Loyal investor sticks with GameStop

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SymbolPriceChange
GME32.11-3.90

GameStop has been a heartbreaker for the bulls, but one investor is still in love.

Our monitoring systems detected a surge of activity in the July and August options in the videogame retailer, which is back to its long-term support levels from the last 3-1/2 years. The adjustment of a single large bullish strategy accounted for almost all the volume.

Some 8,812 July 20 calls were sold for $0.14 while an equal number of July 24 calls were bought for $0.04. An even 6,050 July 15 puts were also bought for $0.06.

At roughly the same time, 12,100 August 18 calls were purchased for $0.99 and 12,100 August 22 calls were sold for $0.15. An even 6,050 August 14 puts were sold for $0.15.

Volume was below open interest in the July options but not in the August contracts, an indication that a position was closed and rolled forward by one month. The strategy entails selling out-of-the-money calls and puts to raise money, which is then used to buy near-the-money calls. If the stock rallies, those calls now stands to leverage a move from $18 to $22.

GME rose 1.95 percent to $17.82 yesterday but has lost one-quarter of its value in the last three months. The company has been fighting an uphill battle along with traditional videogame makers as online distribution flattens barriers to entry into the business.

Despite its weak earnings, some value investors might like the stock because it's trading for less than book value and has zero debt. Short interest is also more than 60 percent of the float, which could potentially spur buying.

Total option volume was 10 times greater than average in the session.

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