GameStop and AMC Surge: Roaring Kitty’s Impact on Market Gains

Updated on: October 9, 2024 1:33 am GMT

GameStop Rally Fueled by ‘Roaring Kitty’ Post in Impressive Trading Day

In a surprising twist that shocked many in the trading community, Friday saw a significant surge in GameStop’s stock price, spurred by a post from noted stock influencer Keith Gill, better known as “Roaring Kitty.” The post, which was his first in over two months, generated enough buzz to yield a remarkable profit for a savvy trader leveraging options contracts tied to the struggling video game retailer. The events unfolded on September 8, 2023, when Gill shared an enigmatic image on the social media platform X, leading to immediate reactions in the market.

What Happened on Friday?

When Gill’s post appeared at noon, it included a manipulated image from the 1999 film “Toy Story 2,” which quickly grabbed the attention of traders familiar with his previous market-moving messages. Following the release, GameStop’s stock price shot up, reaching a peak increase of 9% before settling at a 4% gain at $23.39.

An Impressive Options Trade

Financial analysis revealed that just minutes before Gill’s cryptic post, a trader capitalized on the situation by purchasing around 10,000 GameStop September 13 call options with a strike price of $22.50, costing approximately $1.74 million. As the market reacted to Gill’s tweet, two blocks of those options—5,000 contracts each—were sold for about $2.29 million, converting into a staggering profit of approximately $550,000. This equates to a 30% gain, illustrating the risky yet potentially rewarding nature of options trading.

Expert Reactions

Brent Kochuba, founder of financial insights company SpotGamma, commented on the nature of the trades executed shortly before the post. “That’s a lot of short-dated calls just before a weekend,” Kochuba noted, emphasizing the urgency of the trades which required a swift market movement. “It’s going to raise eyebrows, no doubt about that,” he added, referring to the scrutiny that may come from these hastily made trades.

The Significance of Gill’s Influence

Keith Gill has become a well-regarded figure among retail traders due to his history with GameStop during the meme stock mania of 2021. His previous posts have been known to spark volatility in stock prices, and his absence from social media platforms had left many in the trading community wondering about his insights. Back in June, a post featuring a puppy alluded to Chewy, which had similarly resulted in a stock price surge. Interestingly, a regulatory filing later revealed Gill owned a significant stake in Chewy prior to his post.

Market Reactions to Gill’s Return

On Friday, Chewy’s stock also experienced a rise, increasing by 1.5% to land at $26.54, marking a strong comeback after a brief drop. Gill’s re-emergence on X signifies not only a return of his online presence but also kindles renewed speculation regarding his future posts and their potential impact on various stocks, especially those in the meme stock basket like GameStop and AMC.

Short-Term Gains and Long-Term Uncertainties

Despite Friday’s enthusiastic trading, questions loom regarding the longevity of the profits for both GameStop and related cryptocurrency assets like the GME and KITTY tokens. The tokens recently formed a “God candle,” a term indicating a sudden bullish trend that catches traders off guard. Post-Gill’s return, GME token surged to $0.0052, reaching its highest swing since June, while KITTY token also reflected price gains. However, historical trends reveal that these highs can be fleeting.

Precarious Market Conditions

As GameStop gears up to release its financial results on September 10, expectations remain tempered. Analysts project a revenue decline from over $1.1 billion in the previous quarter to approximately $895 million. The ongoing transformation in the gaming industry, particularly a shift toward online purchases, exacerbates the company’s challenges as operational costs continue to rise.

The Risk of Speculation

Recent trends indicate that while surges in stock prices can lead to quick gains, they are often followed by swift declines. Previous surges in both GME and KITTY tokens have led to rapid drops, with the GME token previously falling from a high of $0.029 to a low of $0.0017 in August. As volatility persists, traders are left to navigate a market environment fraught with uncertainty.

Outlook on Meme Stocks and Cryptocurrencies

The enthusiastic engagement from retail traders, alongside the potential forthcoming price movements from Gill’s influence, indicates an unpredictable court of public opinion surrounding meme stocks. As the market awaits further developments, traders will be watching closely to see if gains can be sustained or if another downturn may occur following the adrenaline of the recent trades.