Roaring Kitty Shifts GameStop Options to Shares

What You Need To Know

Keith Gill, also known as "Roaring Kitty," seems to have exited his GameStop (NYSE: GME) call options position while increasing his holdings of common shares. Evidence from Gill's Reddit account suggests that he no longer holds 120,000 call options with a strike price of $20, but now owns over nine million common shares. This shift is accompanied by a decrease in his cash position, potentially indicating that he used some funds to acquire more shares.

The trading activity surrounding GameStop options has been significant, with a notable increase in trading volume and fluctuations in option prices corresponding to the rise in GameStop's share price. Gill's actions have attracted attention, especially as GameStop recently postponed a shareholder meeting, causing further speculation in the market about his next moves.

What Happened?

1. Options Position Exit: Gill exited his position in 120,000 GameStop call options, which had a strike price of $20. These options were traded at prices ranging between $6 and $9.80, with an average purchase price purported to be $5.6754. This suggests that he sold the options at a profit.

2. Increase in Shares: He increased his common shares from five million to over nine million. This implies he used the proceeds from selling his call options to purchase more shares, leveraging his gains.

3. Cash Position Change: His cash position decreased from nearly $30 million to $6.3 million, indicating he reinvested a significant portion of his cash to acquire additional shares, further emphasizing his commitment to the stock.

4. Stock Price Increase: The value of GameStop shares rose significantly, doubling at one point due to the news of Gill's activities and his return to YouTube, which fueled further investor interest. This rise in stock price would positively impact the value of his increased shares.

Overall, the strategic sale of call options, combined with the reinvestment in common shares during a period of rising stock prices, indicates that Gill has realized substantial gains from his investment in GameStop.

Are These Paper Gains?

Keith Gill's gains in GameStop appear to be a mix of realized and unrealized (paper) gains:

1. Realized Gains: If Gill sold his 120,000 call options at prices higher than his purchase price, he would have locked in actual profits from those transactions. These are realized gains because he has completed the sale and received the proceeds.

2. Unrealized (Paper) Gains: The increase in his common shares from five million to over nine million represents potential gains that depend on the current market value of GameStop shares. As long as he holds these shares without selling them, any increase in their value is considered unrealized or paper gains. These gains are on paper because they reflect the current market price, but they are not converted into cash until the shares are sold.

In summary, Gill has realized gains from the sale of his call options and holds unrealized gains on his increased position in GameStop shares.

Why This Is Important for Retail Investors

1. Educational Insights: Observing Keith Gill's investment decisions provides valuable educational insights for retail investors looking to understand options trading and stock accumulation strategies.

2. Market Influences: Gill's actions may influence market sentiment and trading activity around GameStop, potentially impacting retail investors' portfolios holding the stock.

3. Learning Opportunities: Retail investors can learn from Gill's approaches to portfolio management, risk assessment, and decision-making in high-profile investing scenarios.

4. Risk Management: Understanding the implications of shifting from options to common shares can help retail investors assess and manage risks in their own investment positions.

5. Community Engagement: Gill's Reddit posts and market activities encourage community engagement among retail investors, fostering discussions on investment strategies and market trends.

How Can You Use This Information?

Here are some of the investing ideas that can be explored using this information:

Event-Driven Strategy

Gill's actions highlight the impact of company events on stock movements and the potential opportunities for event-driven strategies.

An event-driven strategy capitalizes on stock mispricing that may occur before or after a corporate event, such as a merger or acquisition.

Speculative Investing

Retail investors may analyze Gill's speculative moves in GameStop to gain insights into speculative investing strategies and their risks.

Speculative investing engages in high-risk investments with the potential for substantial rewards, often over a short time frame.

Contrarian Investing

Observing Gill's unconventional investment decisions offers a case study for contrarian investing approaches in the market.

Contrarian investing involves taking positions against prevailing market trends on the belief that the crowd is wrong.

Growth Investing

Retail investors can assess GameStop's growth potential based on Gill's shifting investments, delving into growth investing strategies amidst volatile market conditions.

Growth investing focuses on stocks of companies expected to grow at an above-average rate compared to other stocks in the market; learn more in our article titled 'What is Growth Investing?'.

Read What Others Are Saying

CNBC: Roaring Kitty's GameStop stake grows to 9 million shares after selling his big options position

Bloomberg: ‘Roaring Kitty’ Appears to Have Exited GameStop Call Options