This is a brief follow-up to my original article: GameStop Short Squeeze.

I felt GameStop's sudden price movement (and Ryan Cohen's involvement) warranted an update. The probability of a short squeeze has increased dramatically. Here are some useful sources for what's going on.

Thesis

GameStop's (GME) share price is extremely undervalued and heavily shorted at ~99% of the float. GameStop is likely to rally as the console cycle kicks off. The non-zero probability of a dramatic short squeeze has created a situation in which OTM calls are fundamentally undervalued.

Ryan Cohen / RC Ventures Update

Ryan Cohen (in conjunction with RC Ventures) has acquired 6,215,326 shares as of Aug. 31, or roughly ~9% of the company.

Cohen's involvement is a big deal. Ryan was the founder of Chewy (NYSE:CHWY) and beat Amazon (NASDAQ:AMZN) in the e-commerce vertical. I'm not sure what Cohen's intentions are yet - but the fact that he bought such as large percentage of GameStop indicate he may try to take an active role. Additionally, Cohen's prior experience in e-commerce are crucial to GameStop proving future viability.

Short Interest

Company Name Ticker Short Int. (% Outs.) Short Int. (# Shares in millions) Sector
GameStop Corp. GME 85.99 55.69 Consumer Discretionary
Bed Bath & Beyond BBBY 58.45 72.54 Consumer Discretionary
Ligand Pharm LGND 55.53 8.93 Health Care
Mallinckrodt Plc MNK 53.77 45.48 Health Care
Macerich Company MAC 50.52 75.51 Real Estate
Tanger Factory Outlet Centers SKT 49.17 45.96 Real Estate
Macy's Inc M 41.64 129.18 Consumer Discretionary

(Source: Koyfin)

Share Price

ChartData by YCharts

Ownership

38709296-15989291392065427.png

(Source: Courage & Conviction)

Catalysts

38709296-15989297709558349.png

(Source: Myself)

Option Pricing (Current)

38709296-15989297713297892.png

(Source: Myself)

38709296-15989298646960876.png

(Source: Myself)

38709296-159892996070078.png

(Source: Myself)

Option Pricing (Expected)

38709296-15989300556190674.png

(Source: Myself)

38709296-1598930095268529.png

(Source: Myself)

38709296-1598930123116545.png

(Source: Myself)

Conclusion

We're in the first innings of a major short-squeeze situation. Option prices are still undervalued, and I'm hoping for a >50x return.

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Apr 30 2021 - Institutions Are Buying GameStop (452 pm)

Sept 11 2020 - GameStop: Chewy's Founder Ryan Cohen Finds 'What's Next'

Jun 28 2020 - GameStop: Zero Near-Term Bankruptcy Risk

Oct 13 2020 - GameStop: A Standoff Between Bulls And Bears

Aug 27 2020 - Gamestop Short Squeeze

Aug 31 2020 - GameStop's: Volkswagen Moment?

Aug 31 2020 - GameStop's: Volkswagen Moment?

Sept 4 2020 - GameStop Short Squeeze Part III: Atop The Caldera

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