Wednesday, April 13, 2011

GameStop (GME) - Stock and Vol Pop... Is GME the Next Netflix?

GME is trading $24.98, up 5.0% with IV30™ up 8.0%. The LIVEVOL® Pro Summary is below.


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GameStop Corp. (GameStop) is a retailer of video game products and personal computer (PC) entertainment software.

The stock is up (from what I can tell) on an interesting research note from Janney Capital analyst Tony Wible this morning. Here's a snippet from a Forbes article where I found the news:
GameStop (GME), the video game retailer, could be the next Netflix. He doesn’t think the company is quite there yet, and this is not to say that he thinks the company is going to compete with Netflix; he just means that the company is going through a similar transition from the physical world to the digital world. “GME is facing a digital transition similar to that undertaken by NFLX as it invests in new platforms to complement its packaged media, and as it leverages proprietary information to put the right content in front of the right investor at the right time.”

He goes on to offer 10 reasons to own the stock:
Source: GameStop: The Netflix Of Games? by Eric Savitz.

Ooo... The next Netflix.

GME company has traded over 15,000 contracts on total daily average option volume of just 6,342. Calls have traded on a 9.4:1 ratio to puts with the action in the May 27, Jul 27 and Jul 28 calls -- all appearing as substantially purchases. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the three calls listed above are mostly opening (compare OI to trade size). Option premium buyers are in today -- and to the call side. I do note that stock volume is already twice the daily average as well with more than 8 million shares trading.

The Skew Tab snap (below) illustrates the vols by strike by month.

We can see Apr has a notable upside skew bend. May is also slightly parabolic reflecting nearly equal risk to the upside and downside.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

We can see the stock climb of late and of course, the nice pop today. GME actually appeared on a high vol scan -- IV30™ is substantially elevated to HV20 and HV180. Apparently, with good reason...

This is trade analysis, not a recommendation.

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