Sept 1 2020 - GameStop Short Squeeze: Part II
I look at current events.
I also look at optimal option pricing.
This is a historic squeeze.
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.
- GameStop Short Squeeze
- GameStop's Volkswagen Moment
- Anatomy of a Short Squeeze
- Priced for Bankruptcy
- Courage & Conviction
- Justin Dopierala
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.
|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|
Share PriceData by YCharts
(Source: Courage & Conviction)
Option Pricing (Current)
Option Pricing (Expected)
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.