GameStop breathes haircuts; the shares still record 151% weekly gain

(Reuters) – GameStop Corp closed 6% lower on Friday as an early rally fell, but the stock ended the week 151% higher in a renewed rise that left analysts puzzled.

The shares of the video game retailer closed at 101.74 USD after withdrawing from a maximum session of 142.90 USD. Weekly missile travel increased despite wider market sales, sending the S&P 500 benchmark .SPX decreasing by 2.5% at the same time.

Analysts have struggled to find a clear explanation, and some have been skeptical that the rally will stand.

“You might make some quick trading money and it could be a lot of money, but in the end it’s the biggest fool theory,” said Eric Diton, president and CEO of The Wealth Alliance in New York. York. The theory is about buying stocks that are overvalued, anticipating that a “bigger fool” will buy them later at a higher price.

Analysts largely ruled out a brief pressure like the one that fueled the GameStop rally in January, when individual investors using Robinhood and other apps punished hedge funds that bet against the stock, forcing them to relax in short positions. Many GameStop shoppers have taken their cues from online investment forums on Reddit and elsewhere.

Short-term interest rates represented 28.4% of the currency on Thursday, compared to a peak of 142% in early January, according to S3 Partners.

GameStop options market activity, which returned to the top of the list in a social media-based retail frenzy, suggested that investors bet on higher prices, higher volatility or both.

Refinitive data showed that retail investors bought deep call options, which have much higher contractual purchase prices than the current share price.

Many of these options contracts were due to expire on Friday, which means nice gains for those betting on a further rise in the price of GameStop shares.

Call options, profitable for holders if GameStop shares reached $ 200 and $ 800 this week, were traded particularly well, the data showed. GameStop shares traded this week at $ 184.54 on Thursday, well below the $ 483-a-day high it hit in January.

“Actors are looking to do everything they can to maximize their impact, and timing is important,” said David Trainer, chief executive of investment research firm New Constructs. “The expiration of options will contribute to their strategy on how to push the stock as far as they can and maximize their profits.”

The robots on the main social networking sites published GameStop and other “meme stocks”, although the extent to which they influenced the prices was unclear, according to the analysis carried out by the cybersecurity company PiiQ Media from Massachusetts.

The US Securities and Exchange Commission (SEC) on Friday suspended trading in 15 companies due to “questionable trading and socialization activity”. GameStop was not among them.

The 15 companies were in addition to six shares they recently suspended due to suspicious social media activity.

Robinhood said it has received investigations from regulators into the temporary trading restrictions it imposed during a wild rally of shortened stocks earlier this year.

Other Reddit favorites were also lower on Friday, with movie operator AMC Entertainment down 3.4%, headphone maker Koss down 22.4% and marijuana company Sundial Growers up 2.9%.