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Retail traders reignite the rally in GameStop shares

People walk by a GameStop in Manhattan, New York, U.S., December 7, 2021. REUTERS/Andrew Kelly

Retail traders reignite the rally in GameStop shares. During regular trading on Wednesday, retail traders were responsible for a roughly twenty percent increase in GameStop (GME.N) shares, which led to the firm reaching a two-month high. This move extended a rally that was taking place in anticipation of the company’s quarterly results, which are scheduled to be released the following week. It highlighted a resurgence in appetite for risk.

Over the past two trading days, the meme stock has increased by about 36%, reaching $15.31.

“Speculation is back, and GameStop is ground zero for speculation,” said Steve Sosnick, chief strategist at Interactive Brokers. “SpielStop represents the epicenter of speculation.”

AMC Entertainment (AMC.N) and Cathie Wood’s ARK Innovation ETF (ARKK.P), two additional investment vehicles popular among retail traders, had gains of around 3.5% and 0.5%, respectively.

Speculative trading, which has been struggling throughout this year, has been given a new lease on life as meme stocks have begun to rebound at the same time as the S&P 500 (.SPX) is getting closer and closer to reaching its most significant level for 2023.

On Tuesday, GameStop finished the day around 13% higher. As of Tuesday, individual investors made a net purchase of the company’s shares amounting to $1.92 million, the most significant amount they had acquired since August 6, according to data provided by Vanda Research.
On Wednesday, traders on the social media website stocktiwts.com discussed equities at a rate that was among the highest.

GameStop’s third-quarter results are scheduled to be released on December 6, and experts anticipate that the company’s net loss will decrease to $25.6 million from $93.4 million in the same period last year.

According to the data and analytics firm Ortex, around 21.6% of GameStop’s shares were sold short, and investors who are pessimistic about the company stand to lose almost $200 million on Tuesday and Wednesday combined.

According to Peter Hillerberg, co-founder of Ortex, “some short sellers may be concerned not only by this price move but also by the fact that GameStop will release earnings that are better than expected the following week.”

Intense activity in the options market contributed to the skyrocketing price of GameStop shares. Most of the approximately 230,000 GameStop options contracts that were exchanged at 11:38 a.m. (1638 GMT) were call options, often purchased to wager on the price of the company’s shares increasing.

There are instances when the price of a company might be given an additional boost by making substantial purchases of out-of-the-money call options. These contracts are not profitable but can potentially increase in value as the stock progresses.

“As long as people continue to buy calls, that should pressure the stock to continue going higher,” said Brent Kochuba, the creator of Spotgamma, a platform that provides statistics on options.

“Another 15% or 20% (move) higher is still on the cards.”

With GameStop shares trading at about $15 per share, the most widely traded GameStop options were call options based on the expectation that the stock would finish higher than $16 by Friday.

Sosnick, on the other hand, issued a warning that speculative rallies in the recent past have been fast to fade away into nothingness.

As of the conclusion of business on Tuesday, shares of GameStop had dropped by 27% during the year, while shares of AMC had lost 80% of their value during the same period.

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