Friday, November 21, 2014

* GameStop (GME) - UPDATE: Option Market Priced in Huge Risk; and That's What We Got

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GME is trading $37.87, down 13.7% with IV30™ down 33.2% off of earnings. The Symbol Summary is included below.

Provided by Livevol

This is a follow up to a story I published on November 14th (one-week ago).
GME - Risk Explodes to Unprecedented Levels; Sales are... Stuck?

In that post I published five images describing rather fully the position GME finds itself in and then noted that:
GME is sitting an essentially unprecedented risk levels ahead of earnings due out on 11-20-14 after the market closes.

[T]he risk in GME is not about past performance, it's all about the future and the unknowns it holds... like WMT now selling used video games... Yikes. Or the XBOX selling so poorly after initial release that GME (and other re-sellers) had to offer massive discounts and that became a problem, because, you guessed it, WMT will discount anyone to death.

[T]he option market reflects a price range of [$39.50, $49.50] by the end of trading on November 21st.

The $44 strike was the at-the-money (ATM) straddle at the time of the first post and was priced at ~$4.50 (see the prior article for the Options Tab).

The Options Tab from today is included below.

Provided by Livevol

We can see, using the stock price, that the straddle in question is now worth $6.15, or ~36% more than it was worth a week ago.  It turns out the unprecedented risk levels were correct, if not still too low. It also turns out, from the five images I posted in the prior post, that sales were (and are) stuck,  growth is a problem.

This is trade analysis, not a recommendation.

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