Shares of the video game retailer closed at $ 101.74 after falling from a session high of $ 142.90. The skyrocketing weekly rally came despite a broader sell-off in the market that caused the S&P 500 SPX to drop 2.5% over the same time, Reuters reported.
“You might be able to make some money from fast trading and it might be a lot of money, but in the end it’s the theory of the big fool,” said Eric Deaton, President and Managing Director at The Wealth Alliance in New York. The theory refers to buying shares that have been overvalued, expecting a “bigger fool” to buy them later at a higher price.
The overdraft accounted for 28.4% of the float last Thursday, compared to a peak of 142% in early January, according to S3 Partners.
GameStop’s options market activity, which has returned to the top of the list in the social media-driven retail trading frenzy, indicated that investors were betting on higher prices, higher volatility, or both.
Refinitiv data showed that retail investors are buying out-of-the-money options, which have contractual purchase prices well above the current share price.
Several of these options contracts are set to expire on Friday, which means good gains for those betting on another increase in GameStop’s stock price.
The data showed that connectivity options, which are lucrative for stockholders if GameStop stocks reach $ 200 and $ 800 this week, were traded particularly heavily. GameStop stock this week traded at $ 184.54 on Thursday, well below the intraday high of $ 483 it hit in January.
“The actors are looking to utilize everything they can to maximize their impact, and timing is important,” said David Trainer, CEO of investment research firm New Constructs. “The expiration of the options will contribute to their strategy of how to pay the stock as much as possible and increase their profits.”
The bots on the main social media sites have been inflating GameStop and other “meme stocks,” although the extent of their impact on prices was unclear, according to an analysis by Massachusetts-based cybersecurity firm PiiQ Media.
Last Friday, the US Securities and Exchange Commission (SEC) suspended trading in 15 companies due to “questionable trading and social media activity,” GameStop was not among them.
The 15 companies were in addition to six stocks they recently suspended due to suspicious activity on social media.
Robinhood said it had received inquiries from regulators about the temporary trading restrictions it imposed during a massive rally in short-circuited stocks earlier this year.
Other Reddit favorites also fell last Friday, with movie operator AMC Entertainment down 3.4%, headphone maker Koss down 22.4%, and marijuana company Sundial Growers down 2.9%.