The game station market is here again! What should I do with options?
$GameStop (GME) $It once rose more than 19% after hours and is now up nearly 7%. According to CNBC, the company is considering investing in Bitcoin and other types of encrypted digital currencies.
Previously, GameStop CEO Ryan Cohen posted a photo with MSTR co-founder Michael Saylor.
GameStop had launched a crypto wallet in 2022 that allowed users to manage their cryptocurrencies and NFTs, but shut down the service in 2023 due to "regulatory uncertainty." GameStop is exploring investing in alternative assets, especially cryptocurrencies, three people familiar with the matter said. The company can also decide not to invest. The company is still considering whether it makes sense for its business, the people said.
Strategy is the publicly traded company with the largest holdings of Bitcoin and has achieved a significant increase in the company's market capitalization, driven by rising Bitcoin prices, despite volatile share prices. However, according to people familiar with the matter, Michael Saylor is not currently involved in GameStop's discussions on cryptocurrency investment.
Ryan Cohen began buying GameStop shares in 2020 and joined the company's board of directors in 2021. At a time when GameStop is a hot Meme stock, Ryan Cohen's extensive e-commerce experience has raised hopes that he will help the brick-and-mortar retailer modernize. However, the company is still struggling to adapt to the changing spending habits of gamers.
Under Ryan Cohen's leadership, GameStop has focused on cutting costs and streamlining operations to ensure profitability even if the business isn't growing. As of November 2 last year, GameStop had accumulated $4.6 billion in cash reserves and has been investing these funds, according to a document filed with securities regulators in December last year.
In addition, it is worth mentioning that in December 2023, GameStop's board of directors approved a new "investment policy" that allows Ryan Cohen, along with two independent board members and other necessary personnel, to manage the company's securities portfolio.
Can this wave of GameStop market rise? Let's wait and see!
What is the bull market subscription spread strategy?
The Bull Call Spread strategy (Bull Call Spread) means that investors buy call options with lower strike prices and sell call options with higher strike prices at the same time. The exercise dates of the two options are the same. Compared with buying bullish alone, an additional premium income has been obtained, which reduces the overall net premium expenditure of the strategy, the break-even point of the strategy has also been shifted to the left, and the winning rate has also increased accordingly. The essence is a low-cost call option strategy.
Maximum profit: When the price of the underlying asset reaches or exceeds the higher strike price, the maximum profit of the strategy is the spread between the two strike prices minus the net option cost (that is, the cost of buying the option minus the income of selling the option).
Maximum loss: Equal to the cost of buying the call option minus the income from selling the call option (i.e. net option cost).
Limited risk, limited reward: The risk and reward of a bull call spread strategy are limited relative to buying a call option outright. Its maximum loss is known and equals the initial net option cost.
It is suitable for investors who believe that the price of the underlying asset will rise moderately, but the increase will not be very large, and can be used in markets where low volatility is expected to make a profit by reducing the cost of options.
GameStop Bull Market Call Spread Case
The current price of GameStop is $28, assuming investors think GameStop will rise to $35 in the next month.
BUYA call option with a strike price of $28 costs $174.
SellA call option with an exercise price of $35 gets a premium of $77.
Here is aBull Call SpreadStrategy, suitable for use when investors believe that the price of the underlying stock will rise to a specific range (but not more than the strike price of the sell). The following is a specific profit and loss analysis.
Buy a call option with a strike price of $28, which costs $174.
Sell a call option with a strike price of $35 and get $77.
Maximum profit:
The largest profit comes when GameStop's stock price reaches $35 or higher at the expiration of the option. At this point, your call and put options behave as follows:
The value of buying a $28 call option: 35-28 = $7 (per share).
Value of a $35 call option sold: $0 (the option is not exercised when it expires).Maximum profit= 700-97 =$603。
Maximum loss:
The maximum loss still occurs when the stock price is below $28, at which time neither option will be exercised, and what you lose is the net investment.
Maximum loss= Net Investment = $97.
Break-even point:
The calculation of the breakeven point remains unchanged:
Break-even point= Call Option Strike Price + Net Investment/Per Share = 28 + 97/100 =$28.97。
Summary:
Maximum loss: $97.
Maximum profit: $603 (when the share price reaches $35 or higher).
Break-even point: $28.97.
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