Keith Gill, popularly known as Roaring Kitty, has amassed a substantial position in GameStop Corp.
What Happened: Trade Alert data revealed that the number of open contracts in GameStop rose to 145,000 by the end of May, a significant increase from the 15,000 recorded on May 19. With an average trading price of $5.52 during this period, a buyer of 120,000 options contracts could have made around $54 million by Monday, based on the contracts' closing price of $10 each, Reuters reported
However, exiting this options trade could pose a challenge. The size of the position and the attention on GameStop could make selling the options or taking delivery of the underlying shares problematic. This could potentially reduce the price of the options and the underlying stock, industry experts noted.
Steve Sosnick, Chief Strategist at Interactive Brokers and a former options market maker, pointed out the difficulty in selling a large chunk of the options position without attracting attention.
"It's much easier to sell 10 to 12 million shares than if you sold 120,000 call options," he said.
Garrett DeSimone, Head of Quantitative Research at OptionMetrics, suggested that taking delivery of the 12 million shares that the disclosed options contracts command may require hundreds of millions in capital.
"Unless he is super committed to being a long term investor and taking delivery of (the shares), it's going to be challenging to monetize this without moving the market just because everybody's hyper aware of this now," DeSimone added
Why It Matters: The Roaring Kitty saga has been a major focus in the market. Gill, a significant figure in the GameStop "meme stock" frenzy, revealed on Reddit that he owns over $115.7 million worth of GameStop shares and has $65.7 million in call options expiring on June 21 with a strike price of $20 each. This disclosure came at a time when Morgan Stanley's E*Trade was considering banning Gill from its platform due to allegations of his involvement in manipulating meme stock prices through his social media activities.
Meanwhile, Citron Research founder Andrew Left raised doubts about Gill's intentions, accusing him of trying to take advantage of retail traders after revealing his huge GameStop position.
Price Action: GameStop was trading 1.6% lower at $27.55 at the time of publication Tuesday, according to Benzinga Pro.