Trade Alert: GameStop

An approach that can make us money in either direction.

Roaring Kitty Returns

“Roaring Kitty”, as the meme stock investor Keith Gill calls himself, returned to X after an absence of three years last month, and posted a few memes, with no specific stock commentary. On the basis of that alone, GameStop Corp. (GME 0.00%↑) shares spiked from $17.46 on May 10th, to $55.69 on May 14th, before giving back those gains. On Sunday, Gill returned to Reddit, posting a screen shot, purportedly of his account, showing a $116 million position in GameStop, and 120,000 call options on it. As a result the stock spiked over 64% in early trading on Monday, before closing up about 30% on the day.

Our Take On GameStop

As regular readers know, each day the market is open, our system ranks every security with options traded on it in the U.S. by its potential return over the next six months. Since we started our Substack in December of 2022, our weekly top ten names have returned 22.73% over the next six months, on average, versus 12.63% for the SPDR S&P 500 Trust (SPY 0.00%↑). On May 23rd, GameStop hit our top ten when it was trading at $18.32. 

Screen capture via Portfolio Armor on 5/23/2024

Our core strategy in our trading Substack is to buy equal dollar amounts of Portfolio Armor's top ten names, put trailing stops of 15% to 20% on them, and replace them with new top names when we get stopped out. In my personal account I hadn't gotten stopped out of any of my top ten the week GME appeared, so I didn't buy the stock, but I did try to place a bullish options trade on it on May 24th. 

I didn't get a fill on that bullish trade, unfortunately. After Sunday's news, I tried to place a bearish bet on GME at about $40 (a credit call spread), but didn't get a fill on that either. 

Today I decided to take a neutral approach, one that can make us money if GameStop moves in either direction after its earnings next week.

Details below.

Our GameStop Trade