GameStop shares on track to triple for week as options trading spikes; GameStop short-sellers have lost $1.9 billion in just 2 days amid the stock’s latest spike

Feb 26, 2021

$29,826/$300,000 (9.9%)
Charles Bohm

Lead Stories

GameStop shares on track to triple for week as options trading spikes
Aaron Saldanha and David Randall – Reuters
Shares of GameStop Corp jumped more than 10% on Friday, putting the video game retailer’s stock on pace to triple for the week in a renewed rally that has left analysts puzzled.
GameStop shares hovered around $105 in late-morning trading, off 3%, but are up nearly 200% for the week to date despite a broader market selloff that has erased nearly all the gains in the Nasdaq Composite Index for the month.
Analysts have struggled to find an easy explanation for the rally, leaving some skeptical that it will continue.

GameStop short-sellers have lost $1.9 billion in just 2 days amid the stock’s latest spike
Ben Winck – Markets Insider
Nearly one month after GameStop’s leap to record highs, Reddit traders are boosting the meme stock all over again. And just like in the January rally, short-sellers are hurting big.
Investors selling GameStop short – betting the stock price would decline – posted $664 million in mark-to-market losses as shares of the gaming retailer rocketed 104% into the close, according to financial analytics firm S3 Partners. The stock’s 84% intraday gain fueled another $1.19 billion in losses, bringing the two-day total to more than $1.85 billion.

GameStop Round 2? How an options-buying frenzy is providing another jolt to meme stocks
William Watts – MarketWatch
Another options-fueled buying frenzy appeared to be sending shares of GameStop Corp. and other “meme” stocks soaring on Thursday. But unlike last month’s market-rattling move, it wasn’t clear that individual investors were the primary driver.
The primary mechanism, however, appeared largely the same.

This week’s GameStop surge could be upending the stock market as it leads hedge funds to reduce leverage, Fundstrat’s Tom Lee says
Matthew Fox – Markets Insider
This week’s stock market sell-off could in part be due to the recent surge in shares of GameStop, Fundstrat’s Tom Lee said in a note on Thursday.
Shares of GameStop surged as much as 355% this week, returning to levels not seen since the epic short-squeeze in late January. The rally started Wednesday afternoon, potentially sparked by the abrupt resignation of GameStop’s CFO, Jim Bell. Sources told Insider that Bell was forced out by the board as part of a push by activist investor Ryan Cohen.

GameStop’s Stock Posts Big Swings, Retail ETF Follows
Michael Wursthorn – WSJ
The return of large-scale volatility to GameStop Corp. shares has dragged investors of a big retail exchange-traded fund along for the ride once again.
Shares of State Street’s rode a wave of gains from GameStop, the fund’s biggest holding, up more than 4% at one point during Thursday’s trading session only to give it all up by the closing bell. GameStop shares initially doubled Thursday before investors appeared to reverse course, paring the videogame retailer’s gain down to 19%.
The ETF, which goes by the ticker XRT, ended up falling 3.1%.

GameStop Is Happening Again
Matt Levine – Bloomberg
Oh no not this again: GameStop Corp. soared Thursday as retail investors revived the surge in Reddit-favorite stocks, pushing it to reap $5.9 billion in market value over two days. The video-game retailer rose as much as 85% to $170.01 in New York, its highest since Feb. 1, as trading volume soared. Among other favorites of traders populating Reddit forums, AMC Entertainment Inc. advanced 13% after gaining 59% in the first three days of the week, while Koss Corp. surged 64%. Nokia Oyj, also a favorite of the meme crowd, climbed 7.4% in Europe. The meteoric rally in some Reddit-promoted stocks triggered volatility halts in GameStop, Koss and Express Inc.

US government bonds steady after heaviest sell-off since March turmoil
Leo Lewis, Daniel Shane and Leke Oso Alabi – Financial Times
US Treasuries steadied on Friday after the most turbulent day for the world’s biggest bond market since the height of coronavirus-induced ructions last March.
Five-year Treasuries, which were at the centre of a fierce rout in US government debt yesterday, ticked higher in price. The yield slipped 0.01 percentage points to 0.78 per cent, after surging more than 0.2 percentage points in the previous session. The 10-year Treasury yield followed suit, slipping 0.02 percentage points to 1.49 per cent after jumping as high as 1.6085 per cent on Thursday.

A $50 Billion Unwind Fueled Treasuries’ Rout. It Has Room to Run
Stephen Spratt – Bloomberg
A chaotic selloff in the Treasuries market was spurred by a massive exodus from popular trades, heightened by liquidity concerns that could inflict more pain in coming days.
The exodus happened at a time when traders were already worried about the imminent disappearance of a support beam for the market — a regulatory exemption that has allowed banks to accumulate more U.S. bonds.

Risk-Parity Quants Hammered by Stocks and Bonds Moving Together
Justina Lee – Bloomberg
One of the ugliest things about this week’s selloff is that there are so few places to hide, and that’s bad news for a breed of quant which seeks to spread out risk across assets.
So-called risk-parity strategies posted their worst day in four months on Thursday, according to an S&P index, while the $1.2 billion RPAR Risk Parity ETF plunged the most since the depths of the Covid rout in March.

Exchanges and Clearing

CME Group records sky-high treasury futures volumes as market looks to mitigate risk; The exchange reached a record volume of 1.7 million contracts for ultra 10-year note futures and 1.8 million 30-year bond futures on 23 February.
Annabel Smith – The Trade
US derivatives exchange CME Group reached new record volumes for ultra 10-year note futures and 30-year bond futures on 23 February as the market looked to mitigate risk. The exchanged recorded 1.7 million ultra 10-year note futures contracts on 23 February, up from the previous record of 1.5 million set on 25 February last year.

*****MR: Check out the CME’s release on the news here.

MSCI derivatives: New revenue sharing scheme
As of 1 March 2021, Eurex Clearing AG and Eurex Frankfurt AG (together “Eurex”) will offer a new revenue sharing scheme as outlined in this circular.

MIAX Wins Most Innovative Exchange Technology at Fund Intelligence Operations and Services Awards 2021
MIAX today announced that the MIAX Exchange Group, consisting of the MIAX, MIAX Pearl and MIAX Emerald national securities exchanges, won the Most Innovative Exchange Technology category at the Fund Intelligence Operations and Services Awards 2021 (formerly the Fund Technology and WSL Awards). This is the third consecutive year that the MIAX Exchange Group has won this category. This year’s other nominees were Cboe, KopenTech, LTSE, MEMX, and Nasdaq.

Regulation & Enforcement

Wirecard Regulator Pursued Critics After a Probe Found Nothing
Birgit Jennen and Nicholas Comfort – Bloomberg
Germany’s financial regulator pursued criminal complaints over alleged manipulation of Wirecard AG shares even after a review of more than half of the overall trading volume found no clear evidence of wrongdoing. BaFin issued the complaints against short sellers and Financial Times journalists in April 2019, almost two months after the probe by a surveillance unit at the payment company’s main exchange in Frankfurt. It’s not clear why the regulator chose to pursue the complaints, although it does have access to more trading information. The report examined trading of stocks, options and certificates on Deutsche Boerse AG’s Xetra Classic, Xetra Frankfurt and Eurex, according to a copy seen by Bloomberg. Together, the three platforms accounted for about 59% of Wirecard share trading in 2019, data compiled by Bloomberg shows.


GameStop (GME) Options Are Betting the Stock Will Reach $800 on Friday
Elena Popina – Bloomberg
Shares of GameStop Corp. doubled yesterday and jumped another 19% today. Options traders think the stock can do much better than that.
The most-active option traded on the stock Thursday was a contract betting that GameStop shares would spike to $800 on Friday. Some 52,000 contracts changed hands during the session betting on this one-day gain of 636%

An indicator that’s historically signaled market bottoms with incredible accuracy just flashed again, according to Tom Lee
Matthew Fox – Markets Insider
An indicator that has been historically accurate in marking a bottom in the stock market flashed again this week for the fourth time since 2012, according to a Thursday note from Fundstrat’s Tom Lee.
Volatility in the stock market spiked as a rapid rise in interest rates derailed high growth stocks. The Nasdaq 100 is off 7% from its February 16 high, while the S&P 500 is down 3% over that same time period.


Cboe Global Markets to Present at the Raymond James Institutional Investor Virtual Conference on Tuesday, March 2
Cboe Global Markets, Inc., a market operator and global trading solutions provider, announced today that Ed Tilly, Chairman, President and Chief Executive Officer, Chris Isaacson, Executive Vice President and Chief Operating Officer, and Brian Schell, Executive Vice President, Chief Financial Officer and Treasurer, will present at the Raymond James Institutional Investor Virtual Conference on Tuesday, March 2 at 8:20 a.m. ET. The webcast and replay of the virtual presentation will be accessible at in the Investor Relations section, under Events and Presentations. The archived webcast is expected to be available within an hour of the presentation.

Registration is open! – FIA Boca 2021

A New Virtual Experience
The Options Industry Conference is Going Virtual in 2021. Join OCC and the options exchanges for the 39th annual Options Industry Conference, April 28-29, 2021. While the conference will be held virtually for the first time in history, the focus will continue to be the key topics facing the options industry today, from the regulatory shifts in the U.S. and Europe to the technological developments that are driving monumental change in markets around the globe.


Charlie Munger Renews Robinhood Criticism, Likens App to Racetrack Betting
Caitlin McCabe and Jason Zweig – WSJ
Legendary investor Charlie Munger continued a war of words Thursday with popular online brokerage Robinhood Markets Inc. over the way it and others have enabled and profited from the recent boom of individual investing.
“I hate this luring of people into engaging in speculative orgies,” Mr. Munger told The Wall Street Journal from his Los Angeles home. Robinhood “may call it investing, but that’s all bullshit.”

(Podcast) TWIFO 238: Volatile Equities, Exploding Copper and Thawing Nat Gas
This Week In Futures Options – Options Insider Radio Network
Host: Mark Longo, The Options Insider Media Group
Ftse Russell Hot Seat: Rick Rosenthal, Director of Business Development, FTSE Russell Indices
CME Hot Seat: Russell Rhoads, EQ Derivatives
On today’s episode, Mark, Rick and Russell discuss:
The Movers and Shakers This Week In Futures Options, Top Volatility Movers, Equities / Mini Russell 2000 Options, Rates / CME Fed Watch Tool, Metals / Copper, Energy / Nat Gas, and much more.

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