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2021-05-21

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GameStop Never Went Back Down, So Profit Off of Those Who Think It Will

Naked puts are a way to profit, as long as GameStop doesn't fall drastically in value It has been ov

GameStop Never Went Back Down, So Profit Off of Those Who Think It Will

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Since then, trading interest and social media chatter around GME stock has died down. Many traders have turned their attention to other short squeeze stocks, tech names and cryptocurrencies.</p>\n<p>Normally, when a stock loses interest, its share price tends to slump. But the funny thing about GameStop stock is that it actually stabilized around the $175 mark. It hasn’t made another huge run-up as the bulls had hoped.</p>\n<p>But it certainly hasn’t crashed either. Instead, it has seemingly found an equilibrium in the $150-$200 range. That’s an outcome almost no one would have predicted heading into 2021. So what do things look like for GME stock going forward?</p>\n<p><b>Seeking to Grow Into Its Valuation</b></p>\n<p>GameStop now holds a market capitalization of around $13 billion. This puts GameStop in something of a no man’s land. The company is drastically overpriced based on the value of its traditional physical games business. After all, GME stock traded south of $10 per share until fairly recently.</p>\n<p>On the other hand, if GameStop can successfully transform itself into an e-commerce giant, $13 billion might seem cheap. The obvious comparison is to online pet products retailer&nbsp;<b>Chewy</b>(NYSE:<b><u>CHWY</u></b>). Ryan Cohen built Chewy into a dominant player in its field as its former CEO. Now, he’ll be trying to work the same magic at GameStop as he steps into the role of chairman.</p>\n<p>Chewy currently has a market capitalization of $29 billion. That’s an encouraging figure for GameStop, as GME stock is still at just half of Chewy’s valuation. On the other hand, Chewy has already demonstrated success at online e-commerce and is running at roughly break even levels in terms of earnings. GameStop will need a good deal more time to get its e-commerce business to a comparable level.</p>\n<p><b>Options Trades Still Offer Appeal</b></p>\n<p>A couple months ago, I discussed selling GME&nbsp;naked puts&nbsp;to capitalize on the weird situation here. GameStop stock is clearly ahead of itself when you look at the fundamentals. On the other hand, the company no longer has any bankruptcy risk. Its recent stock offering ensures that GameStop is cashed up and capable of living on for years to come as it seeks to transform into an e-commerce business.</p>\n<p>As such, GameStop is likely to go down in coming months, but not nearly as quickly as bears hope. The naked put strategy is a way to take advantage of this. The seller gets premium up-front from selling the option. If the stock falls below the pre-determined strike price, the seller buys the stock at said price while keeping the premium.</p>\n<p>Even with GameStop well north of $100, people have been paying good money to bet on GME stock returning to $25 or less within a few months.</p>\n<p>The position I previously discussed — selling July $20 puts — has now returned a 90% profit. With short options, the maximum gain is 100% when the option in question reaches zero. Those puts I sold initially fetched $2 each and are now trading for around 20 cents.</p>\n<p>While that particular option contract is no longer as appealing, there are compelling alternatives in future months. Jan 2022 $30 puts, for example, currently sell for almost $2. This means that a seller would get $200 per contract up front and be on the hook to buy the stock at $28 ($30 minus the premium) if GME stock crashed to less than $30 over the next 8 months.</p>\n<p>Given all the cash GameStop just raised, it should be able to keep its stock price above of $30.</p>\n<p><b>GME Stock Verdict</b></p>\n<p>I see little reason whatsoever to own GME stock. At this price, people are acting as if GameStop’s conversion into an e-commerce company has already been successful. The company can’t come anywhere close to supporting a $13 billion price tag simply based on its existing brick-and-mortar business. Thus, its future e-commerce endeavors will have to achieve major success merely to justify today’s valuation, let alone any further upside.</p>\n<p>However, GameStop isn’t going bust anytime soon, either. The bearish thesis made sense at one point, but that ship has sailed. The company now has cash and plenty of time to try to turn things around. Thus, instead of buying or shorting the stock outright, consider options strategies to profit from the stock’s inflated levels of volatility.</p>","source":"lsy1606302653667","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>GameStop Never Went Back Down, So Profit Off of Those Who Think It Will</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nGameStop Never Went Back Down, So Profit Off of Those Who Think It Will\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-05-20 22:48 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://investorplace.com/2021/05/gme-stock-never-went-back-down-so-profit-off-those-who-think-it-will/><strong>InvestorPlace</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Naked puts are a way to profit, as long as GameStop doesn't fall drastically in value\nIt has been over 3 months since the first massive short squeeze in GameStop (NYSE:GME) stock. Since then, trading ...</p>\n\n<a href=\"https://investorplace.com/2021/05/gme-stock-never-went-back-down-so-profit-off-those-who-think-it-will/\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"GME":"游戏驿站"},"source_url":"https://investorplace.com/2021/05/gme-stock-never-went-back-down-so-profit-off-those-who-think-it-will/","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1188975226","content_text":"Naked puts are a way to profit, as long as GameStop doesn't fall drastically in value\nIt has been over 3 months since the first massive short squeeze in GameStop (NYSE:GME) stock. Since then, trading interest and social media chatter around GME stock has died down. Many traders have turned their attention to other short squeeze stocks, tech names and cryptocurrencies.\nNormally, when a stock loses interest, its share price tends to slump. But the funny thing about GameStop stock is that it actually stabilized around the $175 mark. It hasn’t made another huge run-up as the bulls had hoped.\nBut it certainly hasn’t crashed either. Instead, it has seemingly found an equilibrium in the $150-$200 range. That’s an outcome almost no one would have predicted heading into 2021. So what do things look like for GME stock going forward?\nSeeking to Grow Into Its Valuation\nGameStop now holds a market capitalization of around $13 billion. This puts GameStop in something of a no man’s land. The company is drastically overpriced based on the value of its traditional physical games business. After all, GME stock traded south of $10 per share until fairly recently.\nOn the other hand, if GameStop can successfully transform itself into an e-commerce giant, $13 billion might seem cheap. The obvious comparison is to online pet products retailer Chewy(NYSE:CHWY). Ryan Cohen built Chewy into a dominant player in its field as its former CEO. Now, he’ll be trying to work the same magic at GameStop as he steps into the role of chairman.\nChewy currently has a market capitalization of $29 billion. That’s an encouraging figure for GameStop, as GME stock is still at just half of Chewy’s valuation. On the other hand, Chewy has already demonstrated success at online e-commerce and is running at roughly break even levels in terms of earnings. GameStop will need a good deal more time to get its e-commerce business to a comparable level.\nOptions Trades Still Offer Appeal\nA couple months ago, I discussed selling GME naked puts to capitalize on the weird situation here. GameStop stock is clearly ahead of itself when you look at the fundamentals. On the other hand, the company no longer has any bankruptcy risk. Its recent stock offering ensures that GameStop is cashed up and capable of living on for years to come as it seeks to transform into an e-commerce business.\nAs such, GameStop is likely to go down in coming months, but not nearly as quickly as bears hope. The naked put strategy is a way to take advantage of this. The seller gets premium up-front from selling the option. If the stock falls below the pre-determined strike price, the seller buys the stock at said price while keeping the premium.\nEven with GameStop well north of $100, people have been paying good money to bet on GME stock returning to $25 or less within a few months.\nThe position I previously discussed — selling July $20 puts — has now returned a 90% profit. With short options, the maximum gain is 100% when the option in question reaches zero. Those puts I sold initially fetched $2 each and are now trading for around 20 cents.\nWhile that particular option contract is no longer as appealing, there are compelling alternatives in future months. Jan 2022 $30 puts, for example, currently sell for almost $2. This means that a seller would get $200 per contract up front and be on the hook to buy the stock at $28 ($30 minus the premium) if GME stock crashed to less than $30 over the next 8 months.\nGiven all the cash GameStop just raised, it should be able to keep its stock price above of $30.\nGME Stock Verdict\nI see little reason whatsoever to own GME stock. At this price, people are acting as if GameStop’s conversion into an e-commerce company has already been successful. The company can’t come anywhere close to supporting a $13 billion price tag simply based on its existing brick-and-mortar business. Thus, its future e-commerce endeavors will have to achieve major success merely to justify today’s valuation, let alone any further upside.\nHowever, GameStop isn’t going bust anytime soon, either. The bearish thesis made sense at one point, but that ship has sailed. The company now has cash and plenty of time to try to turn things around. Thus, instead of buying or shorting the stock outright, consider options strategies to profit from the stock’s inflated levels of volatility.","news_type":1},"isVote":1,"tweetType":1,"viewCount":191,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":33,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}