June 21 will be an extremely interesting day for GameStop (NYSE:GME), as that marks the day when Roaring Kitty’s GME options expire.
Yesterday, Roaring Kitty — whose real name is Keith Gill — posted another position update on Reddit. As of the close on June 10, Gill owned 120,000 $20 call options expiring on June 21. These calls were up by a total of $13.73 million. He also owns 5 million shares of GME stock bought at an average price of $21.27 with a gain of $17.77 million and $29.40 million in cash. In total, the value of his calls and stock were worth $206.05 million.
With June 21 just 10 days away, GME stock shareholders are beginning to feel the heat. The attention is mainly on Gill’s options position and whether he will choose to exercise them. Options provide the owner with the right, but not the obligation, to exercise at the strike price.
Dear GME Stock Fans, Mark Your Calendars for June 21
However, Gill must have at least $240 million in cash to exercise and take delivery of the shares from his options position. Each contract represents 100 shares, so 120,000 x 100 x $20 (the strike price) gets us to $240 million. Gill’s last reported cash balance of $29.40 million is not enough to cover this.
Reuters also points out the effect that market makers could have on GME stock:
“Market makers who sold Gill his call contracts would have likely squared the risk on their books by buying GameStop shares […] If the stock price slips below the contracts’ strike price, market makers would have less need to remain hedged and could be in a position to sell shares, potentially exacerbating weakness in the stock.”
Time decay, or theta, will also be a factor, as options contain time value that declines as the expiration date approaches.
It’s unclear what Gill has planned after the June 21 expiration date. In his livestream last week, he noted that his GME position was a “bet on the management” and that the company is currently in a transformation stage. He also added that he was a long-term investor, hinting that he may hold his GME shares for an extended period of time.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
