GameStop Corporation(NYSE:GME) surged over 20% on Tuesday despite the general markets trading slightly lower. Since the epic short squeeze that took place in January, there has often been an inverse correlation between GameStop and theSPDR S&P 500 ETF(NYSE:SPY).
The company is set to print its first-quarter 2021 earnings results after the close on June 8. After reporting itsfourth-quarter 2020earnings, GameStop’s stock plummeted almost 35% in a single day. GameStop reported sales of $2.12 billion, missing the analyst consensus estimate of $2.21 billion and earnings per share of $1.34 per share, which missed the analyst consensus estimate of $1.33.
The morning before postings its last quarterly earnings, GameStopannouncedits Chief Customer Officer Frank Hamlin would be leaving the company, which may have contributed to the sell-off.
Options traders may believe first-quarter earnings will blow investors away or that a big announcement is imminent and bet $367,915 that GameStop will make a 122% parabolic rise toward $800 before July –nearly double GameStop's previous all-time high of $483.
The GameStop Option Trades: Below is a look at the notable options alerts, courtesy ofBenzinga Pro:
- At 9:47 a.m., Tuesday a trader executed a call sweep, near the ask, of 269 GameStop options with a strike price of $800 expiring on July 16. The trade represented a $98,185 bullish bet for which the trader paid $3.65 per option contract.
- At 10:31 a.m., a trader executed a call sweep, near the ask, of 233 GameStop options with a strike price of $800 expiring on July 16. The trade represented a $86,210 bullish bet for which the trader paid $3.70 per option contract.
- At 10:35 a.m., a trader executed a call sweep, near the ask, of 290 GameStop options with a strike price of $800 expiring on July 16. The trade represented a $107,300 bullish bet for which the trader paid $3.70 per option contract.
- At 11:49 a.m., a trader executed a call sweep, near the ask, of 206 GameStop options with a strike price of $800 expiring on July 16. The trade represented a $76,220 bullish bet for which the trader paid $3.70 per option contract.
Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.
These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.
GME Price Action: Shares of GameStop were trading up 16% to $208.87 at publication time.
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