Saqib Iqbal Ahmed
NEW YORK (Reuters) – “Roaring Kitty” Keith Gill, the architect of 2021’s meme-stock boom, may have tens of millions of dollars in book profits from trading GameStop Corp. options, but getting those profits may not be easy.
GameStop soared 21% on Monday after Gill’s Reddit account posted screenshots of a $116 million bet on the embattled video game retailer. The account’s first post in three years also showed a position of 120,000 GameStop June 21 call options with a strike price of $20, worth $65.7 million as of Friday’s closing price. Call options give the right to buy shares at a fixed price in the future.
Reuters was unable to independently verify whether the Reddit post was made by Keith Gill or the authenticity of the positions published.
But GameStop’s open contracts surged to 145,000 by the end of May, from about 15,000 on May 19, according to Trade Alert data. Assuming the average trading price over that period was $5.52, someone who bought 120,000 options contracts would have made about $54 million on Monday, since the contracts closed at $10 apiece.
Getting out of an options trade means either selling the options themselves or taking delivery of the underlying stock — either choice could be problematic given the size of the positions and the attention on GameStop, options experts said.
Market participants said it would be difficult to sell even part of an options position without attracting attention, which could send not only option prices but also the underlying stock prices falling.
“It’s a lot easier to sell 10 million to 12 million shares than it is to sell 120,000 call options,” said Steve Sosnick, chief strategist at Interactive Brokers and a former options market maker.
It could also tarnish Mr. Gill’s reputation for having “diamond hands,” a meme stock term for someone with a high risk tolerance and a reluctance to cave in to pressure to sell their holdings.
“Unless he’s very keen to take delivery (of the shares) as a long-term investor, it’s going to be hard for him to monetise this without moving the market because everyone is so aware of this right now,” said Garrett DeSimone, head of quantitative research at OptionsMetrics.
The other option – taking delivery of 12 million shares as outlined in a publicly disclosed option agreement – could require raising hundreds of millions of dollars, analysts said.
One way Gill could get around this and make a profit would be to short 12 million GameStop shares before the options expire, options traders said. Short investors borrow shares and sell them in the hope of being able to buy them back cheaper in the future.
If GameStop’s share price is above the option’s $20 strike price at expiration, Gill could theoretically exercise his options, buy shares for $20 a share and use those shares to close his short position.
Using Monday’s closing prices, Gill would sell his shares for $28 and then exercise his option to buy them back for $20, making a profit of about $8 per share, or $96 million.
“That means he still has diamond hands and is still likely to make money,” said Chris Murphy, co-head of derivatives strategy at Susquehanna Financial Group.
(This story has been corrected in the second paragraph to show that prices were as of the close of trading on Friday, not Monday.)
(Reporting by Saqib Iqbal Ahmed; Editing by Ila Iosebashvili and David Gregorio)
