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May 10, 2021
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‘This is volatility on steroids’: Four market analysts on GameStop’s monster move

'This is volatility on steroids': Four market analysts on GameStop's monster move
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Volatility has struck shares of GameStop once again.

The stock closed about 18.5% higher on Thursday after a raucous session in which trading was halted multiple times on account of the sharp moves. GameStop surged by over 100% on Wednesday after the company announced that its chief financial officer would resign.

Jim Cramer, the host of CNBC’s “Mad Money,” said there may be only one way to justify GameStop’s stock price:

“One of the things … we saw Square do — initially it seemed ridiculous, but it was OK; PayPal, same thing — is you become a dealer in crypto. Now, last night on the unbelievably good Nvidia call, as a side note, they talked about March. [They’re] going to have some actual cards just for crypto. It really won’t be important for Nvidia, but it could be important for a place like GameStop. If GameStop were to turn itself into a 5,000-store introduction to crypto, make it so that they sell $1 billion worth of stock … and buy crypto with it, and then make it so it’s an international gaming place where you win bitcoin, I think you can justify the stock price. I have not been able to come up with anything else, but this works. And it doesn’t have to be bitcoin. We can make it crypto. But turn it into a crypto information palace and you have worldwide games, no latency, you play it and suddenly [GameStop investor and Chewy co-founder] Ryan Cohen — then you may start believing him. Well, the CFOs, they tend not to have bitcoin on their balance sheet. Perhaps [resigning GameStop CFO] Jim Bell, that’s what he didn’t want. Ryan Cohen’s a big thinker. I have a feeling that this is the way to get this stock higher. I can’t come up with another way.”

Alma Angotti, a former Securities and Exchange Commission enforcement attorney, anticipated more interest from regulatory bodies:

“It’s important to remember that the securities regime is a disclosure regime and people can make speculative bets on stocks and people can lose a lot of money. And maybe in the minds of certain people, that ice cream tweet was related to the CFO resignation tweet and they think the company is going to be fixed and brought into the digital world quite successfully. It’s hard to say. But … I think both Congress and the SEC will be studying that balance between orderly markets and letting people invest what they want to invest for whatever reasons they want to invest even if it doesn’t make sense to us.”

Jon Najarian, the co-founder of MarketRebellion.com and a CNBC contributor, tracked spiking options activity in three Reddit-fueled names:

“This is volatility on steroids. And at the end of last week, that’s regular February expiration. Three stocks really stood out to us both because of the surge in Reddit posts as well as [a] surge in option buying, and those were GameStop, AMC and Blackberry. So, when we saw that, it built into the end of last week … and then it faded off, and that’s probably because GameStop was bouncing a little bit on Monday and on Tuesday it dropped to about 55,000 contracts on the call side. That’s pretty low. [On Wednesday], it pops up to 270,000 calls. So, in other words, fivefold jump in volume [Wednesday]. Similar jumps in AMC that went over a million call contracts from a low of about 155,000 last Friday and then Blackberry also. And all three of them saw outsized moves. In the case of GameStop in particular, … it was just amazing. [On Thursday], they were buying $200 calls and they traded as high as $46 for a $200 call on down to about $12 just before we came on air. So, there’s a lot of fluff and a lot of, I’m not trying to denigrate them, but a lot of amateur trading chasing those up so high with just one trading day to go, because, obviously, these options expire tomorrow, the Februarys expire tomorrow at the $200 strike. Just crazy. But that’s kind of what goes on. You get a big herd move in there — if they catch it right, … they can make a lot of money, and if they don’t move quick, they have less and less time to get out.”

Michael Darda, chief economist and market strategist at MKM Partners, preached caution:

“I think we’re all a bit confused. Talking to family members and friends, I’m getting a lot of questions about the stocks that are a focus in these Reddit forums and also cryptocurrencies. So, all I’m telling retail investors that are friends and family members is just be careful. Speculate if you want to speculate, but it should be a super tiny portion of your portfolio and don’t expect any of this stuff to be a one-way bet. So, caution is certainly needed here.”

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