GameStop Corp. (GME), Trending Stock Report

GameStop Corp. (GME) is in the news again as Keith Gill, aka Roaring Kitty, is back to his old antics. The stock price jumped again after a social media account linked to Gill posted what appears to be his GME holdings. Not only did the activity drive the stock higher, it also sparked news of regulator investigations and the possibility that E-trade might drop Gill as a client.

From an options trader’s perspective, since the first explosion in GME trading, the stock has found support at $13 per share. Current options prices are again very expensive. The last time meme stocks exploded, implied borrow rates told us that GME shares were heavily shorted. The shorting activity was so heavy that it broke the put/call parity. As a result, we stayed away from trading GME.

This time, the shorting activity is not as extreme. Put/call parity is not broken. We entered a high-probability position in March that expired in April with an 11% gain. It looks like we may have another opportunity for a similar high-probability trade today.

This MDM graph compares the modeled expectations of current options prices (the orange line) to the actual movement of GME’s stock price over the past year. You can see that the actual behavior (the blue histogram) did not move as big as the modeled options prices currently expect. This tells us the current options prices are very expensive.

This Volatility Cone graph is showing us that volatility expectations (the yellow dots) are all near the extremely high historical volatility over the last year. To learn more about the Volatility Cone, click here. This graph confirms that GME options are very expensive.

It looks like we have another opportunity for a high-probability trade on another meme stock trade. GME volatility expectations and options prices are extremely high, and we have a strategy that will profit if the stock does not get cut in half over the next 6 weeks.

Be sure to read the ODDS Online Daily Trade Idea report to get the details of our trade idea for selling limited-risk, high-probability GME options today.